Saturday, February 5, 2011

Final Jeopardy! (I)

"A dispute also arose among them, as to which of them was to be regarded as the greatest. And he said to them, 'The kings of the Gentiles exercise lordship over them, and those in authority are called benefactors. But not so with you. Rather, let the greatest among you become as the youngest, and the leader as one who serves.' "
------Luke 22:24-26

FINAL JEOPARDY ANSWER: This change in Jeopardy! rules is a favorite among economists because it demonstrates how people respond to changes in incentives.

FINAL JEOPARDY QUESTION: What was the end of what economists call "linear payoffs?"

Indeed, the popular game show JEOPARDY! is famous to economists because of a change in the rules between the Art Fleming and the Alex Trebek versions of the show. In the original version, contestants who had positive winnings at the end of all three rounds won that amount of money. In economics, that is called a linear payment scheme. In the new version, only the winner is paid the monetary value of their nominal winnings. In economics jargon, this latter is called a "tournament" payment scheme. A typical prediction in economics is that contestants facing FINAL JEOPARDY will behave in a more risk-loving (and therefore exciting) fashion if only the winner gets a monetary prize. Research that I've conducted with Duncan James of Fordham University demonstrates the general accuracy of the tournament model.

This is the first of three posts on this topic that I hope will do three things. First, argue that Jesus was critical of any transformation of life into inter-personal tournaments. Secondly, I'll give a personal example of the trap of tournament thinking. Thirdly, I hope to reiterate Doug's post below about the importance of understanding fairness and justice issues in non-market allocation.

For the first purpose, I opened with the Luke story... one of the good examples where Jesus warns us against viewing life as a tournament in which we receive utility from rank or status. Another example would be Matthew 20 in the parable of the workers in the field, who were bothered not simply by whether their own wages were just, but also for the relative comparisons between themselves and others.

There is plenty to be said about the direct dangers of money or power, but without any doubt Jesus warns us against treating life as a tournament in any aspect: monetary, political, or in our faith. Jesus is saying that he who dies with the most toys wins nothing, and that coming to Christ before someone else is nothing at all like Michael Phelps beating someone else to the buzzer.

(I guess it's a bad coincidence but an instructive lesson to me that this post arrives the day before that ultimate American tournament: Super Bowl XLV or whatever its Roman Numeral is this year, and only a few days after I posted on Facebook the exciting news that FSU was ranked "#1" on college football signing day.)

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