You Are Not So Smart: Why You Have Too Many Friends on Facebook, Why Your Memory Is Mostly Fiction, and 46 Other Ways You're Deluding Yourself

by David McRaney

A group of people sits around a table, and each person is given a few dollars. The group is told they can put as much money as they want in the community pot. An experimenter then doubles the pot, and everyone then gets an equal portion back. If it’s ten people and everyone gets $2, and everyone puts in that money, the pot would be $20. It gets doubled to $40 and divided by ten. Everyone gets back $4. The game proceeds in rounds, and you would think everyone would just put the maximum amount in the pot each time—but they don’t. Someone usually gets the gist of the game and realizes that one can put in very little, or nothing at all, and start making more money than everyone else. If everyone but you puts in $2, the pot would be $18. It gets doubled to $36 and everyone gets back $3.60—including you, the one who put nothing in at all. In experiments where this game is played so everyone can see who puts in a fair share, the pot tends to grow for a while and then it starts to shrink as people test the water by withholding funds. The behavior spreads, because no one wants to be a chump, and eventually the economy grinds to a halt. If people are allowed the option of punishing cheaters, the cheating stops, and everyone wins. If instead of punishment, people are given the choice to reward good players, the economy again crashes after a few rounds. The crazy thing about this game is how illogical it is to stop contributing just because someone in the group is free riding. If ever...