Using experimental economics to measure the effects of a natural educational experiment on altruism

Economic research examining how educational intervention programs affect primary and secondary schooling focuses largely on test scores although the interventions can affect many other outcomes. This paper examines how an educational intervention, a voucher program, affected students' altruism. The voucher program used a lottery to allocate scholarships among low-income applicant families with children in K-8th grade. By exploiting the lottery to identify the voucher effects, and using experimental economic methods, we measure the effects of the intervention on children's altruism. We also measure the voucher program's effects on parents' altruism and several academic outcomes including test scores. We find that the educational intervention positively affects students' altruism towards charitable organizations but not towards their peers. We fail to find statistically significant effects of the vouchers on parents' altruism or test scores.     

Capital Accumulation and Fiscal Policy in an OLG Model with Family Altruism

The idea of family altruism is that parents care only about their children's income and not about the use of this income made by the children. First, we establish dynamical properties which place the OLG model with family altruism halfway between the model with pure life‐cyclers ( Diamond 1965 ; American Economic Review 55, 1126–1150) and the one with dynastic altruism ( Barro 1974 ; Journal of Political Economy 82, 1095–1117). Then, we show that this concept leads to interesting fiscal policy conclusions less clear‐cut and more realistic than those obtained with the two previous standard OLG models: a pay‐as‐you‐go social security is neutral but not a public debt.     

Disentangling the sources of pro-socially motivated effort: A field experiment

This paper presents evidence from a field experiment, which aims to identify the two sources of workers' pro-social motivation that have been considered in the literature: warm glow altruism and pure altruism. We employ an experimental design that first measures the level of effort exerted by student workers on a data entry task in an environment that elicits purely selfish behavior and we compare it to effort exerted in an environment that also induces warm glow altruism. We then compare the latter to effort exerted in an environment where both types of altruistic preferences are elicited. We find evidence that women increase effort due to warm glow altruism while we do not find any additional impact due to pure altruism. On the other hand, men in our sample are not responsive to any of the treatments.     

Donor Altruism and the Transfer Paradox in an Overlapping Generations Model

This paper examines the transfer problem between two countries when a donor exhibits altruistic utility toward a recipient in a one‐sector overlapping generations model. We demonstrate that if the donor has a larger marginal propensity to save than the recipient, the donor's altruism never contributes to donor enrichment irrespective of the degree of the donor's altruism. Donor enrichment occurs only if the donor has a smaller marginal propensity to save and a sufficiently high level of altruism. These findings imply that the altruism of a donor toward a recipient does not necessarily explain the motivation to voluntarily provide a transfer.     

Envy and Altruism: Contrasting Bivariate and Univariate Prospect Preferences

We compare prospect ordering with and without envy and altruism. We find that envy can induce a violation of the univariate first‐degree stochastic dominance (FSD), and thus a violation of the classic expected utility monotonicity axiom. Surprisingly, altruism can also violate FSD preferences. The intuitive explanation of the result in the case of altruism hinges on the sign of the mixed derivative of the bivariate preference: the individual might prefer a certain correlation between her wealth and her peer group's wealth, and is therefore willing to violate FSD as long as the outcomes of the two parties are ordered according to her preferences. When investments are considered, envy and altruism can distort not only preferences but also actual choices.     

The evolution of morality and the end of economic man

1871 saw the publication of two major treatises in economics, with self-seeking economic man at their center. In the same year Darwin published The Descent of Man, which emphasized sympathy and cooperation as well as self-interest, and contained a powerful argument that morality has evolved in humans by natural selection. Essentially this stance is supported by modern research. This paper considers the nature of morality and how it has evolved. It reconciles Darwin’s notion that a developed morality requires language and deliberation (and is thus unique to humans), with his other view that moral feelings have a long-evolved and biologically-inherited basis. The social role of morality and its difference with altruism is illustrated by an agent-based simulation. The fact that humans combine both moral and selfish dispositions has major implications for the social sciences and obliges us to abandon the pre-eminent notion of selfish economic man. Economic policy must take account of our moral nature.     

Intrinsic Motivations of Public Sector Employees: Evidence for Germany

We examine differences in altruism and laziness between public sector employees and private sector employees. Our theoretical model predicts that the likelihood of public sector employment increases with a worker's altruism, and increases or decreases with a worker's laziness depending on his altruism. Using questionnaire data from the German Socio‐Economic Panel Study, we find that public sector employees are significantly more altruistic and lazy than observationally equivalent private sector employees. A series of robustness checks show that these patterns are stronger among higher educated workers; that the sorting of altruistic people to the public sector takes place only within the caring industries; and that the difference in altruism is already present at the start of people's career, while the difference in laziness is only present for employees with sufficiently long work experience.     

Intergenerational transfers,demographic transition,and altruism: Problems in developing Asia

This paper develops a three‐period overlapping‐generations model where middle‐aged agents care about not only their own lifetime utility but also their old parents' and children's well‐being. The doubly altruistic agents choose amounts of intergenerational transfers to their old parents and children as well as private savings. The government specifies amounts of public transfers from working adults to the dependents. The model also takes the effects of demographic transition on the burdens of supporting the elderly and children into account. Using 23 countries' data from the National Transfer Accounts (NTA ), we estimate the degrees of filial and parental altruism and adjust them for their respective life expectancy and fertility rates. The findings suggest that people in developing countries are more parentally altruistic than those in developed ones while the adjusted degree of filial altruism tends to be low in developing Asia. Our welfare analyses reveal that the developing Asian countries must introduce more comprehensive public welfare programs for the elderly to maximize social welfare. Moreover, their low adjusted degree of filial altruism may trap the developing Asian countries at the low levels of public old‐age support and social welfare as the further demographic transition ensues.     

Free‐Riding and the Provision of Public Goods in the Family: A Laboratory Experiment*

We examine the provision of family public goods using experimental economics methods. With sufficient altruism and shared resource arrangements, families can provide the efficient level of family public goods. Becker's Rotten Kid Theorem asserts that transfers from altruistic parents will induce children to maximize family income even if children are not altruistic toward other family members. Consistent with altruism, parents and children contributed more to a public good when in groups with family members than when in groups with strangers. In contrast to the predictions of the Rotten Kid Theorem, however, children's behavior fell short of maximizing family income.     

Keynes,Ricardo and the classical theory of interest

Keynes made harsh and repeated attacks on the work of Ricardo, blaming him particulary for what Keynes called the ‘classical theory’ of interest. Garegnani and others argue that Keynes' criticisms of the classical theory of interest apply to later neoclassical writers, but not to Ricardo. This paper re-examines Keynes' criticisms. It argues that Keynes attacked Ricardoapos;s theory of interest despite his awareness that Ricardo did not hold the ‘classical theory’. Moreover, Keynes not only expressed sympathy for Ricardo's understanding of interest, but his criticisms which do apply to Ricardo do not address Ricardo's theory of interest.     

Optimal contracting with altruism and reciprocity

Motivated by the recent experimental evidence on altruistic behavior, we study a simple principal–agent model where each player cares about other players' utility, and may reciprocate their attitude towards him. We show that, relative to the selfish benchmark, efficiency improves when players are altruistic. Nevertheless, in contrast to what may be expected, an increase in the degree of the agent's altruism as well as a more reciprocal behavior by players has ambiguous effects on efficiency. We also consider the effects of the presence of spiteful players and discuss how monetary transfers between players depend on their degrees of altruism and spitefulness.     

Opting out and topping up reconsidered: Informal care under uncertain altruism

We study the design of public long‐term care (LTC) insurance when the altruism of informal caregivers is uncertain. We consider non‐linear policies where the LTC transfer depends on the level of informal care, which is assumed to be observable, while children's altruism is not. Our policy encompasses two policies traditionally considered in the literature: topping up policies consisting of a transfer independent of informal care, and opting out policies entailing a positive transfer only if children fail to provide care. We show that both total and informal care should increase with the children's level of altruism. This is obtained under full and asymmetric information. Public LTC transfers, on the other hand, may be non‐monotonic. Under asymmetric information, public LTC transfers are lower than their full information level for the parents whose children are the least altruistic, while it is distorted upward for the highest level of altruism. This is explained by the need to provide incentives to highly altruistic children. In contrast to both topping up and opting out policies, the implementing contract is always such that social care increases with informal care.     

Sympathy and its discontents: ‘Greatest happiness’ versus the ‘general good’

The paper explicates the utilitarian principle of sympathy in terms of the shape of what has been called the ‘sympathetic gradient’, which determines the allocation of goods to those close by and afar. It examines challenges to the utilitarian impartial weighting scheme that emerged in the literary community, and from evolutionary biology. As sympathy came to be seen as an impediment to evolutionary perfection, voices urged that sympathy be suppressed. Darwin's Descent of Man explicitly countenanced the suppression of sympathy in a trade-off of happiness for the perfection of the race. A post-Darwinian argument concerning a different capacity for pleasure accompanied the demise of sympathy in utilitarian economic analysis. Utilitarians then moved from the early presumption of ‘everyone to count for one’ to counting ‘every equal increment of pleasure’ equally.     

Persistent inequality: An explanation based on limited parental altruism

This paper proposes an alternative theory for the observed persistence in income inequality across households, a theory based on limited parental altruism. We argue that the degree of parental altruism is ‘limited’ by the economic status of the parent. A poor parent not only has less ability, but also has less willingness to invest in children's human capital formation. This generates a non-linearity in such investment expenditures. As a result, initial income differences may perpetuate over time—even with convex technology and convex preferences. In this context, we also compare the efficacy of the public vis-à-vis the private education system from the perspective of long run growth.     

Vilfredo Pareto on Labor: A Critical Re-examination

This article comprehensively examines Vilfredo Pareto's thoughts on labor and highlights their significance within his body of work. Like the other pioneers in neoclassical economics, Pareto disregarded worker subjectivity toward labor performance and the resulting variability in the substance of labor. Thus emasculating the human traits of labor, in his theory of pure economics, Pareto identified the nature of labor exchange with that of the exchange of nonhuman objects, thereby subsuming the former under his general equilibrium system. This neoclassical principle of rationalizing the market determination of labor exchange on its deindividuation governed Pareto's speculations throughout his work. Even his arguments in applied economics in favor of worker solidarity and strikes were grounded on this principle. It remained the basis for Pareto's opinions on actual labor relations. Pareto's frustration here turned him into an anti-unionist, but it also helped to mold his prime ideas regarding sociology and his awareness of the limits of economics. However, Pareto's adherence to his former concept of labor exchange contradicting its nature became a chief cause of his failure to integrate his economic thinking with its sociological counterpart and occasioned his sympathy with Fascism. Thus, this article concludes that Pareto's thoughts on labor profoundly affected his entire body of thought and that their flaw is not exclusive to him but inherent in neoclassical economics.     

Group Selection and the Limits to Altruism

Several evolutionary mechanisms have been identified in the literature that would generate altruism in humans. The most powerful (except for kin selection) and most controversial is group selection, as recently analyzed by Sober & D.S. Wilson. I do not take a stand on the issue of the existence of group selection. Instead, I examine the level of human altruism that could exist if group selection were an engine of human evolution. For the Sober & Wilson mechanism to work, groups practicing altruism must grow faster than other groups. I call altruistic behavior that would lead to faster growth efficient altruism. This often consists of cooperation in a prisoner's dilemma. ltruistic acts such as helping a temporarily hungry or injured person would qualify as efficient altruism. Efficient altruism would also require monitoring recipients to avoid shirking. Utilitarianism would be an ethical system consistent with efficient altruism, but Marxism or the Rawlsian system would not. Discussions of efficient altruism also help understand intuitions about fairness. We perceive those behaviors as fair that are consistent with efficient altruism. It is important to understand that, even if humans are selected to be altruistic, the forms of altruism that might exist must be carefully considered and ircumscribed.     

An economic theory of altruism based on rankings in a stable social hierarchy

In order to fully understand the interaction between selfish and non-selfish actors, social scientists need rigorous formal models of other-regarding preferences. While the current models clearly present progress relative to the self-interest approach, the evidence also makes it clear that further theoretical progress is warranted. There is ample opportunity for improving our understanding of other-regarding behavior. This paper develops a theory of economic altruism entirely compatible with self-interest utility maximization by rational individuals. Sympathy arises when someone is interested in improving somebody else’s condition, and this will also enhance the utility of the one who acts. Construed in that way, sympathetic behavior is essentially self-interested behavior. A question addressed in this paper is whether a sympathetic population of individuals will exert their income-producing labor differently than a population of egoistic individuals. Two parameters suffice to characterize the altruistic conduct of an individual: a parameter governing the individual’s ranking in a social hierarchy and a parameter determining the sensitivity of an individual’s sympathy for others at different social ranks. The main testable implication of the theory is that in a large population, where each individual has a concave utility function embodying sympathy, the altruistic behavior of any specific individual is determined by his rank in the social hierarchy. A second implication is that in a horizontal social hierarchy, the most altruistic people in the population are those in the middle of it.     

Trust and reciprocity: misunderstandings

We contest a reductive view of trust, quite diffused in economics, and in studies influenced by the Game-Theory framework: the idea that trust has necessarily to do with contexts requiring “reciprocation”; or that trust is trust in the other’s reciprocation. A multi-layer cognitive model of trust will be proposed. Trust is not conceived only as an attitude towards the other, implying different kinds of beliefs (evaluations, expectations, beliefs on the other”s motives, etc.), but also as a willingness to rely on others that makes us dependent and vulnerable to them, as well as a concrete act of reliance based on this. Not necessarily we trust people because they will be willing to reciprocate; and we do not necessarily reciprocate for reciprocating. Trust (even “genuine” trust) is based on a variety of motivations ascribed to others and makes prevail the adoption of our needs and goals: from “altruism” to “self-interest”, from reciprocation to norms or to affective reasons.     

Mixed feelings: Theories of and evidence on giving

This paper examines possible motives and institutional factors that impact giving. Specifically, I consider alternative theories parallel to dictator experiments that generate evidence on both allocation decisions and their effect on feelings. A number of new empirical findings as well as new interpretations for previously reported findings result. A novel test distinguishes warm glow from impure altruism and rules out the former as the sole motive for giving. Very generous donations to charities that aid the needy (with modal gifts of the entire dictator's stakes) cannot be attributed to familiarity with the charities. A charity that offers a matching grant increases its revenues by drawing donors and donations away from one that does not, although aggregate charitable donations do not rise. Additional results on emotions paint a picture of “mixed feelings:” generosity creates good feelings when the recipients are charities and bad feelings when they are fellow students. No group of dictators, however, feels better, on average, than a control group that is given no opportunity to donate. I propose a simple model that accounts for these results on allocation behavior and feelings by incorporating elements of two approaches, unconditional altruism and social preference theories, that to date have mostly evolved independently. A critical feature of this model is the social norm, and the results of the experiments corroborate the theory in the context of two norms of distributive justice that are important to real world giving: equity and need.     

Technology,the Technology Complex and the Paradox of Technological Determinism

This paper examines the working definitions of the term 'technology' across a range of disciplines such as industrial relations, organizational behaviour, operations management and development economics. The precise 'subdefinition' of technology in use depends on the disciplinary problematic. We develop a conceptual device called the technology complex to reveal the pattern that is observable when a large number of subdefinitions are compared. The technology complex is a list of the distinctive 'elements' that comprise the disciplinary subdefinitions of technology and it orders this list of elements from the 'physical' to the 'cultural'. The technology complex captures the idea that a working definition of technology will be some selection from the elements of the complex. The technology complex also captures the idea that in its most general sense 'technology' is 'knowledge related to artefacts'. We apply the technology complex to the issue of determinism in technological and social change using the examples of aircraft design and robotics. We argue that there is not an 'either—or' issue between the social and the technological influences on change since the terms are not distinct: 'technology' always includes some aspect of the social. We show how what appears to be 'technological determinism' in the examples of aircraft design and robotics use can be understood through the technology complex.