Saturday, October 26, 2019


446. How rational is altruism?

In this blog I discussed several aspects of altruism. How would an economist deal with it?

Altruism, recall, is defined as making a sacrifice to someone else without being sure of an adequate return.

What an economist would probably say first, as has indeed been claimed, is that under the pressure of competition one cannot afford it. To survive one needs to grasp every possible opportunity for profit. In fact, the pressure of competition is often not so sharp, with firms doing all they can to soften it, in limits to competition.

However that may be, suppose that nevertheless altruism is observed? The economist, seeking to explain everything on the basis of the maximisation of some ‘objective function’ under constraints, would say that then it must be rational, and that it can be reconstructed by including in the objective function a reward in the form of feeling good about making the sacrifice.

The problem with this is as follows. Assuming that the sacrifice is material, i.e. monetary, in the form of profit foregone, the benefit is not material but ….., yes what? Is it a feeling of moral duty, or a personal sense of empathy, or friendship, or love (agape), or response to a need, or a habit, or a favour in return to a favour received, or creating a good reputation?

Is it clear to the decision maker himself which is at issue? Is he honest to himself about the motive? Recall the issue of limited freedom of the will, according to which many, perhaps most decisions are made subconsciously, by impulse, which then are often rationalized afterwards. Could one still call that rational? 

And suppose he knew which motive was at play, how measurable would its benefit be? The ‘value’ of it would be uncertain, dependent on contingencies the decision maker cannot fathom. If the party the sacrifice is made to also has limited freedom of the will, who can say how he will respond?  How measurable is all this? If not, what remains of the notion of maximizing an objective function?

One should recognize that here, as in many other cases, there is uncertainty in the sense that one does not know all the things that could happen, and what the costs and benefits would be. Then, one cannot calculate and be rational in that sense. One operates by hunch or guess, or more or less at random. Not knowing what the outcome will or even can be, one needs the courage of making a leap of faith, relying on one’s intuitive hunches and impulse.

Research shows that often decisions made that way are surprisingly effective. It is just that one cannot explain how. After all, we operate subconsciously but effectively on the basis of routines in so many everyday activities.

Algorithms operated by ‘platform businesses’ such as Google and Facebook can predict your choices better, on the basis of masses of data collected on your conduct and choices, than you can yourself. Could one still maintain that our choices are rational?    


   

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