The Mutability of Altruism: A Perspective from Economics David Clingingsmith Case Western Reserve University Workshop in Multidisciplinary Philanthropy Studies, IUPUI May 1 st, 2014

How are sharing choices made when there is both earned and windfall income? 1.Neo-classical theory – All income is fungible, so whether we consider it windfall or earnings doesn’t matter. 2.Mental accounting – Income from different sources at least partly infungible. – Income sources linked to appropriate uses. 3.Choice bracketing – Sometimes we ignore the big picture.

Determine Causality Distinguish Mechanisms External Validity Policy Relevance Special Populations Lab Experiments ★★★ ★★ ★ Field Experiments ★★ ★★★ ★★ Natural Experiments ★★★ ★★★ Observational Data ★★★★★★★★★★ What kind of experiment to run? 1.Manipulate mental accounts of actual potential donors to a charity in the field through priming. 2.Create a controlled setting where participants earn income, receive windfalls, and choose whether or not to share.

Field Experiments in Charitable Giving How do we increase the number, gift size, or long-term commitment of charitable donors? Systematic study of alternative methods of approaching potential donors. – Matching grants, seeds, refunds, rebates. – Information on behavior of others. – Leveraging social connections. – Once and done. – Overcoming avoidance.

Dictator Game Person 1 (“dictator”) is endowed with $E and asked to choose amount between $0 and $E to give to person 2 (“receiver”) who is anonymous. Over many experiments, 70% of subjects sharing something and mean amount shared about $⅓E (Camerer 2003).

The Mutability of Altruism An emerging literature suggests the degree of dictator sharing is sensitive to contextual and framing effects that impact neither possible choices nor resources. Making the consequences of choice less “direct” seems to reduce sharing.

Dictators share less when… 1.They can explicitly opt-out (Lazear et. al. 2012). 2.They can delegate to a stingy intermediary (Hamman et al 2010). 3.They will remain uncertainty about amount actually received (Dana et. al. 2006, 2007). 4.They can take as well as give (List 2007). 5.They allocate tokens rather than cash (Mazar et al 2008). 6.They are primed with moral ideas (Mazar et al 2008).

Mental Accounts and Sharing How are sharing choices affected by the relative size of earned and windfall income? Recruit participants to play a dictator game. – Dictator accumulate money via Completing a number-matching task in which they are paid based on matched completed. A randomly drawn windfall. – Dictators decide how much of the accumulated money to share with a receiver.

Number-matching task Select two numbers that sum to 100. No feedback, auto-advance. Not difficult, but requires focus.

Earned Income e Windfall w e0e0 w0w0 Goal: Measure how marginal willingness to share varies with relative size of earnings and windfall

Task: 180s Windfall: M E(Earnings)=25 E(Windfall)=15 BA Task: 180s Windfall: H E(Earnings)=25 E(Windfall)=25 BA

Framed field experiment with online workers. 1.Use online labor market in distributed outsourcing industry (Mechanical Turk). – In this market, workers do short, discrete tasks that can be completed using a browser. – Example tasks: Image classification, data entry and validation, audio transcription, blog commenting, searches, surveys. 2.Employers create a task that appears in a list visible to workers. – A description and wage offer are included. – Workers accept the task and complete it. – Employers review work and release payment. 3.Subjects are mTurk workers in India. – Main job for many of them. – Average pay is about $10/hour.

Sharing choice:

Marginal Willingness to Share

Marginal Willingness to Share by Fraction Earned Plots are coefficients from a local-linear kernel regression

Marginal Willingness to Share by Fraction Earned Largest: Windfall Smallest: Earnings Largest: Earnings Smallest: Windfall

Is the qualitative difference between earnings and windfall essential? – Follow-up with two accounts, but both containing windfall. – Same realized values in the accounts as before. – Dictators learned of the windfall amounts sequentially, and they were separated by demographic and attitude questions. – N=292

Marginal Willingness to Share: Two Windfalls

Marginal Willingness to Share by Fraction from Second Windfall Plots are coefficients from a local-linear kernel regression

What did receivers expect to get?

Marginal Expectation to Receive

Marginal Expectation to Receive by Fraction Earned

Conclusions from the experiment 1.Participants treat earned and windfall income as only partially fungible. 2.Participants paid selective attention to the largest source. Marginal sharing was lowest when the sources were most mixed. 3.It matter that the two accounts were substantively different. 4.Receivers are both over-optimistic and expect more from mixtures rather than less.

Thanks for listening! David Clingingsmith

Ambiguity and Pro-social Behavior (Mazar, Amir, and Ariely 2008; Benabou & Tirole 2011) 1.Agents value perceiving themselves as pro-social. 2.They update their perceptions of themselves based on actions they take. (Imperfect self knowledge.) 3.An ambiguous action is a relatively noisy signal. Less impact on the prior than an unambiguous one. 4.RESULT: Agents will take more selfish actions when actions send a noisy signal, i.e. when they are ambiguous. Related to “cognitive dissonance” in psychology (Festinger 1957). – Tendency to resolve contradictions between our actions and self-concept in our favor, if they are small enough. – Self-serving selective attention to information common when interpreting information relevant to one’s payoffs or self-image. (Hastorf & Cantril 1954; Larwood & Whittaker 1977; Svenson 1981; Ross & Sicoly 1982; Babcock et al 1995; Babcock and Loewenstein 1997).