This is called the Ultimate Game: “Imagine that somebody offers you $100. All you have to do is agree with some other anonymous person on how to share the sum. The rules are strict. The two of you are in separate rooms and cannot exchange information. A coin toss decides which of you will propose how to share the money. Suppose that you are the proposer. You can make a single offer of how to split the sum, and the other person—the responder—can say yes or no. The responder also knows the rules and the total amount of money at stake. If her answer is yes, the deal goes ahead. If her answer is no, neither of you gets anything. In both cases, the game is over and will not be repeated. What will you do?” http://www.ped.fas.harvard.edu/people/faculty/publications_nowak/SciAm02.pdf
This “game” has been played hundreds of times, in many different cultures. The results are consistent: About half the proposers offer to split the money evenly; less than 5 percent offer less than 20 percent; and more than half of those offered less than 20 percent reject the offer, thereby insuring that neither participant receives anything.
The game illustrates the built-in fairness detectors we are born with. This sense of fairness is so strong that half of those offered an amount too small would rather have nothing at all.
We saw the Ultimate Game bubble up when the current economic downturn began. There was resentment that while the economy crashed, CEO’s and Wall Street brokers continued to reap huge benefits.
Where has all the anger gone? In part, it is because the conversation has shifted, aided by the public’s short attention span and abetted by those whose interests are aligned with the wealthy and by ideologues opposed to “big government.” Now rage is directed at the budget and the deficit, not the way in which the depression has affected people unequally.
While unemployment rates hover around 9 percent and the safety net is being shredded with every budget deal, corporate profits and CEO packages are soaring. Business profits were up 30 percent in the last quarter and CEOs in areas such as energy, finance and technology are taking home multi-million dollar paychecks.
At America’s top 200 companies, CEOs’ salaries rose 20 percent last year; the average increase for workers in the private sector rose by one-tenth that. The total compensation for the top 30 executives last year ranged from $84.5 million for Viacom’s Philippe Dauman to $16.8 million for James Cracchiolo at Ameriprise Financial. (See “The Drought Is Over (At Least for C.E.O.’s) see NY Times Sunday Business, BU 1, April 10, 2011)
CEOs claim that they have right to their wealth because they have earned their compensation. But isn’t a more realistic picture given by Warren Buffet? He wrote: “A market economy creates some lopsided payoffs to participants. The right endowment of vocal chords, anatomical structure, physical strength, or mental powers can produce enormous piles of claim checks (stocks, bonds, and other forms of capital) on future national output. Proper selection of ancestors similarly can result in lifetime supplies of such tickets upon birth. If zero real investment returns diverted a bit greater portion of the national output from such stockholders to equally worthy and hardworking citizens lacking jackpot-producing talents, it would seem unlikely to pose such an insult to an equitable world as to risk Divine Intervention.”
Most sociologists agree with Buffet’s analysis. No one is self-made. Luck determines if you are born into circumstances that allow for wealth accumulation or whether circumstances conspire against you. Born in the right place, at the right time, to the right parents, with your anatomy and health intact, you are then in the position to apply your skills, and talents. Buffet wouldn’t be a billionaire if he had been born in the African desert to a nomad family.
If you recognize that the luck of the draw may have given you what you have (the Ultimate Game), what do you do with the $100?
Society has the right to insure that you do the right thing. This is why progressive taxes are both necessary and fair.