I’m in the middle of reading The Moral Economy by Samuel Bowles. It’s about how explicit financial rewards and punishments can lead to bad consequences through their “crowding-out” of a person’s pro-social motivations. I’m learning a lot from the book and I would recommend it.
My only real point of disagreement is semantic. Bowles considers the financial rewards and punishments approach to be leaning on what he calls a “homo economicus” conception of the world: when they make decisions, people care only about the material outcome to themselves. This means that other motivations fall outside of the “homo economicus” purview.
This is all ground that I have written about a lot in the past, for example at Hippo Reads. I just want to highlight one illustrative point where this comes up in a technical way in The Moral Economy. Here is a description of the ubiquitous Prisoner’s Dilemma:
In the Prisoner’s Dilemma game, defecting rather than cooperating with one’s partner maximizes a player’s payoff, irrespective of what the other player does. Defecting in this game is what game theorists call a dominant strategy, and the game is extremely simple; it does not take a game theorist to figure this out. So, assuming that people care only about their own payoffs, we would predict that defection would be universal.
My concern here is that the identity and motivations of the players are in fact primitive parts of the game, not separate from it. The payoff number enjoyed by a player for a given outcome of a game is a characteristic of the player, and so whatever outcomes are feasible given the options available to the players are being translated into payoffs through the players’ intrinsic motivations.
“Players” in the setup of a game are not merely ciphers; when they are introduced they are carrying the very preferences over outcomes that we (the modelers) will use to think about how they might play the game. Under this interpretation, in a game model, outcomes are not objective amounts—cash, say—being pondered over by mysterious players, but are rather interpretations of objective amounts that are made in a predictably subjective way by a motivated player.
In the specific case of the Prisoner’s Dilemma, the logic of the game as I understand it is that the two players are in a situation that, as a product of the structure of the choices they are about to make and the nature of their preferences over the outcomes, corresponds to a Prisoner’s Dilemma.
By contrast, I don’t support this differing interpretation of the logic of the game: there is a situation that, as a product of the structure of the choices available to players and the outcomes of those choices corresponds to the Prisoner’s Dilemma, and two players will arrive to decide what to do.
In the latter interpretation, you are going to be backed in to a specific interpretation of what players want by having fixed payoff numbers in advance, before they showed up in the model. This will seem to elevate self-regarding preferences over objective amounts to a position that it just does not need to occupy in the former interpretation.
In short, if the players in two otherwise identical situations have different motivations, are we in the same game with different players, or a different game altogether?
It’s a small difference, but important. The reason why a fundamental method in economics—rational choice theory—can and will be robust to evidence and thought experiments on a variety of human motivation is that it can be useful in thinking about all kinds of purposes that might underlie choice. I still am reluctant to cast the economic method apart from that, despite the fact that the own-financial motivation has in practice been far too excessively prioritized in economics. There is baggage, no doubt.
Having said all of this, one way or another Bowles argues that to formulate policy based on the own-financial motivation is an approach that is not well supported conceptually or on the balance of evidence, and I would agree. It is also certainly fair to say that the roots of this formulation are in the history of economic thought. I would only argue that I think this reflects decisions and interpretations made by (motivated!) practitioners over the years rather than an immutable aspect of economic methodology.