Re: Self-interest

[MJH YAFFEY <M.J.H.Yaffey@xxxxxxxxxxxxxx>]

On Mon, 14 Nov 1994, Herbert Gintis wrote:

> 	What I mean is that for most of economic theory some notion of
> reciprocal altruism (which is really self-interest) does what is
> needed (e.g., treating social interactions as repeated games where
> cooperation is induced by the threat of not continuing the
> interaction). There are some things that cannot be handled this way.
> One is fairness and the other is revenge. These may be important for
> understanding basic economic institutions, but I haven't seen a
> persuasive example yet. I suspect there are real examples and these
> behavioral traits are very important for economic theory.
>
Agreed. But let me put the following propositions to you:

1) In the matter of actually existing human motivation, most
empirical research has been done, not by biologists, but by
educational psychologists. There is no obvious reason (excluding
biology-envy) why biological theory should be looked to in first
place.

2) Among the paradigms in educational psychology, those of Piaget,
Kohlberg, and Hoffman form a cluster which have in common a concept
of progression (during childhood) through stages of [personal]
moral development, whereby most people [not all] get beyond the
level of calculated reciprocal altruism (Kohlberg Stage Two)
which as Gintis says is really self-interest.

3) The way adult individuals perceive moral stages higher than
their own is interesting. If considered at all, such altruism is
likely to be rationalised as concealed self-interest, mutual
self-interest, or aberrant, or non-existent.

4) The motivation and behaviour of market operators, or game-
theory players, or agents in principal-agent theory, is generally
assumed to be Kohlberg Stage Two or below. The literature is
however very coy in disclosing the psychological correlative
of its economic assumptions. It is also coy in disclosing whether
the assumption of opportunism, or of calculating self-interest,
relates to one or two individuals in a framework of law (as in
Pris Dilemma) or applies to whole society including police and
govt (the Hieronymus Bosch scenario). It is not always clear
(here I have D C North in mind) whether the self-interested
characterisation is intended as an fair approximation or as an
intellectual exercise to study an imaginary worst-case.

5) D C North and others have pointed out that calculating self-
interest produces lower transaction costs than does complete
opportunism (Kohlberg Stage One, relatively rare in adults).
Kohlberg Stage Three would be cheaper still.

6) We should not assume that all individuals are on the same
level. Moral stages are distributed through the population.
The institutions which generate moral development do not act
uniformly. Therefore, a decrease in the proportion at the higher
levels would be associated with an increased number in or below
Stage Two and therefore a higher transaction costs in markets.
The spread of "market values" with undermining of other-
regarding moral behaviour can increase transaction costs and
reduce the efficiency of market economies -- as pointed out by
Prof Platteau in J. Dev. Stud. 1994.

7) According to Hoffman (one of the cluster mentioned) morality
springs from empathetic emotions which are biologically wired-
in. Among these are the empathetic emotions of anger and grief.
These give rise to the desires for retributive justice and
distributive fairness respectively. Hence the revenge and
fairness, mentioned by Gintis as outside the economically
interesting category, are at the very source of behaviour
patterns without which both market efficiency and extra-market
life would be very poor.

If there is any interest, I can post a paper on this, just
before Christmas (I am out of touch after this week).

Michael Yaffey,
Development and Project Planning Centre, Bradford University