Thinking and Deciding

INTUITIONS 433
Subjects may (again) be extending an intuitive principle about equity to cases in
which it has no justification. 4
Preferences for ex-ante equity can have a cost. Suppose I have two nephews. I
can give ten lottery tickets to one nephew or one ticket to each nephew. To get envy
out of the picture while they are waiting for the results, suppose that they will never
know that I have given them the tickets, and that, if one of them wins, he will simply
be told that some unknown person gave him the winning ticket. Many people might
still think that it is wrong to give more tickets to one nephew, because ex-ante equity
is important in its own right, even though ex-post equity is impossible here. In the
end, though, only one nephew can win, and giving one of them ten tickets makes
such an event more likely. The expected achievement of my nephew’s goals — and
mine, insofar as I care about theirs — is greater with the unequal division. If I were
to choose one ticket for each, I must deprive one nephew of an additional chance to
win, and I could not justify this by saying that I had given the other a compensating
gain.
Chances to win are not the same as winnings. An equal-division rule for winnings
is justified by the declining marginal utility of winnings themselves. But the utility
of chances to win is not marginally declining. People may nevertheless apply the
equal-division rule, because they do not know its justification. The same issue may
arise in policy disputes concerning the distribution of risk, such as risk of illness from
pollution. The simple utilitarian approach says that we should minimize overall risk.
We should not be so concerned with equity.
“Do no harm.” Baron and Jurney (1993), asked subjects if they would vote for
various reforms. In one experiment, 39% of the subjects said they would vote for a
100% tax on gasoline (to reduce global warming). Of those who would vote against
the tax, 48% thought that it would do more good than harm on the whole. They were
therefore not using a maximization principle. Of those subjects who would vote
against the tax, despite judging that it would do more good than harm, 85% cited
the unfairness of the tax as a reason for voting against it (for instance, the burden
would fall more heavily on people who drive a lot), and 75% cited the fact that the
tax would harm some people on the whole (for instance, drivers). These subjects are
apparently unwilling to harm some people — relative to the status quo or relative
to an ideal of fairness — in order to help others, even when they see the benefit as
greater than the harm (Baron, 1993c, presents further evidence). This effect may be
related to the “omission bias” discussed in Chapter 16.
The perception of harm can be manipulated by framing. Kahneman, Knetsch,
and Thaler, (1986b) told subjects, “A company is making a small profit. It is located
in a community experiencing a recession with substantial unemployment but
no inflation. There are many workers anxious to work at the company. The company
decides to decrease wages and salaries 7% this year.” Most subjects (62%) thought
4 A more complex utilitarian justification would say that Option 2, in the scenario with two people and
a coin flip, leaves both people with some hope, or, in Option 3, one person cannot grieve for the other. We
could modify the situation to remove these justifications. We could say that the people do not know each
other, and that they do not know of their risk. This would probably not change people’s judgments.