We just saw what voters do when they feel screwed. Here’s the economic theory of why they do it

Newsbeat

One of the most interesting experiments in economics is known as the ultimatum game. It deftly gets at a fundamental truth of human nature?—?about how our deep emotional programming cause us to do things that, when viewed through the lens of rationality, just don’t make sense. The game itself involves two players. The first player receives a sum of money, and gets to propose how to divide it between the two players. The second player can do only one thing: accept or reject the proposal. If the second player accepts, then the money is divided between the two players as proposed. But if the second player rejects the proposal, then neither player gets anything. Approaching the game from a rational economic perspective, the second player should accept any proposal that involves an offer of anything?—?because the alternative, of course, is to receive nothing. But that’s where things get interesting. It’s not how people behave at all. Instead, research shows that we reject offers we consider unfair. Although this varies depending on culture and other factors (there’s even been a version of this research played where both participants were intoxicated), this general trend holds true. Of all the explanations for this behavior, it’s the neurological ones that are most interesting. One experiment placed participants in an MRI imaging machine while they were playing. Offers perceived as stingy light up the anterior insular cortex, a region associated with disgust. In other words?—?when it comes to dividing the pie, we don’t behave rationally. We behave emotionally. This is instructive in explaining Brexit and Trump. There’s been disbelief at the outcomes in both the UK and the US: “How could people vote to burn the house down?! How could they be so stupid?!” These reactions seem to miss something very fundamental about what’s happening here. Policies such as trade, globalization and immigration have all been proven to be of great global economic benefit. Look at the impact they have had on global poverty: The rise of China tracks closely to the above chart; and it shows just how much trade and globalization has done to lift billions out of poverty. But while China and the developing world have benefited enormously from trade, so too has the developed world. The benefits of comparative advantage are real. But the question then becomes: for every extra dollar that has accrued to the US and the UK, who has been the beneficiary? Here’s a hint: it’s not the people who are voting for Trump and Brexit. These folks don’t care about the chart above, or what it represents as an accomplishment for humanity. The first player consists of those people inside the US and UK who have benefitted from globalization and trade: the “elites”, derisively referred to as “the 1%”. And the second player? That’s everyone inside the United States and the United Kingdom who aren’t in those upper income echelons. They’re all the lines in the second chart that aren’t going up. These folks are seeing the pile of money in the game growing ever bigger. And they’re also watching on, as the other player keeps an ever-larger share of that pile for themselves. Now, it’s tempting to adopt a humanist argument: that it’s OK to sacrifice these folks for the greater good. You see this argument all the time: that what is happening in the first chart makes what is happening in the second chart acceptable. That dragging China and the world out of poverty makes it OK for America’s middle class to suffer.