Is money a message as well as a medium?

Money is the medium of exchange as well as the unit of account and store of value. As the medium of exchange money makes life easy because we don’t have to spend a lot of time trying to find someone who is prepared to trade the goods we want to buy for the goods we want to sell. I have never been able to understand what Marshal McLuhan was talking about when he said “the medium is the message”, but the question I want to consider is whether we behave differently when we have money on our minds.

The idea that people may behave differently when they have money on their minds has a long history. Everyone has heard the biblical claim: “the love of money is the root of all evil”. What does this mean? This is not really an assertion that it is evil to collect coins, is it? It seems to me that the statement was not really about money at all but about the love of the worldly goods that money can buy.

The question of whether people behave differently when they have money on their minds also comes up in discussing when it is or is not appropriate to attempt to motivate other people using money. Tyler Cowen, for example, has used several parables to discuss this question, including the dirty dishes parable. Is paying one of your children a good way to ensure that the dishes are washed? Probably not. Children may feel less obligation to do their share of family chores if a voluntary exchange relationship is established in which the parent becomes an employer providing money in exchange for work, rather than a family leader “who is due some amount of obedience in his or her own right” (“Discover your Inner Economist”, p 14).

Is the payment of money intrinsic to this parable? I think that many economists would tend to say that the parable would apply in the same way if the child is paid in kind, e.g. in tickets to rock concerts, rather than in money. In the minds of many economists the issue would appear to be whether strict reciprocity is appropriate to the circumstances rather than about the method of payment that is used. Economists often say that money is a veil.

However, I am not sure that many parents would rule out all forms of bartering as being inappropriate as a means of motivating a child to do his or her share of family chores. It seems to me that bartering could be appropriate if it is about the things that parents do for their children that are beyond what might be generally considered to be the core responsibilities of a parent. For example, like many other parents, while my kids were in their teens I used a substantial part of my leisure time providing an unpaid taxi service to ferry them and their friends to and from various sporting and entertainment activities. Would it be inappropriate for a parent to suggest to a child that it would be unfair to expect provision of such services unless he or she does an appropriate share of family chores without having to be constantly reminded?

This raises the question of whether responses to provision of incentives have more to do with perceptions of the appropriateness of particular incentives than with concepts such as the strictness of reciprocity or the money value of the incentives provided. There is some evidence that actions that merely remind people of money can have a significant effect on behavior. For example, Kathleen Vohs, Nicole Meade and Miranda Goode report an experiment in which participants were primed by sitting at a desk facing posters showing various denominations of currency or posters showing either a seascape or a flower garden. The participants were then presented with a nine-item questionnaire in which each question asked them to choose between two leisure activities – an experience that only one person could enjoy and an experience that two or more people could enjoy together. Participants primed with the money poster tended to chose more individually focused experiences. The authors report similar results for eight other experiments (‘The psychological consequences of money’, Science, 318 (5802), 2006).

So what if responses to incentives are strongly influenced by perceptions of the form in which the incentive is provided and the language used when the offer is made? The most obvious implication is that a lot of care is required in selecting incentives that are perceived to be appropriate and in presenting them in an appropriate way to achieve the desired effect. There are quite different implications in relation to prevention of corruption. The ethics of accepting a bribe do not change merely because the incentive offered is more subtle than a bundle of notes in a brown paper bag.

Are we born to be good?

In arguing that we are born to be good, psychologist Dacher Keltner has in mind a particular definition of what it means to be good. In his book “Born to be Good” he views goodness as synonymous with the Confucian concept of jen: a person of jen “brings the good things in others to completion and does not bring the bad things of others to completion” (p. 4).

The author’s aim is to enable the reader to see human behavior in a new light. He presents evidence supporting his view that we have been wired by seven million years of hominid evolution to practice emotions like compassion, gratitude, amusement and wonder that are associated with bringing the good in others to completion. “We have neuropeptides that enable trust and devotion, and a branch of nerves that connects the brain, the voice and the heart that enables caretaking. Our capacity for awe has given us art, a sense of the sacred. We have genes, neurotransmitters, and regions of the brain that serve these emotions as we serve others. These emotions are the substance of jen” (p 269).

Keltner does not deny that we are also wired to pursue self-interest. His claim is that this is “half the story” (p 11). His research suggests that rather than just one reward circuit in the brain that is activated in response to any kind of pleasure, different neural circuits are involved in different kinds of positive emotions such as sensory pleasure, pride, compassion and awe (pp 265-267). He suggests that in our search for happiness many of us have tended to focus excessively on sensory pleasure and to lose sight of the emotions associated with, for example, “subtle cues of embarrassment, playful vocalisations, the visceral feelings of compassion, the sense of gratitude in another’s touch to your shoulder” (p 15).

The main reservation I have about the book relates to the author’s tendency to equate self-interest solely with pursuit of sensory pleasure and to contrast this with the other positive emotions associated with bringing good things in others to completion. At one point he writes: “Ironically enough, compassion may be a prerequisite to the pursuit of self-interested happiness” (p 249). It seems to me that this is only ironical if one takes a very narrow view of self-interest – a much narrower view than that taken, for example, by neoclassical economists who incorporate the happiness of others in the utility functions they use in their theoretical work.

As discussed in an earlier post, it seems to me that there is a lot of good involved in self-actualization that does not necessarily involve bringing the good in others to completion. Being good also involves such things as the human capacity to distinguish between wanting and liking and to defer gratification that are also the result of evolution. In addition, Gregory Burns seems to me to make a strong case that evolution has also wired humans to meet personal challenges: “The sense of satisfaction after you’ve successfully handled unexpected tasks or sought out unfamiliar, physically and emotionally demanding activities is your brain’s signal that you’re doing what nature designed you to do” (“Satisfaction”, p xiv).

The book omits what seems to me to be the strongest argument that can be advanced in favour of the view that humans have evolved to be good, namely the evolution of the concept of self. As philosopher Daniel Dennett has pointed out, evolutionary processes have supported the evolution of minds powerful enough to capture the reasons for things and make them our reasons: “ We are not perfectly rational agents, but the social arena we live in sustains processes of dynamic interaction that both require and permit the renewal of our reasons, making us into agents that can take responsibility for our acts” (“Freedom Evolves”, p 287).

Despite these reservations and my critical comments in earlier posts about Dacher Keltner’s portrayal of Adam Smith’s views and his apparent attempt to argue that social cooperation cannot emerge from self-interest, I found this book to be highly informative. I am not competent to judge the quality of the author’s research findings, but he is obviously an authority in his field. The book makes a strong case that humans have been wired by evolution to experience positive emotions when they seek to bring the good in others to completion.

Does tit-for-tat prioritize the gains of others over those of the self?

The essential feature of a tit-for-tat strategy is reciprocity – rewarding cooperation and punishing defection. In his book, “Born to be Good”, Dacher Keltner claims that “tit-for-tat instantiates the principle of cost-benefit reversal”. He argues that a set of mechanisms that reverse the cost-benefit analysis of giving is built into the human organism. He suggests: “These mechanisms might prioritize the gains of others over those of the self, and transform others’ gains into one’s own” (p. 71).

Keltner bases his claim that tit-for-tat involved cost-benefit reversal on three observations:

• When cooperation is the default setting, tit-for-tat favours mutually beneficial cooperation.
  
• Tit-for-tat is not envious – the strategy doesn’t change as a partner’s benefits mount.
  
• Tit-for-tat is a forgiving strategy – cooperation is resumed following the first cooperative action of a defector.
  

It seems to me, however, that none of these features of tit-for-tat necessarily involves prioritizing the gains of others over those of the self. It is possible for a tit-for-tat strategy to be adopted purely out of self interest. Robert Axelrod recognised this in “The Evolution of Cooperation” (p 173-4) , in his discussion of the experiments that Keltner uses as the basis for his discussion of tit-for-tat.

A tit-for-tat strategy based on self-interest provides a plausible explanation for the emergence of cooperation among strangers who have no reason to trust each other. For example, consider a situation where strangers are considering the initiation of trade in the absence of third party (e.g. government) protection against opportunistic use of force and fraud. From the perspective of each party the possible outcomes would be: a) a potential gain from trade; b) a potential loss resulting from opportunism by the other party – i.e. theft of the goods offered for trade; c) a potential gain from opportunism – theft of goods offered for trade by the other party; d) a stand-off.

If trade occurs in this situation, is it likely to be because one party places higher priority on the potential gains to the other party than on the potential gains to the self? I think it is more likely to occur because both parties consider that, in view of the likely responses of each other, they have more to gain from a series of mutually beneficial exchanges that they would gain from attempting to steal from each other.

If both parties adopt a consistent tit-for-tat strategy, then trade is likely to continue and they may come to trust each other. It is possible to envisage that the relationship could even develop to a point where they each gain some satisfaction from the benefit that they bestow upon each other through the exchange of goods. But this trust and affection is the outgrowth of mutually beneficial cooperation rather than a pre-condition for it.

I don’t understand why Dacher Keltner seeks to denigrate those who see self interest as a motivating force (see: How high was Adam Smith’s jen ratio?) and seeks to eliminate self-interest from the evolution of social cooperation. Perhaps he identifies the self-interest motive with opportunism, greed and selfishness to such an extent that he cannot see that it is good to desire to avoid being a burden on others, to help family members and other loved ones, and to accumulate the means to contribute generously to worthwhile causes. Perhaps he is uncomfortable with the idea that an invisible hand involved in voluntary exchange processes could enable people to benefit from cooperation with each other without actually intending to benefit each other.

How high was Adam Smith's jen ratio?

Jen is apparently the central idea in the teachings of Confucius. In his book, “Born to be Good”, Dacher Keltner tells us that the numerator in the jen ratio is actions that bring the good in others to completion and the denominator is actions that bring the bad in others to completion. For example, if a writer misrepresents the views of others he would tend to lower the jen ratio.

I have been looking forward to reading “Born to be Good”. I have previously considered on this blog the question of whether the inner nature of humans is good and I want to explore this topic further.

However, after reading a few pages I began to wonder whether reading this book will do much to improve my jen ratio. The problem is that it seems to me that Keltner’s discussion of the views of Adam Smith is uncharitable. Keltner claims that Smith portrayed Homo economicus as some kind of ideal of human evolution who was designed to maximize self-interest in the form of experienced pleasure and advances in advances in material wealth ( p 8).

Smith had a realistic view of human nature. I don’t think he saw humans as rational maximisers of anything, but it is true that he did make some famous observations about self interest as a motivating force. Smith stated: “It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest” (“Wealth of Nations”, I.ii.2). It seems to me that this is an observation about the way the world works rather than a statement advocating selfishness.

I think the closest Smith got to advocating selfishness is his claim that by pursuing his own interests an individual frequently promotes that of society: “I have never known much good done by those who affected to trade for the publick good” (W.N., IV, ii, 9).
It is arguable that Smith was being too cynical at that point. It is possible to think of examples of a great deal of good being done by not-for-profit organisations e.g. in running schools and hospitals.

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).

It is not fair to portray Adam Smith as promoting an “ideology about human nature ... with a jen ratio trending toward zero”.