, JOURNAL OF :ECONOMIC AND :::SOCIAL POLICY · Is Economic Theory Wrong about Human Nature? Pauline Vaillancourt Rosenau Management and Policy Sciences UT Houston - School …

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Volume 10 Winter 2006 Number 2

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Articles Tenth Anniversary Edition

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Alex Millmow JESP - Tenth Anniversary 1I i Roy Achinto and

Reducing Corruption in International Business:

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Alan Singer Behavioural, Managerial and Political Approaches3

J i James DoughneyThe Ageing Workforce? Separating Fact from Hype25. ;i'I Pauline Vaillancourt Rosenau Is Economic Theory Wrong about Human Nature?61

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Flavio Romano Clinton and Blair: The Economics of the Third Way791~

Sue O'Keefe and Contemporary Public Policy Perspectives on Vocational:1 .. Brian Dollery Education and Training in Australia95Philip Lawn and

Comparing Victoria's Genuine Progress with that of the

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Matthew ClarkeRest-of-Australia

115

Reviews

Cumulative Index

139

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Is Economic Theory Wrong about HumanNature?

Pauline Vaillancourt RosenauManagement and Policy SciencesUT Houston - School of Public HealthHouston, Texas USN

Abstract

Traditional economic models assume that all individuals share the same

se!f~oriented l(le perspective. The new economics suggests, on the basis ofdiflerent methodologies, that this is unlikely. These challenges to traditionaleconomic views ol human nature are summarized under four substantivetopic areas (trusting, bonding. and empathy; altruism and cooperation.community orientation and accommodation; fairness and reciprocity; andrationality). Laboratory experiments indicate that a majority of us arecontingent cooperators, tn/sting and willing to give others the benefit of thedoubt - at least initial~v. Vel)' few people are selfish chronic Fee-riders(20-30 percent). The rational-calculating and absolute~v consistent Homoeconomicus is large~v a myth. This has enormous implications for policyand society.

Introduction

Historically, economic and social policy has been informed by classical,Keynesian, welfare, and supply-side economic theory, While there has beenmuch debate about the assumptions of these theories in the past, it has beenlargely subjective and normative, dependent on opinion rather than directevidence, Today, basic research in a number of fields is giving rise to newspecialties in economics. The findings from this research question theadequacy of many traditional economic assumptions. They point to the needfor reasonable new approaches to economic and social policy in all fields. Inshort, taken together, the body of emerging research on economic behaviorconstitutes a paradigm shift of significant importance.

I Received 17 August 2004. revised I March 2005. accepted 4 April 2005.

62 Journal of Economic and Social Policy

Traditional Economics

Adam Smith's Wealth of Nations, first published in 1776, lays out the basis formodern - and largely untested - economic theory. In his earlier Theory ofMoral Sentiment he wrote of the need for an individual to consider the 'welfare

of the whole society of his fellow-citizens' (Smith 1759, part 6). But modemeconomics has focused on his Wealth of Nations, interpreting him as sayingthat it would be optimal if each individual, family, and business pursued itsown self-interest. This would, then, thanks to the mechanism of the invisiblehand, maximize the success of the economy. In short, aggressive individualselfishness and business profit-maximizing make for the general welfare, thecommon interest, and social progress (Smith 1776). Darwinian naturalselection would lead to improvement and progress in the world of businessjust as it did in the animal kingdom. By extension, individual liberty is bestmaximized and government interference with the process of competition isbest minimized. It is also essential to the model that individuals be rational as

consumers in assessing their own self-interest (Rice 1997, p. 6). Economicbehavior is based on preferences and is relatively constant over time.Individuals will ultimately maximize their expected utilities. Economic theoryassumes that everyone will 'free ride' if given the opportunity. It suggests thathuman beings are all willing to let someone else do the work and then takecredit for it. It takes for granted that consumers respond to price and wagechanges and that they will evaluate their options and consistently act tomaximize their choice based on self-interest defined in terms of their

preferences. Actors are assumed to be individually-oriented and inherentlyuncooperati ve.

Criticisms of classical economic theory are common but they are seldom aboutfundamental assumptions and, therefore, do not present a serious challenge tothe field as a whole. In any case, small deviations from a theory are notconsidered by mainstream economists to be a problem. They oftenacknowledge that 'perfect competition' is exceptional. Despite the fact that thebasic model of market competition is unrealistic, it remains in place, thoughother alternative models sometimes fit the data employed by economists muchbetter (Stiglitz 1997, pp. 29-30). In short, critics have been rare when it comesto the unquestioned assumptions economists make about human nature(Richerson & Boyd 2001).

Serious challenges to traditional, mainstream economic models come from thenew approaches to economics in the fields of biology, neuroscience,anthropology, psychology, and sociology. They suggest that major revisions

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Is Economic Theory Wrong about Human Nature? 63

are needed because traditional economic models are poor predictors of humaneconomic behavior. This paper briefly summarizes and reviews themethodologies, explanatory models, and substantive findings of the 'neweconomics' - it points to the policy consequences of the new economics. Thesecontributions are of sufficient importance to merit the development of new,trans-disciplinary sub-specialties in economics, including the fields of neuroeconomics, bio-economics, psycho-economics, evolutionary economics,experimental economics, behavioral economics, behavioral finance, ecologicaleconomics, environmental economic, and ethico-economics.

Methodological Challenges

Innovative methodologies increasingly confront the old economics with itsemphasis on analytical tools, verbal accounting, and mathematical equations.Historically, economists have worried about heteroscedasiticity, autocorrelation, and collinearity. Their favored techniques of analysis includeregression, functional forms, specialized tests, simultaneous equations, andestimations.

The new economists, discontented with traditional approaches, notemethodological inadequacies relating to the absence of evolutionary processes,geography, innovation, and technology (Pajares, Hernandez-Iglesias et al.2004). The new economics does not abandon the old methodologies; it movesbeyond them.

The new economists look to methodologies that use computer science and areconsistent with concepts in cognitive science, artificial intelligence, andgeneral psychology. They employ techniques of simulation, field data,modeling, multi-agent systems, several types of game theory, and ad hoclearning. Their array of methods also includes hormone analysis based ondrawn blood samples as well as neuro-radiology to map brain activity andneural networks. Beginning with the work of Nobel Prize winner, VernonSmith, they integrated laboratory experiments into their research methodology.These techniques offer the possibility of close control over what is beingmeasured and tested.

Some of the most important findings of the new economics involve threegames: Prisoner's Dilemma, the Ultimatum Game, and the Dictator Game.According to the Norton College Dictionary, the Prisoner's Dilemma game isstructured such that the 'non-cooperative pursuit of self-interest by two parties

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makes them both worse ofr. In cases where one person defects and the othercontinues to cooperate, the person who defects gains more than if she or hehad cooperated. In the Ultimatum Game, two people, 'Allocator' and'Recipient,' are asked to split $lO. Allocator must make a one time offer to theother player. Recipient can either accept or reject this offer. If she or heaccepts it they both keep the proceeds. If Recipient rejects the offer, neithergets to keep anything. In the Dictator Game there are two players. The firstplayer proposes a split and decides, for example, to keep $9. The recipientthen gets $10-$9 = $1. In this game, the recipient must accept the amountoffered, no matter what is proposed. The Dictator Game measures the extentof altruism using gift-giving.

Methodological developments in the new economics include advancedtechnology never before available. The use of brain scans to understandhuman emotions and behavior is in its infancy but the potential is impressive.These techniques are already popular for marketing and product development(Thompson 2003), but there is also substantial research potential for analyzingbrain activity associated within a wide range of basic economic and policytopics. For example, activity in certain areas of the brain is now known to beassociated with specific emotions, making it possible to distinguish betweenrational-calculation and affective feelings. It is increasingly clear thateconomic decisions are not only taking place in the brain centers associatedwith rational-calculation; they also involve the emotional areas of the brain(Zak 2004). In the near future hyper-scanning will permit neuro-economists towatch how two people's brains interact during episodes of communication(Montague, Berns et al. 2002).

Substantive Challenges

Challenges to traditional economics are not new. Serious questioning ofeconomic theory from within, using traditional methodologies of logic andintellectual consistencies, are common. Some of them bridge the old and neweconomics. For example, basic human emotions, what Amartya Sen callssympathy and commitment, are central to individual choices about economicdecision. The fact that emotions influence economic behavior undermines

assumptions that such decisions are always rational, calculated, and based onselfish personal preferences. Sen argues that codes of moral behavior exist andthat they distort the calculations that go into making a 'rational' decision(Sen 1982). Tom Rice similarly points out that concepts such as cognitivedissonance call into question the idea that people act in a rational manner, 'that


is, make decisions that truly maximize their utility' (Rice 2002, p. 92).Kahneman, Knetsch, and Thaler suggest community fairness norms mayinfluence behavior of firms as regards raising prices (Kahneman, Knetschet al. 1986). Frank points out that human interdependency means thatindividuals cannot, and will not, act exclusively on the basis of personalpreference (Frank 1985).

Today, a growing body of evidence from the new economics testifies to theneed to modify the view of human nature implicit in traditional economics.These more serious challenges come from outside mainstream economicsaltogether. Accommodating the new economists' views of human naturewould complicate the field of economics and its theoretical underpinnings; butit has the potential to increase predictability and improve its explanatorypowers.

Trust, Bonding, and Empathy

Traditional economic theory ignores concepts like trust, bonding, andempathy. For example, the Nash Equilibrium predicts that rational humanbeings will not trust one another. But laboratory experiments demonstrate thatthere is a neuro-physiological basis to trust. It is a physiological attachmentmechanism commonly observed in mammals and might well be the result ofevolved survival mechanisms (Nesse 2001).

Research in the field of neuro-economics suggests that trust betweenindividuals is surprisingly common. The Investment Game illustrates thispoint. An individual, A, has the opportunity to send all or none or any part of aten dollar gift to another person, B, who they do not know. The amount sentwill be tripled for player B who can then, if she or he wishes, return part of thegain to player A. While modem economics predicts that player A will not trustplayer B, in fact, in the experiments, A almost always sends money to B.Economic decisions are not just based on individual utilities - many of us aretoo closely attached for this to be the case. Here another illustration is helpful:research using brain scans shows that individuals who are emotionally closesuffer pain when their friend or spouse is administered a small electrical shockby an experimenter (Singer, Kiebel et al. 2004).

People in groups where trust is high respect agreed-upon rules of the game andreciprocate when granted favors; cooperative arrangements are more common,based on community level connectedness. One example is the microfinanceinstitutions and fisheries involving 8-15 million households world wide (Pretty2003). They are of long term benefit to the economy. Another example: trust-


based collective management has been found to be more effective than theunlimited pursuit of individual self-interest in protecting the environment.Bonding and empathy are relevant to understanding the process behind thedevelopment of social capital defined as 'social bonds and shared norms'. It ishigh in groups that are well-organized, perhaps because social capital lowersthe transaction costs between the members of a group (Ostrom 1990).

Trust is essential to economic exchange but traditional economic models donot have the intellectual infrastructure to incorporate the emotional intoeconomic policy. The new economics shows that to do so is essential ifmodels are to be adequate predictors. Data suggests that a society that is lowon trust is very likely to be caught in a 'poverty trap'. High trust societies have'higher rates of investment and growth' (Zak & Knack 2001). It is alsoprobable that low trust causes poverty rather than vice-versa (Zak 2003).

Altruism, Cooperation, Community Orientation, and Accommodation

Traditional economics assumes that most people are selfish - not altruistic andcooperative. They say that faced with a Prisoner's Dilemma type situation(explained above) in laboratory experiments people should or would defect. Ifthis is the dominant strategy, and if defectors get the biggest payout, then 'byvirtue of their higher payoffs, defectors would eventually drive cooperators toextinction -- hence the standard conclusion in behavioral biology that genuinecooperation or altruism cannot survive in competitive environments' (Frank2001, p. 61). Economists see it this way: 'Cooperators help others at a cost tothemselves, while defectors receive the benefits of altruism without providingany help in return' (Nowak, Sasaki et al. 2004, p. 646). But this theoreticalconclusion may be based on narrow contextual circumstances that do notreflect the real world.

In fact, research by the new economists shows that a surprisingly largeproportion of humans are altruistic, cooperative, and community oriented.They regularly perform acts of generosity that are not self-serving and do notyield immediate personal benefit. Between 20 and 30 percent of subjects inexperiments behave as economists predict - they are largely selfish free-riders(Fehr & Gachter 2000, p. 157; Fischbacher, Gatchter et al. 2001). But slightlyover 50 percent are contingent cooperators. These cooperators give the benefitof a doubt to those they interact with - at least initially. It is a cognitivepredisposition that is present in many people even in the absence of reward(Brandts & Schram 200 1). This has been found to be the case using outcomemeasures of laboratory experiments and it has been confirmed by analyzingbrain patterns of human subjects (McCabe, Houser et al. 2001).


As with trust, the new economists' research results concerning altruism andcooperation go against traditional economic theory. Rather than leading to arevision of economic theory, this divergence has given rise to a debate aboutwhat accounts for the observed cooperative behavior. The argument offered isthat such altruistic and cooperative behavior is ultimately self-interested orrational because the recipient gets something from it in the end, even thoughthe reward may be remote and non-obvious. Traditional economists hold thataltruism and reciprocity are compatible with the rational actor model. Theyalso argue that altruistic behavior can be attributed to mistakes or confusion in

reasoning (Ostrom & Walker 2003, see this edited book for some examples).

New economists say that there may well be an evolutionary advantage tocooperation 'even when immediate and tangible pay-offs are absent,insufficient or sub-optimal'. Psychologists support them; cooperative relationsset the stage for future individual and group survival (Schuster 2004, p. 261).If many individuals in a group pursue cooperative strategies, these groups maydo better than groups where most individual members are self-interested. Forexample, it might well be the case that cooperators make more effectiveparents; this would give a survival benefit to groups with many cooperativeindividuals. Historically, a 'fitness enhancement ... might have compensatedfor the initial costs of an indiscriminately sympathetic posture towardunrelated individuals' (Frank 2001, p. 71).

Cultural evolution and theories that are described as 'gene-culture coevolution' also offer plausible explanations for altruistic and cooperativebehavior (Gintis 2003). If altruism emerges and if it is sustained in acommunity, it is not possible for it to be exploited by defectors.Mathematicians have modeled how a single cooperator employing a'tit-for-tat'strategy can influence a situation so that cooperation becomes dominant in agroup through the process of natural selection (Nowak, Sasaki et al. 2004).From an evolutionary perspective, there may be a selective advantage thataccrues to groups that actually punish cheaters and reward cooperativebehavior (Bowles & Gintis 2000; Fehr, Fischbacher et al. 2002; Pagel & Mace2004; Gintis 2000). Altruistic punishment is discussed below. There are, ofcourse, variations with regard to results depending on game form, spatialstructure, and size of the group (Taylor & Day 2004).

New evidence sheds light on why community orientation and cooperativebehavior sometimes takes precedence, in the long term, over individual selfinterest. This new evidence directly addresses the arguments advanced byskeptics who say altruistic behavior in the end, is always self-interested. First,laboratory experiments show that people cooperate not just with family or

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those genetically related, but also with perfect strangers that they are unlikelyto interact with again in the future (Fehr & Gachter 2002; Grimes 2003).Second, research based on brain imaging during episodes of observedreciprocity and trust suggest that it is authentic, rather than merely due toulterior motives of rational calculation (Singer, Kiebel et al. 2004). Neuroeconomists conclude, using experiments conducted with MRI-monitoredsubjects, that the human brain is 'hard wired' to accommodate rather thancompete (Rilling, Gutman et al. 2002; Sanfey, Rilling et al. 2003). Partnersexperience positive feelings when cooperating with another equallycooperative person and it is not rational calculating areas of brain activity thatare involved. Mutual cooperation has been found to be associated with'consistent activation in brain areas that have been linked with reward

processing,' ie, the emotional rather than the rational-calculating parts of thebrain. This sensation, feeling, or sentiment may stave off the temptation to actin a more selfish manner even when selfishness is the most rational choice

(Rilling, Gutman et al. 2002).

Fairness and Reciprocity: Retaliation and Altruistic Punishment

Behavioral economists have discovered that in specific, identifiable situationsfairness concerns trump self-interest and profit maximization (Henrich, Boydet al. 2001; Carmer 2003). These findings apply in a wide variety of societiesand cultures (Henrich, Boyd et al. 2004). Preferences and a sense of what isright, wrong, or just plan 'fair' have more to do with economic behavior thanmere distributional material payoff (Falk, Fehr et al. 1999; Falk, Fehr et al.2000). In addition, preferences are not inherent in some sense, but rather socialand 'shaped by the economic and social interactions of everyday life' (Henrich,Boyd et al. 2001, p. 77). For example, contributions to the public good havebeen found to be influenced by social interactions with neighbors at least for90 percent of subjects in a group (Falk, Fischbacher et al. 2003). And anotherexample: perceived fairness of procedures plays a role in how people react toauthoritative decisions including economic policies (Hibbing & Alford 2004).

The concept of fairness is absent from traditional economics but it influenceseconomic behavior substantially. At least that is the conclusion emerging fromexperiments conducted by researchers in the last several years who find thatfairness values sway behavior. In the Ultimatum Game, Allocators generallyoffer 40-50 percent of 'the available money to the other person andResponders reject low offers with a high probability' (Fehr, Fischbacher et al.2002). The amount of money involved is not trivial and fairness concernsremain important even when the stakes amount to between to 2 or 3 times amonthly wage (Fehr, Fischbacher et al. 2002).


That Homo economicus is fairness-oriented should be no surprise. Even in theanimal kingdom fairness norms have been observed (de Waal & Berger 2000).Researchers hypothesize that there may be 'early evolutionary origins of'inequity aversion' (Brosnan and de Waal 2003). In situations of equal effort,capuchin monkeys were found to reject offers of rewards (cucumbers) thatwere lower in value to those offered to monkeys in neighboring cages(grapes). Hauser et al. found that altruistic food giving occurred morefrequently among Tamarin monkeys when it was reciprocal. These animals'discriminate between altruistic and selfish actions, and give more food tothose who give food back' (Hauser, Chen et al. 2003, p. 2363).

The new economists find that what is considered to be fair and unfair in

market competition and society is not a universal standard, but rather, isinfluenced by subjective factors. It varies from person to person (Fischbacher,Fong et al. 2003) and is, in part, cultural. Experimental laboratory gamesconducted in different countries and cultures document that what is considered

fair differs from place to place and between cultures around the world(Henrich, Boyd et al. 2001). Studies comparing free-riding or 'social-loafing'among MBA students in China and the US found such behavior far less likelyto occur in China where cultural norms discourage it (Latane, Williams et al.1979; Earley 1989)

Strong reciprocity is part of a fairness ethiC. It is defined as 'the predispositionto cooperate with others and to punish non-cooperators at personal cost'(Sanchez & Cuesta 2004, p. I). A different term, social reciprocity, functionsalong the same lines (Carpenter & Matthews 2003). The concept of altruisticpunishment is closely related; it means 'that individuals punish, although thepunishment is costly for them and yields no material gain' (Fehr & Gachter2002). Neuro-economists do, however, find that psychological satisfactionresults from this type of altruism (Fehr & Rockenbach 2004; J.-F. deQuervain, Fischbacher et al. 2004).

Despite the fact that what is fair and not fair varies from culture to culturesomewhat, experiments on fairness-related orientations, conducted in manydifferent circumstances, consistently show that overall 'people tend to behavepro-socially and punish antisocial behavior, at a cost to themselves, even whenthe probability of future interactions is extremely low, or zero' (Gintis 2000,p. 177). Experiments in the laboratory indicate that people are willing to giveup money to reduce perceived inequities (Zizzo & Oswald 200 I; Fehr &Rockenbach 2003). Even uninvolved third parties, who~;e economic payoff isunaffected by societal or group violations of equality distribution andcooperation norms, are observed to sanction violators (Fehr & Fischbacher


2004). Cooperation is enforced though a range of devices, processes andtechniques - directly and indirectly (Masclet, Noussair et al. 2003). In sodoing, they are enforcing norms that create a group culture that does nottolerate free-riding (Fehr & Gachter 2000). Most importantly, punishment ofnon-cooperators appears to lead to universal cooperation (Fehr, Fischbacher etal. 2002).

Rationality: It's Hormonal, Emotional, and Intellectual

Traditional economics assumes that rational economic agents are engaged indecision-making with perfect information. They are assumed to be trying tomaximize their individual expected utilities. Research by the new economistsreports that it is not so much rational as it is influenced by social andemotional factors (Kahneman & Tversky 2000; Zak & Knack 2001).Outcomes regarding spending decisions, for example, are often a function ofimpulse and instinct. Human motivation is complex and subjective. Severalexamples from a wide range of situations suggest this to be the case. In afamily structure, the number of boy and/or girl offspring influences how muchis invested in housing and how many hours per week a father puts in on thejob (fathers put in more hours if they have sons) (Leonhardt 2003). Anotherexample from the new economics is the finding that people dislike losses morethan they appreciate gains. Most humans are, in short, loss averse and thisdrives decisions, be they economic or health related (Tversky & Kahneman1992). In forced choice situations, would one sacrifice a life ifthis assured thatfive lives would be saved in an emergency situation, assuming that the fivewere in great jeopardy? The answer, research suggests, depends on if that oneperson is a friend, or geographically proximate, compared with the five peoplewho are far away and unknown to the decision-maker. The choice is oftenemotional and has been documented to be so by MRI studies of the subjects'brain patterns during the course of making such decisions (Begley 2004).

Behavioral economists find incidental emotions from one life-situation can

influence economic transactions in completely unrelated situations. Severalresearch examples illustrate this case. This gives rise to the 'endowment effect'where people ask a higher price for an item that they own, compared to whatthey would be willing to pay for the same item if they were about to purchaseit from a stranger. Another example of the same principle reveals that peoplelike to have options and choices and that it takes considerable monetaryincentives to convince them to give this up (Ahlert & Cruger 2004).

Traditional economic theory predicts that stock traders are 'omniscient andcoldly logical beings, who aim always to maximize their profits based on

/s Economic Theory Wrong about Human Nature? 71

complete knowledge about what the entire market is doing' (Ball 2003).However, Farmer, et aI., while modeling agent behavior with data from theLondon Stock Exchange, found that the observed action patterns were socomplex and varied that they resembled random choice more than anythingelse (Farmer, Patelli et al. 2003). Traders attempt to guard against their ownemotional tendencies but in general they fail this test (Anonymous 2004).Psychologists Daniel Kahneman and Amos Tversky propose a theory of'irrational' economic behavior: their Prospect Theory holds that psychologicalorientations influence people's choices under conditions of uncertainty(Kahneman & Tversky 1979). Economic decisions are more often short-termthan long-term oriented. We tend to discount future rewards in favor of theshort term (Ainslie 1992). People tend to prefer the lower benefit now over agreater reward later, perhaps because it is nearer and more certain. 'A bird inthe hand,' it appears, is valued more than the 'two in the bush'.

Psychological factors such as 'representative thinking' and 'categorization'influence economic choices. Representative thinking is the assumption that thepast represents future trends. For example, if the stock market is going up itwill continue to do so. And an example from public health: after a prolongedperiod of no epidemics, people forget to be vaccinated. If a movie star or thepresident has a certain medical problem, it becomes 'an epidemic' as peopleask their doctors to check if they, too, might be ill in the same way.Categorization means people jump to conclusions on the basis of previousexperience and incomplete data. When someone has lung cancer, people jumpto the conclusions that she or he must be a smoker.

Finally, experimental economists, bio-economists, and neuro-economists havediscovered that 'rational' strategies are influenced not merely by intellectualanalysis or selfish calculation but also by hormones such as oxytocin. Thesehormonal effects vary across the population and sway human decision-making(Zak 200 I; Zak & Knack 200 I; Zak 2003). Sadness seems to make peopleaccept higher prices and to purchase more than they ordinarily would (Lerner,Small et al. 2004).

Conclusion

Overall and in sum, the new evidence from these sub specialties that combineeconomics with other social and medical sciences calls into question the viewsof human nature implicit in classical economic theory. Their relevance foreconomic and social policy is just beginning to be understood. The new


economics challenges the idea that the economic preferences of everyindividual are logical, stable, systematic, and consistent. It concludes thatgreed and selfishness are not universal human characteristics. It uncoverssubstantial variation regarding human motivation where traditional economicmodels permit few exceptions to generalizations about the incentives thatdrive us. It points to the enormous implications of group reference, context,culture, and time frame for economic decisions and human behavior ingeneral.

What does it matter if standard economic assumptions about humans being asbasically ruthless and self-interested are wrong (Frank 2003)? Today's socialinstitutions in western industrialized countries are structured and organizedaround the assumption that people are all basically selfish. If, as this newresearch suggests, most people are willing to forgo their individual interest infavor of better outcomes that work for all, then the appropriateness of thesecurrently-in-place social structures is in question. What is the cost oforganizing social institutions to fit the minority that are unable to trust others,always out for themselves at the expense of the larger society, incapable offairness (equity and reciprocity), and unconcerned by community needs?

Can anything be done or should anything be done to change the views andbehavior of the ruthlessly selfish? Have we all become so accustomed todealing with highly self-interested individuals that we have corne to accept itas the norm? Does this type of behavior become a self-fulfilling prophecy(Frank 2005)? Certainly school curriculum seems to be effective in teachingindividuals to be selfish or altruistic though, of course, one may be so withoutformal education to a particular orientation. For example, long ago researchshowed that students majoring in economics are more likely than students inother disciplines to learn a selfish, free-riding, and uncooperative orientationtowards others (Marwell & Ames 1981) (Yezer, Goldfarb et al. 1996) (Frank,Gilovich et al. 1993). What would be the consequences of an educationalprogram that sought to teach community orientation and empathy with others?Would a city or country be vulnerable if it chose to educate its citizens to beless selfish while its neighboring cities or countries did not do so (Rosenau2003, pp. 185-87)? There is some evidence that at the level of the nation-state,those states that play fair, that do not initiate conflict, or that refuse to join inalliances with states that do instigate conflicts, survive and even prosper in anenvironment where many other states act in a self-interested manner (Cusack& Stoll 1994; Stoll 1998). All this suggests that the assumptions implicit inmodem economics regarding human nature may be well off the mark.


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