Pro-Human Extremist

Extremism in the defense of humanity is no vice

Using the economics of altruism

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In the last post, I described how altruistic behaviors can be explained economically, in terms of utility functions where the two goods are our own consumption and another person’s utility. An indifference map based on such a function would predict altruistic actions any time we can give up some of our own consumption to increase another person’s utility enough that the new combination of our consumption and their utility that has a higher utility for us. If we can buy enough increase in their utility at a low enough cost to ourselves, we’d make that trade. How about some examples of this?

Say you run into a complete stranger who’s really thirsty and is one quarter short of the cost of a drink in a vending machine. No stores are open, so the vending machine is their only hope. Would you give them a quarter so they can slake their thirst? They’re a complete stranger, so you’re never going to get your money back or get any intangible rewards from them for your generous action, other than hopefully a hearty thanks. But the cost to you is small and the benefit to them may be disproportionately great. Does their utility factor strongly enough into your utility function that you would trade a small amount of your own consumption (however much you could buy with a lousy quarter) to make them better off?

I’m too polite to ask for your answer, but while you’re mulling it over I do want to acknowledge that the cost of the quarter may reward you in other ways, besides the increase in the other person’s utility. Humans are complex social animals, and all sorts of emotions about giving and receiving are programmed into us by some combination of genetic and social influences. Being generous in this situation may raise your self-esteem, and that may cause you pleasure. If you don’t give a quarter, you may violate some ingrained moral norm about helping out people who are in need, and that may cause you to feel guilty. Or you may be influenced by the slight chance of other people hearing about what you did in this situation.

Any of those motivations could factor into your decision. So if you do give that poor thirsty person a quarter, we can’t be positive that their utility does indeed factor into your utility function. But your actions can be explained in terms of the value to you of their utility—in terms of altruism. I emphasize this because some people delight in undercutting the idea of altruism by pointing out that these other motivations exist. But that fact by no means rules out that altruism is also a bona fide human motivation, and may explain a lot of what we do.

Another nice example is the ads you’ve probably seen showing deprived children in tropical countries that you can help feed for just pennies a day. You don’t know these children and probably never will, but the ads promise that a small decrease in your own consumption will dramatically increase their utility. Would you make that trade? Would that new combination of their utility and your consumption increase your own utility?

This example illustrates the well-established economic principle of diminishing marginal utility: if you have almost no money, then a dollar increases your utility more than if you already have a lot of money and get one dollar more. Pennies a day would increase the child’s utility far more than losing the same number of pennies would decrease yours, if you’re a fairly affluent member of a developed economy. So even though the child is a perfect stranger, you can buy a lot of their utility with a relatively small cost to your own consumption, which means the trade-off may increase your utility even if the well-being of a perfect stranger isn’t vitally important to you (a.k.a., only weakly factors into your utility function).

But if it’s really just the child’s utility that is motivating you, then you should be almost as likely to pony up to support a second child, and a third, and so on until you’ve given up so much money that a further loss of consumption would actually reduce your utility more than it would be increased by the knowledge that a child somewhere has been fed. That would happen eventually if you kept on giving. Each donation leaves you with less money than before, so each bit of money you give up should lower your utility more than the last one did. (That’s the principle of diminishing marginal utility in reverse, by the way.) But what are the chances that after just one donation you’d reach that critical point where the next donation wouldn’t be worth it to you? That would imply that you had been at a point where your loss of money and the child’s gain of food had almost exactly equal value in your utility function.

My hunch is that the vast majority of people contribute enough in these campaigns to support a single child and then stop, which implies that there are other motivations at work—not necessarily to the exclusion of a sincerely altruistic motivation, but at least in addition to one. People  may benefit from the boost to their self-esteem of knowing that they were generous enough to help out a needy child, and that benefit may more or less max out after one donation. A second donation would have to be motivated only by the value of a second child’s well-being, which may not be quite enough to balance the loss of consumption in their utility function. Or a picture of one starving child may only help the average person derive utility from the thought of one child being given food, and their imagination may not extend to a second. Or a single donation may be small enough that they don’t feel the need to carefully weigh the costs and benefits to themselves of making it, whereas giving in quantity may call for a deeper self-examination that they may not be up for at the moment. Truly, the human heart is mysterious and complex!

© Joel Benington, 2011.

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Written by Joel Benington

June 2, 2011 at 6:45 pm

Posted in altruism, economics, numbers

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