Notes - The Moral Economy: Why Good Incentives Are No Substitute for Good Citizens - Samuel Bowles

The Moral Economy: Why Good Incentives Are No Substitute for Good Citizens - Samuel Bowles (2016)

Notes

I. The Problem with Homo economicus

1. Rousseau 1984.

2. Gneezy and Rustichini 2000.

3. Gasiorowska, Zaleskiewicz, and Wygrab 2012.

4. Warneken and Tomasello 2008, 1787.

5. Sandel 2012; 2013, 121.

6. Satz 2010.

7. Horace 2004, 199.

8. Kahneman and Tversky 2000; Kahneman 1994; Thaler and Sunstein 2008.

9. Kahneman 1994.

II. A Constitution for Knaves

1. Belkin 2002.

2. Greenberger 2003.

3. Similar ground has been beautifully covered (though in quite different ways from the story I will recount) in the studies by Dumont (1977) and Hirschman (1977).

4. Aristotle 1962, 103.

5. Confucius 2007, 20.

6. Hayek 1948, 12.

7. New York Times 1988.

8. Buchanan 1975, 71.

9. Holmes 1897.

10. Hayek 1948, 11.

11. Machiavelli 1984, 69-70.

12. Strauss 1988, 49.

13. Machiavelli 1984, 109.

14. Ibid., 71.

15. Quoted in Benner 2009.

16. Machiavelli 1984, 174, 180.

17. Mandeville 1924, 24.

18. Mandeville 1988a, 366.

19. Ibid., 369.

20. Smith 1976a, bk. 4, ch. 2.

21. Ibid., bk. 1, ch. 2.

22. Hume 1964, 117-18.

23. Bentham 1962, 380.

24. Smith 1976b, 3.

25. Holmes 1897.

26. Machiavelli 1984, 103, 121; Benner 2009.

27. Aristotle 2006, 1382b7-9.

28. Bloomfield 1952, 95.

29. Boswell 1980, 597.

30. Hobbes 2005, 104 (ch. 13).

31. Machiavelli 1900, 92.

32. Spinoza 1958, 261.

33. Mandeville 1988b, 407.

34. Smith 1976a, bk. 4, ch. 9.

35. Mandeville 1924, 37.

36. Mill 1844, 97.

37. Edgeworth 1881, 104.

38. Arrow 1972, 351.

39. Wrzesniewski et al. 2014.

40. Carroll 2000, 92.

41. Smith 1976a, bk. 1, ch. 10.

42. Gauthier 1986, 84, 96. For the point he is making, he should have added “assuming that all contracts are complete,” which, he assured me, he had intended.

43. Durkheim 1967, 189.

44. Bowles 2004.

45. Arrow and Hahn 1971, vi-vii.

46. Durkheim 1967, 189.

47. Arrow 1971, 22.

48. Schumpeter 1950, 448.

III. Moral Sentiments and Material Interests

1. Laffont and Matoussi 1995; Lazear 2000. The same is true in many experiments, for example, the public-goods experiment in the study by Falkinger et al. (2000).

2. Angrist and Lavy 2009.

3. Fryer 2011.

4. Holmas et al. 2010.

5. Besley, Bevan, and Burchardi 2008.

6. Ginges et al. 2007.

7. Frey and Jegen 2001.

8. Wilkinson-Ryan 2010.

9. Fehr and Fischbacher 2002, C16.

10. I address some challenges of inferring individuals’ social preferences from these behavioral experiments at the beginning of the next chapter. A good survey of the use of experimental games to measure social preferences is the study by Camerer and Fehr (2004). A brief review of the main results of experiments on social behavior is in chapter 3 of Bowles and Gintis (2011).

11. Fehr and Gaechter 2000b; Camerer 2003.

12. Loewenstein, Thompson and Bazerman 1989, 433.

13. Andreoni 1990. Experimental evidence on the nature and extent of social preferences is surveyed in the study by Bowles and Gintis (2011).

14. Cardenas, Stranlund, and Willis 2000.

15. Irlenbusch and Ruchala 2008.

16. Bowles and Polanía-Reyes 2012.

17. Heyman and Ariely 2004.

18. Cardenas 2004.

19. Hwang and Bowles 2014; Bowles and Hwang 2008. Related studies addressing similar problems of incentives when people are motivated by social preferences are those by Benabou and Tirole (2006), Seabright (2009), Bar-Gill and Fershtman (2005), Bar-Gill and Fershtman (2004), and Heifetz, Segev, and Talley (2007).

20. Sung-Ha Hwang and I explore conditions under which the underuse of an incentive by a naïve legislator will occur (depending on the nature of the crowding-out problem) in three papers: Hwang and Bowles 2014, Bowles and Hwang 2008, Hwang and Bowles 2015.

21. Falk and Heckman 2009; Levitt and List 2007.

22. Benz and Meier 2008.

23. Baran, Sapienza, and Zingales 2010.

24. Carpenter and Seki 2011.

25. Gneezy, Leibbrandt, and List 2015.

26. Fehr and Leibbrandt 2011.

27. Rustagi, Engel, and Kosfeld 2010.

28. Further evidence on the external validity of the behavioral experiments presented here is in Bowles and Gintis (2011).

29. Fehr and List 2004.

IV. Incentives as Information

1. Packard 1995, 135.

2. Bowles and Polanía-Reyes 2012.

3. Andreoni and Miller 2002.

4. Our data set includes all the economic experiments we were able to locate that allow for this or some other test of the separability assumption.

5. Hayek 1945, 1937.

6. Ross and Nisbett 1991; Tversky and Kahneman 1981.

7. Healy 2006.

8. Lepper et al. 1982, 51; lowercase roman numerals added.

9. Benabou and Tirole 2003; Fehr and Rockenbach 2003.

10. Fehr and Rockenbach 2003.

11. Similar cases of crowding out due to the “bad news” conveyed by the incentive are at work in experiments among student subject pools in Switzerland, the United States, Italy, France, and Costa Rica (as well as Germany), and in a diverse set of games, including Gift Exchange, Public Goods, and a charity-giving setting similar to Dictator. Costa Rican businessmen also responded negatively to the bad news that incentives conveyed.

12. Bandura 1991; Shu, Gino, and Bazerman 2011, 31.

13. Zhong, Bohns, and Gino 2010.

14. Kaminski, Pitsch, and Tomasello 2013.

15. Fiske 1991, 1992.

16. Falk and Szech 2013a.

17. Hoffman et al. 1994.

18. Ellingsen et al. 2012.

19. Schotter, Weiss, and Zapater 1996, 38.

20. Barr and Wallace 2009; Henrich et al. 2010.

21. Grant 2012.

22. Lepper and Greene 1978; Deci and Ryan 1985; Deci, Koestner, and Ryan 1999.

23. Deci 1975.

24. Lepper, Greene, and Nisbett 1973, 7

25. Warneken and Tomasello 2008, 1788.

26. Lepper, Greene, and Nisbett 1973.

27. Lepper et al. 1982, 62.

28. Falk and Kosfeld 2006.

29. Burdin, Halliday, and Landini 2015.

30. Li et al. 2009.

31. Greene 2014.

32. Greene et al. 2001; Loewenstein, O’Donoghue, and Sudeep 2015; Sanfey et al. 2006.

33. Sanfey et al. 2006; the earlier study was by Sanfey et al. (2003).

34. Camerer, Loewenstein, and Prelec 2005.

35. Small, Loewenstein, and Slovic 2007.

36. Skitka et al. 2002.

37. Loewenstein and O’Donoghue 2015.

38. Bowles and Gintis 2011.

39. Cohen 2005.

40. Loewenstein and O’Donoghue 2015.

41. I model and explain how this vicious cycle of cultural decline might occur and suggest reasons why it has not been the fate of liberal societies; see Bowles 2011.

V. A Liberal Civic Culture

1. Marx 1956, 32.

2. Fisman and Miguel 2007.

3. Burke 1955, 86.

4. Montesquieu 1961, 81.

5. Some of it is surveyed in the study by Bowles (1998).

6. Kohn 1969; Kohn and Schooler 1983; Kohn 1990.

7. Kohn et al. 1990, 967.

8. Ibid.

9. Kohn 1990, 59.

10. Barry, Child, and Bacon 1959.

11. Ibid.

12. Sung-Ha Hwang and I have developed this explanation in more detail (Hwang and Bowles 2015).

13. Bowles 2004; Cavalli-Sforza and Feldman 1981; Boyd and Richerson 1985.

14. Zajonc 1968.

15. Lepper et al. 1982.

16. It is of course possible that the incentive induces large numbers of self-interested people to act as if they were generous, leading to an offsetting perception error by observers.

17. Falkinger et al. 2000.

18. Gaechter, Kessler, and Konigstein 2011.

19. Frohlich and Oppenheimer 2003.

20. Ibid., 290.

21. Arrow 1972, 3.

22. Frohlich and Oppenheimer 2003, 290.

23. Henrich et al. 2005.

24. Henrich et al. 2006; Henrich et al. 2010.

25. Woodburn 1982.

26. Herrmann, Thoni and Gaechter 2008a.

27. Fehr and Gaechter 2000a.

28. These statistics and those below are calculated from data reported by Herrmann, Thoni, and Gaechter (2008b).

29. Mahdi 1986; Wiessner 2005.

30. Ertan, Page, and Putterman 2009.

31. Mahdi 1986; Boehm 1984.

32. Gellner 1988, 144-45.

33. Voltaire 1961, 18.

34. Smith 2010, 254-55.

35. Bowles 2004, 232-49.

36. D’Antoni and Pagano 2002; Bowles and Pagano 2006; Bowles 2011.

37. Elias 2000.

38. Rawls 1971, 336.

39. Shinada and Yamagishi 2007.

40. Bohnet et al. 2008.

41. Yamagishi, Cook, and Watabe 1998; Yamagishi and Yamagishi 1994; Ermisch and Gambetta 2010.

42. Tabellini 2008.

43. Alesina and Giuliano 2011.

44. Greif 1994.

45. Gellner 1983.

VI. The Legislator’s Dilemma

1. The careful reader of the article will know that he actually said, “The superiority of the liberal economy is incontestable and can be demonstrated mathematically” (Debreu 1984; my translation).

2. Titmuss 1971; Arrow 1972; Solow 1971; Bliss 1972.

3. A Cornell University dissertation two years later (Upton 1974) suggested that monetary incentives substantially reduced highly motivated potential donors’ likelihood of giving blood; but the work was never published and little read.

4. Lucas 1976, 41-42.

5. Hirschman 1985, 10.

6. Taylor 1987.

7. My first paper in this project (Bowles 1989) was well received when I presented it at a seminar held at the University College London Department of Philosophy in 1989, but the main claims that I advanced there lacked empirical support (experimental economics was in its infancy), so I set it aside.

8. Aaron 1994.

9. Frey 1997.

10. Ostrom 2000.

11. Mellstrom and Johannesson 2008. Other economists turned to problems of law and public policy in cases in which social preferences and incentives were not separable: Bar-Gill and Fershtman 2004, 2005; Aghion, Algan, and Cahuc 2011; Cervellati, Esteban, and Kranich 2010.

12. Laffont 2000; Maskin 1985; Hurwicz, Schmeidler, and Sonnenschein 1985.

13. Gibbard 1973; Hurwicz 1972, 1974.

14. Dworkin 1985, 191; see also Goodin and Reeve 1989.

15. Jones 1989, 9.

16. Machiavelli 1984, 69-70.

17. Becker 1974, 1080.

18. Bergstrom 1989.

19. Royal Swedish Academy of Sciences 2007, 9.

20. Gibbard 1973; Laffont and Maskin 1979.

21. Chatterjee 1982.

22. Chatterjee’s results apply to the double auction a similar result demonstrated by d’Aspremont and Gerard-Varet (1979) in the case of the revelation of preferences for a public good. Under their mechanism, truthful revelation is incentive compatible, but the mechanism requires that participation be mandatory.

23. Hwang and Bowles (2016) explain the reason.

24. Machiavelli 1984, 111.

25. Royal Swedish Academy of Sciences 2007, 6.

26. Besley 2013, 492.

27. Lipsey and Lancaster 1956-57.

28. Weber 1978, 636.

29. Parsons 1967, 507.

30. Ouchi 1980; Sahlins 1974; Durkheim 1967; Tonnies 1963.

31. Loewenstein and Small 2007.

32. Kollock 1994, 341.

33. Brown, Falk, and Fehr 2004.

34. This was studied by Axelrod and Hamilton (1981), who refined and extended the earlier insights of Shubik (1959), Trivers (1971), and Taylor (1976).

35. Ostrom 1990.

36. My account is based on Braaten 2014.

37. Mallon 1983.

38. In the village Palanpur (in Uttar Pradesh, India), the extension of the labor market (and the resulting increased geographic mobility) appears to have reduced the costs of exit and, hence, the value of one’s reputation, thereby undermining the informal enforcement of lending contracts (Lanjouw and Stern 1998, 570). Similar cases in which the greater mobility and, hence, anonymity of traders, induced and facilitated by market incentives, undermined the ethical and other-regarding social norms that underpinned the preexisting norm of contractual enforcement come from long-distance traders in early modern Europe (Greif 1994, 2002) and shoe manufacturers in Brazil and Mexico (Woodruff 1998; Schmitz 1999).

VII. A Mandate for Aristotle’s Legislator

1. This account is based on work by Ober (2008, 124-34) and Christ (1990).

2. Cooley 1902; Yeung and Martin 2011.

3. Akerlof and Kranton 2010.

4. Bowles 2012; Fong 2001.

5. I have this from Chelsey Evans, who coordinated the drive.

6. Fehr and Rockenbach 2003.

7. Interpretations other than this “unfair intent” explanation are possible, however, because the larger the desired back-transfer, the more costly the compliance. Thus, for larger demands, simply returning nothing and paying the fine (as many of the subjects did) might have been attractive to self-interested subjects, who, had they been faced with a lower demand, would have maximized payoffs by complying. It seems from this and similar experiments that fines may have negative effects even when imposed to implement a fair outcome and even when the decision to use the fine is made not by the investor, but rather by chance (Fehr and List 2004; Houser et al. 2008). In these cases, the fine appears to have compromised the trustee’s sense of autonomy. But the experiments also are consistent with the idea that threats deployed in self-interested ways can backfire. When they do, it is probably because accepting unfair treatment is inconsistent with an individual’s project to constitute herself as person who is not easily taken advantage of.

8. Carpenter et al. 2009.

9. Barr 2001; Masclet et al. 2003.

10. Schnedler and Vadovic 2011. A large number of other experiments have found positive effects for incentives imposed by the decision of the targets of the incentives rather than by the experimenter or by a principal in the role of employer or investor; see the work by Kocher et al. (2008); Cardenas, Stranlund, and Willis (2005); Tyran and Feld (2006); Ertan, Page, and Putterman (2009); Mellizo, Carpenter, and Matthews (2014).

11. Bentham 1970, 26.

12. Garvey 1998.

13. Times (London) 2014.

14. Loewenstein and Small 2007.

15. Rosenthal 2008.

16. Galbiati and Vertova 2014. In my taxonomy, their result is a case of categorical crowding; see also Galbiati and Vertova 2008.

17. Reported in Fehr and Falk 2002.

18. Besley and Ghatak 2005.

19. Carpenter et al. 2009.

20. Hwang and Bowles 2012.

21. Stout 2011, 171-72.

22. Friedman 1970.

23. Schotter, Weiss, and Zapater 1996; Falk and Szech 2013b.

24. Ariely et al. 2015.

25. Bisenius 2001.

26. This account is based on the studies by Guiso, Sapienza and Zingales (2013) and White (2010).

27. Tilly 1981.

28. Farooq 2005.

29. This account is based on the following studies: World Bank 2015, 176-77; Martin and Ceballos 2004; Mockus 2002; Humphrey 2014; Riano 2011.

30. Mockus 2002, 24.

31. Schultze 1977.