The Economics of Altruism and Spite

I want to dedicate today’s post to a really great episode of Freakonomics on humans’ propensity for spite. This is an interesting topic to bring into the economic field because it seems at odds with our assumption that people are motivated to act only if the benefits of their action outweigh the costs. In standard economic theory there is no such thing as altruism or spite because people do not act if they incur losses.

Social behaviour Primary effect on recipients
+
Primary effect on actor + Mutual benefit Selfishness
Altruism Spite

(Adapted from Krupp, 2013, p.2748)

Let’s firstly define what spite is. For this we have to look at social behaviour which can be broadly classified into four categories. The methodology above is adapted from a paper by Krupp and can be found as a reference for further reading if you like. It is derived from the effects of the primary interaction between actor and recipient. In the crudest sense, spite occurs if we hurt ourselves to hurt others while altruism occurs when we hurt ourselves to help others. Therefore altruism tends to be seen as the counterpart of spite. What is important in the definition of spite, though, is that true spite is not driven by the desire to punish someone’s bad behaviour as economist Benedikt Hermann mentions in the Freakonomics episode.

Stephen Dubner drills down on the concept of spite from different angles. For example, he speaks to economist Benedikt Herrmann about his “money-burning” experiments which provided evidence for spite in a lab setting. He found that there were a surprisingly large number of people that would give up a certain amount of the promised money only to take away some money from the opponent (which they did not know). Hermann attempts to explain this with the “Homo rivalis” concept, as he puts it. While the Homo economicus is driven by self-interest and wants to get as much as possible in absolute terms, the Homo rivalis is driven by competition and wants to maximize the difference between his or her gain and the opponent’s gain. So you could describe that person as a relative pay-off maximiser rather than absolute pay-off maximiser. This phenomenon can lead to spite according to Herrmann. However, a limitation of such lab games is their anonymous setting. In the real world, we tend to know the recipients of our action.

After seeming to have some evidence for spite in human behaviour the next question of the podcast is whether spite is in our human nature or whether we somehow happened to develop this behaviour along the way. To answer this Freakonomics Radio producer Katherine Wells speaks to biologist E. O. Wilson about whether spite exists in nature. According to Wilson spite, i.e. doing harm to someone else at the cost of harm to yourself, might not exist in nature. Animals are very much motivated by some advantage or other gain and Wilson argues that this also applies to humans. He reasons that there are always some benefits – even if it is only emotional – a perpetrator gains from his or her actions. So in sum, real spite might actually not exist; neither in nature nor in human behaviour.

Personally, the last six minutes of the podcast are the most interesting ones as Katherine Wells turns away from spite to altruism. Wilson sees altruism in the framework of either doing the moral/ heroic thing or the selfish thing, where the moral or heroic thing is the altruistic choice. He compares pure altruism to ants as social insects. On the other hand pure selfishness would be mere chaos. So the ‘human condition’ is to actually be in the middle, which sounds plausible for the functioning of society in general terms.

Steven Levitt concludes the episode and firstly establishes the link between economics and evolutionary biology (Wilson’s view) to prove his point on spite thereafter. According to Levitt both disciplines are motivated by costs and benefits and their striving for simplicity and – especially based on the former commonality – this is exactly why true spite may not exist. Even if the perpetrator does not gain from the outside you merely do not know for sure. For true spite to exist the perpetrator would need to act without any benefit, but you cannot prove this in the real world (maybe in a lab setting). This is why Levitt stresses one of the premises of economics “that we never know what other people are thinking and why they are doing what they are doing but we focus on what they are doing”. Similarly for altruism, as the flipside of spite, this could well be motivated by self-interest rather than by true altruism. However, for economists this is not the primary concern because we know that we don’t know their motivation. What economists focus on is the actions they observe. This is still consistent with “people do the best they can” according to Levitt.

So what does the episode leave us with? There is a lot to digest and a lot of different aspects to the concept of spite and altruism. While there might be such thing as spite in a lab setting, it is much harder to find in the real world. One should be cautious in applying the findings from these lab experiments to the real world. What is more, true spite as something where the perpetrator does harm to someone else at the cost of harming him- or herself may not even exist; neither in nature nor in human behaviour (so I probably have to be sorry for the somewhat wrong title). As humans, or “homo economicus” if you like, we are very much motivated by a gain – extrinsic or intrinsic – from our actions. This is why in economics the focus tends to be on people’s actions. This is not really at odds with the concept of spite or altruism in general and does not mean that they cannot exist. We only acknowledge that what people call spite or altruism can either be true altruism/spite or actually motivated by self-interest…

Thanks for reading!

Jasse


Freakonomics, 2013. Spite Happens. [podcast online] Available at: http://freakonomics.com/podcast/spite-happens/.

Krupp, D.B., 2013. How to distinguish altruism from spite (and why we should bother). Journal of Evolutionary Biology, 26(12), pp.2746-2749.

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