20 Nov 2015

Money and Altruism: Does it hurt us or help us?

Josh writes*

It’s been a common conception through recent history that cumulatively, money influences us to the point that when money is involved, our empathy is reduced, and to a large extent that appears to be the case.

An intriguing article from CPACanada discusses the ways in which money can negatively affect our personality and the way we interact with others, specifically that it reduces our empathy. This might not make sense according to the primordial economic view on altruism: gaining satisfaction or happiness from benefiting other people. Under this logic, people should be giving more as they earn more because they increasingly have greater economic security (pending strategic financial planning) and a larger surplus that can be spent on helping the unfortunate.

The answer could be seen as thus- despite increasing incomes, as goods across nearly all markets have wide price-ranges, the marginal cost of giving up an expensive car over a regular car can be portrayed as greater than the benefit of giving more money to a charity because 1) you don’t necessarily see where your money is going and so you don’t trust the middle man (NGO) entrusted to handle it, and 2) the chance to show off your expensive car to others is highlighted by the fact that “exclusive” consumer goods are excludable, whereas altruism may now be considered an expected value to be held by post-modern democracies.

As money is only a means to acquiring goods, and is not a good in itself, we may be able to understand why patterns of altruism appear to be more logical with the absence of money. This is not to say that from a behaviouralist perspective, money cannot be seen as a method of acquiring value from other people, but rather that as a phenomenon, people often seek money for the sake of seeking money, and without it people may begin to remember that “the only possible value of money is other people.” When a value of money isn’t quoted alongside somebody’s time spent volunteering, that person won’t be as likely to compare the value of his time to some market baseline and thus feel that he is being underpaid. Instead the reliance to measure the value of some altruistic act then falls upon social values, which say that it is acceptable to be self-interested when it is done by helping another person.

Bottom Line: This argument isn’t trying to suggest that rich people can’t be altruistic, but is suggesting that altruism is more possible when the focus isn’t on the potential cost-benefit analyses between caring for others and consumer goods, but is instead on the group benefit that can be derived from individual support for one another.

* Please comment on these posts from my microeconomics economics students, to help them with unclear analysis, other perspectives, data sources, etc.