Altruism Versus Self-Interest

I've always been intrigued as to how and why certain people behave in a certain way in a given situation. Why do they choose x over y? Did they do that certain something truly for someone else, or did they do it simply to make themselves feel better? If you're equally as intrigued, then I'd recommend reading Freakonomics and Superfreakonomics. Give one a try for your next holiday.

I'm quite a cynical person. I guess this cynicism comes from both my personal and professional experiences over the last ten years. That said, I'm also a realist, and quite the optimist when it comes to looking at the 'big picture'.

I work in digital marketing, and one of the biggest growth areas over the last 2 years has been Social Media. Friends, friends of friends, colleagues and family all post on Facebook, Twitter and other platforms about what they're doing, what they're reading, taking pictures of, watching, poking, tagging, pinning, and who and what they're doing those things with. Suddenly everyone has become famous in their own right, and attention and intrigue into others lives are the drugs that keeps us hooked.

Image from S-cool.co.uk
Here's my puzzle. Combine my human behaviour intrigue, cynicism, and realism and apply it to Social Media and everyday life. Do people make certain public posts, decisions and/or actions because they are truly altruistic, or are they doing it simply to feel better about themselves or look good in front of others and grab another 15 minutes of fame?

I've said in a previous post that I believe humans are (generally) inherently good by nature, but I think our online egos and interactions are beginning to turn the tables on what we believe is truly important.

I could delve deep into my thoughts and spend a week writing about what I think the answer is, but instead I'm going to copy an excerpt from chapter three of SuperFreakonomics, and let you decide for yourselves.

"We all witness acts of altruism, large and small, just about every day. We may even commit some ourselves. But economists don't know anything about such behavior, do they? Sure, liquidity crunches and oil prices and even collateralized debt obligations -- but social behaviors like altruism? Is that really what economists do?

For hundreds of years, the answer was no. But in the early 1960s, a few renegade economists had begun to care deeply about such things. Chief among them was Gary Becker, the longtime University of Chicago economist who was awarded the Nobel Prize in 1992. Not satisfied with just measuring the economic choices people make, Becker tried to incorporate the sentiments they attached to such choices.

Some of Becker's most compelling early research concerned altruism. He argued, for instance, that the same person who might be purely selfish in business could be exceedingly altruistic among people he knew -- although, importantly (Becker is an economist, after all), he predicted that altruism even within a family would have a strategic element. Years later, the economists Doug Bernheim, Andrei Shleifer, and Larry Summers empirically demonstrated Becker's point. Using data from a U.S. government longitudinal study, they showed that an elderly parent in a retirement home is more likely to be visited by his grown children if they are expecting a sizable inheritance. But wait, you say: maybe the offspring of wealthy families are simply more caring toward their elderly parents? A reasonable conjecture -- in which case you'd expect an only child of wealthy parents to be especially dutiful. But the data show no increase in retirement- home visits if a wealthy family has only one grown child; there need to be at least two. This suggests that the visits increase because of competition between siblings for the parent's estate.

What might look like good old-fashioned intrafamilial altruism may be a sort of prepaid inheritance tax.

Some governments, wise to the ways of the world, have gone so far as to legally require grown children to visit or support their aging moms and dads. In Singapore, the law is known as the Maintenance of Parents Act.

Still, people appear to be extraordinarily altruistic, and not just within their own families. Americans in particular are famously generous, donating about $300 billion a year to charity, more than 2 percent of the nation's GDP. Just think back to the last hurricane or earthquake that killed a lot of people, and recall how Good Samaritans rushed forward with their money and time.
But why?

Economists have traditionally assumed that the typical person makes rational decisions in line with his own self- interest. So why should this rational fellow -- Homo economicus, he is usually called -- give away some of his hard- earned cash to someone he doesn't know in a place he can't pronounce in return for nothing more than a warm, fuzzy glow?

Building on Gary Becker's work, a new generation of economists decided it was time to understand altruism in the world at large. But how? How can we know whether an act is altruistic or self- serving? If you help rebuild a neighbor's barn, is it because you're a moral person or because you know your own barn might burn down someday? When a donor gives millions to his alma mater, is it because he cares about the pursuit of knowledge or because he gets his name plastered on the football stadium?

Sorting out such things in the real world is extremely hard. While it is easy to observe actions, it is much harder to understand the intentions behind an action.

Laboratory experiments are of course a pillar of the physical sciences and have been since Galileo Galilei rolled a bronze ball down a length of wooden molding to test his theory of acceleration. Economists, however, have never been as reliant on the lab. Most of the problems they traditionally worry about -- the effect of tax increases, for instance, or the causes of inflation -- are difficult to capture there. But over time, some economists came to believe that if the lab could unravel the scientific mysteries of the universe, surely it could help figure out something as benign as altruism.
These new experiments typically took the form of a game, run by college professors and played by their students. One was called Dictator. In this game, a small pool of money is divided between two people, but only one of them gets to decide how the money is divided. (Thus the name: the "dictator" is the only player who matters.)

The original Dictator experiment went like this. Annika was given
$20 and told she could split the money with some anonymous Zelda in one of two ways: (1) right down the middle, with each person getting $10; or (2) with Annika keeping $18 and giving Zelda just $2. 

Dictator was brilliant in its simplicity. As a one- shot game between two anonymous parties, it seemed to strip out all the complicating factors of real-world altruism. Generosity could not be rewarded, nor could selfishness be punished, because the second player (the one who wasn't the dictator) had no recourse to punish the dictator if the dictator acted selfishly. The anonymity, meanwhile, eliminated what ever personal feeling the donor might have for the recipient. The typical American, for instance, is bound to feel different toward the victims of Hurricane Katrina than the victims of a Chinese earthquake or an African drought. She is also likely to feel different about a hurricane victim and an AIDS victim.

So the Dictator game seemed to go straight to the core of our altruistic impulse. How would you play it? Imagine that you're the dictator, faced with the choice of giving away half of your $20 or giving just $2. The odds are you would . . . divide the money evenly. That's what three of every four participants did in the first Dictator experiments. Amazing!

Dictator yielded such compelling results that the games soon caught fire in the academic community. They were conducted hundreds of times in myriad versions and settings, by economists as well as psychologists, sociologists, and anthropologists. As it turns out, it didn't matter if the experiment was run in western Mongolia or the South Side of Chicago: people gave. By now the game was usually configured so that the dictator could give any amount (from $0 to $20), rather than being limited to the original two options ($2 or $10). Under this construct, people gave on average about $4, or 20 percent of their money.

The message couldn't have been much clearer: human beings indeed seemed to be hardwired for altruism. Not only was this conclusion uplifting, but it rocked the very foundation of traditional economics.

Non-economists could be forgiven if they felt like crowing with satisfaction. Homo economicus, that hyper- rational, self- interested creature that dismal scientists had embraced since the beginning of time, was dead (if he ever really existed). Hallelujah!

If this new paradigm -- Homo altruisticus? -- was bad news for traditional economists, it looked good to nearly everyone else. The philanthropy and disaster- relief sectors in particular had reason to cheer. But there were far broader implications. Anyone from a high government official down to a parent hoping to raise civic- minded children had to gain inspiration from the Dictator findings -- for if people are innately altruistic, then society should be able to rely on its altruism to solve even the most vexing problems.

One of the most prolific experimental economists among the new generation was a native of Sun Prairie, Wisconsin, named John List. In 2005, thanks largely to his experience with field experiments, he was offered a tenured professor position at the University of Chicago. By now he knew the literature on altruism experiments as well as anyone. And, as someone who grew up in a family of truck drivers, he knew the real world a bit better. List set out to definitively determine if people are altruistic by nature.

His weapon of choice was Dictator, the same tool that created the conventional wisdom. But List had a few modifications up his sleeve. This meant recruiting a whole bunch of student volunteers and running a few different versions of the experiment.

He began with classic Dictator. The first player (whom we'll call Annika once again) was given some cash and had to decide whether to give none, some, or even all of it to some anonymous Zelda. List found that 70 percent of the Annikas gave some money to Zelda, and the average "donation" was about 25 percent of the total. This result was perfectly in line with the typical Dictator findings, and perfectly consistent with altruism.

In the second version, List gave Annika another option: she could still give Zelda any amount of her money but, if she preferred, she could instead take $1 from Zelda. If the dictators were altruistic, this tweak to the game shouldn't matter at all; it should only affect the people who otherwise would have given nothing. All List did was expand the dictator's "choice set" in a way that was irrelevant for all but the stingiest of players.

But only 35 percent of the Annikas in this modified, steal- a-dollar-if-you-want version gave any money to Zelda. That was just half the number who gave in the original Dictator. Nearly 45 percent, meanwhile, didn't give a penny, while the remaining 20 percent took a dollar from Zelda.

Hey, what happened to all the altruism?

But List didn't stop there. In the third version, Annika was told that Zelda had been given the same amount of money that she, Annika, was given. And Annika could steal Zelda's entire payment -- or, if she preferred, she could give Zelda any portion of her own money.

What happened? Now only 10 percent of the Annikas gave Zelda any money, while more than 60 percent of the Annikas took from Zelda. More than 40 percent of the Annikas took all of Zelda's money. Under List's guidance, a band of altruists had suddenly -- and quite easily -- been turned into a gang of thieves.

The fourth and final version of List's experiment was identical to the third -- the dictator could steal the other player's entire pile of money -- but with one simple twist. Instead of being handed some money to play the game, as is standard in such lab experiments, Annika and Zelda first had to work for it. (List needed some envelopes stuffed for another experiment, and with limited research funds he was killing two birds with one stone.)

After they worked, it was time to play. Annika still had the option of taking all of Zelda's money, as more than 60 percent of the Annikas did in the previous version. But now, with both players having earned their money, only 28 percent of the Annikas took from Zelda. Fully two-thirds of the Annikas neither gave nor took a penny.
So what had John List done, and what does it mean?

He upended the conventional wisdom on altruism by introducing new elements to a clever lab experiment to make it look a bit more like the real world. If your only option in the lab is to give away some money, you probably will. But in the real world, that is rarely your only option. The final version of his experiment, with the envelope-stuffing, was perhaps most compelling. It suggests that when a person comes into some money honestly and believes that another person has done the same, she neither gives away what she earned nor takes what doesn't belong to her.
But what about all the prizewinning behavioral economists who had identified altruism in the wild?

"I think it's pretty clear that most people are misinterpreting their data," List says. "To me, these experiments put the knife in it. It's certainly not altruism we've been seeing."

List had painstakingly worked his way into the center of an elite group of scholars who were rewriting the rules of economic behavior. Now, in order to stay true to his scientific principles, he had to betray them. As word of his findings began to trickle out, he suddenly became, as he puts it, "clearly the most hated guy in the field."

When you look at the world through the eyes of an economist like John
List, you realize that many seemingly altruistic acts no longer seem so altruistic.

It may appear altruistic when you donate $100 to your local public radio station, but in exchange you get a year of guilt- free listening (and, if you're lucky, a canvas tote bag). U.S. citizens are easily the world's leaders in per-capita charitable contributions, but the U.S. tax code is among the most generous in allowing deductions for those contributions.

Most giving is, as economists call it, impure altruism or warm-glow altruism. You give not only because you want to help but because it makes you look good, or feel good, or perhaps feel less bad.

Consider the panhandler. Gary Becker once wrote that most people who give money to panhandlers do so only because "the unpleasant appearance or persuasive appeal of beggars makes them feel uncomfortable or guilty." That's why people often cross the street to avoid a panhandler but rarely cross over to visit one.

And what about U.S. organ-donation policy, based on its unyielding belief that altruism will satisfy the demand for organs -- how has that worked out?

Not so well. There are currently 80,000 people in the United States on a waiting list for a new kidney, but only some 16,000 transplants will be performed this year. This gap grows larger every year. More than 50,000 people on the list have died over the past twenty years, with at least 13,000 more falling off the list as they became too ill to have the operation.

If altruism were the answer, this demand for kidneys would have been met by a ready supply of donors. But it hasn't been. This has led some people -- including, not surprisingly, Gary Becker -- to call for a well-regulated market in human organs, whereby a person who surrenders an organ would be compensated in cash, a college scholarship, a tax break, or some other form. This proposal has so far been greeted with widespread repugnance and seems for now politically untenable.

Iran established a similar market nearly thirty years ago. Although this market has its flaws, anyone in Iran needing a kidney transplant does not have to go on a waiting list. The demand for transplantable kidneys is being fully met. The average American may not consider Iran the most forward- thinking nation in the world, but surely some credit should go to the only country that has recognized altruism for what it is -- and, importantly, what it's not.

If John List's research proves anything, it's that a question like "Are people innately altruistic?" is the wrong kind of question to ask. People aren't "good" or "bad." People are people, and they respond to incentives. They can nearly always be manipulated -- for good or ill -- if only you find the right levers."


What do you think? Are we being manipulated by the powerful, intrusive world we currently live  in?

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