This is the first book to examine behavioral theories on social preference from institutional and philosophical perspectives using economic experiments. The experimental method in economics has challenged central behavioral assumptions based on rationality and selfishness, proposing empirical evidence that not only profit seeking but also social preferences matter in individuals' decision making. By performing distribution experiments in institutional contexts, the author extends assumptions about human behavior to understand actual social economy. The book also aims to enrich (...) behavioral theories of economics directed toward institutional evolution. The author scrutinizes how specific institutional conditions enhance or mute individuals' selfish incentives or their fairness ideals such as egalitarian, performance-based, labor-value radicalism or libertarianism. From experimental results and their analysis, implications for actual problems in social economy and institutional change are derived: why performance-based pay often fails to promote workers' productivity; why labor wages decline whereas shareholder's values increase after financialization; and whether socially responsible investment can be a social institution for corporate governance. The book is also addressed to philosophers of social sciences interested in how experimental methods can contribute to developing cognition of human behaviors and be extended to social theories. Referring to behavioral theorists in the history of economic thought, the author discusses the meanings of experiments in the methodology of social sciences. She also proposes new ways of interpreting experimental results by reviving historic social theories and applying them to actual social problems. (shrink)

This paper is a partial review of the literature on ‘social preferences'. There are empirical findings that convincingly demonstrate the existence of social preferences, but there are also studies that indicate their fragility. So how robust are social preferences, and how exactly are they context dependent? One of the most promising insights from the literature, in my view, is an equilibrium explanation of mutually referring conditional social preferences and expectations. I use this concept of equilibrium, summarized (...) by means of a figure, to discuss a range of empirical studies. Where appropriate, I also briefly discuss a couple of insights from the (mostly parallel) evolutionary literature about cooperation. A concrete case of the Orma in Kenya will be used as a motivating example in the beginning. (shrink)

We investigate the conflict between the ex ante and ex post criteria of social welfare in a new framework of individual and social decisions, which distinguishes between two sources of uncertainty, here interpreted as an objective and a subjective source respectively. This framework makes it possible to endow the individuals and society not only with ex ante and ex post preferences, as is usually done, but also with interim preferences of two kinds, and correspondingly, to introduce interim forms (...) of the Pareto principle. After characterizing the ex ante and ex post criteria, we present a first solution to their conflict that extends the former as much possible in the direction of the latter. Then, we present a second solution, which goes in the opposite direction, and is also maximally assertive. Both solutions translate the assumed Pareto conditions into weighted additive utility representations, and both attribute to the individuals common probability values on the objective source of uncertainty, and different probability values on the subjective source. We discuss these solutions in terms of two conceptual arguments, i.e., the by now classic spurious unanimity argument and a novel informational argument labelled complementary ignorance. The paper complies with the standard economic methodology of basing probability and utility representations on preference axioms, but for the sake of completeness, also considers a construal of objective uncertainty based on the assumption of an exogeneously given probability measure. JEL classification: D70; D81. (shrink)

Should social preferences conform to the principles of rationality we normally expect of individuals? Should they, for instance, conform to the consistency axioms of expected utility theory? This article considers one fragment of this question.

This article explores some issues having to do with the use of experimental results from one‐shot games to reach conclusions about the existence of social preferences that are taken to figure in the explanation of cooperation in repeated interactions in real life. †To contact the author, please write to: Division of Humanities and Social Sciences, California Institute of Technology, Pasadena, CA 91125; e‐mail: [email protected].

Guala appears to take social preferences for granted in his discussion of reciprocity experiments. While he does not overtly claim that social preferences are only by-products that arise in testing environments, he does assert that whatever they are they have little value in the real world. Experiments on animals suggest that social preferences may be unique to humans, supporting the idea that they might play a prominent role in our world.

This paper wishes to problematize the foundations of production governance and offer an analytical perspective on the interrelation between agents’ preferences, strategic choice, and the public sphere . The value is in the idea of preferences being social in nature and in the application both to the internal stakeholders of the organisation and its impacts on people outside. Using the concept of ‘strategic failure’ we suggest that social preferences reflected in deliberative social praxis can reduce false beliefs (...) and increase individual wellbeing. From this approach, the paper offers a taxonomy of production organisations, based on social preferences about two variables: the governance form other strategic decisions that characterize the management of a company at a more operational level, once its fundamental legal form has been chosen. Each dimension is then categorised alongside two basic preferences: towards inclusion or exclusion of ‘publics’ that have no substantial access to decision power about these variables. Our framework explains governance heterogeneity by contrasting exclusive and inclusive social preferences in cooperatives, social enterprises, as well as traditional corporations. A discussion of the evolution of social preferences and organizational forms is addressed through examples and regional experiences. (shrink)

Claims regarding negative strong reciprocity do indeed rest on experiments lacking established external validity, often without even a small Guala's review should prompt strong reciprocity proponents to extend the real-world validity of their work, exploring the preferences participants bring to experiments. That said, Guala's approach fails to differentiate among group selection approaches and glosses over cross-cultural variability.

Most of the existing literature on social preferences either tests whether certain characteristics of the social context influence individual decisions, or tries to estimate parameters of social preference functions describing such behavior at the level of the entire population. In the present paper, we are concerned with measuring parameters of social preference functions at the individual level. We draw upon concepts developed for eliciting other types of utility functions, in particular the literature on decision (...) making under incomplete information. Our method derives parameters of social preference functions from indifference statements about the distribution of payoffs a group. We apply our method in a controlled social preference experiment to establish the external validity of estimated parameters. Our results show the expected relationships to some external factors and also a strong correspondence between parameter estimates and factors that, according to the subjects’ own descriptions, influenced their behavior. We also find that some concepts discussed in the literature on social preferences, in particular envy toward players receiving a larger payoff, have very diverse and complex effects at the individual level. (shrink)

Some behavioral economists argue that the honoring of social norms can be adequately modeled as the optimization of social utility functions in which the welfare of others appears as an explicit argument. This paper suggests that the large experimental claims made for social utility functions are premature at best, and that social norms are better studied as equilibrium selection devices that evolved for use in games that are seldom studied in economics laboratories.

In recent years, experimental economists have complemented earlier research by psychologists on equity theory, altruism, and related theories, by studying the anonymous allocation of dollar prizes by experimental subjects. This research has helped us understand the nature of attitudes towards fairness, reciprocity, and other "social preferences," and how these attitudes interact with self interest. The author critically reviews some of this evidence and the prevalent interpretations of this evidence to suggest some general lessons and ideas for where further research (...) would be useful. (shrink)

This article surveys some of the philosophical issues raised by recent experimental work in economics on so-called social preferences. This work raises a number of fascinating methodological and interpretive issues that are of central importance both to economics and to social and political philosophy.

Experimental data on social preferences present a number of features that need to be incorporated in econometric modelling. We explore a variety of econometric modelling approaches to the analysis of such data. The approaches under consideration are: the Random Utility approach ; the Random Behavioural approach ; and the Random Preference approach. These approaches are applied in various ways to an experiment on fairness conducted by Cappelen et al. :818–827, 2007). Various models that we estimate succeed in capturing (...) the key features of the dataset. Conclusions concerning fairness-related behaviour depend crucially on the choice of econometric model. (shrink)

Certain messages, even when not directly payoff relevant, can be a credible form of communication in light of natural social preferences. Social image concerns and other-regarding preferences interact to create incentives to communicate about how one feels about other people. Recognizing the prevalence of the incentive to communicate about one’s social preferences suggests that many social and economic phenomena—from norms of etiquette to cooperation to gift exchange—should be seen, in part, as forms of signaling. These behaviors (...) may be surprisingly robust to material costs, yet sensitive to context. (shrink)

We characterize the positional social preference correspondences (spc) satisfying the qualified majority property for any given majority threshold. We also characterize the positional spcs satisfying the minimal majority property. We next evaluate the probability that the Borda, the plurality and the antiplurality spcs fulfil the two aforementioned properties under the Impartial and Anonymous Culture assumption in the presence of three and four alternatives for various sizes of the society. Our results show that the Borda spc is the positional (...) spc which better behaves in relation with the qualified majority principle and the minimal majority principle. (shrink)

Since Condorcet discovered the voting paradox in the simple majority rule, many scholars have tried to investigate conditions that yield “social-preference cycles”. The paradox can be extended to two main approaches. On the one hand, Kenneth Arrow developed a general framework of social choice theory; on the other hand, direct generalizations of the paradox were offered. The motivation and surface meaning of the two approaches are different, as are the assumed background conditions. In this paper, we investigate (...) the relationship between the two approaches by taking a close look at two works, Ferejohn and Fishburn and Schwartz. (shrink)

This paper addresses various solutions to Meno's Problem: Why is it that knowledge is more valuable than merely true belief? Given both a pragmatist as well as a veritist understanding of epistemic value, it is argued that a reliabilist analysis of knowledge, in general, promises a hopeful strategy to explain the extra value of knowledge. It is, however, shown that two recent attempts to solve Meno's Problem within reliabilism are severely flawed: Olsson's conditional probability solution and Goldman's value autonomization solution. (...) The paper proceeds with a discussion of the purpose of having a higher value of knowledge as opposed to merely true belief, both in evolutionary and social terms. It claims that under a reliabilist analysis of knowledge it can be explained how knowers could evolve rather than just truthful believers. Subsequently, the paper develops an account of how we can manipulate our testimonial environment in an epistemically beneficial way by valuing reliably produced true belief more that just true belief and so gives an indirect justification of the extra value of knowledge. (shrink)

Standard economic theory usually analyzes the decisions made by individuals as a rational process in which each individual has sound and consistent preferences and makes decisions according to the principle of subjective expected utility maximization. Starting from the pioneering work of Herbert Simon and the research of cognitive psychologists Kahneman and Tversky, the contributions provided by cognitive-behavioral theory have repeatedly shown that real agents make choices in a way that differs systematically from standard theory, hence highlighting its limits. Rather than (...) considering standard normative theory as false or unable to explain the data obtained by behavioral economists, several economists decided to develop new formal models that could include the results of different experiments and empirical observations that captured all dimensions of the choice made by an individual. In this sense, they proposed new models that were not intended to challenge standard theory but rather designed to provide a kind of psychological expansion to it. This article has the aim of describing and analyzing the advantages and limitations of these new models, which unfortunately are not always suited to describe the individual behavior, the individuals’ actions, or the equilibria due to the combination of the actions of several players. To overcome the limits of these models, we decided to take into consideration the unfortunately unfinished work of Michael Bacharach, who strived to understand the individual and collective forms of rationality without applying only analytical devices or a theoretical vision of the world but bringing rationality back to the perception level of the agents. (shrink)

This paper deals with the evidential value of neuroeconomic experiments for the triangulation of economically relevant phenomena. We examine the case of social preferences, which involves bringing together evidence from behavioural experiments, neuroeconomic experiments, and observational studies from other social sciences. We present an account of triangulation and identify the conditions under which neuroeconomic evidence is diverse in the way required for successful triangulation. We also show that the successful triangulation of phenomena does not necessarily afford additional confirmation (...) to general theories about those phenomena. (shrink)

This paper examines a special kind of social preference, namely a preference to do one's part in a mixed-motive setting because the other party expects one to do so. I understand this expectation-based preference as a basic reactive attitude. Given this, and the fact that expectations in these circumstances are likely to be based on other people's preferences, I argue that in cooperation a special kind of equilibrium ensues, which I call a loop, with people's preferences (...) and expectations mutually cross-referring. As with a Lewis-norm, the loop can get started in a variety of ways. It is self-sustaining in the sense that people with social preferences have sufficient reason not to deviate. (shrink)

A series of experiments investigated the effect of speakers’ language, accent, and race on children’s social preferences. When presented with photographs and voice recordings of novel children, 5-year-old children chose to be friends with native speakers of their native language rather than foreign-language or foreign-accented speakers. These preferences were not exclusively due to the intelligibility of the speech, as children found the accented speech to be comprehensible, and did not make social distinctions between foreign-accented and foreign-language speakers. Finally, (...) children chose same-race children as friends when the target children were silent, but they chose other-race children with a native accent when accent was pitted against race. A control experiment provided evidence that children’s privileging of accent over race was not due to the relative familiarity of each dimension. The results, discussed in an evolutionary framework, suggest that children preferentially evaluate others along dimensions that distinguished social groups in prehistoric human societies. (shrink)

According to Hobbes, individuals care about their relative standing in a way that shapes their social interactions. To model this aspect of Hobbesian psychology, this paper supposes that agents have social preferences, that is, preferences about their comparative resource holdings. Introducing uncertainty regarding the social preferences of others unleashes a process of trust-unravelling, ultimately leading to Hobbes’s ‘state of war’. This Trust-unravelling Model incorporates important features of Hobbes’s argument that past models ignore.

In a series of one-shot linear public goods game, we ask subjects to report their contributions, their contribution plans for the next period, and their first-order beliefs about their present and future partner. We estimate subjects’ preferences from plan data by a finite mixture approach and compare the results with those obtained from contribution data. Controlling for beliefs, which incorporate the information about the others’ decisions, we are able to show that plans convey accurate information about subjects’ preferences and, consequently, (...) are good predictors of their future behavior. (shrink)

We present evidence against the standard assumptions that social preferences are stable and can be measured in a reliable, nonintrusive manner. We find evidence that measures of social preferences can affect subsequent behavior. Researchers often measure social preferences by posing dictator type allocation decisions. The social value orientation (SVO) is a particular sequence of dictator decisions. We vary the order in which the SVO and a larger stakes dictator game are presented. We also vary the form (...) of the dictator game. In one study, we employ the standard dictator game, and in the other, we employ a nonstandard dictator game. With the standard dictator game, we find that prosocial subjects act even more prosocially when the SVO is administered first, whereas selfish subjects are unaffected by the order. With the nonstandard dictator game, we find evidence across all subjects that those who first receive the SVO are more generous in the dictator game but we do not find the effect among only the generous subjects. Across both dictator game forms, we find evidence that the subjects who are first given the SVO were more generous than subjects who are given the SVO last. We also find that this effect is stronger among the subjects with a perfectly consistent SVO measure. Although we cannot determine whether the order affects preferences or the measure of preferences, our results are incompatible with the assumptions that social preferences are stable and can be measured in a reliable, nonintrusive manner. (shrink)

This paper investigates behavior in finitely repeated simultaneous and sequential-move prisoner’s dilemma games when there is one-sided incomplete information and signaling about players’ concerns for fairness, specifically, their preferences regarding “inequity aversion.” In this environment, we show that only a pooling equilibrium can be sustained, in which a player type who is unconcerned about fairness initially cooperates in order to disguise himself as a player type who is concerned about fairness. This disguising strategy induces the uninformed player to cooperate in (...) all periods of the repeated game, including the final period, at which point the player type who is unconcerned about fairness takes the opportunity to defect, i.e., he “backstabs” the uninformed player. Despite such last-minute defection, our results show that the introduction of incomplete information can actually result in a Pareto improvement under certain conditions. We connect the predictions of this “backstabbing” equilibrium with the frequently observed decline in cooperative behavior in the final period of finitely repeated experimental games. (shrink)

In past decades, significant work in behavioural economics has decisively revealed the limitations of the human agency model known as Homo Economicus, whereby humans are purely driven by material self-interest. These behavioural findings are, however, far from integrated in mainstream economic theory, which builds heavily on the neoclassical tradition. Unbeknown to modern economics, Bernard Mandeville and Adam Smith already proposed a richer model of human agency in which choices also depend on the desire for social approbation. The social (...) approbation mechanism complements material self-interest and provides a more diverse toolset, which is able to explain social preferences. Mainstream economic agency confines the study of human action to an artificially-limited spectrum because it reduces society to atomistic individuals who maximise one all-purpose measure of value: utility, which is often instrumented by consumption. Collective action is therefore only sustainable where material incentives are in place, as the economic agent rides for free unless financially penalised. To explain pro-social behaviour from the standpoint of self-interest, Mandeville and Smith proposed that agents also maximise social approbation, which conveys incentives to act pro-socially because the desire for others' approval encourages compliance with social norms. The upshot for collective action is that, assuming social norms represent common interests, approval from others provides an extrinsic motive for pro-social behaviour. I formalise the mechanism by proposing a simple utility function in which agents maximise social approbation as well as material self-interest. (shrink)

We investigate the haggling process in bargaining. Using an experimental bargaining game, we find that a first offer has a significant impact on the bargaining outcome even if it is costless to reject. First offers convey information on the player’s reservation value induced by his social preferences. They are most often accepted when they are not above the equal split. However, offers which request much more than the equal split induce punishing counter-offers. The bargaining outcome is therefore critically influenced (...) by the balance of toughness and kindness signalled through the offers made in the haggling phase. (shrink)

We would like to thank the commentators for their generous comments, valuable insights and helpful suggestions. We begin this response by discussing the selfishness axiom and the importance of the preferences, beliefs, and constraints framework as a way of modeling some of the proximate influences on human behavior. Next, we broaden the discussion to ultimate-level (that is evolutionary) explanations, where we review and clarify gene-culture coevolutionary theory, and then tackle the possibility that evolutionary approaches that exclude culture might be sufficient (...) to explain the data. Finally, we consider various methodological and epistemological concerns expressed by our commentators. (shrink)

Experimental results in Ultimatum, Trust and Social Dilemma games have been interpreted as showing that individuals are, by and large, not driven by selfish motives. But we do not need experiments to know that. In our view, what the experiments show is that the typical economic auxiliary hypothesis of non-tuism should not be generalized to other contexts. Indeed, we know that when the experimental situation is framed as a market interaction, participants will be more inclined to keep more money, (...) share less, and disregard other participants’ welfare [Hoffman et al., 1994]. When the same game is framed as a fair division one, participants overall show a much greater concern for the other parties’ interests. The data thus indicate that the context of an interaction is of paramount importance in eliciting different motives. The challenge then is to model utility functions that are general enough to subsume a variety of motives and specific enough to allow for meaningful, interesting predictions to be made. For the sake of simplicity (and brevity), in what follows we will concentrate upon the results of experiments that show what appears to be individuals’ disposition to behave in a fair manner in a variety of circumstances [Camerer, 2003]., though what we are saying can be easily applied to other research areas. Such experimental results have been variously interpreted, each interpretation being accompanied by a specific utility function. We shall consider three such functions and the underlying interpretations that support them, and assess each one on the basis of what they claim to be able to explain and predict. (shrink)

Rachlin rightly highlights behavioural reinforcement, conditional cooperation, and framing. However, genes may explain part of the variance in altruistic behaviour. Framing cannot be used to support his theory of altruism. Reinforcement of acts is not identical to reinforcement of patterns of acts. Further, many patterns of acts could be reinforced, and Rachlin's altruism is not the most likely candidate.

This chapter demonstrates how the reflexive governance approach is applied to innovative institutional design of the science–policy interface in global and local public goods provision. To achieve this objective, it discusses methodological options for sustainability valuation, explaining different valuation methods used in various real-world applications. The chapter highlights those methods that are conceptually and practically suitable for evaluating policies, programs, and projects where sustainability is a key factor. It also reviews sustainability valuation methods, which mix analytical and collective methods that (...) require knowledge and provide learning opportunities during the valuation process, resulting in a transparent process. Different types of evaluation and institutional structures also influence the result of sustainability valuation. (shrink)

Social identity is embedded in social structures, generated by various social processes, and has multiple dimensions. We report findings from a laboratory experiment eliciting two-dimensional social identities: a horizontal identity determined either randomly or by preferences and a vertical identity defined by income status and determined either by luck or performance. We also vary income gaps between vertical identity groups. Participants make redistributive allocation decisions between two beneficiaries differing in identity attributes. We find robust evidence of (...) in-group favoritism and that both the identity distance between the allocator and the in-group recipient and income gaps influence the degree of in-group favoritism. (shrink)