The Self According to Others: Explaining Social Preferences with Social Approbation

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Abstract

In past decades, significant behavioural work has been done in economics contesting the human agency model known as Homo Economicus. These findings are, however, far from integrated in mainstream economic theory, which builds heavily on the neoclassical tradition. Beyond tracing the axiomatic foundations of mainstream economic agency, I reconstruct the argument made by Bernard Mandeville and Adam Smith that human choice also depends on the desire for social approbation. The social approbation mechanism complements material self-interest and provides a more diverse toolset when explaining social preferences. I begin by proposing that mainstream economic agency confines the study of human action, in particular large-scale collaboration, to an artificially-limited spectrum because it reduces society to atomistic individuals who maximise one all-purpose measure of value: utility, which is often instrumented with consumption. Collective action is therefore only sustainable when material incentives are in place, as the economic agent rides for free unless financially penalized. To explain pro-social behaviour from the standpoint of self-interest, Mandeville and Smith propositioned that agents also maximise social approbation, which conveys incentives to act pro-socially because the desire for others’ approval encourages compliance with social norms.  The upshot for collective action is that, assuming social norms represent common goals, approval from others provides an extrinsic motive for pro-social behaviour. I formalise the mechanism by proposing a simple utility function in which agents maximise social approbation as well as material self-interest.

Posted for comments on 20 Nov 2017, 11:28 am.

Comments (2)

  • Avner Offer says:

    The argument is that behavioural economics has created a crisis for Orthodox neoclassical economics which is premised on material self-interest. The 18th century economics of Mandeville and Smith (which is premised on the incentive of social approbation) is more consistent with behavioural economics findings. Parts 1 to 3 cover the first topic, parts four and five cover the second.

    The text is heavy going. It suffers three recurrent defects. Incorrect terms or words are often used altering the meaning of the sentence away from the author’s intention. Verbatim quotes are combined with authorial insertions and sometimes lack in probative value. And the syntax is not always idiomatic.

    The first argument, that behavioural economics constitutes a crisis for orthodoxy, is not novel. Parts 1 to 3 read as if the author is trying to work the argument through for himself. I don’t think they add anything much to an informed reader. The point has been made, has been absorbed, and is even contested. It is not as secure as the author thinks. He repeatedly defines self interest and neoclassical economics as ‘material’ self-interest. It is not clear what that means and in the literal sense it is not true . The author himself mentions the choice of leisure, which is not a material good, but discretion over the use of time. It could be argued that leisure constitutes the sacrifice of income and is material in that sense. But then there are other choices, including altruism and social preferences, which might also involve a sacrifice of income, but the author appears to think that neoclassical economics excludes them as legitimate choices. I think that is not the case. Altruistic choices are available to individuals, but they are discretionary, not binding. This is actually consistent with the behavioural findings in which prosocial choices are not made by everyone, but by a large minority or small majority. There are always some antisocial players. The example of the ultimatum game is not I think compelling, since self-interested interpretations are also available.

    My advice would be to drop parts 1 to 3 altogether, and to distil their argument into a page or two. I disagree in detail with some of the arguments in this section but since I think it is redundant I will not specify my comments in detail. I can however provide this critique to the author directly in the form of a scan of my comments on his text . Deleting these parts would also reduce the size of the article to one that is more manageable. Part four also suffers from some of the defects of the first three but the argument is less familiar and more interesting. Part five is an attempt to formalise the argument of part four. I do not feel competent to evaluate it. Hence my detailed comments which follow below, are meant to highlight problems mostly in part four.

    Detailed comments

    p. 23, quote This is presented as an indented verbatim quote. Usually quotes this short are not indented but incorporated into the text. It appears that the first five words have been inserted by the author and only the section in quotes is from David Hume. Furthermore, I don’t think that the quote validates the interpretation of David Hume that precedes it in the text.

    p. 24 First two paragraphs are to the point. The best in the article. However, it is not made clear whether the Joseph Butler mentioned is a contemporary of Mandeville or of ourselves. Inserting his dates would solve this problem. [He is a contemporary of Mandeville]

    ‘branded as’ – not the right term. Perhaps ‘characterised as’?

    ‘On the contrary, the limbic system’ – should be ‘in contrast, the limbic system’

    p. 26 ‘Smith depicted improvement as an “innate desire to receive the approbation of others.” [The quote is from a recent academic article]. But surely whatever improvement is, it is not a desire. Maybe it should be ‘the satisfaction of an innate desire to receive the approbation of others’, but that is not what the quote says. There is a typo in the title of the journal in the reference to this quote.

    ‘Rousseau identified that’ — non-idiomatic. Maybe ‘considered that’.

    p. 27 ‘change the nature of wealth acquisition from having intrinsic to instrumental value’ – non-idiomatic. The appropriate form is ‘from having an intrinsic value to an instrumental one.’

    ‘Smith does acknowledge that wealth is accumulated beyond material needs’ – not clear what kind of needs are assumed here. Is it subsistence requirements? Is it physiological needs? Is it some conventional standard of living?

    p. 28 indented quote at the top opens with three words inserted by the author.

    Second quote opens with a word inserted by the author.

    p. 29 ‘resemblance empathy’ should be ‘resembles empathy’.

    ‘connects individual’ should be ‘connects the individual’.

    p. 30 proprietary – should be propriety.

    disprove – should be disapprove.

    p. 31 Top paragraph – very good points.

    Consequentially – should be consequently.

    Cultivated – not the right word: suggest ‘developed’.

    p. 32 ‘independently from’ – should be independently of?

    Quote from Mandeville is not probative. It does not validate the preceding argument.

    ‘He proposed that’ – not idiomatic. He argued that.

    P. 34. ‘Mandeville thought of the self-interested agent might value…’ – So did Smith in his reference to soldiers in chapter 10 of book 1 of The Wealth of Nations.

    p. 37, note 113. This argument merits a quote.

    Note 115. Typo in the title.

    p. 38 ‘this mechanism takes the form of the impartial spectator in Smith’. This requires an explanation. The quote that follows is not probative.

    The following quote from Hont does not clarify. It is convoluted and confusing.

    ‘Is not holistic’ – should be ‘is not exclusive’.

    *I supervised an undergraduate dissertation which was a previous version of this paper.

    • Oswin Krueger Ruiz says:

      Dear Avner,

      Many thanks for your comments and feedback, which are warmly welcomed. The detailed comments will provide an extremely valuable basis for improving and polishing the paper.

      Parts 1 to 3 certainly aim to outline the challenge of behavioural economics to economic orthodoxy, or at least the part resting on the utility-maximising agent as modelled through choices of consumption bundles. This might be known information to some readers, yet I think it provides one of the premises of the argument.

      You are fully right in highlighting the difficulty of defining “material” self-interest, especially when considering the inclusion of time as a material good. Other drivers of human economic activity, such as altruism, could similarly be modelled through their financial opportunity cost. Yet what much behavioural economic research highlights, is that humans either do not follow this type of thinking or simply act irrationally. They (we) consistently make choices over both physical and immaterial consumption bundles that do not maximise the “$ economic value”.

      It is highly alien to standard economic thinking to consider the intrinsic value of things. (Economists have provided all sort of estimates for the economic value of gender parity, yet there is little research about the intrinsic value of gender equality). This is arguably because anything close to ethical or subjective valuation is excluded from the domain of economists. Partly a mistake in my view. Not because economists should begin discussion ethical questions, that might be a separate field. The mechanism of these reasons-to-act might still be of interest! Ethical considerations of individuals are clearly a driver of economic activity. (i.e. foregoing a higher paid job because it compromises one’s ethics, not killing people for money, etc.). While some might argue that there is always a price, I believe some of these drivers of human economic activity do not have a price tag at all. In that case, a different measure of value, beyond “material” might be needed. (Careful: I am not saying there are some things which no human has a price tag for, instead my point is that every human has some things which for them do not have a monetary price tag and hence there must be an alternative driver in the utility function). An interesting discussion on this can be found in Michael Sandel’s Moral Limits of Markets. Although I still think he partly suffers from the tendency to consider ethical and economic realms (markets) as incompatible.

      What is meant by material self-interest is the consumption goods, either physical or non-physical, that have a monetary price tag for the individual. Anything that can be measured with monetary means does not need to feature independently in the utility function of individuals. In the case of Social Approbation, however, the hypothesis derived from the thought of Mandeville and Adam Smith is that it has intrinsic value to human agents. A clear example is: when extra money becomes effectively worthless because you have accumulated enough to buy anything you can exchange for it, the extra accumulation of wealth can be explained through social approbation. This would indicate that social approbation has value in and of itself and is an independent “variable” in human utility.

      The paper proposes no evidence as to the strength of the social approbation incentive, nor on what it may trigger it. Because of its dependency on social norms, triggers of social approbation might vary extensively and not be observed across all individuals in a single experiment. The proposition of the paper is simply that social approbation can provide a theoretical mechanism which makes some of the empirical findings of behavioural economics (i.e. existence of social preferences) compatible with the utility-maximising economic agent.

      PS: I would be delighted to receive the more detailed commentary if the offer still stands.

      Best regards,
      Oswin

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