Models in economics typically assume that the individuals who inhabit them are what is called homo economicus or "rational agents," agents that are perfectly rational-- they calculate perfectly and make no mistakes as they seek their ends-- and perfectly selfish-- the "utility" which they seek to maximize (the utility maximization assumption is itself probably innocuously tautological since "utility" is just whatever it is agents want) is assumed not to incorporate the welfare of any other individual as an objective except instrumentally. Reversing Kant, other agents are regarded as means, not ends. They may be described as amoral.
Is this assumption realistic, and if not, what is the alternative? Economic experimentalists and empirical behavioralists recognize the many ways in which the rational agent assumption fails in practice, but sometimes remain reluctant to admit, if not the existence, at least the prevalence of "other-regarding behavior." Why I think this debate is conducted in a biased fashion may be illuminated by the following theoretical exercise.
First, assume that individuals have a primary utility function, u=f(c), where c is own consumption.
Next, introduce a secondary utility function, which incorporates other-regarding behavior. For simplicity let this be a linear function of all the primary utilities. Thus: V(i)=u(i)+au(1)+bu(2)+...+zu(n), where u(1), u(2), ... , u(n) are the primary utilities of agents 1...n (not including i), and a, b, ... z are "altruism coefficients." Let the secondary utility function be what agents actually seek to maximize.
Now consider two special cases the "rational agent" and the "universal altruist." The rational agent's altruism coefficients are all zero: a=0, b=0, ... z=0. The universal altruist's altruism coefficients are all 1: a=1, b=1, ... , z=1.
Note that the rational agent's secondary utility function simply collapses into the primary utility function. This is important because it underlines that the other-regarding agent is the more general case; the rational agent requires a much more restrictive assumption. This calls into question the practice of assuming rational agents and asking for special proofs to believe in altruism.
Some human behaviors are hard to reconcile with the rational agent assumption. Why do people give to charity, or sacrifice themselves in battle?
Is the "universal altruism" assumption plausible? I am perhaps eccentric in thinking that a large part of human behavior could be consistent with people being universal altruists. Why do people give only 1-2% of their incomes to formal charity? Well, they need a lot of their income just to keep themselves fed and clothed and sheltered and healthy, and to keep generating the surplus value-- that is, value not captured by them but spilling over to others-- that they generate in their daily activity as workers, customers, etc. They spend a lot on family and friends, to whom they are closer and whose needs they know better, even if those needs are not as acute as those of some others. Formal charities may be inefficient and/or create perverse incentives. Give a man a dollar, you turn him into a beggar; hire him to do something for you for a dollar, you give him the dignity of labor as well as sustenance. Charities may also be misguided about which causes are really good: thus Oxfam has agitated against free trade; Greenpeace has opposed immigration. And the impersonalism and bureaucracy is a cost. A gift given to someone we love brings joy not only for the practical benefits it confers, but for the love it expresses. Apparent selfishness may simply be a form of delegation: one might be a universal altruist, and think: my welfare is part of the general welfare, and I'm the one most competent to look after it. I don't want to take this too far: I don't really think the world is full of universal altruists. But I think it's a mistake to regard this as obvious. This is important because if there are universal altruists, they may not look like heroes, they may look... normal. And the fact that only 1-2% of income is given to formal charity is not, I think, necessarily incompatible even with universal altruism.
The main point, though, is that to reject the universal altruist should not imply acceptance of the rational agent. Most likely both special cases are false. Most people may care very little about the destitute millions in Africa, and not much about the problems of American inner-city youth, yet care quite genuinely, in a non-strategic and not-intentionally-self-serving way (that it may happen to benefit them on average and in the end is not a proof of selfish motives), about their family, friends, church, colleagues, company, country, and so forth. The justification for the rational agent assumption is not its realism, but that economists specialize in studying situations where other-regarding behavior is not important: after all, in a perfectly competitive market, since the outcome is socially optimal, a universal altruist would presumably behave in the same way as a selfish rational agent. That ignoring altruism in such cases has been analytically useful is no justification for overturning the commonsense conviction that people do, and should, take one another's welfare into account.
I didn't know Greenpeace opposed immigration. Of course, it's not like I needed additional reasons to revile them.
Posted by: Nato | February 26, 2008 at 01:01 PM