This blog will host my ramblings about life. To be a bit more specific, I'll probably focus on these subjects: music, sports, food, the everyday beauty of life, and the comedy/tragedy/absurdity of our existence. That about covers it.
Tuesday, June 2, 2009
"The Altruism in Economics"
If you're interested, click HERE for what I found to be an interesting article about the flaws of traditional economic models and information about behavioral economics. These economists are going against the "horse-and-sparrow" model.
2 comments:
travolta
said...
Is it a bad sign when I disagree with the premise of the very first line in the article?
"Standard economic theory states that people are interested only in their own material gain."
No, it doesn't. People will always act in what they perceive to be their self-interest. Sure, most of the time that is measured in purely material gain. But not always. The "not always" part explains why people form communities. It explains why people will sacrifice themselves for their family/city/tribe/nation.
Listed in the story are prime examples of this: "Across the country and around the world, people are sharing jobs or accepting reduced wages in order to help their colleagues and prevent wider unemployment." --- because they believe that it is in their long-term self interest to do this.
Essentially, they are agreeing to share jobs in the hopes that someone will do it for them in the future, if needed. It is insurance against losing their own job.
This is why people donate to charities. They do it partly to feel good about themselves, "Look at me, I'm a good person because I donated, I'm raising my social status", partly because it helps the community as a whole, "I don't want poor people dying in the streets", and partly because they want charities in place in case they need it, "I hope someone would donate to a food pantry if I was unemployed."
The common thread in these reasons to donate is that they are all in the donator's self-interest.
To quote A Beautiful Mind, Adam Smith's theories are incomplete. As the article states: "How selfish soever man may be supposed," wrote Smith, "there are evidently some principles in his nature, which interest him in the fortune of others and render their happiness necessary to him, though he derives nothing from it except the pleasure of seeing it."
The "pleasure of seeing it" is quite real, real enough to explain why people do altruistic things.
I also strongly disagree with an assertion made towards the end of the article: "Movements for civil rights, civil liberties and political democracy in authoritarian states are responsible for creating modern liberal democracies," writes Gintis, "yet participation in such movements cannot usually be explained in terms of self-interest."
I want to ask Gintis if he was taking crazy pills when he wrote this. Participation in these movements are explained entirely by people's desires to live under what they consider to be a better, more free government. That is the essence of self-interest.
Oh, I figured having you read this article would be like showing a full moon to a werewolf, but the merit of the article is that it tries to combat the free market fundamentalism that is very much out there.
And the statement from Smith that the author quotes is from The Theory of Moral Sentiments, not The Wealth of Nations. The former is a treatise that more followers of Smith need to read along with his lecture notes on Rhetoric. What Smith stated in the Moral Sentiments work, and I think I'm getting this right, is that people and nations are/should be motivated by "enlightened self-interest," which is different than how many people interpret Smith's ideas.
The article does have a strong anti standard economic theory slant, but the slow rise of behavioral economists might be getting to a better interpretation of Smith than Stigler, Friedman, Greenspan, and Gordon Gecko.
The problem that the article tries to expose is that too many people think of self-interest equaling only monetary interest, which is dumb.
2 comments:
Is it a bad sign when I disagree with the premise of the very first line in the article?
"Standard economic theory states that people are interested only in their own material gain."
No, it doesn't. People will always act in what they perceive to be their self-interest. Sure, most of the time that is measured in purely material gain. But not always. The "not always" part explains why people form communities. It explains why people will sacrifice themselves for their family/city/tribe/nation.
Listed in the story are prime examples of this: "Across the country and around the world, people are sharing jobs or accepting reduced wages in order to help their colleagues and prevent wider unemployment." --- because they believe that it is in their long-term self interest to do this.
Essentially, they are agreeing to share jobs in the hopes that someone will do it for them in the future, if needed. It is insurance against losing their own job.
This is why people donate to charities. They do it partly to feel good about themselves, "Look at me, I'm a good person because I donated, I'm raising my social status", partly because it helps the community as a whole, "I don't want poor people dying in the streets", and partly because they want charities in place in case they need it, "I hope someone would donate to a food pantry if I was unemployed."
The common thread in these reasons to donate is that they are all in the donator's self-interest.
To quote A Beautiful Mind, Adam Smith's theories are incomplete. As the article states: "How selfish soever man may be supposed," wrote Smith, "there are evidently some principles in his nature, which interest him in the fortune of others and render their happiness necessary to him, though he derives nothing from it except the pleasure of seeing it."
The "pleasure of seeing it" is quite real, real enough to explain why people do altruistic things.
I also strongly disagree with an assertion made towards the end of the article: "Movements for civil rights, civil liberties and political democracy in authoritarian states are responsible for creating modern liberal democracies," writes Gintis, "yet participation in such movements cannot usually be explained in terms of self-interest."
I want to ask Gintis if he was taking crazy pills when he wrote this. Participation in these movements are explained entirely by people's desires to live under what they consider to be a better, more free government. That is the essence of self-interest.
Oh, I figured having you read this article would be like showing a full moon to a werewolf, but the merit of the article is that it tries to combat the free market fundamentalism that is very much out there.
And the statement from Smith that the author quotes is from The Theory of Moral Sentiments, not The Wealth of Nations. The former is a treatise that more followers of Smith need to read along with his lecture notes on Rhetoric. What Smith stated in the Moral Sentiments work, and I think I'm getting this right, is that people and nations are/should be motivated by "enlightened self-interest," which is different than how many people interpret Smith's ideas.
The article does have a strong anti standard economic theory slant, but the slow rise of behavioral economists might be getting to a better interpretation of Smith than Stigler, Friedman, Greenspan, and Gordon Gecko.
The problem that the article tries to expose is that too many people think of self-interest equaling only monetary interest, which is dumb.
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