Are Economic Agents Really Selfish?

One way to improve economics is to improve economic models. Economic models prototypically employ self-interested agents, but does that help us understand the real economy? In other words, are people really purely selfish?

In one sense we can argue that people are totally selfish. Consider that you donate to charity. Does it make you feel good? Aha! You did it just to feel good! In an elementary sense we can call this selfish, but in a more normal sense of the term we would not think of this as selfish. Caring about other people isn’t usually considered selfish. Even self-sacrifice for the sake of others would be considered selfish under this view, given that such self-sacrifice is demanded or done happily. Ironically, those who die for us willingly are generally considered to be more selfless, not less.

Dr. Bryan Caplan utilizes a useful dichotomy between selfishness per se, or human selfishness as Hayek would put it, and “narrow selfishness”, when he asks the following as part of a homework assignment: “What aspects of your behavior today were NOT compatible with narrow selfishness? Discuss specific behavioral choices motivated by altruism, fairness, and vindictiveness.”

I share a revised version of my own answer to this open-ended question below:

Perhaps I’m biased or otherwise incorrect, but I think quite a few of my actions are not motivated by narrow selfishness, or there is at least some component of selfless motive. I will discuss 4 categories of such actions: Obvious altruism, family-based altruism, warm-glow labor, and moral consumption.

Regarding motivations other than altruism, I don’t find myself very vindictive, but I am motivated by fairness. My notion of fairness is characterized by Divine Desire Theory and as such many of my religious activities can be seen as obtaining utility through this mechanism, although such activities and motivation often overlap with altruistic motive.

I give monthly and annually to charity. In addition, I attend a church where I donate regularly although my theology holds that such contributions are optional. In the past I also volunteered labor for church activities, although I haven’t done much of that since I moved to the D.C. area. I sometimes give food to the homeless and even less frequently I do give homeless individuals plain cash. I would consider these activities to be obviously altruistic.

I engage in some altruism regarding my family. I expend resources in ways counterfactual to my own utility maximization with the goal of improving my wife’s utility. There is a component of such expenditure which is narrowly selfish: When my wife is in a good mood she might let me pick what we eat for dinner. There is also a component of such expenditure which is truly and happily sacrificial.

I help out my parents and siblings with time, labor, and money where it is needed and I am able. Some of this is narrowly selfish but I think quite a bit is not. One interesting motive here is a sense of debt I feel to my parents for having raised me, although they insist no such debt exists.

My labor is incentivized by selfish and selfless components which may be considered a warm-glow labor effect. I am simultaneously motivated by the prospect of more income and, separately, the ability to improve the lives of others. I would have disutility if I made even large income by harming others.

Another way in which I engage in altruism or fairness is through moral consumption. I consume Christian music and also sometimes concerts or movies. I prefer Chick-Fil-A to other fast food restaurants. I have a higher willingness to pay for these goods because a portion of my expenditure is going towards a public good, which is the institution of Christianity. I don’t view this as very self-interested: I gain utility from the expectation that other lives will be improved by Christianity, not because I think I am investing in a social contract to grant Christians special benefits.

In conclusion, I have discussed 4 categories which I consider to be expressions of selflessness in part or in full. I considered broad selfishness to be any action which improves my utility. Narrow selfishness is any activity which improves my utility, regardless of the effect on others. Non-narrow selfishness, or selflessness, is considered to be the contingent effect of the utility of others on my own utility.

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