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Rules, Feelings, and Economic Behavior

Tore Ellingsen

Stockholm School of Economics

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Tipping

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Assuming the worst?

To what extent is it wise, when designing the institutions of a society or the internal governance structure of a business firm, to assume the worst about the rulers, the citizens, or the workers?

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Thomas Hobbes (1588-1679)

Desire of praise disposeth to laudable action, such as pleaseth those whose judgment they value.

Leviathan (1651)

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David Hume (1711-1776)

Tho fame in general be agreeable, yet we receive a much greater satisfaction from the approbation of those, whom we ourselves esteem and approve of, than those, whom we hate and despise.

Treatise of Human Nature, 1739

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Adam Smith (1723-1790)Nature, when she formed man for society, endowed him with an original desire to please, and an original aversion to offend his brethren. She taught him to feel pleasure in their favourable, and pain in their unfavourable regard. She rendered their approbation most flattering and most agreeable to him for its own sake; and their disapprobation most mortifying and most offensive.

Theory of Moral Sentiments, 1759

                                                            

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Game Theorists John Nash and Robert Aumann

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Gary Becker: Altruism

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Adam Smith: Not Altruism

Every man […] is much more deeply interested in whatever immediately concerns himself, than in what concerns any other man: and to hear, perhaps of the death of another person, with whom we have no particular connexion, will give us less concern, will spoil our stomach, or break our rest much less than a very insignificant disaster which has befallen ourselves.

Theory of Moral Sentiments, 1759

                                                            

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Dictator Experiments

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Exit prices

• Broberg, Ellingsen and Johannesson (2007) • 119 subjects. Sharing SEK 100.

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Guilt aversion?

• Ellingsen et al (2009)• 84 pairs.• Relationship between

the recipient’s belief and the dictator’s donation.

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Charles Darwin (1809-1882)

At how early a period the progenitors of man in the course of their development, became capable of feeling and being impelled by, the praise or blame of their fellow-creatures, we cannot of course say. But it appears that even dogs appreciate encouragement, praise, and blame.

Descent of Man, 1871

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Richard Titmuss (1907-1973)

Does monetary incentives crow-out public spirit?

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Elinor Ostrom

…[setting] payoff structures for rational egoists may have been misdirected—and perhaps even crowded out the formation of social norms…Journal of Economic Perspectives, 2000

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What Do You Think?

To what extent is it wise, when designing the institutions of a society or the internal governance structure of a business firm, to assume the worst about the rulers, the citizens, or the workers?