In the spirit of the season (isn't it interesting that the biggest month in retail is driven by people buying things for other people?), here are some notes on altruism.
Altruism and Economic Man
The most persistent ideological argument against social investing is that altruism has no place in economic life. Society will work best, according to this argument, when everyone acts soley in their own economic self-interest. Leaving aside the question of whether you can be an altruist when you're not giving up returns (the historical experience of social investors), this boils down to a defense of Economic Man, the classical economic view of humans as self-interested profit-maximizers.
Social investors risk wasting time and resources responding to this argument in all its forms - no matter how many times it is answered there will always be someone paid to make it one more time. But it is worth noting that Economic Man has plenty of respectable enemies, from Keynes to Richard Thaler to the Austrian School.
An economic defense of social investing must be based on the idea that Economic Man is seriously incomplete. This is true on at least three levels:
- It is incomplete as an explanatory concept because people don't behave rationally - they misjudge risk, they buy lottery tickets, they pay high premiums for small marginal gains in convenience - so a model assuming rational behavior is bound to produce disappointing results.
- It is incomplete as an investment approach because Economic Man doesn't have to deal with the emotional implications of his decisions. As markets become more efficient it is likely that successful investment strategies will entail considerable psychological costs. For a hugely entertaining riff on this theme in the investment world see Malcolm Gladwell's brilliant New Yorker article on Nassim Taleb, or better yet, read Taleb's book, Fooled by Randomness, in which he described the excruciating psychological pain of his winning investment strategy.
- Most importantly, it is incomplete because Economic Man is not cognizant of the environmental impacts of his decisions. Economic Man seeks the highest return, but no rational person would accept a high return on investment if it meant permanent severe damage to his health and wellbeing. Let's say it's 100 years from now and there's no potable water in the state of California. Their first question about us is not going to be "did they seek the highest possible investment returns?"
Altruism and Evolution
In an earlier post I mentioned that experiments in game theory have not found altruism to be a successful strategy, raising a serious intellectual challenge to those who practice it (game theory is basically Economic Man on steroids). In trying to formulate a response I turned to evolutionary theory (which is arguably game theory on steroids).
The final chapter of Ernst Mayr's This is Biology asks "how could any ethics develop [from evolution] that is based on altruism and on a sense of responsibility for the welfare of the community as a whole?" Mayr, who passed away earlier this year, says "my own values are rather close to Julian Huxley's evolutionary humanism. 'It is a belief in mankind, a feeling of solidarity with mankind, and a loyalty toward mankind. Man is the result of millions of years of evolution, and our most basic ethical principle should be to do everything toward enhancing the future of mankind. All other ethical norms can be derived from this baseline.' Evolutionary humanism is a demanding ethics, because it tells every individual that somehow he or she shares a repsonsibility for the future of our species, and that this responsibility for the larger group should be just as much a part of cultural ethics as concern for the individual."
For the truly committed, there is Elliot Sober and David Sloan Wilson's Unto Others: The Evolution and Psychology of Unselfish Behavior, who argue that "the case against evolutionary altruism has already crumbled when judged by normal scientific criteria." This is a hard book, but I think an important one for people who are trying to think clearly about these things.
There is an article on biological altruism in the Stanford Encyclopedia of Philosophy, here.
So what should we do? Enjoy the holidays! We'll come back next year and figure all this stuff out.
If you are feeling altruistic and would like to get some additional deductions before AMT sets in next year, here are some places where your donation would be likely to have a significant lasting impact: