Sunday, 16 January 2000

From "If Homo Economicus Could Choose His Own Utility Function, Would He Want One with a Conscience? Reply"

By Robert H. Frank.

Suppose two honest mutants, A and B, arrive in an uncountably large population consisting entirely of dishonest persons. And suppose that the probability that an honest person exhibits an intense blush is, say, 0.999, while the corresponding probability for everyone else is only 0.001. When A sees an intense blush on the face of B, what will then be hls estimate of the probability that B is honest? Assuming that A knows the laws of elementary probability and corrects for the base rate of honest persons in the population, it will be zero. When virtually everyone in the population is dishonest, even a person with an intense blush will be pegged as dishonest, provided that even the smallest fraction of dishonest persons also shows an intense blush. Without a fail-safe signal whereby A and B could identify one another as being honest, each would expect that it would not pay to interact with the other. And so it follows that the honest mutants could not reap the fruits of cooperation under these circumstances. If, however, A and B had a sure way of identifying one another as honest persons, they could then interact selectively with one another and make headway against the rest of the population.

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