The story about the economics professor and the effects of “socialist” grade sharing is circulating again. If you aren’t familiar with it, I’ve included a version of it at the bottom of this post.*
Here’s a different version:
An economics professor at a local college recently failed almost all his students in a particular class. Students in this class had insisted that economic markets driven by individual self-interest were always superior to more collective (or cooperative) efforts. When the professor discovered that his students were unconvinced by his effort to convince them otherwise, he set up a simple experiment.
He broke the class into groups of four students and gave each student two index cards-one red, and one blue. “At the start of each week for the next 10 weeks,” the professor explained, “each member of your group will secretly show me one card-either the red one or the blue one.” Your goal, as a team, is to make sure that everyone shows me a blue card. You will receive points as follows:
1) If every team member shows me a blue card (B, B, B, B), you will each receive 100 points.
2) If one person shows me a red card and three of you show me a blue card (R, B, B, B), the student with the red card will receive 500 points, and each of the other students will lose 100 points.
3) If two students show me a red card, they will each receive 250 points. The two students with blue cards will each lose 200 points.
4) If three students show me a red card, they will each receive 100 points. The student with the blue card will lose 300 points.
5) If all members of the group show me a red card, each member of the group will lose 100 points.
“This is a simple game,” promised the professor. “I’ll give an ‘A’ to anyone with 500 or more points at the end of the 10 weeks-and I’m going to fail anyone with less than that. And just to make things interesting, I’ll personally give $1000 dollars to the student that gets the most points.”
The teams met and all members of each teach team pledged to cooperate. The first and second weeks only blue cards were shown to the professor. In the third week, one student on one team showed a red card and received a 500 point bonus. The next week, three students on different teams showed red cards. By the seventh week, most teams were in complete disarray. Distrust and infighting were rampant. On the eighth week, five of the seven teams turned in all red cards and each member of these teams lost 100 points. Despite this outcome, each student on these teams was afraid of being the only member of team to turn in a blue card-which would result in a loss of 300 points. Once a team member had turned in a red card, it seemed impossible for the group to cooperate in subsequent weeks. Team members would pledge to cooperate, but would turn in a red card, reasoning that it was in their self-interest to do so. If other members lived up to their promise to cooperate, they would be rewarded with a 500 points bonus. If they didn’t, then the most they would lose would be 100 points-and that was better than running the risk of being the only blue card and losing 300 points.
One team, however, consistently turned in blue cards each week. Each member of this team had amassed 1000 points by the end of the experiment. No other member of the class had reached the 500 point threshold. These four students each received an ‘A’ in the course and split the $1000 prize for the most points.
The professor asked the students on the team that had cooperated throughout to explain to the class how they had managed to do it.
“Well,” the students explained, “we decided that we wanted to either succeed or fail as a team, so we came to your office and asked if you would agree to let us pool all the points we received as individuals and then divide the points evenly among us after the experiment was over. You said that if we wanted to make that agreement, you’d let us. After that it was obvious that the way for the group to get the most points was for each of us to show you a blue card.”
“These four students figured it out,” said the professor. “Sometimes it’s better to cooperate than to compete. And that’s why these four students will receive an ‘A’ for the course-and why I’ll be seeing the rest of you again next semester.”
Isn’t it odd that although some of our greatest achievements as a country and a society have been the result of collective (and cooperative) effort, we continue to discount collective action as “socialist” and somehow doomed to failure? We have the best universities in the world, built with land grants and tax dollars, and staffed with tenured scholars that can’t be fired, while the best the “market” has given us is the University of Phoenix. Our highway system is the envy of the world-should we have let private companies haphazardly blanket the country with toll roads instead? Should we have waited for private companies to beat the Soviet Union to the moon? If we had, we’d still be waiting to get there (after all, why would a private company willingly incur that kind of expense?). The difficult question is when-and under what circumstances-the market is superior to collective action and vice versa. That’s a question worth answering.
The original story often includes an admonition to “pass this along,” so I’ll do the same.
*An economics professor at a local college made a statement that he had never failed a single student before, but had recently failed an entire class. That class had insisted that Obama’s socialism worked and that no one would be poor and no one would be rich, a great equalizer.
The professor then said, “OK, we will have an experiment in this class on Obama’s plan”. All grades would be averaged and everyone would receive the same grade so no one would fail and no one would receive an A.
After the first test, the grades were averaged and everyone got a B. The students who studied hard were upset and the students who studied little were happy. As the second test rolled around, the students who studied little had studied even less and the ones who studied hard decided they wanted a free ride too so they studied little.
The second test average was a D! No one was happy. When the 3rd test rolled around, the average was an F.
As the tests proceeded, the scores never increased as bickering, blame and name-calling all resulted in hard feelings and no one would study for the benefit of anyone else.
All failed, to their great surprise, and the professor told them that socialism would also ultimately fail because when the reward is great, the effort to succeed is great, but when government takes all the reward away, no one will try or want to succeed. Could not be any simpler than that.
Please pass this on. Remember, there is a test coming up. The 2012 elections.
I’m no economist and couldn’t give any great reasoned response to this, but I really really love the new version. It resonates deeply with me. I’ve read a couple of books that provide a great deal of research that seems to indicate that cooperation really is the way to go and that most people actually aren’t selfish and aggressive by nature: 1) No Contest and 2) The Brighter Side of Human Nature, both by Alfie Kohn.
The only problem I have with the new version is that I think more people would have been smarter about it and figured out that all blues were the way to go. Unless they were really that brainwashed with capitalism….
It seems to me you’re comparing apples to oranges here. In the original the students grades are based on average test results. While in the new version the students grades are based on turning in a blue or red card. Am I the only one to see the difference? Why not put students into groups of four and average the test scores across that group. Will you still get the same results? Will some groups have high performing students that help their lower performing peers in the group to study and work toward a higher average? Or will the higher performing students decide it’s not worth working harder to pull the group up when there group members are not working hard? It’s one thing to explain the logic to the group that they will do better if they all turn in the same colored card but what if they all have to work at getting a better grade?
In my opinion neither is a really good experiment of capitalism versus socialism but the new version isn’t even close to it. How do you get an ‘A’ in economics just for turning in a colored card? Have you actually studied or done any work to learn the material?
Jenkins, the point is that there are situations in which the individual pursuit of self-interest will lead to bad collective outcomes. And yes, these kinds of situations are different in important ways than other situations in which self-interest is likely to produce good (or even optimal) outcomes. The trick is to recognize the difference. Blindly trusting the invisible hand of deregulated economic markets is a rookie public policy mistake that will, in certain circumstances, produce disastrous collective outcomes. . .
Brent,
You say that the point is “that there are situations in which the individual pursuit of self-interest will lead to bad collective outcomes”. I’m not arguing against that. I’m just pointing out that the new experiment does not negate the original experiment. The new experiment is based on very different things, namely handing in a colored card versus doing actual work to get a good grade.
Based on these experiments I could just as easily say that “Blindly trusting the hand of socialist economic markets is a rookie public policy mistake that will, in certain circumstances, produce disastrous collective outcomes.” I don’t believe the new experiment says anything to the contrary of that statement. In fact the collective outcome of the new experiment was that the majority of the students failed, which, in my mind, is a “disastrous collective outcome”. The only thing the new experiment seems to support is that if a small collective of individuals have different information available to them that is not given to the competition then they will take advantage of that information. The students in the winning group did not do what was best for the entire class, they did what was best for each of them individually, which, in this set of circumstances was to work as a group competing against the rest of the class.
So, I guess if you look at experiments a little bit deeper they both prove essentially the same thing. Individuals will do what is best for the individual. To me, the trick is to find a way in which the collective is benefited by individuals pursuing their own self-interest.
For either of these stories to have any connection to reality, you’d have to assume that everyone wants to have infinite stuff. There could be no concept of having enough. Even though our consumerist, competitive, capitalist culture encourages this view, in practice there are only a few people for whom this is the case. And they’re mostly psychopaths and seem to work mostly on Wall Street.
Jenkins, the second experiment wasn’t intended to negate the first. . . And yes, I believe you are correct in stating that blindly trusting collective action is also a rookie public policy mistake that will, in certain circumstances, produce disastrous collective outcomes. I think experience teaches us that, as well.
What is interesting about the second set of circumstances is that a uniform distribution of points across members of the group created a situation in which the pursuit of self-interest by individual team members led to a good outcome for the group. In the first case, a similar “socialist” distribution of test grades led to disaster. It all depends on the circumstances.
I also agree that the trick is to create a context in which the pursuit of self-interest leads to desired collective outcome (which is often easier said than done, and in some cases it may require the group to constrain self-interest at the individual level in counter-intuitive ways).
I think Brent’s version provides a good counterpoint to the first story that tries to use a straw man argument against liberal / progressive political ideals. I’m not sure that most people understand game theory, but I hope more people can see that cooperation doesn’t necessarily take away motivation. Thank you Brent.
Brent, it is a good story. It is in harmony with positive economics. Both the team that made an A, and the teams that failed were comprised of individual members who acted in their own self interest. The story is nice, because it does not put the fault on theories or on institutions. It appropriately shows that perceived self-interest varies from person to person. The cost/benefit schedule was the same for all parties. One group of 4 realized that through cooperation, not competition, they would bring about the best result.
I guess the thing I love the most about your story is it illustrates that both competition and cooperation exist in a free market environment. Where else can cooperation exist, after all? Kudos.
Socialist Business’s
John Lewis Partnership, one of the biggest supermarket/department store chains in England, is owned entirely by its employees, otherwise known’s as partners. The partners all have a say in how the business is run and receive an annual profit distribution in addition to their yearly salary.