Attribution – NonCommercial - ShareAlike Altruistic Economics AE605: What Economics Can't Tell You About Money V1.2 www.altruists.org A presentation by Robin Upton, 2011-01-25, Latest version at www.altruists.org/ae605 Attribution – NonCommercial - ShareAlike

Contents 1. Money as Motivation 2. Relationship to Pain 3. Money Sharing Games 4. Subliminal Effect 5. Selfishness of Economists

93% 65% 1. Money as Motivation In 1973, a US blood bank randomly asked http://www.altruists.org/d998 In 1973, a US blood bank randomly asked former donors one of 2 different questions: A) “Would you like to donate blood again?” 93% B) “Would you like to donate blood again, if we give you a $10 reward?” 65%

Woldenschiessen, Switzerland http://www.altruists.org/d998 In 1990's, adult residents of Wolfenschiessen, Switzerland, were asked about a local nuclear waste processing facility: A) “Would you support its construction?” C 51% B) “Would you support its construction, if given a reward of up to $8700?” C 25% +

Money “Crowds Out” Other Motives Why did money work as a disincentive?... ...when money is involved, people think more selfishly. Money motivation reduces altruism.

2. Relationship to Pain Counting money decreased pain sensitivity... http://www.altruists.org/f1000 People put their hand in hot water then rated the pain, after 2 different counting activities... Counting money decreased pain sensitivity... ...especially when people are already feeling social exclusion!

Losing Money heightens Pain http://www.altruists.org/f1000 People put their hand in hot water then rated the pain, after chatting about 2 different topics... Talk of money loss heightened pain sensitivity... ...especially when people are already feeling social exclusion!

Money as a (Social) Pain Killer “The mere idea of money has considerable psychological power, enough to alter reactions to social exclusion and even to physical pain.” Money as a (Social) Pain Killer Why did touching money reduce people's pain? Thinking about money makes most people feel strong & independent. Money reduces people's natural desire for friendship.

http://www.altruists.org/d998 3. The Dictator Game Player A receives money to split between himself & Player B Both players than receive this allocation. Economic Theory predicts Player A will not give any money away In reality, Player A often splits the money evenly Player A Player B Player A Player B

The Ultimatum Game Theory predicts Player B will accept any split: http://www.altruists.org/ideas/economics/behavioral Like the Dictator Game, Player A splits the money, but then Player B can choose to accept this or cancel the experiment. Theory predicts Player B will accept any split: In reality, Player B often rejects unequal splits: Player A Player B Player A Player B

Why Don't People Self-maximise? Dictator Game: Why do dictators give away any money? Ultimatum Game: Why does Player B reject unfair splits? Most people like things to be fair, a reality to which economics is blind.

4. Subliminal Effect “Pull up a chair...” http://www.altruists.org/f1000 The experimenter invited people to pull up a chair... A computer in the background showed one of 3 different screensavers. “Pull up a chair...” And proximity to the desk was measured.

Distancing Effect http://www.altruists.org/f1000 The money screensaver increased the distance people sat from the experimenter!

Working Alone or Together? http://www.altruists.org/f1000 Working Alone or Together? Subjects were offered the choice either to work on a task alone or with another person. The money screensaver dramatically decreased willingness to work together!

competition rather than collaboration. “In summary,we found that small reminders of money produced large changes in behavior.” http://www.altruists.org/f1000 Subliminal Effect Why did the money screensaver make people choose to sit further away & work alone? Even subtle reminders of money make people feel more independent. Money encourages competition rather than collaboration.

5. Selfishness of Economists They give less to charity... 5. Selfishness of Economists (Why) do selfish people self-select in economics? Since 1990's, many studies have compared behavior of economics graduates with other graduates. They give less to charity... ...and are more selfish in experiments. A B A B Economists Non-economists

Does Economics attract Selfish Students? Or does Studying Economics (Why) do selfish people self-select in economics? Or does Studying Economics increase Selfishness? Or Both? This answer is still unclear.