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The economy of favors
This post is triggered by two coincident events: a post last week by David D. Friedman, and the SCA Board of Directors' recent revival of the proposal to require paid membership to participate in SCA activities.
Dan Ariely's recent book Predictably Irrational addresses, from a behavioral psychologist's perspective, a number of ways in which real human beings, consistently and predictably, do not behave like the "rational choosers" of economics. I recommend reading the whole book, but the chapter that's relevant here is entitled "The Cost of Social Norms". In a nutshell, Ariely divides human interactions into those governed by "social norms" and those governed by "market norms": in the former, people do "favors" for one another, perhaps in the hope of receiving future favors in return, but not immediately, not necessarily, and not measured precisely, while in the latter, people expect to "get what they pay for," now, no more and no less.
Example 1: a bunch of people (presumably students in Psych 101, the main source of lab-rats for such experiments) were asked to perform a simple task for five minutes, dragging as many shapes as possible from one part of a computer screen to another. A third of them were paid $5 to participate; another third were paid $.50 to participate; and the remaining third were paid nothing, and asked to do it as a favor. The $5 group, on average, dragged 159 shapes in five minutes; the $.50 group dragged 101 shapes; and the "favor" group dragged 168 shapes. Conclusion: when money was involved, participants worked more or less depending on how much they were paid, but when no money was involved, they switched into a qualitatively different mode of motivation. 0 > 5 > .5
Example 2: The AARP asked lawyers to offer discounted legal services to needy retirees, and almost none of the lawyers agreed. Then the AARP asked the same lawyers to offer pro bono (completely free) services to the same retirees, and most of them agreed. Conclusion: as before, plus the factor that "discounting" legal services might be seen as impugning the lawyers' professionalism, while pro bono work is a part of their professional code and duty.
Example 3: A group of martial-arts students were studying with a famous Japanese sensei, who was not charging them for the instruction. At length the students felt that this was unfair and suggested that they pay the sensei for his time and effort; he replied that they wouldn't be able to afford him.
Example 4: Open-source and free software. See examples 2 and 3.
Example 5: a variation on the experiment of Example 1. This time participants were offered either nothing, a 50-cent Snickers bar, or a 5-dollar box of Godiva chocolates for their participation; there was no significant difference in performance among the three groups. But when participants were offered the same gifts and told how much each gift cost, the results were the same as in Example 1: the mention of prices had effectively converted the gifts into money, putting the participants back into "market norms" mode.
Example 6: A bunch of human lab-rats were given a "sentence-unscrambling" task, followed by a difficult geometrical task, for which they were told that they could ask the experimenter for help. Half of the participants were given sentences based on neutral words, and the other half sentences based on money-related words, the intent being to put them in a "market norms" state of mind. The former group asked for help after about 3 minutes, while the latter group stuck it out for 5.5 minutes before asking for help. The former group were also more likely than the latter to help others (helping an experimenter enter data, helping another participant who seemed confused, or helping a stranger who spilled a box of pencils). The former group also chose to sit closer to one another than the latter group. Conclusions: prompting people with thoughts of money made them act more individualistically and less socially.
Example 7: A day-care center had a moderate problem with parents arriving late to pick up their kids. When the center imposed an explicit fine on such parents, the lateness problem increased. Furthermore, when the fines were subsequently discontinued, the problem did not return to its previous level, but rather increased slightly. Conclusion: imposing the fine switched the parents from "social" mode to "payment for services" mode, and they were willing to pay the cost for the service; when the fine was removed, they didn't return to "social" mode but rather acted as though the cost for the service had decreased. And in general, when a "social norm" and a "market norm" collide, the latter tends to drive out the former more-or-less permanently.
In summary, "money is often the most expensive way to pay for something."
Now, how does this apply to David's gift-giving puzzle? He observes the fact that people are more likely to give things than money, even though the money would give the recipient the option of buying the exact same thing or something (s)he would like even better; and also the fact that gifts tend to be very small relative to the assets of the donor or the recipient. Both of these are difficult to explain under Becker altruism theory (which counts the recipient's utility as a benefit to the donor); David suggests the alternate hypothesis that what's actually counting as a benefit to the donor is the recipient's short-term happiness, which more heavily discounts the future than a full-fledged utility function would.
Several people responding to David's post said basically "That's too complicated; it's not about the recipient's short-term or long-term utility at all, but simply about building and maintaining social ties," essentially what Ariely says in a more precise way. Ariely's chapter easily explains both halves of David's puzzle: first, giving -- or even mentioning -- money would convert the social relationship into a business relationship, which might be undesirable for a number of reasons; and second, if an inexpensive gift is (within reason) just as effective in maintaining social ties as an expensive one (see Example 5 above), the inexpensive gift is obviously more efficient for the donor.
Now, what about the SCA's "pay-to-play" issue (which caused a firestorm of protest when proposed fifteen years ago; the Board of Directors backed off and instead instituted a "non-member surcharge" tacked onto the monetary fees participants were already paying to get into specific events)? The SCA depends on volunteer labor. Literally millions of person-hours, some highly skilled, of volunteer labor. Volunteers teach classes, organize and attend educational demos, organize events, make decorations for event sites, calligraph and illustrate award scrolls, cook and serve feasts for hundreds of people, make jewelry, clothing, furniture, and comestibles as gifts, move chairs and tables, sweep floors, put on musical and dramatic performances, build and maintain Web sites, carry heavy objects, staff first-aid stations, etc. For some of these tasks, people expect to be reimbursed for their out-of-pocket expenses (e.g. feast ingredients, fabric for clothing), but in general people charge nothing for their time, expertise, and labor. Why? Because it's a society, in which it would be considered tacky to worry about precisely how much you put in or to expect exactly the same amount in return. In practice, people are rewarded explicitly for all this by awards and titles, and implicitly by "word-fame" and personal reputation.
Every time money is brought to people's attention, Ariely would predict, they move away from social norms and towards market norms. If I'm paying money for the Society, I'm a customer and I expect customer service as I would from a business; I don't think the SCA, Inc. can remotely afford to provide this level of customer service. If I'm providing payment for services rendered, I will put into the Society exactly as much as I want and expect to get out of it -- which is probably a lot less than I'm currently putting in. If tens of thousands of people all reason this way, the result will be a dramatic loss of available volunteer labor, and the Society will be a far poorer place for it.
Dan Ariely's recent book Predictably Irrational addresses, from a behavioral psychologist's perspective, a number of ways in which real human beings, consistently and predictably, do not behave like the "rational choosers" of economics. I recommend reading the whole book, but the chapter that's relevant here is entitled "The Cost of Social Norms". In a nutshell, Ariely divides human interactions into those governed by "social norms" and those governed by "market norms": in the former, people do "favors" for one another, perhaps in the hope of receiving future favors in return, but not immediately, not necessarily, and not measured precisely, while in the latter, people expect to "get what they pay for," now, no more and no less.
Example 1: a bunch of people (presumably students in Psych 101, the main source of lab-rats for such experiments) were asked to perform a simple task for five minutes, dragging as many shapes as possible from one part of a computer screen to another. A third of them were paid $5 to participate; another third were paid $.50 to participate; and the remaining third were paid nothing, and asked to do it as a favor. The $5 group, on average, dragged 159 shapes in five minutes; the $.50 group dragged 101 shapes; and the "favor" group dragged 168 shapes. Conclusion: when money was involved, participants worked more or less depending on how much they were paid, but when no money was involved, they switched into a qualitatively different mode of motivation. 0 > 5 > .5
Example 2: The AARP asked lawyers to offer discounted legal services to needy retirees, and almost none of the lawyers agreed. Then the AARP asked the same lawyers to offer pro bono (completely free) services to the same retirees, and most of them agreed. Conclusion: as before, plus the factor that "discounting" legal services might be seen as impugning the lawyers' professionalism, while pro bono work is a part of their professional code and duty.
Example 3: A group of martial-arts students were studying with a famous Japanese sensei, who was not charging them for the instruction. At length the students felt that this was unfair and suggested that they pay the sensei for his time and effort; he replied that they wouldn't be able to afford him.
Example 4: Open-source and free software. See examples 2 and 3.
Example 5: a variation on the experiment of Example 1. This time participants were offered either nothing, a 50-cent Snickers bar, or a 5-dollar box of Godiva chocolates for their participation; there was no significant difference in performance among the three groups. But when participants were offered the same gifts and told how much each gift cost, the results were the same as in Example 1: the mention of prices had effectively converted the gifts into money, putting the participants back into "market norms" mode.
Example 6: A bunch of human lab-rats were given a "sentence-unscrambling" task, followed by a difficult geometrical task, for which they were told that they could ask the experimenter for help. Half of the participants were given sentences based on neutral words, and the other half sentences based on money-related words, the intent being to put them in a "market norms" state of mind. The former group asked for help after about 3 minutes, while the latter group stuck it out for 5.5 minutes before asking for help. The former group were also more likely than the latter to help others (helping an experimenter enter data, helping another participant who seemed confused, or helping a stranger who spilled a box of pencils). The former group also chose to sit closer to one another than the latter group. Conclusions: prompting people with thoughts of money made them act more individualistically and less socially.
Example 7: A day-care center had a moderate problem with parents arriving late to pick up their kids. When the center imposed an explicit fine on such parents, the lateness problem increased. Furthermore, when the fines were subsequently discontinued, the problem did not return to its previous level, but rather increased slightly. Conclusion: imposing the fine switched the parents from "social" mode to "payment for services" mode, and they were willing to pay the cost for the service; when the fine was removed, they didn't return to "social" mode but rather acted as though the cost for the service had decreased. And in general, when a "social norm" and a "market norm" collide, the latter tends to drive out the former more-or-less permanently.
In summary, "money is often the most expensive way to pay for something."
Now, how does this apply to David's gift-giving puzzle? He observes the fact that people are more likely to give things than money, even though the money would give the recipient the option of buying the exact same thing or something (s)he would like even better; and also the fact that gifts tend to be very small relative to the assets of the donor or the recipient. Both of these are difficult to explain under Becker altruism theory (which counts the recipient's utility as a benefit to the donor); David suggests the alternate hypothesis that what's actually counting as a benefit to the donor is the recipient's short-term happiness, which more heavily discounts the future than a full-fledged utility function would.
Several people responding to David's post said basically "That's too complicated; it's not about the recipient's short-term or long-term utility at all, but simply about building and maintaining social ties," essentially what Ariely says in a more precise way. Ariely's chapter easily explains both halves of David's puzzle: first, giving -- or even mentioning -- money would convert the social relationship into a business relationship, which might be undesirable for a number of reasons; and second, if an inexpensive gift is (within reason) just as effective in maintaining social ties as an expensive one (see Example 5 above), the inexpensive gift is obviously more efficient for the donor.
Now, what about the SCA's "pay-to-play" issue (which caused a firestorm of protest when proposed fifteen years ago; the Board of Directors backed off and instead instituted a "non-member surcharge" tacked onto the monetary fees participants were already paying to get into specific events)? The SCA depends on volunteer labor. Literally millions of person-hours, some highly skilled, of volunteer labor. Volunteers teach classes, organize and attend educational demos, organize events, make decorations for event sites, calligraph and illustrate award scrolls, cook and serve feasts for hundreds of people, make jewelry, clothing, furniture, and comestibles as gifts, move chairs and tables, sweep floors, put on musical and dramatic performances, build and maintain Web sites, carry heavy objects, staff first-aid stations, etc. For some of these tasks, people expect to be reimbursed for their out-of-pocket expenses (e.g. feast ingredients, fabric for clothing), but in general people charge nothing for their time, expertise, and labor. Why? Because it's a society, in which it would be considered tacky to worry about precisely how much you put in or to expect exactly the same amount in return. In practice, people are rewarded explicitly for all this by awards and titles, and implicitly by "word-fame" and personal reputation.
Every time money is brought to people's attention, Ariely would predict, they move away from social norms and towards market norms. If I'm paying money for the Society, I'm a customer and I expect customer service as I would from a business; I don't think the SCA, Inc. can remotely afford to provide this level of customer service. If I'm providing payment for services rendered, I will put into the Society exactly as much as I want and expect to get out of it -- which is probably a lot less than I'm currently putting in. If tens of thousands of people all reason this way, the result will be a dramatic loss of available volunteer labor, and the Society will be a far poorer place for it.
no subject
If Arielly is right, then there's a Heisenbergian phenomenon going on: the very act of measuring something in monetary terms changes its value -- indeed, changes what you mean by "value". Perhaps everything can be measured in terms of everything else, but what you choose to measure it against, in what chronological order, affects the answer.