altruism: theory and empirical evidence · 1.2 altruistic punishment and rewarding 20 mu 20 mu 10...

Altruism:

Theory and empirical Evidence

Erik Hermann Anne-Kathrin Marsel May 17, 2010 Seminar: Inequality IBA Master

Table of contents

1 Altruistic Behavior

1.1 Dictator Games

1.2 Altruistic Punishment and Rewarding

1.3 Reciprocal Altruism and Strong Reciprocity

2 Altruism and Inequity Aversion

3 Altruism & Income Distribution

3.1 Altruism in low-income Areas

3.2 Altruistic Parents: Raising Children

3.3 Limits of Altruism: Generosity vs. Altruism

4 Consistency of Preferences for Altruism and Framing Effects

5 Summary

1 Altruistic Behavior

•  “personal sacrifice in behalf of others” (Gintis et al. 2003)

•  “act of giving up of value to improve the well-being of another” (Kamas et al. 2008)!

•  human characterized by division of labor,

networks of exchange & cooperation

•  cooperation in animal world restricted to kin selection

•  existence of both: altruism & envy counterintuitive,

but certain mixture of both evolutionary stable

Definitions

Characteristics

1.1 Dictator Games

•  game-theoretic viewpoint: no transfer by dictator

•  But: altruism observable in multitude of experiments with

different experimental designs & recipient groups:

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•  Punishment: illustrated by ultimatum game

Theoretical assumption:

•  every positive offer accepted by responder,

Empirical Evidence(e.g. Güth et al 1990):

•  rejection due to proponents’ assumption of high stake of punishers among

responders, higher offers & consequently benefit for all responders

•  phenomenon of norm enforcement by individuals economically not affected

by violations

! Evidence via third-party punishing game: third party (punisher) informed

about transfer from dictator to recipient + opportunity of punishment by

stake of own endowment given


(1) Experiment by Fehr/Fischbacher (2003)

55% punishment, if less than half of dictator’s endowment transferred &

negative correlation of punishment (also expected by recipients)

(2) Experiment by Fehr et al. (1993)

10 MU 10 MU

Optional transfer by both


20 MU 20 MU

10 MU + informed about A‘s donation

10 MU

(2) Experiment by Fehr et al. (1993)

•  assuming selfishness: no transfer of B independent of A’s donation

Conclusion

in 50% of the cases positive transfer by B & positive correlation between transfer of A and B


Sociological viewpoint (Trivers (1971))

P(death of drowning man) = 50% P(death of rescuer) = 5%

•  survival (death) of drowning man in case of survival (death) of rescuer

•  in case of single/isolated event, no incentive for rescuer to help

•  in case of change of roles & reversal of survival chances, profit for both of

risking their lives (reduction of 50% chance of dying to 10% probability)

Scenario generalized to community: selection of two individuals risking their lives over those facing risk on their own


2. Age/reproductive value of organisms

1. Kin selection (even observable in former hunter-gatherer societies)

7. Failure to reciprocate (cheating): gross vs. subtle cheating

4. Number of reciprocal relationships (group formation)

5. Friendship/liking + sympathy/gratitude

6. Moral aggression (education/punishment of reciprocators)

3. Cost-benefit ratio of reciprocal altruism


Test of strong reciprocity on the labor market (Fehr et al. 1997)

Contract offer by employer with certain wage & desired effort level

Possibility to accept by employee ! but not demanded to perform according to contracted effort level (no penalty for deviation)


Test of strong reciprocity on the labor market (Fehr et al. 1997)

According to theory: zero-cost effort level by employee & minimum

wage to facilitate acceptance by employers

But due to reciprocity much higher wages & effort levels

2 Altruism and Inequity Aversion

•  Assumption of transfers to individuals with in equitable lower economic

payoffs (comparison to reference group = crucial)

•  linked to feelings of guilt + envy

guilt ! altruistic rewarding (individual better off than reference group)

envy ! altruistic punishment (attempt to penalize)

•  Often transferred to inequality aversion (attempt to limit difference

between own payoffs and those of reference group)

•  Cooperation in one-shot prisoner’s dilemma ! rejection of low offers in

ultimatum games, high punishment in third-party punishment game

3 Experiments on Income Distribution 3.1 Altruism in low income areas

Experimental Evidence Schluter, Wahba (2004)

!  Give cash transfers to parents, conditional on regular school attendance of their children

!  Examined expenditures

!  Child related: clothing & toys

!  Parental goods tobacco & clothing

!  Household public good food

!  Aiming to find evidence for parental altruism

!  Results helpful for development of effective welfare programmes

Results

Interpretation

Found significant and symmetric positive effects on expenditure for boys‘ & girls‘ clothing

Insignificant impact on parental goods clothing & tobacco

! Strong evidence of parental altruism

Efficient design of governmental transfer programmes requires this knowledge

(I)

(II)

(III)

Evidence by Lindbeck, Nyberg (2006)

•  Degree of parents‘s altruism defines norms of children

•  Examining efforts of parents to instill work norms in their children

•  Assumptions

(1) generous social insurance arrangements tend do weaken parents‘ initiatives to instill such norms in their children

(2) children with altruistic parents could free-ride if they fail on the labor market

•  Inglehart et al. proved: European welfare states do not require „hard work“ as a quality especially for children to learn at home

3.2 Altruistic Parents: Raising Children

Non-monetary altruistic impacts

Social contacts

Emotional support

Control techniques

Work norms

Achievement motivation

Furnham (1990): attitude to work / unemployment correlates between parents and children

Impacts

Results

Altruistic parents‘ interest in instilling work norms depends on children‘s wages & parental income & ambitions to instill work norms ! rotton-kid theorem (Becker, 1974)

Concerning the influence of social insurance arrangements: (1) weaken the economic efforts to work and (2) lead to weaker incentives for parents to instill work norms

If failure in the labor market becomes more widespread, the perceived non-economic cost of failing declines (Modig & Boberg 2005) ! the more advanced a welfare state is, the less ambitions to instill work norms

(I)

(II)

(III)

Empirical studies by Wright (2000) about role and meaning of charitable giving in different countries & cultures

3.3 Limits of Altruism: Generosity vs. Altruism

vs.

Americans are more altruistic than the British?!

Results: Giving patterns

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S#$*+!<#'7C*'7#8!B*%);!#8!%#:7*+!;?'&!

UK: Pure Altruism / US: Generosity

Conclusion

!  Verification by Public Goods Game (experiment by Andreoni 1999):

!  one token in private good earns one cent for subject

!  one token in public good earns a half cent for all subjects participating

! description as positive externality, alternative frame:

!  each token invested in private goods yields return of one cent, but

reduces the return of other players by a half cent

! others’ investment in private goods reduces indiv. return by a half cent

! incentives = same, but decision negatively framed for other subjects


Experiment & results: 80 participants + 10 rounds

Condition Contribution 1st round

Contribution 10th round

Contribution average

Positive-frame condition

48% 21% 34%

Negative-frame condition

27% 1% 16%

Signicantly higher free-riding (zero contributions) in negative-frame condition

(for first round higher than for all of positive condition)

“...the warm glow must be stronger than the cold prickle.”


5 Summary

!  Self-interest, profit-maximization, egoism not central + unique

human behavioral characteristics concerning cooperation/interaction,

but existence of social motives + indisputable deviations

!  Altruistic punishment/rewarding/reciprocity = influential for human

interaction + exchange

!  Creation of wealth/improvement also for other individuals

!  Rejection of assumption of pure selfishness/self-regard

!  Focus of future research: interaction/long-term effects, integration of

participants being representative for whole countries/cultures

References

! Andreoni J. (1999), Warm-Glow versus Cold-Prickle: The Effects of Positive and Negative Framing on Cooperation in

Experiments, Quarterly Journal of Economics 109, pp. 1-21,!!!

! Eckel, C.C./ Grossman P.J. (1996), Altruism in Anonymous Dictator Games, Games and Economic Behavior 16, pp. 181-191.

! Fehr, E./Kirchsteiger, G./Riedl, A (1993), Does Fairness Prevent Market Clearing? An Experimental Investigation, Quarterly

Journal of Economics 108, pp. 437-459.

! Fehr, E./ Gächter, S./Kirchsteiger, G. (1997), Reciprocity as a Contract Enforcement Device: Experimental Evidence,

Econometrica 65, pp. 833–860.

! Fehr, E./Schmidt, K. M. (1999), A Theory of Fairness, Competition, and Cooperation, Quarterly Journal of Economics 114, pp.

817-868.

! Fehr, E./Fischbacher (2003), The Nature of Human Altruism, Nature 425, pp. 785-791.

! Festinger, L. (1954), A Theory of Social Comparison Processes, Human Relations 7, pp. 117-140.

! Forsythe, R./Horowitz, J.L./Savin, N.E./Sefton, M. (1994), Fairness in Simple Bargaining Experiments, Games and Economic

Behavior 6, pp. 347–369.

Furnham, Adrian (1990), The Protestens work Ethic: The Psychology of work.related Beliefs and Behaviours, Lonodon

! Güth, W./Schmittberger, R./Tietz, R. (1990), Ultimatum Bargaining Behavior - A Survey and Comparison of Experimental

Results, Journal of Economic Psychology 11, pp. 417-449.

! Hoffman, E./McCabe, K./Shachat, K./Smith, V. (1994), Preference, Property Rights and Anonymity in Bargaining Games, Games

and Economic Behavior 7, pp. 346–380.

• Inglehart, Ronald et al. (Ann Arbor 2003), World Values Surveys ans European Vaue Surveys, 1981-1984, 1990.1993, and

1995-1997

! Johanesson, M./Persson, B. (2000), Non-Reciprocal Altruism in Dictator Games, Economic Letters 69, pp. 137-142.

!  Lindbeck, Assar, Nyberg, Sten (2006), Raising Children to work hard: Altruism, Work norms and social insurance, Quarterlly

Journal of Economics November 2006

!  Schluter, Chtistian, Wahba, Jacklin (2004), Are porr parents altruistiv? Evidence from Mexico, Univerity of Southampton

! Trivers, R. L. (1971), The Evolution of Reciprocal Altruism, The Quarterly Review of Biology 46, pp. 35-57

!  Wright, Karen (2000), Generosity vs. Altruism, Center for Civil Society, London Schhol of Economics, London

altruism: theory and empirical evidence · 1.2 altruistic punishment and rewarding 20 mu 20 mu 10...

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