Self interest is almost always everything

Via the International Herald Tribune, but turning out to be in the New York Times, was this odd piece:

When Self-Interest Isn’t Everything

Traditional economic models assume that people are self-interested in the narrow sense. If “homo economicus” — the stereotypical rational actor in these models — finds a wallet on the sidewalk, he keeps the cash inside. He doesn’t leave tips after dining in restaurants that he will never visit again. And he would never vote in a presidential election, much less make an anonymous donation of money or time to a presidential campaign.

The author is Robert H. Frank, an economist at the Johnson School of Management at Cornell University. According to his bio, he’s written a Principles of Economics book – so why is he writing as though the last couple of decades of Behavioural Economics never existed? Exempli gratia:

In growing numbers, people peel away from their private rat race to devote energy to collective goals. The free-rider problem ceases to inhibit them, not only because they now assign less value to private consumption, but also because they find satisfaction in the very act of contributing to the common good. Activities viewed as costs by self-interest models are thus seen as benefits instead.

No – “self-interest models” merely improve and are adapted. “Rationality models” (keeping the lexicon) used to assume a great many things were irrational, because they didn’t fit the model. Then Economists began to realise that, in a market with voluntary exchange, every choice is rational to the person making it. From compulsive gamblers to heroin users, they actions make well-enough sense to them. If we want to get beneath them, improve their information and stop them from making bad decision rationally, we must find out what is rational, what incentives are at work.

This is no different. Collective engagement in a social activity (even something so nasty as government-by-politics) does not defy self-interest. It exemplifies (a) the growth of self-interest to individuals, citizens, consumers, etc., and (b) the betterment of our understanding of self-interest. Some of us, at least. Frank seems to content to use terms like “traditional” when he should be using “old” or “no longer used” or something.

Case in point:

…what about the millions of others who make small cash donations? The elderly South Carolina woman who sent her chosen candidate a money order for $3.01 surely did not expect to be appointed ambassador to the Court of St. James next January. And what about the volunteers who staff phone banks from home, or who perform other tasks that offer little opportunity for social interaction?

When viewed through the lens of traditional self-interest models, such behavior is equivalent to the impossible geological phenomenon of rivers flowing uphill. It often seems to entail a yearning to participate in something larger than oneself and is by no means limited to the political domain. Fans of sports teams, for example, often seem oblivious to the standard cost-benefit calculations, as do the followers of certain rock bands.

Yes – this is why the lens of traditional self-interest models were bloody well put away in a draw with all the other old and hopelessly out-dated lenses of other models. Never to be used again except by columnists for the New York Times, apparently (I since I hope to God he’s not teaching this to his students).

Why, one wonders, might small-donor people participate in an election? Because it is in their bloody self-interest. They aren’t oblivious to cost-benefit calculations. They believe that the value to them (as to society) of a given candidate getting the Presidency (or not getting the Presidency, say) is so great that even their small contribution to that end is cost-effective to them.

Alternatively no, they don’t. They’re like sports-fans. They understand, as they must, that they are just the fans. Meaning that they are participating in the romance of their team, or their candidate. Which is no less self-interested, no less rational, than someone reading a book.

When Robert Franks sees a woman reading a romance novel on the train, does he call her irrational for not reading something of higher merit? No, because the woman is engaging in an activity that gives her utility greater than her opportunity cost (reading another book, spending the money on another activity). It’s basic economics. Really basic.

The one interesting thing in the article was this, which was actually taken from a book in 1982, Shifting Involvements by Albert Hirschmann.

Although social movements often command substantial allegiance for many years, at some point their supporters’ commitment begins to falter. One reason for this, perhaps, is that the bar that defines morally praiseworthy behavior shifts with context: when growing numbers of people actively dedicate themselves to the pursuit of civic virtue, it becomes harder to earn moral approval by volunteering. When some discouraged volunteers abandon the social movement to resume pursuing private accumulation, remaining adherents feel increasing pressure to do likewise. And at that point the cycle is set to repeat.

From an informal survey of 20th-century American social movements, Mr. Hirschman concluded that these cycles have an average duration of about 20 years.

This is interesting not in this instance but, rather, relative to the increasing participation and interest in “living green”. See how well you match the phenomenon discussed by Hirschmann to, say, this one:

U.S. suburbs start to watch their carbon

“In the American suburbs, people are suddenly literate in the language of carbon emissions and carbon footprints,” he said. “I’m hearing it in most mainstream places.”

If the United States is ever to reduce its carbon emissions, suburbanites – that is, roughly half of all Americans, said William Frey, a demographer at the Brookings Institution – are going to have to play a big role. And lately, they are trying.

Since 2005, the mayors of hundreds of suburban communities across America have pledged to meet or even beat the emissions goals set by the Kyoto Protocol, a treaty to reduce greenhouse emissions.

I can see – a bit – where Franks is coming from: understanding why people are participating now; why participation is meaningful to people now. But this isn’t the bloody 1980s. It isn’t at all difficult as a concept, though. People view participation as necessary now. After more than two decades of Gingrich revolution, Fox News, the Reagan bloody fantasy, wars, recessions, attacks on women, on migrants, on the poor, on the sick, on the elderly – people see a body politic (the United States) in desperate need of better stewardship. People are responding to their realisation that they have not lived up to their responsibility as citizens, lately.

Or, in the famous words of Mos Def:

Heard ‘em say it was all about the Benjamins
I don’t believe it now; didn’t believe it then


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