SNS Research Brief 1. Human driving forces: The need for psychology in economic analysis

Tore Ellingsen

To what extent are people altruistic, reciprocal, driven by norms and looking for status? This survey provides a sample of research results and discusses how these insights affect the advice that economists can give to both managers and politicians.

sns_analys_nr_1_manniskans_drivkrafter-_behovet_av_psykologi_i_ekonomisk_analys_1.pdf 231.4 KB PDF

PSYCHOLOGY has become of increasing interest to economists. Research on purely individual decisions has been strong for a long period of time, but the focus has now been moved to social behaviour. To what extent are people altruistic, reciprocal, driven by norms and looking for status? This survey provides a sample of research results and discusses how these insights affect the advice that economists can give to both managers and politicians.

ABOUT ALTRUISM
The efficiency norm stipulates that we should, in particular, give to others if the recipient’s utility is larger than our own. There is also a great deal of evidence that many follow this norm when the utility of giving is transparent. In a thought-provoking experiment, there are, however, many test subjects who choose not to have any exact knowledge about the utility of a gift, being well aware of the fact that they would give more if they were to learn that the utility was large.

ABOUT RECIPROCITY
A small number of field experiments have been carried out to find out whether higher wages lead to an increased work effort but, so far, there are no clear indications of that being the case. However, considerable positive effects have been found for so-called non-monetary gifts.

ABOUT CONFORMITY
Even the most moral person might have difficulties in respecting a norm that everyone else is violating. But the worst opportunist can also have difficulties in violating a norm that everyone else respects.
AUTHOR: Tore Ellingsen holds the Ragnar Söderberg Chair in Economics at the Stockholm School of Economics. E-mail: tore.ellingsen@hhs.se.