Wednesday, May 20, 2009

Altruism Harms the Economy?

Too much of a good thing? Why altruism can harm the environment?

Gilles Grolleau, Lisette Ibanez & Naoufel Mzoughi
Ecological Economics, 15 May 2009, Pages 2145-2149

Abstract: Success of eco-labeling schemes, broadly defined, varies among products and across countries. Based on a simple theoretical framework, we show that the nature of environmental attributes among products (i.e., private versus public) and the consumer type (i.e., egoist versus altruist) shape the overall performance of such schemes. In addition, we demonstrate that altruistic consumers exhibiting a too high willingness to pay for the eco-labeled product can inadvertently prevent egoistic consumers from purchasing it, leading to a sub-optimal outcome in terms of environmental performance. Several policy and managerial implications are drawn.

Do you mean that perhaps Fair Trade does more harm than good? Russ and I talked about that, a bit. And I wrote this up....

So more evidence continues to pile up for a simple proposition:

[E]very individual necessarily labours to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good.

Perhaps that's not really surprising. The altruism folks, the tree-huggers and bed-wetters who want to force other people to act differently, are not really trying to help anyone. They are just trying to impose their own vision of "the good," using coercion instead of persuasion.

And, in fairness, I have to give props to Gavin K. The opposite of altruism is not "selfishness." It is honest self-interest, embedded in a community where charity is important, and in a bargaining setting where contracts are paid off. Further, I should quote Gavin's other point, on Smith's actual view of benevolence, from TMS. Quoting Kennedy, who then quotes Smith:

Anyone who had an interest in presenting a fair picture of Smith’s views of human nature, however, would also take account of the views he presented in “The Theory of Moral Sentiments”. For example: “The virtues of prudence, justice, and beneficence, have no tendency to produce any but the most agreeable effects. … In our approbation of all these virtues , our sense of their agreeable effects , of their utility, either to the person who exercises them , or to some other persons, joins with our sense of their propriety, and constitutes always a considerable, frequently the greater part of that approbation” (TMS IV, iii, 59).

Beneficence, benevolence, charity....all good things. Adam Smith clearly thought so, and I agree completely. Because those things, and the actions they imply, are MY choice, voluntary. Altruism-worshippers want to require me to sacrifice, because THEY think it is good for me. Poor A's need implies that altruistic B can rightly take from hard-working C to give to A, and then B gets to feel good about it! Quite a different matter.

(Nod to Kevin L for the journal reference, though he is emphatically not complicit in any of the conclusions I draw here)


Tom said...

Three concepts are getting mixed up here. Mungowitz rightly condemns the compulsory "altruism" of the modern welfare state. Then there is the false image of altruism of some fraudsters, who make a claim of helping someone or some thing while knowingly or negligently stealing or wasting the surcharge. Finally, genuine altruism, which can be, but surely doesn't have to be, associated with buying a product.

It's hard to know when you are making that third kind of action, because you cannot just examine the product and find it in there. But if, by luck or astute observation, you do manage it, then you have NOT harmed the producer; still less have you chained him to some primitive existence. After all, getting more than "true" market value for manual labor doesn't prevent one from switching to an even greater return on a capitalized endeavor. I count as part payment for his effort, such things as the lack of bug bites and sunburn for the tractor driver as compared with the hoer. The point is that my beneficiary, the producer, adds it all up and makes his choice. ...not my fault for trying to help.

I don't actually try to do this, much.

Justin Ross said...

The mechanism of the absurdly marketed "fair trade" seems to have changed from your original podcast on EconTalk. My friends have accepted from me that the fair trade schemes aren't effective ways of increasing incomes. Now they buy into this other new fair trade scheme where the producers are paid more but then have to devote this part of their profits to building wells or health care clinics or whatever for the community.

This is still a fallacy, you can't have your free lunch and eat it too. But I admit that I haven't been as effective arguing against it as I was against the old "fair wage" argument. They don't follow on the opportunity cost of resources, nor do they see it as a bizarre mechanism for foreign aid (why not just buy a well yourself instead of overpaying for coffee?).

If you are ever searching for another fair trade essay, maybe you can come up with another good story like your "walmart tip cup" that clearly exposes the fallacy.

kamagra said...

This is simple because many changes for altruist people are responsible of the damage, I think we need concise ideas and projects in order to avoid those tendencies.m10m

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