Impure Altruism

Impure Altruism
Impure Altruism

The economist James Andreoni has incorporated the idea of a warm glow feeling into a model of what he calls impure altruism, this model can explain the real-world charitable giving better than models based on pure altruism.

The anomalies in charitable giving

If people give is in part because giving feels good, then government subsidies shouldn’t completely offset private giving. Tax dollars that support public radio don’t substitute for one’s own gift, since the tax dollars don’t lead to a warm glow and impure altruism and can’t explain why people give the public goods that have a very large reach such as a Red Cross or National Park.

When many people could give, the incentive for any one person to give is very small. One person’s gift isn’t likely to make much difference in the existence of the public good, but if people are motivated by the feeling they get by acting altruistic then they’ll still give even when they know others are likely to give too. Impure altruism is a powerful idea. It explains some of the anomalies in charitable giving.

Over the past few decades major universities have begun capital campaigns to raise hundreds of millions or even billions of dollars. When one of these capital campaigns start, there’s usually some glitzy ceremony where the University president announces the goal of, say, $3 billion. Why announce a goal? Wouldn’t the University benefit from every dollar that’s donated?

What makes it even stranger is that the set the starting point of a major capital campaign isn’t zero. Usually the campaign isn’t officially started and the donations aren’t publicly announced until after some significant fraction of the goal has already been raised in what’s called a silent phase of the campaign. That is something like 1/3 of the goal might already be pledged as seed money before publicly asking for donations.

Donors are motivated by impure altruism

Universities and other charities do this because donors are motivated by impure altruism: they want to feel part of a large collective enterprise, they want to feel that their donation was part of something much greater. A well-defined goal in seed money toward that goal increases people’s confidence that they’ll feel that sense of accomplishment.

Empirical data supports this explanation, suppose that two similar and similarly deserving charities each want to raise $10 million, say, for a new building. The first charity announces that they need $10 million, the second charity announces that they already have $5 million in seed money and thus they only need 5 million more to construct the building. Who will receive more money from these announcements?

If anything, the first charity seems more deserving since they are the most in need, but research shows that the second charity is likely to receive more money in new donations. People give more money when they feel confident that their gift will matter. That’s a fact, and so far I talked about that a warm glow feeling that motivates her behavior.

Now, a skeptic might suspect that this feeling isn’t anything tangible or measurable, it’s just a variable that economists put in their models to improve explanations of real-world behavior, but there’s actually some pretty amazing evidence that translates the warm glow feeling into something tangible.

People give because they want they want so

The economist Bill Harbaugh and his colleagues were interested in distinguishing between impure and warm glow explanations for altruism. So, they use neuro-imaging techniques to measure how the brain respond to charitable donations. Participants in their study were given an initial monetary endowment and then they made decisions about money for themselves and for a local food bank.

Sometimes the participants were forced to donate money to the food bank, that’s like taxation. Other times, they could freely choose whether to donate. For example, they could decide to sacrifice $15 of their own money, so the charity would receive $30. The charity was real, the donations were real and the experimenters went to great lengths to anonymize donations and to eliminate any effects of social status, meaning that there was no social pressure to please the experimenter by donating more money.

Harbaugh and his colleagues found that a brain structure called the nucleus accumbens, a key target for dopamine neurons, showed increased activity when subjects were taxed and when they were forced to give money to a worthy charity. By itself that result would support the idea of altruistic giving, that people give because they want the public good to exist.

Our internal motivations matter too

But they also found that there was more activation in that same region when people could give freely, and those people who had the most activation in this brain region, when the charity receives money compared to when they themselves receive money, those were the ones who are most likely to give. That’s consistent with impure altruism, the public good matters but our internal motivations matter too.

These results represent a remarkable confluence of economic theory and neuroscience. In this case the economic theory helps neuroscience identify a warm glow effect within the brain’s dopamine system and neuroscience, in turn, helps refine economic theory. As I described in an early article, the dopamine system isn’t associated with feelings of pleasure themselves but with motivation, its activity reinforces our actions so that we do them again.

The warm glow that we feel when giving to a deserving charity isn’t just a feeling, it’s a source of motivation, it pushes us to give again. This explains why we choose to give our own money to support a charity, rather than to depend upon the generosity of others, but it doesn’t explain why we get to some causes and not others.

But, the larger the problem the less likely the charity

Of course, we each have our own reasons for giving and our own personal set of causes to support, but there is one factor that seems to be most critical for encouraging people to act on their other regarding preferences and that is seeing others in need. Remember Wesley Autrey’s quote: “I just saw someone who needed help”.

People are more willing to give when they know that a specific identifiable other person will benefit from their actions. And, this isn’t necessarily a good approach of charitable giving. When a child suffering makes the national news spontaneous donations to that one child my total hundreds of thousands of dollars.

Such giving is very generous but it helps only one person or one family at the expense of many others who might have similar needs and people are often less willing to give when many thousands or millions of people need help as when famine afflicts an entire region or when war or genocide tear a country apart. In a general sense the larger the problem, the less likely it is to elicit charitable giving.

By successdotinc

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