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Who is Afraid of the Past?
Economic Theorists and Historians of Economics on Altruism
Philippe Fontaine
Ecole normale superieure de Cachan
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Historians of economics can rightly observe that most economic theorists
have a restricted conception of the past, paying little attention to
contributions prior to 1970. The fact remains, however, that they have
their own failings on this score. A quick perusal of History of Political
Economy (1980-1997), the Journal of the History of Economic Thought
(1980-1997) and the European Journal of the History of Economic Thought
(1993-97) reveals that historians of economics tend to neglect premodern
thought and to balk at investigating post-1970 works. Todd Lowry (1991)
has argued that historians of economics can better understand modern
economics by incorporating the study of premodern thought. I would like
to suggest that similar benefits can be expected if they look at modern
economic analysis from an historical perspective.
The revival of interest in altruism, which occurred around 1970,
provides an interesting illustration of the way both communities see the
past. Wishing to advance current economic analysis, economic theorists
usually refer to recent work. However, the late development of altruism
research has led them to extend their references to earlier historical
contributions. In so doing, economic theorists have put earlier and modern
works on the same footing, investigating both the distant and the near
past according to the needs of modern theory. On the other hand, since
the economics of altruism really took shape after 1970, historians of
economics feel that altruism research does not come within their province;
accordingly, they have investigated altruism and themes of related
interest in earlier works, neglecting that modern theories influence our
evaluation of the latter.
I. ECONOMIC THEORISTS AND THE HISTORY OF ALTRUISM
A standard article on altruism begins with a brief review of the
post-1970 literature relevant to the argument. Such references help
situate the contribution of the paper as an attempt to either generalize
or qualify or refute known results (see, for instance, Andreoni 1989,
Berheim and Stark 1988, Wintrobe 1981). In other words, modern
economic theorists refer to recent works to buttress their own arguments.
And even when they do dip further into history, they often do it with
little sensitivity. References to earlier authors are deemed useful to
the extent that they can serve as authoritative legitimation of current
interpretations.
Interesting illustrations appear in Becker's (1981) and Kolm's (1983)
uses of Smith's work--a classical reference among economic theorists.
It is interesting to note that, unlike Becker, Kolm claims that Smith
acknowledges that selfishness is more efficient than altruism in the
marketplace, although Kolm concedes that Smith failed to demonstrate
the informational inefficiency of altruism. Yet, the fact that Becker's
reading departs from Kolm's is no surprise, since the former emphasizes
the utility-interdependence view of altruism whereas the latter stresses
the dual-utility view. In referring to Smith's own formulations, both
Becker and Kolm seek support for their own views of altruism. Becker
(1981) thus observes that "Smith ... tries to explain why people are
more altruistic towards their families than towards strangers,
but he does not consider what happens when altruistic and selfish
behaviours 'compete' in market transactions" (pp. 10-11). Likewise, in
addressing "Das Adam Smith Problem," Kolm (1983) notes that "it is ...
contradictory to define--and indeed, as with Smith and Pareto, to
praise--the efficiency of markets by reference to people's egoistic
preferences ... rather than by reference to people's global preferences"
(p. 20). Therefore, in referring to the work of Smith, Becker (1981) and
Kolm (1983) do not mean so much to understand Smith's own theory of
altruism as to explain how certain of its aspects can serve the purposes
of modern economic theory. They make it clear, indeed, that their main
objective remains to contribute to neglected areas of research. Thus,
Becker refers to the "analysis of the consequences of altruism" (p. 12),
while Kolm mentions the economics of gifts and the "incorporation of
social relations and human characteristics, and of preferences over
these, into the normative analysis of society" (p. 62).
If the interest of economic theorists in the history of economics is
mainly based on its potential lessons for modern theory, we may expect
theorists to project old ideas into modern frameworks and therefore to
lose touch with the context of their production.
II. HISTORIANS OF ECONOMICS ON ALTRUISM
In investigating the historical sources of the notion of altruism,
historians of economics have put emphasis mainly on Smith, Edgeworth and
Wicksteed. Many contributions have thus been devoted to Smith's
"sympathy," taken as concern for others' welfare. Commentators have
explained that sympathy is as important as self-love in Smith's system
and that it is widespread in close-knit groups, where it develops on the
basis of frequent interactions. Hence, it is argued that even partners in
trade can show concern for each other's welfare (see Dimand and Dimand
1991). Unfortunately, students of Smith often equate "sympathy" with the
act of imaginative place-switching (see, for instance, Wilson 1976, p.
74), whereas Smith actually distinguished between the two. For this
reason, they have somewhat downplayed the fact that the concern for
others' welfare can also develop on the basis of empathy.
Once the role of empathy is acknowledged, it becomes obvious that one
can sympathize with relatives as well as with strangers. Although the
concern for others' welfare may be more accurate when it rests on frequent
interactions, it can nonetheless arise from empathy. In Smith, then, the
significant difference is not, as in modern literature, between sympathy
in close-knit groups and selfishness in impersonal gatherings. It is
merely between people who know each other thanks to frequent interactions
and people who use empathy to accumulate knowledge about each other--all
of them being sympathetic to some degree, and behaving either selfishly
or altruistically depending on the circumstances. Accordingly, although
Smith's sympathy can easily be depicted in terms of utility
interdependence, it should be remembered that it sometimes requires a
form of identification with others whereby the individual tries to
discover what makes them happy or sad.
Collard (1975) devoted an article to "Edgeworth's propositions on
altruism," where he insisted on his fundamental contributions to the
theory of altruistic behaviour. Yet, the core of Collard's argument and
his results are about Edgeworth's "coefficients of effective sympathy,"
whereby one measures the weight given to the utility of another in an
individual's utility function. Considering two individuals, A and B,
Collard suggests that when the utility of A depends on the utility of B,
modified by a coefficient of effective sympathy, A actually shows altruism
towards B. The problem involved in equating the concern for another's
welfare with altruism is particularly obvious when both coefficients equal
1. A gives the same weight to his own utility as to B's. And B attaches
the same weight to her own utility as to A's. As aresult, A and B maximize
the same utility function and they both have the same point of maximum
utility. As Boulding (1962) rightly observes, "In this case the parties
simply move immediately to their mutual optimum in the field and whether
this is done by gift or by exchange really makes very little difference"
(p. 62). This is precisely the problem: the fact that A cares for his own
welfare as much as he cares for B's does not necessarily imply that he
contributes personally to B's level of utility. Thus, in suggesting that
Edgeworth developed an analysis of altruism, Collard obscures one of the
limitations of Edgeworth's theory. Indeed, the latter makes it difficult
to distinguish among people whose utility is affected by the level of
others' utility, between those who participate directly in increasing the
level of others' utility and those who do not.
Last to be considered is Steedman's ([1989] 1995) contribution on
Wicksteed. Steedman points to Wicksteed's example of the housewife to
suggest that it does not make sense to argue that she is egoistical when
buying potatoes in the marketplace and altruistic when serving them at
home (p. 113). Steedman recalls that for Wicksteed this example shows
that there is no opposition between selfishness in the marketplace and
altruism in the family. Instead, the opposition is between the nature of
economic relations--the fact that the agent enters an economic relation
without expressing sympathy for the purposes of his or her partner
("non-tuism")--and its motives, which can be either selfish or altruistic.
For Wicksteed, altruism and sympathy operate on different levels of
analysis. It makes no sense, therefore, to exclude altruistic motives from
the study of economics, since an individual may enter a transaction to
further his or her own welfare as that of significant others; but it does
not make more sense to equate altruism with sympathy, since the
carrying out of the individual's unselfish purposes requires the
cooperation of others for whose purposes he has no sympathy.
III. ALTRUISM AFTER 1970: AN HISTORICAL PERSPECTIVE
Once it is remembered that in modern economic theory altruism is usually
represented by utility interdependence and that the latter is taken as the
expression of a concern for another's welfare, it appears that Smith's
analysis of sympathy may shed some light on the way modern economic
theorists model altruism. The work of Smith makes it clear indeed that the
utility-interdependence view of altruism, as found in modern economics,
relies on the idea that people can develop a knowledge of each other's
utility functions only on the basis of frequent interactions--hence the
special attention given to close-knit groups in altruism research. This is
clear from Becker's (1977) response to Tullock's criticism that it is
impossible for altruists to know the utility functions of beneficiaries:
"No doubt it is difficult to discover the function of someone living 1000
miles away, or of an unknown 'poor' person, but surely parents have
considerable knowledge of the utility functions of their children, as
brothers or close neighbours have of each other's functions" (p. 507). It
is interesting to note that Becker ignores the possibility that by putting
himself or herself in the shoes of others, the altruist can acquire some
knowledge about their utility functions (1). However, provided that people
are able to develop a sense of community with others whom they do not
know, there is no valid reason to restrict altruism to the family or,
more generally, close-knit groups.
Likewise, once it is realized that in mainstream economic analysis,
utility interdependence is assumed more than explained (see Kurz 1977, p.
177; Landes and Posner 1978, p. 419), it may be useful to remember that
in focussing on the utility-interdependence view of altruism modern
theorists have mainly followed in Edgeworth's footsteps. In this
connection, it is worth noting that Edgeworth's analysis of sympathy
marks a break with Smith: it no longer involves reference to an imaginary
change of positions; instead it connects sympathy with the vaguely
defined notion of "social distance" between individuals. In borrowing
Edgeworth's framework, economic theorists have thus unconsciously set
aside the possibility that the concern for another's welfare can rest on
the discovery of his or her utility function, as a result of an imaginary
change of positions.
Finally, the work of Wicksteed can contribute to explaining why modern
economists tend to equate sympathy with altruism and usually model the
latter as a form of utility interdependence. Wicksteed suggests indeed
that altruism and sympathy concern different levels of analysis. The fact
that the economic relation is impersonal means that the two transactors
show no sympathy for each other's purposes. This does not suffice,
however, for the characterization of transactors as either selfish or
altruistic. For what makes them selfish or altruistic depend only on what
motivates them--their own welfare or the welfare of another who is not
personally involved in the transaction. By contrast, in modern economics,
the impersonality of the economic relation is often associated with the
selfishness of agents while the personal character of relations is often
equated with the altruistic tendencies of members of close-knit groups.
In other words, the question of motivation becomes secondary in
determining whether agents are selfish or altruistic. What matters is the
context of the economic relation. As Becker (1981) notes: "I am giving a
definition of altruism that is relevant to behaviour, rather than a
philosophical discussion of what 'really' motivates people" (p. 2).
IV. CONCLUDING REMARKS
I have suggested that both economic theorists and historians of economics
are uneasy with the past: the former with the distant past; the latter
with the near past. Advocating an instrumental conception of the past,
economic theorists rebuild it according to their needs. For instance,
they overlook the fact that with empathy Smith provided an original
justification for utility interdependence and that Wicksteed analyzed
altruism without the help of utility interdependence. Likewise, economic
theorists present the current orientations of altruism research as
if they were the ineluctable consequences of the progress of economic
analysis, when they actually correspond to specific theoretical
orientations associated with the history of the discipline. For example,
they do not seem to be aware that in adopting Edgeworth's analysis of
sympathy, they also inherited his propinquity argument as its foundation.
On the other hand, in not extending their subject to the study of recent
developments in the economic analysis of altruistic behaviour, historians
of economics leave unexplored the question of the very selective use of
earlier contributions by modern theorists and therefore miss the
opportunity to show that the current orientations of altruism research are
historically determined. The fact that in the hands of modern economic
theorists, altruism has gradually become a sophisticated form of
self-interest indicates retrospectively that retrieving the messages of
the past is hardly a disinterested undertaking. It likewise suggests that
in investigating modern economic theory from an historical perspective,
historians of economics may have something to say about its current
orientations, which significantly departs from the justifications advanced
by modern theorists.
NOTES
1. As Boulding (1962) notes, "It is this capacity for empathy--for putting
oneself in another's place, for feeling the joys and sorrows of another's
as one's own--which is the source of genuine gift" (p. 61). However,
Boulding's idea was not followed up in modern economic theory.
ACKNOWLEDGEMENTS
I am grateful to Robert Leonard and Esther-Mirjam Sent for very
constructive criticisms.
REFERENCES
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charity and Ricardian equivalence. Journal of Political Economy, 97
(December): 1447-58.
Becker, Gary S. (1977). Reply to Hirshleifer and Tullock. Journal of
Economic Literature, 15 (June): 506-507.
________. (1981). Altruism in the family and selfishness in the market.
Economica, 48 (February): 1-15.
Bernheim, B. Douglas and Stark, Oded (1988). Altruism within the family
reconsidered: do nice guys finish last? American Economic Review, 78
(December): 1034-45.
Boulding, Kenneth E. (1962). Notes on a theory of philanthropy. In
Philanthropy and Public Policy (Frank G. Dickinson, ed.) New York:
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Collard, David (1975). Edgeworth's propositions on altruism. Economic
Journal, 85 (June): 355-60.
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Wintrobe, Ronald (1981). It pays to do good, but not to do more good than
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