The Experimental Study of Social Preferences

Abstract

Matthew Rabin The Experimental Study of Social Preferences I. INTRODUCTION IT IS COMMON FOR UNDERGRADUATES TO ENCOUNTER THE FOLLOWING quote from The Wealth ofNations (Smith, 1976 [1776]: 26-7) at the begin­ ning of Economics 1: It is not from the benevolence ofthe butcher, the brewer, or the baker that we expect our dinner, but from their regard for their own interest. We address ourselves not to their humanity, but to their self-love, and never talk to them of our necessities, but of their advantage. There is not much to disagree with in Smith’s poetic analysis of the motivations driving most market behavior, and probably no other twoword description of human motives comes close to “self-interest” in explaining economic behavior. Yet self-interest, as narrowly defined, is far from a complete description of human motivation. Both abundant research and common sense suggest that human motivation is a mix of both self-interested motives and “social preferences”—the sundry ways people are motivated to affect the well-being of those around them. Hence, the task for economists is to move away from an exclusive focus on self-interest to a broader conception of human nature. Dawes and Thaler (1988:195) eloquently set parameters for this endeavor: In the rural areas around Ithaca it is common for farmers to put some fresh produce on the table by the road. There is social research Voi 73 : No 2 : Summer 2006 4 0 5 a cash box on the table, and customers are expected to put money in the box in return for the vegetables they take. The box has just a small slit, so money can only be put in, not taken out. Also, the box is attached to the table, so no one can (easily) make offwith the money. We think that the farmers have just about the right model of human nature. They feel that enough people will volunteer to pay for the fresh com to make it worthwhile to put it out there. The farmers also know that if it were easy enough to take the money, someone would do so. Economists will, and should, maintain the assumption that self-interest is the main human motive in most economic contexts, and other social scientists should recognize how strong a motive self-interest is in social interactions. But sometimes it is not the main motive. And often, even a “little bit” of departure from pure self-interest can have enormous impacts on economic and social outcomes. Certain phenomena should not be examined solely through the lens of narrow self-interest. This article discusses, from a somewhat personal and informal perspective, some recent research by experimental economists examin­ ing alternatives to pure self-interest. This topic has—depending how one counts—20, 200, or 3,000 years of history behind it. But it has none­ theless been relatively neglected, especially in terms of detailed empiri­ cal study. The rebirth has taken place largely because of experimental economics—the study of individual choices or games in controlled laboratory settings, where subjects’ decisions affect how much money they and one or more anonymous other subjects are paid. This research complements earlier research by psychologists on equity theory, altru­ ism, and related theories by studying the anonymous allocation of dollar prizes by experimental subjects. It has helped us understand the nature of attitudes toward fairness, reciprocity, and other “social pref­ erences,” and how these attitudes interact with self-interest. Rather than a participant in this research program, mostly I am a consumer (with a consumer’s skepticism) of these experiments. But, after giving an overview of some the issues in this literature, this article 4 0 6 social research discusses a few simple games tested by my colleague Gaiy Chamess (a skilled experimentalist, whose joint work this article draws heavily from) and myself, meant to reflect on and expand on themes and issues extracted from the broader literature. II. SOCIAL-PREFERENCES EXPERIMENTS There is now a very large and growing body of research studying such social preferences by looking at how anonymous American and European (and occasionally other) undergraduates (and occasionally nonstudents) distribute money in the laboratory. I begin by describing this...