Assumption Of Self-interest Research Articles

People, Firms and Society - Three Proposals for Aligning Personal Motives, Firm's Goals and Societal Needs

This paper presents three proposals for aligning personal motives, firm's goals and societal needs. A growing number of scholars are turning their attention to the impact of assumptions on management theory and practice. The search for sustainable ways for aligning economic and social goals at different levels of analysis has been and it continues to be a key task of scholars from different disciplines and, therefore, management studies. This paper aims at contributing to the effort of these scholars by revisiting the dominant assumption underlying the relationship between economic and social goals and proposing alternative models for a sustainable alignment between people, firms and society in management studies and practices. In order to achieve this aim, this paper first revisits the assumptions and impact on practice of the dominant paradigm explaining the relationship between firm performance and societal needs. This paradigm, coined the great trade-off illusion - that is, the belief that firms must sacrifice financial performance to meet societal obligations - assumes a permanent trade-off between economic and social performance and, therefore, is unable to explain and prescribe sustainable ways for aligning personal motives, firm's goals and societal needs. After making explicit the assumptions and impact of the trade-off illusion dichotomy, this paper analyzes and build an alternative paradigm called instrumental-alignment. As in the case of the trade-off dichotomy, the instrumental alignment proposal does not allow for a sustainable alignment given its restrictive assumptions. In particular, this latter proposal is based on the assumptions of enlightened self-interest, profit maximization, societal material well-being, and a conflict between individual and collective rationalities, which create inherent trade-offs that create unsustainable alignments.In order to overcome the limitations of the trade-off and instrumental-alignment models, this paper proposes a third model, named intrinsic alignment. This model is based on the assumptions of excellence and practical or part-whole rationality, in which both self-interest and others' interests are taken into account as ends and therefore are not assumed to be object of trade-offs. Therefore, this model allows a sustainable alignment between personal motives, firm goals, and societal needs because that alignment has value in itself. This paper ends with implications for academics, managers, and policy makers at the level of assumptions, practices, and outcomes.

Two Views of Corruption and Democracy

The pessimistic view of corruption and democracy sees democracy as either corrupt or unlikely to deter corruption. This view can be traced to the writings of Plato and Aristotle. The modern neoclassical and public choice literatures advance a modern version of the pessimistic view. They suggest that democracy is not likely, in itself, to deter corruption. Shleifer and Vishny go further and suggest that the egalitarian tendencies in democracies produce conditions conducive to corruption. Sen's work, in contrast, supports the optimistic view that democracy can act as a powerful corruption deterrent. Sen takes a broader view of democracy, relaxes the self-interest assumption, allows for the influence of democracy on value formation and stresses the importance of democratic practice. However, a constitutive relationship also holds between corruption and democracy because certain forms of corruption are undemocratic in their very nature. This also involves an optimistic view since, on this view, democratization and corruption-deterrence go hand in hand.

Self-Interest Assumption and Relational Trust in University-Industry Knowledge Transfers

Since knowledge is a critical resource for ensuring firm growth and survival, firms are increasingly going outside their boundaries and collaborating with other organizations to obtain new knowledge. This study focuses on two distinct self-enforcing safeguards important for interorganizational knowledge transfer. Using survey questionnaire data from senior executives in 180 small to large-sized industrial firms working with university research centers, we focus on the self-enforcing safeguards of self-interest assumption and relational trust and examine the role of each in university-industry knowledge transfer. Results from multiple linear regression show both self-interest assumption and relational trust are positively associated with greater knowledge transfer, however, relational trust is more strongly associated to knowledge transfer than self-interest assumption. We also found that as knowledge becomes more tacit, self-interest assumption becomes negatively associated with knowledge transfer while relational trust becomes more strongly positive. We conclude by discussing implications for future research and management practice

Qual o valor do auto-interesse?

The article critically reviews past and current justifications for the theoretical use of the behavioral assumption of self-interest, explanatory, normative, representational and critical, focusing on the critical function. This latter emerges from an incursion into the modern history of ideas and may be shown still to fertilize a number of contemporary economic approaches.

Experimental economics in anthropology: A critical assessment

ABSTRACTIn recent years, well‐funded cross‐cultural economic experiments have received considerable publicity in science journals. The anthropologists conducting these experiments have made ambitious claims about the value of their research, saying that their findings “illuminate the nature of human nature” and the “appropriateness of the assumption of self‐interest that underpins much of social science.” The publication of a new book, Foundations of Human Sociality, provides an opportunity to assess these claims. The findings reported in the book are consistent with long‐accepted ideas in sociocultural anthropology. The book's contributors are often insufficiently critical of theoretical assumptions in economics, psychology, and biology and pay insufficient attention to relevant theory in economic anthropology. In particular, the evolutionary psychology paradigm accepted by many anthropologists conducting economic experiments does not aid in understanding their findings.

Knowledge and relationships: when cooperation is the norm

We believe that structural changes in a knowledge economy mean that managers will increasingly seek to make cooperative relationships the norm in their organisations. However, they are hampered in their attempts to do so by organisation designs that institutionalise the dominant assumption about human intentionality, which sees people and their relationships as motivated by self-interest. We argue that the self-interest assumption runs counter to the types of cooperation required to leverage fully the potential of the knowledge-based firm since it provides for relatively restricted forms of social exchange. We propose that the assumption of excellence, as set out by Aristotle in Nicomachean Ethics, provides a valuable alternative. We discuss four tenets of this assumption and find that they suggest important differences in organisation design that are more likely to encourage and institutionalise cooperative relationships. We explore these differences, considering their implications for practice and research. European Management Review (2005) 2, 3–14, advance online publication, 20 May 2005

The Weak Rationality Principle in Economics

The weak principle is not an empirical statement but a heuristic rule of how to proceed in social sciences. It is a necessary ingredient of any understanding social science in the Weberian sense. In this paper, first this principle and its role in economic theorizing is discussed. It is also explained why it makes sense to use a micro-foundation and, therefore, employ the assumption in economic models. Then, with reference to the bounded rationality approach, the informational assumptions are discussed. Third, we address the assumption of self-interest which is often seen as a part of the assumption. We conclude with some remarks on handling the problems of free will as well as weakness of the will within the economic approach.

Constitutional Economics (Okonomische Theorie der Verfassung)

In this paper the approach of Constitutional Economics is presented and some of its applications are shown. First, the concept of the original position (constitutional convention) with its informational restrictions and the unanimity rule are discussed. Next, the exchange paradigm which lies behind the whole approach and the role of the self-interest assumption are discussed. Then it is asked for the value judgments which have to be accepted whenever this approach is to be applied to problems of real constitutions. Finally, we show applications of this approach to problems of public debt, taxation, fiscal federalism as well as the tension between liberalism and democracy as organising principles of a modern society.

Strong reciprocity, human cooperation, and the enforcement of social norms.

This paper provides strong evidence challenging the self-interest assumption that dominates the behavioral sciences and much evolutionary thinking. The evidence indicates that many people have a tendency to voluntarily cooperate, if treated fairly, and to punish noncooperators. We call this behavioral propensity "strong reciprocity" and show empirically that it can lead to almost universal cooperation in circumstances in which purely self-interested behavior would cause a complete breakdown of cooperation. In addition, we show that people are willing to punish those who behaved unfairly towards a third person or who defected in a Prisoner's Dilemma game with a third person. This suggests that strong reciprocity is a powerful device for the enforcement of social norms involving, for example, food sharing or collective action. Strong reciprocity cannot be rationalized as an adaptive trait by the leading evolutionary theories of human cooperation (in other words, kin selection, reciprocal altruism, indirect reciprocity, and costly signaling theory). However, multilevel selection theories of cultural evolution are consistent with strong reciprocity.

Families and Self-Sacrifice: Alternative Models and Meanings for Family Theory

The concept of sacrifice used to be a dominant theme in social scientific theorizing, but it is now so neglected that recent work speaks of the need for a recovery of sacrifice. Similarly, self-sacrifice in the service of family members, formerly seen as high virtue, is now often characterized as personality defect or self-defeating behavior. Neither self-sacrifice nor family love play a significant part in the prevailing family theories, grounded as they are in the assumption of self-interest and framed in the logic of utilitarian individualism and the rationalized marketplace. This silence is more ideologically based than reflective of family process. The absence of a language of sacrifice and love limits our ability to give voice to our experience, and the professional neglect of these concepts diminishes our understanding of the processes they name. Some recent work on sacrifice by scholars in other disciplines has implications for family theory. We draw from the disciplines of economics, history, philosophy, literature, sociology, and from life as lived by everyday people in making the case that self-sacrifice is a powerful and essential part of social life generally, and family life in particular. It merits a more substantial place in contemporary theory. Some theoretical approaches compatible with self-sacrifice as principle and practice are offered.

Other-Regarding Preferences and Social Norms

Legal scholars have become keenly interested in approaches to law that recognize that real people do not always behave in a rationally selfish fashion. For example, numerous recent papers examine how human choice can be distorted by endowment effects, anchoring effects, availability biases, and other cognitive deficiencies. There is a curious imbalance to this behavioral law and economics literature, however. Contemporary critiques of the rational selfishness model of human behavior tend to focus far more on the first modifier - the assumption of rationality - than on second - the assumption of self interest. This essay reverses that emphasis. It argues that the human tendency to act in an other-regarding fashion (to sacrifice in order to help or harm others) is far more pervasive, powerful, and important than generally recognized. In support of this claim, it reviews the extensive empirical evidence that has been accumulated over the past four decades on human behavior in social dilemma games, ultimatum games, and dictator games. This evidence establishes that in the right circumstances, experimental subjects routinely behave as if they care about costs and benefits to others. (In the parlance of economics, their behavior reveals other-regarding preferences.) Moreover, subjects' decisions to act in an other-regarding fashion seem driven primarily not by their own payoffs but by social context - their perceptions of what others believe, what others expect, and how others are likely to behave. These findings are important not only to our understanding of individual behavior, but also to our understanding of a wide variety of social institutions. To illustrate, this essay considers how the reality of socially-contingent, other-regarding behavior may offer insight into the nature and workings of social norms. In particular, it considers how the phenomenon of other-regarding preferences sheds light on a variety of questions that have been debated in the norms literature. These include the questions of what sorts of behaviors are most likely to solidify into norms; why people follow norms; and how policymakers and other norm entrepreneurs can best use norms to change behavior.

Altruism and Spite in a Selfish Gene Model of Endogenous Preferences

Economists and biologists have long grappled with the apparent contradiction of altruism in a naturally-selected world. Standard economic models are built upon an assumption of material self-interest where agents maximize individual outcomes without regard for the effects on others. This paper begins with a brief discussion of the evidence that human behavior deviates from the economic assumption. With the goal of more accurately describing human nature, the interpersonal components of preferences are derived in a genetic model. This model predicts a variety of behaviors that are considered paradoxical within the standard economic framework. The optimal attitude towards others is parameterized by the genetic relationship between individuals and by the population size. For interactions between ‘average’ individuals, the standard economic assumption is the limiting case of the genetic model as the population becomes arbitrarily large.

Expectations and Aspirations in Dilemma Interactions

Incentive compatibility solutions to social dilemmas change individual consequences of non-co-operative and co-operative acts such that self-maximizers will rationally choose to act in ways that promote the public good, i.e. to co-operate. The traditional selfish egoism assumption of rational choice requires dilemmas to be solved by either adding some likely punishment to defection or reward to co-operation. Dilemma co-operation can also, of course, be explained by relaxing the narrow self-interest assumption. By allowing for the possibility that outcomes of interdependent interactions are subjectively evaluated by reference to the actor's own as well as others' interests, or that people get additional utility (or avoid disutility) by following certain normative codes, co-operation in finitely repeated dilemmas can be rational.For examples of evidence of subjective transformations of given payoff matrices, see James Andreoni, ‘Giving with Impure Altrusim: Applications to Charity and Recardian Equivalence’, Journal of Political Economy, 97 (1989), 447–51; and Michael D. Kuhlman and Alfred F. J. Marshello, ‘Individual Differences in Game Motivation as Moderators of Preprogrammed Strategic Effects in Prisoner's Dilemma’, Journal of Personality and Social Psychology, 32 (1975), 922–31.

Beyond Self-interest: A Set of Propositions Relevant to Interpersonal Orientations

After describing limitations of the assumption of rational self-interest, which has dominated considerable theory in the social and behavioral sciences, I advance six propositions relevant to our understanding of interpersonal orientations. Based on empirical research, as well as principles of interdependence theory, it is argued that the power of individualistic orientation, while important, tends to be overestimated (Proposition 1), and that this orientation needs to be complemented by the orientations of cooperation (enhancement of joint outcomes), egalitarianism (enhancement of equality in outcomes), generosity (enhancement of other's outcomes), and competition (enhancement of relative advantage over other's outcomes) (Proposition 2). Three further propositions focus on the inter-relatedness of prosocial orientations (Proposition 3), the social development of prosocial orientation (Propositions 4 and 5), and situational and dispositional views of interpersonal orientations (Proposition 6). Evidence in support of these propositions, especially the latter three propositions, is evaluated by classic and/or recent research. I close by outlining four lines of research that are important for understanding the implications of the propositions discussed in this chapter.

The norm of self-interest.

The self-interest motive is singularly powerful according to many of the most influential theories of human behavior and the layperson alike. In the present article the author examines the role the assumption of self-interest plays in its own confirmation. It is proposed that a norm exists in Western cultures that specifies self-interest both is and ought to be a powerful determinant of behavior. This norm influences people's actions and opinions as well as the accounts they give for their actions and opinions. In particular, it leads people to act and speak as though they care more about their material self-interest than they do. Consequences of misinterpreting the "fact" of self-interest are discussed.

Concepts of Rationality in Environmental Economics

After a short description of the economic model of behaviour first the weak rationality assumption in this model is discussed. As the assumption of self-interest is often seen to be an integral part of the economic model, we also discuss this assumption and its role in economic theorising. Then the two central normative rationality concepts of economics are discussed, which are both based on the Pareto principle: static and dynamic efficiency. It is shown that objections against this approach are hardly convincing. We conclude with some remarks on the relation between economic, legal and political rationality.

Collusion in a three-tier hierarchy: Credible beliefs and pure self-interest

The assumption of a purely self-interested supervisor in the principal–supervisor–agent framework gives rise to the possibility of supervisor–agent collusion. In this paper, I show that equilibrium refinement assumptions on type belief updating during side contract negotiations can guarantee that collusion occurs. Even if the principal is allowed to manipulate the incentives in the contract he offers, the only way to prevent collusion is to ignore the supervisor. Thus the role of a purely self-interested supervisor, in this case, is questioned. Lastly, I discuss some plausible alternatives and explanations of the assumption of pure self-interest.

Rise and fall of the Japanese saving rate: The role of social security and intra-family transfers

Alternative models of household saving behaviour are tested using Japanese post-war time series data. Basic life-cycle theory and models based on some form of intergenerational altruism are rejected in favour of an extended life-cycle model based on the assumption of strategic self-interest. The early rise and subsequent fall of the saving rate is explained by the interaction of state, capital market and extended family as providers of old-age social security.

Beyond the Crystal Ball: Modelling Predictions about Quebec and Canada

Within the field of Canadian politics, intense debate over the constitution is a central and abiding concern. Given the failure of the Meech Lake and Charlottetown Accords, it is suitable to reflect on Canada--and especially Quebec--as a political entity in the greater setting of North America. The passage of the North American Free Trade Agreement (NAFTA), which creates economic alternatives for Quebec, (1) makes this an especially appropriate time to examine the prospects for significant (or macro) constitutional change. (2) Neither executive federalism nor popular referenda have succeeded in producing lasting agreement on basic principles of government between Quebec and the Rest of Canada (ROC). After the intense conflict over the Charlottetown referendum, while much of Canada retreated into constitutional hibernation, Quebeckers, possibly buoyed by anticipated passage of the NAFTA, boldly elected fifty-four members of the independantiste Bloc Quebecois (BQ) in the federal election of 1993, and a separatist Parti Quebecois (PQ) government in the provincial election of the following year. Given the passage of the NAFTA and the political uncertainty that still exists in post-referendum Quebec and Canada, constitutional issues promise to attain even greater centrality. Thus, the time is right for appraisal of constitutional problems and prospects within a new theoretical frame of reference. After all, one of the few apparent points of agreement about previous rounds of bargaining is that time pressure and lack of foresight are enemies of constructive change. (3) This research note introduces to the study of Canadian politics a new technique for predicting the outcome of bargaining over key issues. Although the paper's aim is modest--to describe the technique--it also outlines a more substantial research project that is currently underway and should provide insights into the outcomes of two fundamental issues facing Quebec-Canada relations in the aftermath of the 1995 referendum on sovereignty in Quebec. More specifically, the project seeks to predict the outcome of Quebec-Canada constitutional bargaining and the outcome of bargaining over a sovereign Quebec's attempt to join the NAFTA. The investigation unfolds in three stages. The first presents the Decisions Insights expected utility forecasting model. The second describes the current political and economic setting of the ROC and Quebec, and offers some predictions based upon the model as a means of presenting the outlines of a promising research program. The third and final stage encourages extension of the research project on both intellectual and practical grounds. Toward an Expected Utility Model Constitutional bargaining and negotiations among governments and interest groups can be studied in any number of ways. Conventional approaches combine (in varying degrees) empirical theory from political science and historical analysis. The result is a set of informative case studies that collectively trace the evolution of bargaining over distribution of power between the federal and provincial governments, most notably Quebec. (4) Models based on rational choice, or the application of microeconomic theory to the study of politics, are well suited to the analysis of the kind of bargaining that can be expected between Quebec, the ROC, and a range of others. These models begin with the assumption of self-interest and focus directly on how and why policies are made. The specific characteristics that link economic thought to political processes may be summarized as follows: first, methodological individualism as a point of departure; second, the assumption that individuals strive after their own interests in a rational way and try to maximize utility--this assumption may be called the fundamental behavioral hypothesis; and, third, use of methods and techniques of economic analysis. Thus, rational choice is a theoretical perspective with well-developed methods that can be applied to the integration of horizontal and vertical elite bargaining. …

The participatory principle in development projects: the costs and benefits of cooperation

Many development theorists and practitioners, including those in key agencies like the World Bank and UNDP, now see participation as critical to successful project implementation, and strongly support cooperative organizational systems. This article cautions against undue optimism about such forms of organization, and attempts to explain their limited success when they compete with private firms by applying rational choice theory to behaviour in cooperative systems. It examines the relevance of assumptions of self interest, opportunism and bounded rationality in such solidaristic organizations, then uses them to calculate the costs and benefits of using participatory systems. It shows that these costs are likely to outweigh the benefits in large organizations unless participatory processes are effectively associated with managerial autonomy, appropriate incentives, sanctions and hierarchies. © 1996 by John Wiley & Sons, Ltd.