Employers’ intentions matter, according to experimental research by Professors Gary
Charness and David Levine, published in the July 2007 issue of the Economic
Journal. Their study finds that there can be high costs to treating workers unfairly. The
good news is that if low compensation or other outcomes are clearly due to forces
outside management’s control, workers may be much less likely to penalise their
employer.
Everyone knows ‘the road to hell is paved with good intentions’. At the same time, the
famous American jurist Oliver Wendell Holmes explained, ‘even a dog knows the
difference between being stepped on and being tripped over’.
This study moves beyond contradictory aphorisms of devils and dogs to human
decision-makers. The researchers ask: do people care about intentions – even when
good intentions do not produce good results?
Economists and psychologists have run many experiments with simulated ‘workers’ and
‘employers.’ In many experiments, ‘workers’ routinely punished a ‘firm’ that paid an
unfairly low wage – even if the punishment was costly to the worker.
In this experiment, Charness and Levine separated how much workers received from
how much the firm tried to pay. The difference was a matter of luck.
They found that workers reacted strongly to the firm’s intentions – how much it tried to
pay – and much less to the higher or lower wage actually received (after fate intervened
to raise or lower some workers' pay).
For example, workers who end up receiving 'medium' wages responded much more
positively when this resulted from the firm offering a high wage (but bad luck lowered
the worker's pay) than when this resulted from the firm offering a low wage (and good
luck raised the pay).
ENDS
Notes for editors: ‘Intention and Stochastic Outcomes: An Experimental Study’ by
Gary Charness and David Levine is published in the July 2007 issue of the Economic
Journal.
Gary Charness is at the University of California Santa Barbara, David Levine is at the
University of California, Berkeley.
For further information: contact David Levine on +1-510-642-1697 (email:
levine@haas.berkeley.edu; website: http://faculty.haas.berkeley.edu/levine); or Romesh
Vaitilingam on 07768-661095 (email: romesh@compuserve.com).