Why Rules Don’t Work

Rules don’t always work–quirky coincidences can mess up the best-laid plans. In fact, rules that are supposed to ensure minimum standards may in the end serve only to LOWER standards further than they might be without any rules at all.

Finance expert Tom Rietz thinks this is because rules put in place to guarantee minimum standards unwittingly establish a "good enough" level, so that people will perform only what is minimally needed. He says, "Rules may serve to calibrate expectations indicating what actions are good enough and, as a result, behavior may effectively fall to the rule. People who on their own initiative may have gone above and beyond instead do only the minimum."

For example, free-will offerings might generate more admission income at a charity event than an established entry fee. One of Reitz’s experiments involved groups of 18 to 24 subjects who were paired off. One of the people in each pair–an "Investor"–was given $10, any amount of which could be given to the second person, the "Trustee." Whatever was given was then tripled, and the Trustee could return any portion of that tripled amount to the Investor. In some of the pairings, there were no rules dictating how much money Trustees had to return to Investors. With other pairs, Trustees were required to return a minimum of 10%, 20% or 30% to Investors. Guess who returned the most?

On the other hand, no minimum standards (like a minimum wage or rules about which farm is organic and which isn’t) almost GUARANTEE exploitation.

We don’t have any rules about who can come to our website, read our great edge news or listen to our radio shows (for the first week, anyway), but we’re getting pretty tired of being exploited, when you can subscribe and support us for less than a latte a WEEK! Won’t you help make sure we don’t disappear tomorrow? Please subscribe today!