The moral iden­tity of homo eco­nomi­cus

Financial Mirror (Cyprus) - - FRONT PAGE -

Ak­erlof and Kran­ton pro­pose a sim­ple ad­di­tion to the con­ven­tional eco­nomic model of hu­man be­hav­iour. Be­sides the stan­dard self­ish el­e­ments that de­fine our pref­er­ences, they ar­gue that peo­ple see them­selves as mem­bers of “so­cial cat­e­gories” with which they iden­tify. Each of these so­cial cat­e­gories – for ex­am­ple, be­ing a Chris­tian, a fa­ther, a ma­son, a neigh­bour or a sports­man – has an as­so­ci­ated norm or ideal. And, be­cause peo­ple de­rive sat­is­fac­tion from be­hav­ing in ac­cor­dance with the ideal, they be­have not just to ac­quire, but also to be­come.

Bowles shows that we have dis­tinct frame­works for analysing sit­u­a­tions. In par­tic­u­lar, giv­ing peo­ple mon­e­tary in­cen­tives may work in mar­ket-like sit­u­a­tions. But, as a now­fa­mous study of Haifa day­care cen­tres showed, im­pos­ing fines on peo­ple who picked up their kids late ac­tu­ally had the op­po­site ef­fect: if a fine is like a price, peo­ple may find that it is a price worth pay­ing.

But with­out the fine, com­ing late con­sti­tutes impolite, rude, or dis­re­spect­ful be­hav­iour to­ward the care­givers, which self-re­spect­ing peo­ple would avoid, even with­out fines. Un­for­tu­nately, this other-re­gard­ing view of be­hav­ior has been de-em­pha­sised both in the cor­po­rate and the pub­lic do­main. In­stead, strate­gies have been de­rived from the view that all our be­hav­iors are self­ish, with the in­tel­lec­tual chal­lenge be­ing to de­sign “in­cen­tive-com­pat­i­ble” mech­a­nisms or con­tracts, an ef­fort that has also been recog­nised with No­bel Prizes.

But, as Ge­orge Price showed long ago, Dar­winian evo­lu­tion may have made us al­tru­is­tic, at least to­ward peo­ple we per­ceive as mem­bers of the group we call “us.” The new rev­o­lu­tion in eco­nom­ics may find a place for strate­gies based on af­fect­ing ideals and iden­ti­ties, not just taxes and sub­si­dies. In the process, we may un­der­stand that we vote be­cause that is what cit­i­zens ought to do, and we ex­cel at our jobs be­cause we strive for re­spect and self-re­al­i­sa­tion, not just a raise.

If suc­cess­ful, the new rev­o­lu­tion may lead to strate­gies that make us more re­spon­sive to our bet­ter an­gels. Eco­nom­ics and our view of hu­man be­hav­ior need not be dis­mal. It may even be­come in­spi­ra­tional.

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