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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1.2 Altruistic Punishment and Rewarding

•  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

1.2 Altruistic Punishment and Rewarding

(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

1.2 Altruistic Punishment and Rewarding

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

1.3 Reciprocal Altruism and Strong Reciprocity

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

1.3 Reciprocal Altruism and Strong Reciprocity

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

1.3 Reciprocal Altruism and Strong Reciprocity

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)

1.3 Reciprocal Altruism and Strong Reciprocity

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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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

4 Consistency of Preferences for Altruism and Framing Effects

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.”

4 Consistency of Preferences for Altruism and Framing Effects

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

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

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817-868.

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1995-1997

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Journal of Economics November 2006

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