Review accomplished in late September, early-October, 2002, with modifications in 2003 and again in 2004, with the 2004 elaborations emerging from presentations and interactions with graduate students in the AECN 896- Behavioral Economics class, Spring, 2004. Special thanks are due Levente Littvay and Christopher Larimer for their presentations on Part I and Part II, especially the empirical evidence highlighted in these two parts.
Reference:
Sober, E. and D. S. Wilson. Unto Others: The Evolution and Psychology of Unselfish Behavior. Cambridge, MA: Harvard University Press, 1998 (third printing 2000).
Bentham wanted the University's Board of Trustees to live-up to that which Bentham and Mill had taught about morality and politics! So, he demanded that his egoistic presence be in attendance at the Trustee meetings! Life, indeed, human nature, was all about avoiding pain and seeking pleasure.... not only what it ought to be, but what it in fact was (S&W, 1998, p. 1). The ego was to be recognized and rewarded.
The foundation on which modern economics has been built... the philosophy of utilitarianism, the psychology of egoism-hedonism... has little basis in scientific fact. It is perhaps equally likely that individuals have a pluralist philosophy that includes others, and has a psychology of empathy-altruism as well as egoism-hedonism.
S&W note how the "individual-level functionalism" represents the view they are opposing in the book. Part I of the book explores the evolutionary biology literature. Part II focuses on the social sciences and philosophy.
While we will focus herein on Frank (2004), it perhaps will help in setting the stage for this review to consider some other key books, materials in a quick, fly-by overview. Frank (2004) is just one of many books contributing to the dialogue here, and was selected for this IBES Section Track event Free Session due to the Theme: "Has 'cooperation' Lost its Luster? Understanding the Evolution of Policy and Practice in Agriculture, the Environment and Rural Communities." Frank (2004) is all about cooperation, asking if cooperation works in a competitive environment, through the catchy title of "What Price the Moral High Ground?" which more accurately (in terms of what is covered in the book) perhaps should have read "What Price the Cooperative Environment?" Also, the answer in Frank (2004), as we will see, is clearly "No": Cooperation has not lost its luster, and, in fact, may be the only way to sustain a competitive environment.
Regarding this particular quote on this slide, Gintis (2000, pp. xxiv) goes on to note that economists often argue for the long-term, enlightened self-interest idea that supposedly has been confirmed in the tit-for-tat experiments. He points out this argument is misplaced, in that it implies an extremely low discount rate, i.e. everyone is quite future oriented. Yet, it is in the short-term, when one is facing immediate crisis, when discount rates are exceedingly high, that one most often observes cooperation. In fact, given this phenomenon, societies pursuing long-run self-interest will collapse when seriously threatened. Also, as Gintis (2000, p. xxv) further points out, there is ever more evidence of pro-social behavior, far more than is predicted by the self-interest model.
Gintis, H. Game Theory Evolving: A Problem-Centered Introduction to Modeling Strategic Behavior. Princeton, NJ: Princeton University Press, 2000
Henrich, J., Boyd, R., Boyles, S., Camerer, C.F., Fehr, E., Gintis, H. and McElreath, R. "Overview and Synthesis." in Henrich, J., Boyd, R., Bowles, S., Camerer, C., Fehr, E. and Gintis, H. Foundations of Human Sociality: Economic Experiments and Ethnographic Evidence from Fifteen Small-Scale Societies. New York: Oxford University Press, 2004, pp. 8-54.
Henrich et al (2004, pp. 89) cite the main researchers in each of these areas, including all the editors and authors in this volume of edited works. We might further add that this new wave is not unlike a tsunami: Ignore it at your own risk!
Khalil, E. L. "Etzioni versus Becker. Do Moral Sentiments Differ from Ordinary Tastes?" De Economist 145 (1997): 491-520.
Khalil, E.L. "Interests and Commitments: Replies to Etzioni, Dolfsma and van Staveren." De Economist 146 (1998): 613-618.
Lynne, G.D. "Divided Self models of the Socioeconomic Person: The Metaeconomics Approach." Journal of Socio-Economics 28 (1999), 267-288.
_________. "Agricultural Industrialization: A Metaeconomics Look at the Metaphors by Which We Live." Review of Agricultural Economics 24 (2002): 410-427.
_________. "Toward a Dual Motive Metaeconomic Theory." Journal of Socio-Economics (in press).
_________. "On the Economics of Subselves: Toward a Metaeconomics." in Altman, M. Handbook of Behavioral Economics. New York: M.E. Sharpe, Inc., in press.
Sober, E. and Wilson, D.S. Unto Others: The Evolution and Psychology of Unselfish Behavior. Cambridge, MA: Harvard University Press, 1999 (third printing, 2000).
Khalil is here referring to self-interest. Microeconomics in the hands of the neo-classical economists would replace all of social science, the ultimate in imperialistic activity and accomplishment.
The amoralist approach, i.e. leaving the moral dimension implicit in the framework and analysis, is that of microeconomics applied in the spirit represented in the neoclassical agenda. The moralist approach is common in several other social sciences, as Khalil argues in highlighting the pitfalls of the approach as represented in the critique of Etzioni's work (e.g. see Etzioni, 1988) in this paper.
Metaeconomics recognizes microeconomics, and its neoclassical rendition, as the core of the metaeconomics approach, only adding to the analytical machinery that is microeconomics, while going beyond and transcending its fundamental premise of egoism-hedonism being the only basis for behavior.
I'm reminded of the book by Kohn (??), titled "Punished by Rewards." This book points to substantive empirical evidence that human beings are intrinsically motivated, and that by going to extrinsic rule based rewards and incentives, one can actually "squelch" the intrinsic motivation. There is good evidence that this occurs with respect to recycling behavior in particular. Attempts to pay people to recycle has generally resulted in less recycling. Similarly, paying people to donate blood results in fewer blood donations. Sober and Wilson (1998), too, see the evolution of unselfish (similar to Frank's "prosocial") behavior as in the nature of human nature.
Metaeconomics is fundamentally all about how to "transcend its limitations" by modeling the sentiments, which it posits arise in the empathy-altruism domain of the human psyche. It treats the sentiments as a kind of taste, but an other-interest taste that arises jointly with self-interest related tastes, and thus may or may not be commensurable with self-interest, dependent upon the situation at hand. A main feature of the model is self-sacrifice, both in the self-interest and the other-interest domain. Altruism is explicitly in this model and entails self-sacrifice, a feature not included in microeconomics, especially not in its neoclassical presentation.
There is no self-sacrifice in the microeconomics model, especially as applied from the neoclassical perspective. One would never move to point C' away from maximization of self-interest at point A'. One can thing more generally of the product on the horizontal axis as a social good; due the IBES section focusing attention on cooperation, the horizontal axis is represented as the "unity with" good that distinguishes a cooperative way of doing business from other forms.
Metaeconomics suggests conflict between the self-interest and the (shared with others) other-interest, that can only be resolved with some self-sacrifice in the self-interest domain, as well as some other-sacrifice in the other-interest domain. Life is hard! Also, decisions involving the resolution of this inherent conflict are far more than strictly cognitive, with feelings playing a substantive role.
We would posit that moral emotions through an empathy-altruistic driven commitment tends to condition the self-interest path 0G. The result will be some more satisfactory path 0Z. Notice that every point on 0Z entails some sacrifice in UG, as well as in UM.
Cooperation requires a kind of altruistic self-sacrifice, as illustrated with UG being less at point B than at point A. Notice how it also requires sacrifice in what could be achieved in the other-interest domain, as well, with UM less at point B than at point C. Conflict resolution, and achieving "peace-of-mind" (and peace, generally, if more than two individuals, groups, nations, are involved), means the give-and-take, a kind of satisficing activity, at point B. The outcome at point B could also be synergistic, even symbiotic such that the sum is greater than the sum of the parts, which would be depicted by these frontier curves becoming ever further apart as one moved out along 0Z. This is the theoretical explanation for what Frank (2004) speaks of as the advantage of cooperation in a competitive environment.
The scientific focus... to help turn economics into a science based effort rather than an ideology, as it currently practiced, is to focus on just where is path 0Z? How do real people orient their economic interests? What motivates the orientation? What are the policy implications? If it is found that a particular target population orients their interest on 0Z, clearly it will not work to develop policy based on what neoclassical applications of microeconomics might suggest.
The notion of driven by a combination of selfish and altruistic motives fits nicely with the metaeconomics idea: There is a kind of joint set of interests at work, this set placing both motives in one's approach to everything.
Frank, R.H. What Price the Moral High Ground? Ethical Dilemmas in Competitive Environments. Princeton, NJ: Princeton University Press, 2004. Review prepared for the Institutional and Behavioral Economics Section (IBES) Track Free Session titled "Codifying and the Classification of the Domain of IBES in AAEA and Beyond: The Future of IBES" at the American Agricultural Economics Association meeting, July, 2005, in Providence, Rhode Island.
This part of the Free Session focuses on the current empirical understanding of the economic nature of human nature. It is offered with the hope that it also suggests directions for new research frontiers in economics, especially for the IBES economists.
As we will argue later, the notion of sacrifice does not fit within standard economics, as it makes no sense to think of maximizing one's utility through sacrifice. That is, the whole notion of "minimizing pain" cannot be achieved with sacrifice; rather, one is avoid any kind of real sacrifice. Just adding another argument to the utility function does not work!
I'm reminded of the book by Kohn (??), titled "Punished by Rewards." This book points to substantive empirical evidence that human beings are intrinsically motivated, and that by going to extrinsic rule based rewards and incentives, one can actually "squelch" the intrinsic motivation. There is good evidence that this occurs with respect to recycling behavior in particular. Attempts to pay people to recycle has generally resulted in less recycling. Similarly, paying people to donate blood results in fewer blood donations. Sober and Wilson (1998), too, see the evolution of unselfish (similar to Frank's "prosocial") behavior as in the nature of human nature.
As we will argue later, the notion of sacrifice does not fit within standard economics, as it makes no sense to think of maximizing one's utility through sacrifice. That is, the whole notion of "minimizing pain" cannot be achieved with sacrifice; rather, one is avoid any kind of real sacrifice. Just adding another argument to the utility function does not work!
This is to say, with it being human nature to seek unity with good causes as well as the bad, it can be counterproductive to put in place strong sanctions and/or large incentives to cause good behavior. There could be a kind of backlash effect, as has been found in recycling behavior.
In effect, we need to be asking what motivates certain kinds of behaviors, in this case, what drives giving to charity?
Kidnapper who turns cold feet, but dares not release the victim lest the individual will report the event to the police. So, the victim admits some act that the kidnapper can hold against the victim; e.g. the victim has been blackmailing someone. Telling the kidnapper ensures the victim will not report the kidnapper. This becomes an "effective commitment device" (p. 5) with good outcomes: The kidnapper releases the victim, and they each remain committed to not reporting the other, on a common unity, that both have done, in this case, a bad thing. Frank raises the question: "Can moral emotions, for example, function as commitment devices?" Perhaps this capacity has been favored by evolution?
Notes how legal contracts do not work well in the second case. Arguably, even the "contractual commitments" are emotion based, however, thinking of emotion being at the base of all contracts. As Frank argues, especially in the case of the "emotional commitments" idea, doing a strict benefit-cost analysis of the situation (e.g. couples using "scorecards") does not work. This is not only about the benefits and costs related to "reproductive fitness." (Frank, 2004, p. 8)
Optimistic conclusion that if we could only know who the cooperators are, then cooperation would emerge, is not the experience. Will still find defectors. So, need an "intermediate model." Metaeconomics is such a model, in that it recognizes a broader based "empathy"... projecting oneself into the state of others... and thus modifying one's own behavior. In the case of the Prisoner's Dilemma, this empathy would lead to not defecting.
*Key idea
Frank, R.H., Gilovich, T., and Regan, D. "The Evolution of One-Shot Cooperation." Ethology and Sociobiology 14 (July, 1993): 247-256. The notion that one has both tendencies is easily explained with metaeconomics, as the tendency to a kind of autistic (not sensitive to others) pursuit of self-interest can go on at the same time there is at least a minimal expression of an empathy based altruism. It is all about orientation at any given point in time, in some given situation.
Metaeconomics suggests we are potentially both, at the same time, defectors and cooperators. The situation does matter. Our emotional balance that day in that situation matters. We may even switch from one situation to another.
*Key idea
*Key idea
*Key idea here: Frank (2004) is connecting moral emotions with commitment, that commitment is fundamentally about the moral dimension. Earlier, Frank (2004) connected the moral emotions to cooperation... such that we now see moral emotions, commitment, and cooperation all connected.
What is interesting here, is that empathy could also produce these kinds of results, without the entity involved having to act on sympathetic purposes. Rather, it seems that one could empathize with someone, but project oneself into that situation in such a way that it is still one's own utility that is being considered. This would not require any expression of sympathy. In contrast, an expression of sympathy seems to require some sort of a guess about what the other person's utility may be in this situation.
Not sure where he is headed at this point, in that the "Darwinian approach" has not yet been defined, other than to suggest it is all about reproduction, that all reasons lead to this ultimate goal of passing one's genes onto the next generation. It seems there may be other reasons to get-up-in-the-morning; in fact, how does one explain the behavior of many who choose not to have children? Why would individuals adopt children, especially if there are nieces and nephews they could help support? The narrow version of the "Darwinian approach" lacks a great deal, albeit better than the "just add a taste" approach used in neoclassical economics.
Hopefully Frank will be able to convince the reader that the Darwinian approach will suffice; so far, through this part of the book, the argument is not convincing.
Frank notes how a rewarding strategy is to cooperate in these one-shot social dilemma cases (p. 28). For this to occur, those who cooperate need to find each other.
The collective advantage of cooperation is illustrated in the northwest corner. The standard outcome as predicted by microeconomics (the rational choice, self-interest notion) is the southeast corner with both defecting.
Before they started the game, each group met from 10 to 30 minutes. The idea was to create a situation wherein each of the participants could glean whatever information they thought necessary to determine the extent to which their partners might cooperate. Each group of three was then taken to a separate room. They would fill out a form indicating whether they thought their partners would cooperate or defect, and indicated on a scale of 50 to 100 how confident they felt about their prediction.
Each of the subjects received a single payment including the actual payoffs from the games with each of the partners, plus a random amount added to the total. The idea was to ensure that the subject could not determine how the other two had played. Also, the game was designed such that the experimenter could not know how the subjects had played.
In the unlimited conversation group, subjects were told that they could vow to cooperate with one another. The randomness of the experiment, however, would preclude enforcing this vow. In some of the groups, the experimenters asked if they could record conversations, which revealed that invariably there would be many who would vow to cooperate.
In the intermediate conversation groups, they were told they could not make promises to cooperate. In the limited group, they were not to discuss the prisoner's dilemma game at all; they were only to get better acquainted.
Consistent with earlier studies, found that the overall rate of cooperation rose when subjects were given more time to interact (Frank, 2004, p. 31). Intriguingly, respondents consistently predicted more cooperation then actually occurred. It is perhaps significant, however, how those who communicated more extensively also predicted more accurately.
Frank notes that the cooperation rates were consistent with that in other studies. In fact, over one-half cooperated. Frank (2004, p. 31) claims , "in view of the added step we took to assure anonymity, our findings provide even stronger evidence of the inadequacy of the narrow self-interest model." Also, out of 161 predicted to cooperate, 130 did so, or 130/161 = 80.7%. Of the 37 predicted to defect, only 21 did so, or 21/37 = 56.8%. These numbers are plotted in Figure 2.4.
A measure of accuracy is to consider the row (predicted) percentages relative to the column (actual) percentages, as in:
(.813/73.7) + (.187/26.3) = 64.8 %
i.e. the accuracy rate for each subject.
Here we see how accurate the subjects actually were, providing more support for the idea that cooperation can be stirred in a one-shot Prisoner's Dilemma game.
There "confidence" was also quite accurate: When they expressed confidence in the accuracy of their prediction greater than 75%, the accuracy was around 80%..
Intermediate communication groups did not predict as proficiently as did the full communication group.
Same is true of the limited communication group; more time spent at communication improves the ability to predict.
Yet, even in these other groups, they were more accurate when they expressed a higher confidence.
Notably, the only difference here, as compared with the other experiments, is that the individuals had known each other longer from belonging to the same fraternity or sorority. The process of the experiment, however, would not allow that others knew what the choice had been, so reputations were preserved. The result is still pronounce: Substantive cooperation, and even more cooperation than in the other experiments.
Comparing the next two slides, 1) males defected more frequently, and 2) were less accurate in their predictions of defection
Females defected less, cooperated more.
This makes sense: If "we had a pleasant conversation" is operant, this simply means the individuals have found a unity with the other person, sharing some path 0M in the metaeconomics model (see Lynne, 1999; 2002; Hayes and Lynne, 2004; Kalinowski, Lynne and Johnson, in press).
Yes, every behavior, in this idea, is about maximizing utility.
*Key point: The notion of driven by a combination of selfish and altruistic motives fits nicely with the metaeconomics idea: There is a kind of joint set of interests at work, this set placing both motives in one's approach to everything.
"Accomodating preferences for moral behavior" is a small step in the right direction; to argue, however, that these are somehow on par with the regular kind of preferences (as this statement implies) is to go back to Bentham, putting everything on the same plain.
The key idea seems to be that the individuals involved must somehow be able to "see" the cooperator in others, in order for there to be cooperation.
Albeit an extreme example, perhaps "drinking crankcase oil" is better thought of as symbolic of the idea that one might do some sacrificing perhaps even in one's own health (albeit perhaps this is particular example is going to far), for good reasons not explainable with the "maximizing utility" or "maximizing profit" notions. It is not uncommon, e.g., for people to take risky actions, like drinking too much alcohol, taking drugs, driving too fast, etc., at considerable risk to individual well-being in order to "fit in", to be part of something that is not necessarily in any sense contributing to the self-interest. Rather, this kind of behavior is satisfying what we might refer to as a shared other-interest.
Perhaps the key point of this chapter is: Need to allow for self-sacrifice. Neither the present-aim or the self-interest models do so, i.e. neither model allows for morality to drive behavior, other than as an empty "taste."
Notice here how efficiency depends on honesty. It also depends on the capacity of this individual to find an honest manager, to make that assessment.
Metaeconomics easily explains this phenomenon, albeit this consumer acting with a social conscious is sacrificing the self-interest.
We might add: Cooperation involves self-sacrifice in the self-interest domain, for real gains in the shared, other-interest domain. Cooperation involves an element of altruism, i.e. a degree of self-sacrifice.
*Key point
*Key point. Like Frank (2004, p. 91) says it, "It seems fair to conclude that the burden of proof not properly lies on those who claim that economists may safely neglect unselfish motives."
This is easily explained with metaeconomics: They had become attached to the tickets, with the tickets meaning "going to the show". So, without the tickets, they could not go. On the other hand, the $10 bill being lost had not connection with, no unity with the show, so having lost the $10 bill has less bearing on attending the show. Any $10 bill will work, so, they just write-it-off to bad luck, and go anyway.
*Key point.
*Key point.
Not sure this is it, per se. Rather, it seems that buying the tickets for $350 puts one in the mindset of being in unity with the event, with "the cause" as it were, and thus one becomes committed to it, such that selling the tickets for some large sum (Frank claims these tickets were selling for as much as $6000) is out of the question. The reason is: This would take away from one's unity with the team. Commitment is not easily converted into dollars, because it is in a different domain, one that is not commensurable with dollars, as in "what is the price you have on your first born?" Answer: This commitment to the first born is not in the same domain as daily transactions using money.
*Key point: It is human nature to have both, at the same time, in varying degrees.
*Key point: These are joint in most people most of the time.
*Key point. Frank (2004, p. 120) notes that "In both cases it appears that populations consisting only of pure types are unlikely to be evolutionarily stable." He then suggests a charitable organization... at least the "industry" of such organizations... must appeal to both, at the same time, in order to be stable. Metaeconomics easily explains this phenomenon, as the demand for the "charitable good" includes both the egoistic-hedonistic based self-interest and the empathetic-altruistic based other-interest.
*Key point: Yes, it is this "unity with cause" effect, which may even be latent in most individuals, is also a part of human nature. And, yes, "sympathy" which can only be produced by first empathizing with the situation, with empathy perhaps a better way to describe what happens next: Individuals "internalize the externality" in effect, which is to say, they reconsider how the interests had been oriented, and will reorient same in such a way as to buy more of the charitable good.
*Key point: This is empathy at work. We would also imagine ourselves, the child in us, in that position. This is easily explained with metaeconomics: Replacing the horizontal axis of Fig. 2 with "Save a child's life", through empathy, we put ourselves in unity with this child, with this situation and as individuals being in it, and condition our self-interest toward the shared other-interest in coming out of the mine shaft alive. We "buy more" of this good, moving toward some path 0M.
The matching grants approach works because individuals see themselves as joining forces with someone else, to make this happen: This is the "metaeconomics" prediction, that people need a certain number of "unity with cause" activities. This would be just one among many others that a person might be pursuing in order to fill this need, a need just as powerful and strong as the need to satisfy material self-interest.
Standard microeconomic theory, neoclassical version, would predict consumers would ignore the sunk costs once the booklet is in hand. It appears on the surface that this is what charitable donors are doing, as often the discount books are not used by the purchasers. Yet, this is not what is going on, as metaeconomics suggests: Rather, the consumer/donor has purchased the "charitable good" along some path 0M, or at least some path 0Z, such that it now has a different flavor to it... like Frank says, it has been "encoded" differently.
Earmarking for specific purchases is essentially the same thing. One is appealing to a particular "cause" the individual can buy into, and see, as definitely giving a pay back to ones need for unity with something.
*Key points.
Intriguingly, a metaeconomics based calculation of the marginal value would show the empathy-altruistic interest tending to dampen these marginal values even more than shown in the table, in effect including the social costs of such an investment.
*Key point.
The notion of "internal motivational states" is also a theme in metaeconomics: We seek to understand how the individual is orienting the self as between the self-interest and the other-interest on some path 0Z, the latter the subject of empirical study and measurement.
*Key point: Concern over the nature of presumed economic nature has been around a very long time.
*Key point: An exception are those who belong to IBES/AAEA! ... and to associations like the Society for the Advancement of Behavioral Economics (SABE). We need to be proud of the fact that we are at least trying to address 1) the criticisms of economics, and 2) the need to go beyond and transcend its now scientifically/empirically documented shortcomings. So, we also see farmers as going beyond and transcending the narrow motivation of self-interest as they decide to install environmentally sound practices on their farms and to buy/sell in a committed way through the local cooperative(s).
*Key point:
Metaeconomics is a kind of low key "insurgency" but based more in trying to go beyond and transcend (and, thus, the carefully selected prefix "meta") rather than to replace standard microeconomics. As argued in Lynne (1999), microeconomics is the default case: If the empathy-altruistic based other-interest motive is found to not be playing a substantive role in a particular situation, the analytical machinery of metaeconomics reduces down to that of microeconomics.
*Key points: Second point likely explains why Departments of Agricultural Economics are generally viewed by Agricultural Administrations at the Land Grants as unruly, largely unmanageable, not working as a group in unity with the rest of the college, research and extension arm of the Land Grant.
*Key point: Observing a free rider, are observing a person expressing strict self-interest.
*Key point: Metaeconomics would predict a split somewhere in the middle, as suggested by the path 0Z kind of solution; something close to 1:1 ratio, along a 45o line out of the origin is quite possibly a frequent path for many individuals much of the time (See Lynne, JSE paper, in press, in commenting the Cory proposition that a kind of synergistic, sustainable outcome dictates a ratio of -1 as between the egoistic and empathetic forces within the self).
*Key point: Seems this might also, then, influence how economists study cooperatives, and how cooperatives function!
Frank did not have income for the respondents, so used an "imputed income" estimate based on years of experience.
*Key point.
*Key point.
*Key point.
In effect, people can be egoistic-hedonistically pursuing the self-interest while simultaneously empathetically-altruistically pursuing the other-interest, as metaeconomics proposes. And, as long as one has a healthy does of self-control (thinking of altruism as a form of self-control, after Rachlin, 2002), then outside sanctions may not be needed; realistically, however, sanctions in the background keep people focused on self-control, on hundreds of small altruistic acts leading to overall better conditions for both the indiviudal and the community along path 0G.
Frank's words are given precision, with the "trust" that individuals will move along 0Z, with sanctions reflecting 0M in the background to keep an element of disciplined, self-control to avoid exclusive attention to only 0G, narrow kind of selfishness modeled in the self-interest and the