When Adam awoke one morning from unsettling dreams, he found himself transformed into a grotesque creature. His body was covered in a thick, impenetrable shield. He should call himself Adam S. from now on, he thought, wincing at the throbbing headache. Was this some bizarre effect of last night's excesses? Ah - now he remembered! Too much whisky again at the local tavern. He always did this, waking up with clothes strewn around as souvenirs of wild nights. Last night in Prague must have been particularly raucous.
The clocktower rang. That reminded him! He did remember starting the night at a cellar in the big tavern on the central marketplace! What happened afterwards, is one big blur though. Every time he did this - the hangover did not outweigh the fun - it never does. He crawled out of bed, in animal-like fashion thinking that he needed to go back to finish his economics work. How did he not anticipate this coming headache and work when drinking last night again?! He thought he might be slightly myopic. Or maybe not as rational a man, as he made humanity out to be.
As he sat behind his desk, the doorbell rang on the ground floor. Adam stayed put and glanced out of the window – looking straight at a bloodied man downstairs. Quickly moving away, he sat back at his desk to continue working. Surely someone else would open the door for him Again, the doorbell rang a few times. It started to annoy Adam. After five more times, the door was opened by Adam’s servant, who must have come from the outhouse. “Hello,” he heard the servant say downstairs, “How can I help?” Agitatedly the stranger said “I need you to come urgently. Why did the person upstairs not open the door? I saw him upstairs looking. Why didn’t he help?! I had an accident and I need a few people to come and help me straight away!” A few moments later the servant shouted up: “Sir Adam – can you please come downstairs?” Adam totally ignored them. Adam heard some further muted discussions downstairs. Further calls for him to come downstairs didn’t move him either. Then he heard the footsteps making their way up the stairs. “Please open the door!” a few people shouted in harmony. Ignoring reality, Adam crawled under his safe space - his desk. Then Adam decided to move behind a cupboard. He looked out of his window overlooking the solemn Prague dusk. Further loud knocks at the door. Thinking to himself “What did I do already? Why would I help a random stranger?”
Then suddenly, the door cracked open and the door broke and fell, followed by three tumbling policemen falling over themselves one after another. “You are under arrest!” one of them said. Breathing heavily, Adam exclaimed: “Hang on, why am I under arrest? What have I done?!!
Tit for Tat
All shackled up, Adam lay on his bed, in the corner of his dark, damp dungeon cell. He heard the podgy prison guard walking down the corridor likely plodding his evil plans. Adam had already learned to recognise this guard’s footsteps announcing his early morning visits. This prison guard was clearly a fan of food and order. His rounds were regularly preceded by loud German militaristic march music. One day, if he’d be able to take over the prison, he’d play his own favourite music out loud to the whole prison population. Perhaps something heavenly like that aria in “the Marriage of Figaro.”
With a bang on the door, “Von Neuman,” as the other guards cheekily called him, announced his presence outside his cell. Adam looked up and through the cell bars saw part of his face. With his thick Hungarian accent, he said: “We need you to make a decision now. Both you and your counterpart need to tell us what you intend to do.” As he spoke, Adam saw an apple slowly moving forward through the hatch. “Here is your apple by the way, something to eat while you make up your mind.” Clearly enjoying this game, Von Neuman’s brain was racing away, visibly liking the power he had over Adam’s decision over good and bad.
“As I have said time and time again, I don’t even know what I am accused of,” Adam said exasperated. “To punish me every day for something, not even knowing what I’m accused of is barbarous. You may label me as Selfish and rational as I used to think in my science, but I am starting to believe I’m growing out of it. And this growth hurts; if you’d like to know.”
“Actually, we all know that you did it. I see you now and know what type of person you used to be. You better admit to it quickly – just look at it like a game. You admit to it and go free if your counterpart did it. However, you know you’re not the only one in the world. You should take that into account. Hopefully, you understand that by now. Unfortunately, if you admit to it and your partner in the cell next to you does the same, you will both not go free. Clearly, it cannot be the case that both of you did it!”
Totally having lost the plot, Adam started getting infuriated by this odd trial “But what have I done?” Though he had admitted to his accusation in the past, a different approach was clearly needed. Perhaps his supposed partner in the cell next to him, would get the indirect message if he’d continuously stick with not ratting him out. Maybe he’d start doing the same. He had enough of the pain inflicted on him so far. It would probably be best to simply state they were innocent to get a consistently lower sentence.
Von Neuman observed Adam’s conundrum with a smug smirk from above. He had played this game before like a god. Adam had enough of it – it seemed like Von Neuman was just playing tricks with his mind. He surely knew that he wasn’t as selfish as he himself had made out to be. It was not in his self-interest after all to stay in the cell.
“I have had enough. I am not going to admit to having done something I have not done and from now on I’ll stick to it. I’m done with your mind games!” After a silence the door of his cell opened. Smiling, Von Neuman stood on the other side. With that he opened the door widely and his counterpart Adam’s nurse rushed into the cell. Before he understood what happened to him, Adam felt a pinch – as he looked to his side, he saw she had stuck a needle next to his rib. Then, all the lights went out.
Alter Adam
“Why don’t you take a seat and make yourself comfortable. My name is Dr. Twersky. I am here to help you discover your full self” Adam, being led by his prison guard, stumbled into his seat. The room was warm, colourful, and full of tchotchkes. Dr. Twersky looked like he had been here before. Rather jovial looking like his surroundings, yet bored and monotonous like he knew exactly what he’d say in advance. “You have undergone quite the transformation, recently haven’t you? Why don’t you try to explain what happened to you and why you ended up here?”
Adam, still somewhat dazed and numb in his face and limbs, made himself comfortable. Already glad he was let out of his surreal, sudden cell ordeal, he shyly started: “Well, one morning things had clearly changed. I felt different than I used to. You know, I normally feel part of society but that morning I felt – rather strange. Probably a week ago, I felt like I didn’t want to be a part of anything anymore. Do you know what I mean? Be a rebel - I felt like a Selfish. I guess my nights out in Prague, have made me rather ‘hedonistic.’ You know free spiritedness often really equates to selfishness? Looking back, the mentality shines through in my work.”
“Maybe you can explain further?” Dr. Twersky prodded. “Yes, I work as a moral philosopher and my belief is that human beings are rational, calculating and selfish. We see that everywhere around us unfortunately. Selfishness, I do not think is as bad as the church makes it out to be. Self-interest rather is a nicer way of putting it. This self-interest can lead to good things too - don’t you think?” Dr. Twersky nodded, though Adam could not make out whether he agreed or not. Adam continued: “Also, who says that others automatically lose if another person gains? I still believe that, I think.” Bending forward and putting his head under his chin as if to imitate a Rodin sculpture he said: “My time in prison made me realise that the real world is more than selfish – it depends on others. And everyone makes choices and behaves accordingly.”
Giving things a bit more thought and looking around the room and at Dr Twersky “Moreover, if you describe a world in a certain way, your reality starts mimicking that somehow. Don’t you think? It is like when God created the universe, he did that by uttering words. Now, I am not a very religious man, but I do believe that words create a reality to some extent. Like the cliché that Eskimos have a world of many different descriptions for the word snow. Metaphysics is a reflection of reality, maybe a somewhat distorted and bad one. However, having been in Von Neuman’s cell and having undergone his mind games have had an impact. I have started to think that we are less selfish than previously thought. My concept of reality has refined.”
“What do you mean?” Dr Twersky encouraged “What happened after you were apprehended?” Adam was somewhat frazzled at the prospect of reliving the shock therapy that he received. How much could he trust Dr. Twersky whom he had just met? He paused for a second; looking at Twersky, assessing his apparent honesty. “Let’s just say, I had a lot of time to think. I was forced to rethink my rational, selfish strategy and life view by this prison guard called “von Neuman” who pulled all sorts of tricks on me.” Pushing him along “What kind of tricks?” “Well he told me to rat out my supposed “partner in crime” in the dungeon next-door. I wonder whether he was just some figment of his imagination. The pain he inflicted was immense. Each time I was selfish. But sometimes he punished me even when I didn’t tell on my so-called co-conspirator… I think he is as much a scientist as I am. He taught me that over time it can be less preferable to do what seems beneficial. Normally being selfish is namely Minimising losses of pain but in the long run it is really the aim of the game in life as well.
Dr. Twersky scribbled some notes frowning his eyebrows: “I agree that people are part of society so you think you are now at odds with your own idea of being selfish and that you want to minimise losses - I fully agree – but is that always rational? I see my patients doing irrational things every day - don’t people take drug overdoses? Don’t people overeat even when it isn’t pleasurable anymore? Don’t people prefer to pay hefty insurance premiums though they are better off putting some money aside themselves - just because they are too afraid to lose small amounts?
Looking surprised, Adam paused for a long while. A minute went by. “I see, you’re right: I guess we’re not always rational – I’ll have to adapt my view of reality some more.”
Theories as Built from the Ground Up
Modern economic history starts with man being cast in a form of a selfish and rational actor. Adam Smith thinks that that is not all bad. As he put it: “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their interest.”
The fundamental premise of a rational and selfish man stayed around for a few hundred years. These initial theories have had a long-lasting effect on the direction of the discipline. Until the opposition against it became more accepted. After all, pure selfish behaviour theory does not explain the existence of cooperation in practical reality. For instance, people run businesses to internally collaborate with employees and stakeholders. Also, many phenomena show businesses collaborating – or even colluding. So there is clearly more to incentives at play than pure self-interest. Cooperation and society are needed and reigning in short term self-interest as well.
When the Hungarian polymath John Von Neuman, saw the inaccuracies of economic theory, he included game theory. Games included a more complex view of reality. Strategies that you pursue are part of your own immediate interest. Your choices are impacted by behaviour of others - society. In the different context of sociology and political history, Francis Fukuyama argues in his book “Trust,” that social capital is needed to make economies and society work. A society that cooperates with a higher level of trust or lack of self-interest, reduces transaction costs. This lower friction enables (business) transactions to over time increase in volume, variety and velocity.
The inclusion of game theory was already an improvement on the purely self-interested man. However, rational behaviour was still clamouring to be deconstructed some more. Israeli Professors Kahneman and Twersky added a psychological element to contend with the rational, selfish, and optimal outcome seeking man.
Debates evolve. We have societal influences and our own biases. Sometimes, to reach the moon, you need small incremental inventions. In order to build a roof, we need to start by creating a foundation. Then later, an accurate understanding of reality will emerge. A better understanding of reality as reflected in human nature, will allow us to make better economic and societal decisions in the end. Self-interestedly speaking in an economic context this should have more people, leading more prosperous, happier lives.