Strangely, one of my strongest childhood memories is when I called my brother an idiot, and two minutes later I stubbed my toe. My brother told me that God was punishing me—that seemed to make sense to me given the Catholic framework in which I was raised. Perhaps if I were raised as a Buddhist, my brother would have told me it was "Karma," or a spiritual theory of moral causation that states people get what they deserve. This is a fairly common belief adopted by many cultures that has real effects on our behavior and on society.
First, an important rule of critical thought: a universal law cannot be logically assumed from an anecdote or personal experience. We all have had times when we felt the effects of what could be Karma—we do something bad to someone, then something bad happens to us. Through subjective validation, even a slight belief in Karma will result in hyper-sensitivity when it comes to making sense of coincidences, in order to support the belief in Karma.
A similar concept to "Karma" is the "Just world hypothesis," which helps people deal with injustice. For example, if I see a homeless person, instead of having painful and negative feelings, my belief in a just world (or Karma) alleviates my own discomfort as I tell myself that the homeless person is getting what he deserves. This concept has been explored by researchers Melvin J. Lerner and Carolyn H. Simmons back in 1966 (for more details, see http://www.sociallypsyched.org/item/the-innocent-victim).
The belief in Karma is often, but not always, associated with reincarnation. To believers, it is very clear in some cases, such as with the starving children in Africa, that they did nothing to deserve their fate. Rather than abandon Karma, it could just be extended to past lives—so that little starving African child, he was probably Hitler. Now you can sleep better at night and spend that money on a cup of coffee rather than donating it to a campaign with the goal of feeding children who are really only getting what they deserve.
Another cognitive bias that cultivates belief in Karma is our tendency to notice the hits but ignore the misses (a form of the confirmation bias). A good example of this is found with Bernie Madoff, the guy who in 2009 was convicted of swindling an estimated $64.8 billion from investors. In his case, it appears that Karma is very real, however, for every Madoff there are thousands of others who get off with no more than a slap on the wrist (admittedly, most for lesser crimes). The media fosters the idea of Karma by reporting stories of justice—this is what we, the public, desire.
A form of Karma certainly does exist; it exists as a social phenomenon fueled by our own beliefs, guilt, and cognitive biases. For example, if we steal, we have social rules (laws, in this case) that are in place to promote justice. If we don't get caught, we might experience guilt and through subjective validation, connect any negative event to the act of stealing, when in reality, the two are events are independent. It is also known that guilt can lead to self-sabotage, and the belief that one deserves good fortune acts as motivation to make good fortune more probable for that person. The important difference between the kind of "Karma" explained psychologically and socially, and some magical brand of divine or universal law, is that in the latter, the results of "Karma" are not objectively measurable but exist in the minds of the believers. In the case of self-sabotage and motivation, "Karma" is the result of modified behavior stemming from belief.
Should we believe in Karma? I certainly don't think so. First, because evidence clearly does not support such a phenomenon (that should be reason enough) and second, because it is imperative that we don't blame victims and make those who have good fortune into gods. We live in a world that is not always fair, and not always just. What goes around does not always come around, and many times people reap more than then they sow. It is up to us to help and offer sympathy those who need it and not expect "Karma" to pay us back, and do good simply for goodness sake.
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