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Altruism, Morality, and Economic Theory

Altruism, Morality, and Economic Theory

Edited by Edmund S. Phelps
Copyright Date: 1975
Published by: Russell Sage Foundation
Pages: 244
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  • Book Info
    Altruism, Morality, and Economic Theory
    Book Description:

    Presents a collection of papers by economists theorizing on the roles of altruism and morality versus self-interest in the shaping of human behavior and institutions. Specifically, the authors examine why some persons behave in an altruistic way without any apparent reward, thus defying the economist's model of utility maximization. The chapters are accompanied by commentaries from representatives of other disciplines, including law and philosophy.

    eISBN: 978-1-61044-679-2
    Subjects: Economics, Psychology, Sociology

Table of Contents

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  1. Front Matter
    (pp. i-vi)
  2. Table of Contents
    (pp. vii-viii)
  3. Preface
    (pp. ix-x)
  4. Introduction
    (pp. 1-10)
    Edmund S. Phelps

    The compartmentalizing of the study of human behavior and human knowledge into separate fields of inquiry, and the segregation of scholars into these compartments, seems to be a widely acknowledged fact of scientific life. However, the separations have never been airtight, and the leakages and seepages have often been as important as the walls limiting them. Men of great talent like Hume, Mill, Pareto and Ramsey commuted comfortably from economics to philosophy, or to politics or sociology, with their talents evidently conserved in the process. Just as successful nuclear physicists have felt licensed to share with us their views on...

  5. PART 1

    • Gifts and Exchanges
      (pp. 13-28)
      Kenneth J. Arrow

      Richard Titmuss is justly distinguished for his devotion to the welfare of society at large and particularly to those who have received the least of society’s benefits. He has not rested content with the moral satisfaction of advocating the good but has immersed himself in the detailed factual analysis and speculative thinking needed if good intentions are to become good deeds. The gift he has made of his talents has now found an appropriate embodiment in his latest and much-noticed study,The Gift Relationship: From Human Blood to Social Policy.¹ The study focuses specifically on the workings of a particular...

    • Economics of Trust, Altruism, and Corporate Responsibility
      (pp. 29-44)
      Roland N. McKean

      Greater ability to trust each other to stick with agreed-upon rules would save many costs and make life much pleasanter. It would economize on locks and keys, safes and vaults, guards, monitoring devices and procedures, some of the fine print in contracts, and, perhaps most important of all, time and anguish for everyone. It might make life still less costly (or more pleasant) if, in addition, concern for others was more prominent in our utility functions—that is, if we were less selfish. These are different phenomena—trust and altruism; the former means trusting each other to adhere to relatively...

    • Business Responsibility and Economic Behavior
      (pp. 45-56)
      William J. Baumol

      Under pressure from many sides, corporate managements have been quick to assert their agreement in principle to the proposition that the firm should concern itself with the ills of society, particularly as those ills have begun to seem increasingly threatening. After all, the modern firm has shown itself to be one of the most efficient economic instruments in history. Since the beginning of the industrial revolution it has increased real per capita incomes perhaps twenty-fold, incredible though that may seem. It has doubled and redoubled and redoubled again the energy placed at the service of mankind, and has achieved an...

    • Comment
      (pp. 57-62)
      Guido Calabresi

      The three papers I am to discuss appear to alternate between viewing altruism as a commodity which has value in our individual preference functions, and as a tool or device which might be useful in achieving an efficient allocation of other goods. Let us assume that Taney is altruistic—that is, he gets pleasure from Marshall’s well-being— or even that Taney gets pleasure from the existence of altruism in the world—that is, that he gets pleasure from Marshall’s getting pleasure from Chase’s well-being. One may view these preferences of Taney’s as matters to be taken into account in determining...

    • Comment
      (pp. 63-68)
      Thomas Nagel

      While the most conspicuous departures from self-interest in economic transactions are no doubt caused by folly rather than by altruism, some form of consideration for the welfare of others certainly plays a significant role in economic life. I shall discuss three kinds of cases: (1) The contribution of support to an institution or practice from which the contributor benefits, even though his benefit is not contingent on his contribution; (2) the attempt to pursue and avoid certain causal relations between one’s own welfare and that of others; (3) the inclusion of altruistic motives within the scope of a service offered...

  6. PART 2

    • The Samaritan’s Dilemma
      (pp. 71-86)
      James M. Buchanan

      This paper is an essay in prescriptive diagnosis. It represents my attempt to show that many different “social problems” can be analyzed as separate symptoms of the same disease. The diagnosis, as such, may be accepted without agreeing that the disease amounts to much or that, indeed, it is disease at all. Prescription for improvement or cure is suggested only if the disease is acknowledged to be serious. Even if the diagnosis and prescription be accepted, however, prospects for “better social health” may not be bright because, as the analysis demonstrates, the source of difficulty may lie in modern man’s...

    • The Indeterminacy of Game-Equilibrium Growth in the Absence of an Ethic
      (pp. 87-106)
      Edmund S. Phelps

      A recent paper by Robert Pollack and myself¹ essays the optimal saving problem when, by reason of (limited) selfishness on the part of each generation, future generations will not consume and save the capital they inherit in the proportions that the current generation would like them to do. This situation poses for each generation a “second best” problem or “sub-optimization” problem—neither term is wholly appropriate—whose solution depends upon the assumptions made by each generation about future saving behavior.

      If each generation expects future generations to behave as it would behave in their situations, then there may result a...

    • A Mathematical Note
      (pp. 107-114)
      Wilfried M. A. Pauwels

      The purpose of this note is twofold. First, we want to propose an alternative and simpler derivation of the results obtained [above] by E.S. Phelps. Secondly, we want to apply these results to a continuous version of the earlier model on game-equilibrium growth examined by E. S. Phelps and R. A. Pollak.¹

      In section I we examine the general properties of the game-equilibrium consumption function using the Hamilton-Jacobi partial differential equation. In section II we apply these results to a model which uses the same pro duction function and utility function as Phelps and Pollak. Finally, in section III, we...

    • Charity: Altruism or Cooperative Egoism?
      (pp. 115-132)
      Peter Hammond

      If a Covenant be made, wherein neither of the parties performe presently, but trust one another; in the condition of meer Nature, (which is a condition of Warre of every man against every man,) upon any reasonable suspition, it is Voyd: But if there be a common Power set over them both, with right and force sufficient to compell performance; it is not Voyd. For he that performeth first, has no assurance the other will performe after; because the bonds of words are too weak to bridle mens ambition, avarice, anger, and other Passions, without the feare of some coerceive...

    • Comment
      (pp. 133-140)
      Edward F. McClennen

      James Buchanan has treated us to a most interesting and provocative analysis of what he regards as a crucial problem facing modern, affluent society. Like himself, I find the game matrices on which he bases much of his analysis to be both interesting and suggestive. But I find myself somewhat in disagreement with him about the merits, from the point of view of a calculus of rational choice, of playerAattempting a “strategic” as opposed to a “pragmatic” approach to the sequential version of thefirstmatrix. There is a problem of parity of reasoning here, which might lead...

    • Comment
      (pp. 141-146)
      Karl Shell

      The static general equilibrium model has left us with a fundamental proposition in welfare economics: If “external effects” are absent from consumption and production, then a competitive equilibrium allocation is also a Pareto optimal allocation. Much of social policy may be thought of as an attempt to cope with or exploit these externalities. Phelps’s paper on game-equilibrium growth focuses on adynamiceconomy with consumption externalities. Individuals are neither perfectly selfish nor perfectly altruistic. The utility function of a generation depends upon its own consumption and upon the consumption of each of the future generations.

      Since Phelps’s generations are not...

  7. PART 3

    • Private Philanthropy and Public Finance
      (pp. 149-170)
      William Vickrey

      Fiscal support for private philanthropy can take a number of forms. These include the making of outright grants to private philanthropic agencies, assignment of parts or all of certain revenues, exemption of philanthropic institutions from various taxes on property used or on transactions involved in their activities, exemption from taxes on investments, the proceeds of which are devoted to philanthropic activities, exemption from estate, gift or inheritance tax of amounts contributed to such philanthropies, and the granting of credits or deductions for charitable contributions under individual and corporation income taxes. These measures have varying impacts on philanthropic activity and have...

    • Toward a Theory of the Voluntary Non-Profit Sector in a Three-Sector Economy
      (pp. 171-196)
      Burton A. Weisbrod

      This paper is an exploratory effort to examine the role of a voluntary, “philanthropic” sector in an economy with public and private (for-profit) sectors and with collective-consumption and private-consumption goods. More generally, it seeks an answer to the questions what factors determine which goods will be provided governmentally, which privately in for-profit markets, and which in voluntary markets. The approach is primarily positive, attempting particularly to predict the circumstances under which the voluntary sector will develop, grow and decline. A model will be fashioned in which certain behavioral and organizational constraints limit public-sector and for-profit sector activities and stimulate the...

    • Toward a Behavioral Theory of Philanthropic Activity
      (pp. 197-224)
      Bruce R. Bolnick

      Much of the all-too-scarce literature on the economics of philanthropy is devoted to analyses of the effects of philanthropic or charitable activity¹ on interesting economic phenomena. This genre of the theory is typified by the analysis of income redistribution presented by Hochman and Rodgers²: assuming that utility functions contain interpersonal arguments (e.g. that an increase in Jeff’s income will benefit Mutt to some extent), redistribution can be considered as an optimality problem. David Johnson has carried this approach even farther, examining the patterns of exchange generated under a variety of assumptions about the form of interdependent utility functions.³ By assuming...

    • Comment
      (pp. 225-228)
      Amartya Sen

      William Vickrey has presented a penetrating analysis of the U.S. fiscal system related to philanthropy and has made a number of well-argued suggestions for reform. I have only a few comments. First, the opaqueness of the tax refund system may, in fact, be part of its attraction to donors in so far as a relatively small net contribution is made to look like a much larger donation. This fact would not affect Vickrey’s expectation that a tax reform which makes things less opaque should, if implemented, increase total donation, but it is of relevance in explaining the continuation of the...

  8. Index
    (pp. 229-232)