Fair Shares: Accountability and Cognitive Dissonance in Allocation Decisions

Everyone has observed people invoking fairness arguments in defense of their opinions or actions, and it is not uncommon for such arguments to be wielded on both sides of an issue about which views conflict. For example, during a televised debate Representative Charles B. Rangel said, “I think [Affirmative Action] has to involve a search for fairness,” whereas commentator Avi Nelson opined that “you promote more unfairness than fairness when you depart from the basic criterion, which is that individuals should be treated as individuals” (Annenberg/CPB Collection, 1984). On the 1986 tax reform legislation, Senator Robert Packwood stated: “Taxes are about more than money and they’re about more than economics. They’re about fairness, and this bill is fair,” whereas Senator Carl M. Levin argued: “For our economy, this is the wrong bill at the wrong time . making deficit reduction more difficult and less fair” (Los Angeles Times, September 28, 1986 pp. A1, A8). Such cases contribute to the frequent conclusion that justice is merely a ploy, a vacuous concept used opportunistically by selfinterested and self-serving agents. If fairness arguments were sheer subterfuge, however, it would be difficult to account for their use at all, let alone their frequent use or earnest consideration by others. That they have at least occasional impact on outcomes may be inferred from the very fact that they are advanced. Those who take justice seriously also claim more direct evidence of its effects on legal proceedings, government regulatory and taxation policies, wage and benefit structures in the workplace, results of bargaining experiments in the laboratory, and even pricing policies in the market (e.g., Daniel Kahneman et al., 1986b; R. Mark Isaac et al., 1991; H. Peyton Young, 1994; Linda Babcock et al., 1995). On the other hand, the ostensibly self-serving manipulation of fairness arguments also presents a problem for proponents of justice and defenders of its importance in social interaction. If people value equity so highly that they make personal sacrifices for its sake, how is it that they also apparently distort it for their own selfish ends? Although most studies of bargaining behavior suggest nontrivial deviations from narrow self-interest (e.g., Werner Güth et al., 1982; Alvin E. Roth et al., 1991), some of these same studies reject the “fairness hypothesis” that fairness alone accounts for this behavior (e.g., Gary E. Bolton, 1991; Robert Forsythe et al., 1994). This paper proposes and tests a theory of decision making that attempts to elucidate the roles of fairness, self-interest, and selfdeception in the allocation of economic rewards. Fairness is treated as a genuine value, but there also exists an incentive and a potential for changing beliefs about it. This suggests an explanation for why arguments about it are advanced and considered, but sometimes conflict, as in the affirmative action and taxation examples cited earlier. In addition to the standard “material utility” from the agent’s own allocation of a good, the theory integrates concepts of fairness and cognitive dissonance into the objective function. When the decision maker has * Department of Economics, Loyola Marymount University, 7900 Loyola Boulevard, Los Angeles, CA 90045. The author gratefully acknowledges the helpful comments and suggestions of two anonymous referees of this Review and of Reinhard Selten, Werner Güth, Gabriel Fuentes, Gary Biglaiser, and of seminar participants at the University of Bonn, the University of Arizona, Humboldt University, and the 1997 Economic Science Association meetings. I also thank Tim Cason, John Conlisk, Joseph Earley, Zaki Eusufzai, Gabriel Fuentes, and Petra Konow for their advice or assistance conducting the experiments, and the LMU Research Committee and College of Liberal Arts for financial support. Any remaining errors are, of course, my own. 1 Material utility is what is meant when (narrow) selfinterest or selfishness are mentioned in this paper. Of course, if fairness is assumed to be a goal of the agent, one may argue that it is in his or her self-interest to be, to some