What is Wrong with a Social Preference, or Two?
—Shaun Hargreaves Heaps
People act philanthropically, Paul Lewis argues, because these actions serve to fix or express their identity. To make sense of this, he sketches a model of individual agency that has a two-tiered structure in which what is added to a conventional instrumental model of acting to achieve an end is, variously, a sense of commitment or an ability to switch into a mode of “we reasoning.” In both cases it is membership in a group that creates the possibility of this distinct second motivational tier. He also argues that Hayek’s defense of the classical liberal view of social/market order depends on such a model of agency (and the implicit possibility of philanthropic behaviors).
I think Lewis is right on the matter of what model of agency can make sense of both philanthropy and Hayek. I shall engage with his argument, nevertheless, in two ways: first through a more detailed comparison with the standard “economic” or instrumental explanation of philanthropy and then with some related thoughts on the moral underpinnings of the market order.
A Comparison with the Standard Instrumental Explanation
The standard explanation of philanthropy in economics grants that individuals can have so-called “social” or “other-regarding” preferences. As a result, when they act to satisfy best their preferences (in the straightforward, instrumental manner) they can exhibit forms of pro-social or unselfish behavior. In this sense philanthropy is unmysterious, and the question arises as to why some more elaborate model of agency, such as that proposed by Lewis, should be required. The economic model would seem to have much to commend it, since much has been discovered recently about pro-social behavior in laboratory settings through the use of this model.
For example, we know from these experiments that (1) pro-social behaviors are really rather ubiquitous (that is, people act so in a variety of decision settings), but (2) these behaviors are distributed differently across the population (perhaps as much as half of the experimental population don’t ever exhibit these behaviors), (3) they often have a reciprocal character and are sensitive to group allegiance, (4) they can be triggered in some institutional contexts but not others, (5) communication helps, and (6) considerations of fairness often dominate mere additions to individual welfare.
These are all rather useful regularities to know about pro-social behavior, and in large measure they can be inferred from behavior in the laboratory precisely because these other-regarding considerations are incorporated into the formal instrumental model of decision making. Without this encompassing formal model, the interpretation of behavior in these terms would be very much more difficult.
So, with this range of insight into the regularities of philanthropy, what is gained by having a more elaborate model of individual agency?
A first thought here is that the Lewis account has the advantage of making membership in a group quite crucial (indeed necessary) to the existence of pro-social behaviors, whereas it emerges as a contingent feature of these behaviors in the standard instrumental model. The necessity arises for epistemic reasons. People do like to reflect on what they do, and these reflections are a source of feelings of self-worth (or its reverse), but the standard for these judgments has to be external to the individual; otherwise, the judgments will be tainted by the suspicion that they are self-serving and so lose their psychological charge. Your group supplies this external standard. This may not at first seem terribly important, but it is. Groups have a discursive life. That is, members of groups talk to each other over what are good, bad, honest, honorable, just, etc., behaviors, and in this way the norms of a group which influence pro-social behavior adjust and evolve. But why might this be important?
There are two ways. First, when evaluating outcomes and forming policy prescriptions, one has to be concerned not just with how well any arrangement (or policy) satisfies people’s preferences (as in the conventional welfare economics that is based on the instrumental model), one also has to attend to how the capacity of individuals to engage in the normative discussions which underpin these reflections of self-worth is served.
Second, it is important for explanatory reasons. The difficulty with the standard instrumental model from this standpoint has always been that it supplies no account of the origin of people’s preferences. This is not a terrible weakness, at least in an explanatory sense, as long as people’s preferences seem reasonably stable. Unfortunately, what the experimental evidence demonstrates is that these “social” preferences “come and go” in intensity depending on institutional context. In other words, they are sometimes endogenous rather than exogenous. For this reason we need some account of social preference formation, and this is where the Lewis-type model has an advantage, for the reason that I have just sketched.
There is, however, something more that we know about the endogeneity of preferences, which again can be related to Lewis-like models. It comes from the psychological theory of extrinsic and intrinsic reason and the earlier work in cognitive dissonance theory. In these theories, intrinsic reasons for action (which often correspond to the motivation that comes from a social preference, to use the language of the standard instrumental model) get crowded in or crowded out in reasonably predictable ways. The broad idea is that people like to find a reason for their action in an economical sort of way, and they have two generic types of reason that can be drawn upon for this purpose. There is extrinsic reason, which comes from the externally given circumstances of the action: one might buy something, for example, because the price is low. The price being right, so to speak, provides an extrinsic reason for the action. Alternatively, there is intrinsic reason: that is, an action is not contingently the best thing to do, but it is intrinsically the right thing to do. The “economical” part of this theory arises because people like to have a reason for action but only a sufficiency and not a surfeit. Thus if an action has both extrinsic and intrinsic reasons, it is overegged, and people adjust the reason they have control over, the intrinsic variety, downwards—there is a motivational crowding-out. Alternatively, if a person does something and there are weak or no apparent reasons, then the person adjusts the intrinsic reason for the action upwards—there is crowding-in.
I say this can be related to the Lewis-type model of agency because both his and the psychological literature share a view that people reflect on what they do. They like to make sense of what they do. In addition, the source of the problem when there is a surfeit of reason essentially turns on an epistemic issue that is related to the one I sketched above. When an action is dually motivated as outlined in this psychological literature, there can be no unambiguous identification of the action with the relevant norm of intrinsic reason, and unless a norm can be instantiated reasonably unambiguously in action, it will wither.
There is another and increasingly popular explanation of the origins of social preferences which sits less comfortably with the Lewis-type model, which I should mention. It comes from evolutionary psychology. The idea here is that these social preferences are a genetic (or possibly also a cultural) inheritance of a set of behaviors that proved successful, in an evolutionary sense, in settings commonly encountered in the hunter-gatherer societies that have characterized most of human history. Thus we have some predispositions to act in these pro-social ways because there are some “modern” decision problems that are very close or similar to problems encountered in the longue duree of human history where such pro-social behavior proved evolutionarily valuable. In this way, philanthropy is not really thought about seriously at all; it is more like a tic, an involuntary, evolutionary twitch.
This is tempting for those wedded to the instrumental model, because it seems to explain the existence of social preferences and why they might appear more strongly in some circumstances than others without departing from that model in any deep sense. It is also capable of suggestive insights. For example, it has been argued that altruism within a group is most likely to arise when there is competition between groups and as a result altruism within a group may be associated with intergroup behaviors marked by hostility. Whether it can explain the variety of human behaviors in the experimental population in the same setting is less clear. What is clear, however, is that evolutionary accounts of behavior are just that. They are not an account of how we come to attach symbolic significance to these behaviors (describe them as “just,” “right,” honorable,” etc.), and this is the fact of social existence that the Lewis-type model addresses. We are concerned with the meaning of our actions; we reflect on what we do, and we share in those reflections with others.
The observation Lewis makes regarding how quite basic market transactions often rely on a background set of shared beliefs that people’s behavior will, in some relevant respects, be normatively constrained has often been a source of concern. The worry arises because it seems that the expansion of the market might progressively undermine its moral underpinnings in two ways. First, from a sociological perspective it seems that moral norms might be generated from the socializing experiences of the retreating nonmarket institutions (and so might gradually disappear). Second, from psychology, because the market tends to be associated with the operation of extrinsic reason, it seems markets might crowd out intrinsic reason in the manner I have just sketched. I want to dispute the logic that turns these two tendencies into some internal contradiction of a market society.
In particular, I want to argue that what is likely to happen in market societies is not so much an evacuation as a change in the normative constraints on behavior. The reason for believing this comes from considering whether it is possible to imagine a society of people who are solely preference satisfiers capable of deriving a sense of self-worth from the activity of preference satisfaction. One might suppose that this would be possible if people had a higher-order preference for being preference satisfiers. This would appear to retain the simple model of preference satisfaction while gesturing in the direction of some kind of motivational reflection. The difficulty with this line of argument is that even if preference satisfiers have a preference for being preference satisfiers, this would not give them a reason or justification for valuing being a preference satisfier, because preferences are just that; they are not reasons.
A preference satisfier who derives a sense of self-worth from the activity of preference satisfaction has to have some expanded motivational wellspring that deals in reasons for behaving as a preference satisfier. Or to put this the other way around, if we observe people operating in the paradigmatically market mode of preference satisfaction and they also appear to be moved by considerations of self-worth, then they cannot solely be preference satisfiers. They must be something more in the sense that they are plugged into a normative discourse that valorizes preference-satisfying behavior. One has only to consider one obvious candidate element in such a discourse—the belief in freedom, or liberty—to see that this would still involve some constraints on individual behavior because individual liberty is never absolute: it is always practically and politically defined as the freedom to do anything that is consistent with others in society having the same freedoms.
It is interesting that experiments are beginning to throw some light on how markets affect behavior along these lines by triggering different normative constraints. I say this at the end by way of reinforcing my first observation: the standard model has much to recommend it even if it cannot be the whole story. But as Paul Lewis says at the end of his paper, and by way of endorsing what he says, the story of the market is one for another time.