Journal of Economic Methodology ISSN: 1350-178X (Print) 1469-9427 (Online) Journal homepage: http://www.tandfonline.com/loi/rjec20 Book Reviews Philippe Fontaine To cite this article: Philippe Fontaine (1999) Book Reviews, Journal of Economic Methodology, 6:2, 297-303, DOI: 10.1080/13501789900000019 To link to this article: http://dx.doi.org/10.1080/13501789900000019 Published online: 28 Jul 2006. Submit your article to this journal Article views: 35 View related articles Full Terms & Conditions of access and use can be found at http://www.tandfonline.com/action/journalInformation?journalCode=rjec20 Download by: [LSE Library] Date: 08 November 2017, At: 23:32 Book reviews 297 Downloaded by [LSE Library] at 23:32 08 November 2017 ALTRUISM BETWEEN HOMO ECONOMZCUS AND HOMO ETHZCUS A review of The Economics of Altruism, edited b y Stefano Zamagni, Aldershot: Elgar, 1995. Pp. xii + 456. ISBN 1-85278-953-0. The social crisis of the 1960s contributed to redirecting the attention of economists towards the undesirable consequences of self-interested behavior, prompting them to question the view that self-interest alone suffices to achieve social cohesion. Accordingly, economists started to investigate altruistic behavior, hoping that a better understanding of it will help remedy some of the social ills of the time. In the process, they faced a real challenge: how to fit altruism into their preferred model of human behavior - the self-interest model? Logically, some researchers tackled this problem by perfecting the self-interest model, whereas others chose instead to supplement it with another model. In other words, in studying altruism, economists have been torn between the homo economicus paradigm and the homo ethicus paradigm. Stefano Zamagni, the editor of The Economics of Altruism, has chosen to include in the volume only those works which cover the period between 1975 and 1994. Since the great majority of journal articles and contributions to edited volumes on altruism appeared after 1974, Zamagni's selection suffices to characterize the two main orientations of altruism research. 1 PERFECTING THE SELF-INTEREST MODEL Among the works trying to fit altruism into the self-interest model, three main directions can be distinguished. First to be mentioned is Becker's (1974) article, 'A theory of social interactions', to which most economic theorists would give a privileged place among the texts whose interpretation has informed theories of altruism. Becker (1974) and the works inspired by it have largely contributed to making 'pure' altruism - taken as behavior where reciprocation has no place - compatible with the assumption of utility maximization. By showing that the altruist can sacrifice part of his or her own consumption or own income to the benefit of others without suffering any decrease in his or her utility level, Becker made it possible for the neoclassical utility maximizer to display altruism. Thanks to utility interdependence, indeed, altruists derive utility from their transfers. As a result, 'pure' altruism, and not only enlightened self-interest, appears as a utility-maximizing behavior. Applying this framework to the analysis of the family, Becker was able to show that provided that the family has an altruistic head, its other members are led to act as ifthey too were altruistic. Becker's 'rotten kid theorem' can thus be replaced in the context of groups characterized by the interactions of selfish individuals, where opportunistic tendencies occasionally surface. From this perspective, the integration of 'pure' altruism in the economics of the family appears as a response to the social crisis of the late 1960s and early 1970s - family dislocation in particular. Downloaded by [LSE Library] at 23:32 08 November 2017 298 Book reviews Following Becker's analysis of social interactions, several contributions pointed to the inefficient outcomes generated by the presence of 'pure' altruism. The paper by Assar Lindbeck and Jorgen Weibull in the volume, for instance, shows that in an intertemporal setting, altruistic behavior can lead to inefficiencies because the recipient can act strategically and thus induces the donor to give more than he or she was prepared to. In the same vein, Douglas Berheim and Oded Stark argue that altruism is a counterproductive force unless it reaches a certain level, thus acknowledging the limits of altruism in explaining the functioning of groups. A second line of analysis is associated with the impact of the publication of Wilson's Sociobiology on economics. Here, again, Becker played a crucial role in introducing economists to the wonders of biology. However, it should be noted at the outset that Becker took liberties with Wilson's argument, claiming that altruism can actually increase the individual's personal fitness when Wilson argued to the contrary that behaving altruistically means increasing another's fitness at the expense of one's own. The fact is that in using Wilson's theory, Becker mainly intended to ground the assumption of an altruistic head in natural science. Becker's contribution, 'Altruism, egoism, and genetic fitness', was followed by notable attempts at exploring the evolutionary foundations of altruistic behavior (see, for example, Jack Hirshleifer 1977). Overall, however, the use of biological models in the economics of altruism had a difficult start. And a decade after the publication of Wilson's essay, Paul Samuelson (1985) could still write: 'there is much territory between economics and biology that is still virgin ground. It will be tilled increasingly in the future' (p. 172). Judging from economic research in this area in the following decade, it seems that Samuelson was not altogether wrong. And the works selected by Zamagni show indeed that evolutionary arguments can shed a new light on altruistic behavior in groups. A third line of analysis, which is not represented in the selection, owes much to James Andreoni's 'impure' altruism model. Andreoni's (1989, 1990) model of giving includes not only the usual Beckerian motive of 'pure' altruism, whereby he means that people benefit from the total supply of a public good, but also a selfish motive illustrated by the fact that donors benefit from their private contribution to the public good - feel a 'warm glow'. In the context of the family, Andreoni (1989) has proposed an interesting reformulation of Becker's 'rotten kid theorem' where all family members, including the head, are altruistic. Interestingly, in this model, parents are defined as 'impure' altruists because they care about their children's consumption and their contribution to it, whereas children are represented as 'pure' altruists because they care about their consumption only (the public good). In other words, the most selfish individuals in the model, those who care only about their own consumption, are described as 'pure' altruists while those who actually make one-way transfers evince only 'impure' altruism. Andreoni's paradoxical terminology expresses the ambiguities of the various approaches which ~ Downloaded by [LSE Library] at 23:32 08 November 2017 Book reviews 299 use the assumption of utility maximization to represent altruistic behavior. Another interesting illustration of these ambiguities is perceptible in Mordecai Kurz's essay in the volume, 'Altruism as an outcome of social interaction', a sequel to Kurz's (1977) 'Altruistic behavior'. The inclusion of the latter in the volume would have greatly facilitated the understanding of Kurz's analysis since the paper selected by Zamagni presents itself as a refinement of the early one. Although Kurz (1977) keeps the assumption of utility maximization, he is rather critical of those economists who 'have been content to regard all altruistic behavior as arising from utility interdependence', since 'as such the notion of altruism itself is held to have no meaning: the optimizing individual simply attains maximal selfish satisfaction by helping those on whose welfare his utility function depends' (p. 177). Accordingly, Kurz decides to substitute social norms for utility interdependence, thus giving up the idea of 'pure' altruism d la Becker. Without utility interdependence, a transfer of goods or services to others results in a decrease in the altruist's welfare - a rather problematic outcome for the economists who adhere to the assumption of utility maximization. Kurz escapes this problem by acknowledging that the altruist is compensated at some point because of the existence of social norms. It should be noted that despite his dismissal of 'pure' altruism, Kurz recognizes that the gift relationship remains specific since the beneficiary can default on the altruist when it comes to reciprocating his or her altruistic act. In other words, no enforceable contract can guarantee reciprocation in the gift relationship; only social norms can be effective in this respect. In sum, whether they consider 'pure' or 'impure' altruism, the above authors put the assumption of utility maximization at the center of their analysis and in so doing they do not seem to depart much from the homo economicus paradigm. A different story is to be heard on the side of economic theorists who try to go beyond the latter. 2 BEYOND THE SELF-INTEREST MODEL Here three directions of research are worth mentioning. First, one finds authors who believe that some attention should be given to a sort of homo ethicus. Sen's distinction between sympathy and commitment is particularly relevant in this regard. Although this distinction appears in the essay selected by Zamagni, it made its first appearance in Sen's (1977) 'Rational fools', where one reads: 'The former [sympathy] corresponds to the case in which the concern for others directly affects one's own welfare. If the knowledge of torture of others makes you sick, it is a case of sympathy; if it does not make you feel worse off, but you think it is wrong and you are ready to do something to stop it, it is a case of commitment' (p. 326). With this distinction Sen could show that 'behavior based on sympathy [defined as altruism by most economists] is in an important sense egoistic' (p. 326), which amounts to rejecting Downloaded by [LSE Library] at 23:32 08 November 2017 300 Book reviews the definition of altruism in terms of utility interdependence, and that commitment involved counterpreferential choices, which means that altruism cannot readily be reconciled with the assumption of utility maximization. Accordingly, Sen stressed the connection between commitment and ethics. In so doing, however, his intention was not so much to point to a kind of universal sense of duty as to emphasize a sense of duty towards particular groups. In the wake of Sen's article, several contributions stressed the ethical dimension of altruistic behavior. Among these works, two are worth noting: an article by Buchanan (1978), which is not included in the reader, and a book by Collard (1978), whose spirit the reader can grasp by reading the articles by the same author in the volume. Like Sen, Buchanan insists on the influence of groups on individual behavior. He thus distinguishes between two motivational forces, namely, self-interest and community. The latter, which is supposed to prevail provided that individuals can recognize themselves as members of a group, refers only to non-self-interested motives. According to Buchanan, identification with a group depends on its size. So, as group size increases, people find it more and more difficult to identify with groups and ethical principles retreat at the expense of self-interest. Like Buchanan's, Collard's (1978) work can be regarded as supplementing the self-interest model with ethical principles. However, whereas Buchanan concentrates on small groups, Collard intends to provide an analysis of altruism in large communities. Hence his insistence on 'a generalised concern. . .towards particular types of need by socially distant and unknown other individuals' (p. 12). Although Collard relies on utility interdependence while analyzing altruistic behavior, he observes that 'in a large community, altruism will have to be buttressed by duty if it is to be effective' (p. 17), thus showing that in order for sympathetic preferences to give rise to altruistic behavior, there need to be ethical rules in society. A second direction of research has consisted in dichotomizing homo economicus. The reader will find little on such an orientation in Zamagni's volume. Indeed, few papers in the volume refer to Margolis's (1982) Selfishness, Altruism, and Rationality. Moreover, Zamagni did not include Margolis's (1991) 'Dual utilities and rational choice', which summarizes the main argument of this book. Unlike most economists, who stress utility interdependence, Margolis builds a dual-utility model, where each individual is assigned two utility functions, which represent respectively his or her selfinterested preferences and his or her group-interested preferences. Interestingly, in this theory, the individual, say Smith, is not the utility-maximizing agent of conventional theory. Instead, Smith decides how to allocate resources between private and public spending, and S-Smith and G-Smith, that is, two metaphorical actors operating inside Smith, use the resources thus allocated to maximize respectively S-utility and G-utility. The interest of this approach lies in its escaping the dichotomy between homo economicus and homo ethicus by describing the individual as driven all the time by both self-interested and I I Downloaded by [LSE Library] at 23:32 08 November 2017 Book reviews 301 altruistic motivations. It is unclear whether the last direction of research can really be associated with theories of altruism. Yet, to the extent that Zamagni included articles representative of this view in the volume, this reader feels less bothered with presenting it. A good illustration of this line of research appears in Sugden's work, 'On the economics of philanthropy'. Sugden is very close to the spirit of the above studies if only because he develops a theory of public goods which is not based on utility maximization and where individuals act on moral principles. Yet, he does not claim to build a theory of altruism, making it clear in a subsequent article that in his approach 'people follow a morality, not of altruism but of cooperation' (1984: 774). By that Sugden means that there are cases where people's contributions towards public goods cannot be explained by simply assuming that 'individuals derive utility from one another's welfare' (p. 773). Instead, Sugden advocates a theory of reciprocity based on the idea, 'not that you must always contribute towards public goods, but that you must not take a free ride when other people are contributing' (p. 775). 3 CONCLUDING REMARKS By presenting papers covering the period 1975-94, The Economics of Altruism provides a fair characterization of altruism research in modern economics. As has already been noted, the inclusion of a few additional articles published over these two decades would have probably facilitated the task of the reader in situating altruism research between the homo economicus paradigm and the homo ethicus paradigm. Overall, however, the reader should not suffer much from Zamagni's editorial choices; moreover, the Introduction to the book, though brief, makes up for the inevitable omissions. More problematic is the choice to start the selections with the year 1975, since the upswing of interest for altruism dates from the early 1970s. Of particular interest in this respect are the publication of Richard Titmuss's ([I9701 1997) well-known study on blood giving, The Gift Relationship; the organization of a conference on altruism at the Russel Sage Foundation in March 1972, which gave rise to Altruism, Morality, and Economic Theory, a collection of essays later published by Edmund Phelps (1975); and the publication of Kenneth Boulding's (1973) The Economy of Love and Fear. Of course, Zamagni could hardly include in the volume excerpts of the books by Titmuss and by Boulding, although one may be surprised that none of the articles included in Phelps's collection appears in the volume. Space constraints allow me only to provide a brief summary of what the reader can miss when left unaware of these contributions. It is no exaggeration to suggest that altruism research emerges in the context of a growing dissatisfaction with the self-interest model following the difficulties experienced by Western societies in the late 1960s. Not surprisingly, then, the main actors in the renewal of interest in altruism were concerned with interdisciplinarity Downloaded by [LSE Library] at 23:32 08 November 2017 302 Book reviews and the actual merits and shortcomings of decentralized economies in relation to social cohesion - two orientations which have to be taken together. Thus, Titmuss's numerous references to anthropology were meant to show that there was a danger in further departing from giving in areas of social policy, which were still characterized by a form of social obligation. In referring to leading anthropologists and their analyses of gift-exchange as expression of social obligation, Titmuss could more easily oppose the views of economists who saw the main characteristic of private market systems as freeing individuals from any sense of obligation and regarded the commercialization of social services as something essentially positive. Likewise, Boulding regarded the study of the grants (one-way transfers) economy as supplementing the analysis of the exchange economy and he indicated in the preface to his book that 'the grants economy is an important link between economics and the other social sciences. At the integrative level, it moves toward sociology; at the threat level, it moves toward political science' (p. vi). In stressing the need to redraw the boundaries between economics, on the one hand, and sociology and political science, on the other, Boulding was expressing not only a theoretical concern, but also political preoccupations. As he put it, the 'grants concept points up the fact that there is a large overlap between the socialist and capitalist worlds' (p. 6), since they both included elements of exchange and grants. In this sense, the attempt to integrate the grants concept in economics made it possible to compare the merits of socialist and capitalist societies and possibly to change the proportion of activities they both organized by exchange. Finally, in the introduction to Altruism, Morality and Economy, Phelps (1975) somewhat laments the compartmentalizing of the study of human behavior. Drawing his inspiration from the excursions of economics in such fields as the theory of conflict and the economics of crime and punishment, Phelps presents his collection of essays as such an expedition, thereby indicating that economics did not then embrace the study of altruistic behavior. In extending the subject of economics to altruistic behavior, Phelps meant that economics had to be rethought. Yet, he associated his claim for the recognition of altruistic behavior with the observation that it was crucial to the functioning of markets, thus suggesting that a better understanding of altruism could contribute to raising economic efficiency in Western societies. In the light of all this, the wavering of altruism literature between homo economicus and homo ethicus after 1975 can be seen as reflecting distinct theoretical strategies in dealing with the social crisis of Western societies in the late 1960s and in particular with the changes affecting the sphere of public goods - changes which were seen as a threat to social cohesion (see, for instance, Mancur Olson [I9651 1971: 172-3). Thus, some economists tried to rescue homo economicus, claiming that the question of import was to explain why people do not contribute to public goods, while others strove to supplement homo economicus with homo ethicus, pointing out that what deserved to be explained was why people contribute to public goods even when they can Book reviews 303 easily free-ride. That these two perspectives are well represented in The Economics ofAltruism is not the least of its merits. Downloaded by [LSE Library] at 23:32 08 November 2017 REFERENCES Andreoni, J. (1989) 'Giving with impure altruism: applications to charity and Ricardian equivalence', Journal of Political Economy 97: 1447-58. (1990) 'Impure altruism and donations to public goods: a theory of wannglow giving', Economic Journal 100: 464-77. Becker, G.S. (1974) 'A theory of social interactions', Journal of Political Economy 82: 1063-93. Boulding, K.E. (1973) The Economy of Love and Fear: A Preface to Grants Economics, Belmont, CA: Wadsworth. Buchanan, J.M. (1978) 'Markets, states, and the extent of morals', American Economic Review: Papers and Proceedings 68: 364-8. Collard, D. (1978) Altruism and Economy: A Study in Non-Selfish Economics, Oxford: Martin Robertson. Hirshleifer, J. (1977) 'Economics from a biological viewpoint', Journal of Law and Economics 20: 1-52. Kurz, M. (1977) 'Altruistic equilibrium', in B. Balassa and R. Nelson (eds) Economic Progress, Private Values and Public Policy, Amsterdam: North-Holland, pp. 177200. Margolis, H. (1982) Selfishness, Altruism, and Rationality: A Theory of Social Choice, Chicago: The University of Chicago Press. (1990) 'Dual utilities and rational choice', in J.J. Mansbridge (ed.) Beyond Self-Interest, Chicago: The University of Chicago Press. Phelps, E.S. (ed.) (1975) Altruism, Morality, and Economic Theory, New York: Sage. Samuelson, P.A. (1985) 'Modes of thought in economics and biology', American Economic Review: Papers and Proceedings 75: 166-72. Seldon, A. (ed.) (1973) The Economics of Charity: Essays on the Comparative Economics and Ethics of Giving and Selling with Applications to Blood, IEA Readings 12, London: Institute of Economic Affairs. Sen, A.K. (1977) 'Rational fools: a critique of the behavioral foundations of economic theory', Philosophy and Public Affairs 6: 317-44. Sugden, R. (1984) 'Reciprocity: the supply of public goods through voluntary contributions', Economic Journal 94: 772-87. Titmuss, R.M. ([I9701 1997) The Gift Relationship: From Human Blood to Social Policy, ed. A. Oakley and J. Ashton, New York: The New Press. Wilson, E. (1975) Sociobiology, Cambridge, MA: The Belknap Press. Philippe Fontaine Ecole normale suph-ieure de Cachan