The economics of altruism.
Feb 16, 2004, Vol. 9, No. 22 • By JOHN J. DILULIO JR.
What Price the Moral High Ground?
WHEN I WAS an undergraduate, among my favorite instructors was a then-untenured economist who preached a greed-is-good gospel ostensibly derived from Adam Smith: Man is homo economicus, a rationally selfish creature who, left free to compete, single-mindedly produces prosperity for himself but only serendipitously produces it for others. There was, he explained, really no room for such concepts as kindness, altruism, or sympathy in serious microeconomic analysis.
He elaborated that very point one fine afternoon when he kindly stayed after class to talk with me, and altruistically offered to help me land a better work-study job on campus the next summer. He also responded sympathetically when a group of us asked for extra help with an especially difficult problem set, buying us snacks on the way back to his office and leaving a tip. Some years later he got tenure, but several equally well-published assistant professors of economics who practiced me-first morality on the job did not.
Adam Smith would not be surprised, and he probably would pardon my other-regarding economics instructor for caricaturing Smith's ideas as many do. Both in his most famous book, "An Inquiry into the Nature and Causes of the Wealth of Nations" (1776), and in his earlier but less known work, "The Theory of Moral Sentiments" (1759), Smith taught that sympathy was every bit as natural a human propensity as selfishness.
It was, in fact, in "The Theory of Moral Sentiments" that he first discussed the "invisible hand," writing that the rich "are led by an invisible hand" to "divide with the poor the produce of all their improvements . . . and afford means to the multiplication of the species." The book's first sentence declares: "How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortunes of others, and render their happiness necessary to him, though he derives nothing from it except the pleasure of seeing it." His arch-villains in "The Wealth of Nations" are mercantile capitalists whose unbridled greed, backed by government, begets neither individual productivity nor common prosperity. He argued that "in every improved and civilized society," government should promote the "wealth of nations" by permitting merchants and manufacturers to compete freely yet fairly while taking "pains to prevent" prosperity being purchased "at the expense . . . of the labouring poor."
It appears that contemporary social science and sociobiology are finally catching up to Adam Smith. Robert H. Frank's new "What Price the Moral High Ground? Ethical Dilemmas in Competitive Environments" may have the least alluring title imaginable, but it is a readable and important study. A Cornell University economist, Frank summarizes what numerous theoretically sound and methodologically rigorous studies from diverse academic disciplines now suggest about human nature and the conditions under which nice guys--and corporations and nations--finish first.
"All but the most extreme socio-paths," observes Frank, "have within them the capacity to experience sympathy for others and to weigh others' interests when deciding what to do." There is "persuasive evidence that in many situations we simply do not behave in the narrowly self-interested ways predicted by traditional theories." Standard "rational-choice" behavioral models cannot explain why you will probably return a wallet if you find it in a taxi. Likewise, the "stereotypical Darwinian actor does not help a victim in distress unless that victim is likely to return the favor or is a sufficiently close genetic relative." Instead, people make charitable gifts, and some love to do so anonymously. We sometimes strive to do a good job even when we know that we will get no material or social rewards for doing so. And total strangers sometimes risk life and limb for each other--but why?