A colleague is promised $10 on the condition that he share this amount with you. If you agree to accept the offer, both of you receive your shares; if not, both of you will get nothing. The colleague suggests sharing the amount equally. Would you accept?

Of course you would! And both you and your friend would go home well pleased, clutching $5 bills. But what if your colleague stops for a moment to reflect and realizes that, since he is the one making the offer, he could just as well keep $9.50 and offer you 50 cents. Would you accept? Most of us would refuse indignantly. “Who does he think he is? I’d rather do without half a dollar than let this scoundrel get away with $9.50 on my account!”

Reactions such as these have been replicated in experiments all over the world. This is somewhat surprising because they contradict traditional economic theory. After all, refusing even 50 cents is not rational. The offer of 50 cents may not be fair, but the alternative—going home with nothing—is worse still. Why then do people who find themselves in such situations behave irrationally?

For years this so-called ultimatum game has given economists headaches. They always assumed that economic decisions are firmly based on rational thought processes. A decision maker calculates the costs and benefits of his actions, weighs the probabilities of certain scenarios, and then makes the optimal decision. This is the fundamental assumption on which economic theory is based.

But what has emerged over the course of the years and been borne out by experiments with the ultimatum game is that while this assumption may well hold for decisions

of institutions—firms, for example, and government agencies—it does not apply to decisions made by individuals. As it turns out, human beings do not make decisions based solely on hard facts and on the calculations of one’s own advantage. They are also guided by emotional factors, such as envy, prejudice, altruism, spitefulness, and numerous other human weaknesses.

To explain the paradoxical results of the ultimatum game, scientists suggest evolutionary mechanisms. Refusing a derisory amount—so the argument goes—serves to uphold one’s reputation. “I am not a wimp. Next time he will think twice before making such an insulting offer.” Scientists believe that, in the long run, the social reputation of an individual may increase his survival chances.

Researchers at Princeton University and the University of Pittsburgh chose a different approach in the hope of gaining a better understanding of the decisions involved in the ultimatum game. They investigated the physiological processes that take place in the brain. This reductionist approach to the study of economic decisions—basing them purely on chemical and mechanical interactions between neurons, axons, synapses, and dendrites—is a novel way of conducting research into economics and decision theory.

The psychologists and psychiatrists who made up the research team subjected 19 test persons to the ultimatum game. The players, who had to compete against both humans and computers, were attached to magnetic resonance imaging scanners. These scanners highlight the regions in the brain in which changes in blood flow indicate increased activity of the nerve cells.

According to a report in the journal Science, their study was successful. They identified the regions in the brain that were activated during the ultimatum game. But somewhat to their surprise, not only the regions that are usually activated during thought processes—the prefrontal dorsolateral cortex—became busy. Rather, a region that is generally associated with negative emotions was also activated. And the more insulting the financial offer, the more intense the activity in the nerve cells became. The so-called anterior insula is the same area in the human

brain that is activated in cases of strongly felt aversions, for example, when individuals are exposed to offensive smells or tastes. Insults stink.

But they had yet another surprise in store for them. The players’ responses depended on whether it was an individual or a computer who made the offer. Unfair offers made by electronic calculators resulted in less activity in the anterior insula and were refused less frequently than unreasonable offers made by humans. After all, one does not let oneself be insulted by a computer.