Sunday, July 06, 2008

Altruism and economics

Another shocker: even economists may have to take into account that altruistic behavior, not just selfish behavior, can be rational, while selfishness can be suboptimal. Gordon Gekko, the Republican Party, and the Chicago School of Economics may not agree, but:

The Economics Of Nice Folks (6/19/08)
A basic tenet of economics is that people always behave selfishly, or as the 18th century philosopher economist David Hume put it, "every man ought to be supposed to be a knave."
You may recall that David Hume was recently mentioned here, concerning a related aspect of ethical theory.
But what if some people aren't always knaves?

Sam Bowles argues in Science June 20 that economics will get it wrong then, sometimes badly so. He points to new experimental evidence that people do often act against their own personal self-interest in favor of the common good, and they do so in predictable, understandable ways. Poorly-designed economic institutions fail to take advantage of intrinsic moral behavior and often undermine it. ...

These examples show that economists ignore human altruism at their peril. Standard economic theory assumes that incentives that appeal to self-interest won't affect any natural altruism that may exist, but that assumption is clearly wrong. Bowles discusses the research to date that helps to explain when and why that assumption breaks down.

The thesis here may be more clearly expressed in the abstract of the research review in question:

Policies Designed for Self-Interested Citizens May Undermine "The Moral Sentiments": Evidence from Economic Experiments (6/20/08)
High-performance organizations and economies work on the basis not only of material interests but also of Adam Smith's "moral sentiments." Well-designed laws and public policies can harness self-interest for the common good. However, incentives that appeal to self-interest may fail when they undermine the moral values that lead people to act altruistically or in other public-spirited ways. Behavioral experiments reviewed here suggest that economic incentives may be counterproductive when they signal that selfishness is an appropriate response; constitute a learning environment through which over time people come to adopt more self-interested motivations; compromise the individual's sense of self-determination and thereby degrade intrinsic motivations; or convey a message of distrust, disrespect, and unfair intent. Many of these unintended effects of incentives occur because people act not only to acquire economic goods and services but also to constitute themselves as dignified, autonomous, and moral individuals.

You may also recall that Sam Bowles showed up in this, from last November, concerning a more distantly related aspect of evolutionary ethical theory.

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