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The role of moral sentiment in economic decision making

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The role of moral sentiment in economic decision making Tadeusz Tyszka Centre for Economic Psychology and Decision Making Kozminski University conclusions There is a ... – PowerPoint PPT presentation

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Title: The role of moral sentiment in economic decision making


1
The role of moral sentiment in economic decision
making
  • Tadeusz Tyszka
  • Centre for Economic Psychology and Decision
    Making
  • Kozminski University

2
  • How selfish soever man may be supposed, there
    are evidently some principles in his nature,
    which interest him in the fortune of others, and
    render their happiness necessary to him, though
    he drives nothing from it except the pleasure of
    seeing it.
  • Smith, A. (1759/2006)The Theory of Moral
    Sentiments.

3
  • Some economic decisions are associated not only
    with financial outcomes (gains/losses) but
    also with moral outcomes (negative/positive)

4
Haidt and Joseph (2004) - five psychological
systems
  • harm/care,
  • fairness/reciprocity,
  • ingroup/loyalty,
  • authority/respect,
  • purity/sanctity.

5
  • In our research we focused on three of these
    systems
  • (1) harm,
  • (2) fairness,
  • (3) trust

6
harm
  • How do people resolve conflicts between moral
    sentiments (guilt, disgust, contempt, etc.) and
    economic self-interest?

7
  • Recently, controllers advised an owner of a
    factory to introduce safety changes because the
    present technical state can be dangerous for
    workers. However, the owner has some financial
    problems. He considers two options (1) to
    introduce the changes immediately or (2) to
    postpone the introduction of changes.

8
two questions concerning moral judgments.
  • Q1. What is the role of moral emotions in
    intuitive moral judgments?
  • Are such judgments the products of the affective
    or of the rational faculties of thought?

9
  • Haidt (2001) people are often unable to
    articulate a rational basis for strongly held
    moral convictions

10
  • neuroimaging and neuropsychological studies
    making moral judgments is accompanied by
    increased activity of emotional structures.

11
  • behavioral studies using affective manipulations
    (e.g. introducing disgust) may modify moral
    judgments

12
  • Q2. How do people arrive at moral judgments? Are
    they consequentialists or deontologists

13
trolley problem
  • an individual sees an out-of-control trolley
    approaching five people who are walking along the
    track. The main track has a side track on which a
    single person is working.
  • The individual must decide whether to divert the
    trolley to the side track, killing one person but
    saving five.

14
Consequentialists
  • What is morally right or wrong depends upon
    (expected) consequences of the act.

15
Deontologists
  • Consequences do not matter, some acts are simply
    intrinsically wrong, and can not be justified by
    the goodness of their consequences.

16
Are people deontologists or consequentialists ?
  • Research shows a strong relationship between
    emotions and moral judgments.

17
footbridge problem
  • Situation is quite similar to trolley case,
    except that the only way to save the five people
    is to push a large stranger off the footbridge
    in front of the oncoming train, witch will stop
    but will kill the stranger.
  • The individual must decide whether to push the
    stranger, killing one person but saving five.

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conclusions
  • There is a close relationship between emotions
    and moral judgments.
  • In situations where an act does not elicit strong
    negative emotions respondent behave as
    utilitarian, i.e. he/she compares consequences of
    alternatives and chooses this one which maximizes
    utility. On the other hand, when an act elicits a
    strong negative emotions an automatic emotional
    response is evoked and the individual behave as
    deontologist.

20
fairness
  • Preferences concerning the principles
  • of distributive justice
  • both declared in (1) abstract settings and (2)
    inferred from actual choices with financial
    consequences.

21
  • In moral context we often see discrepancy between
    what one declares and what one does.

22
  • The principles of distributive justice

1. Maximization of the minimal income in the
population (Rawls) 2. Maximization of the
average income in the population (Harsanyi) 3.
Minimization of the range of distribution
(egalitarian position).
23
Preferences towards principles of justice
  • The principle of
  • Maximizing the minimal income
  • Maximizing the average income
  • Minimizing the income range

distribution I distribution II distribution III
Minimum income PLN 20 000 16 000 18 000
Average income PLN 59 600 63 200 58 300
Income range PLN 102 000 128 000 96 000
24
Preferences towards principles of justice
  • 3 task groups
  • 1. pure ranking group
  • direct ranking (after the justice consideration)
    from the most just to the least just
  • pure choice group
  • choice of a distribution which is wanted to be
    executed - four sets (financial consequences),
  • 3. choice with justice consideration group
  • (after consideration of the three principles of
    justice), choice of a principle which is the most
    just - four sets (financial consequences).

25
RESULTS
Type of tasks
 1. Direct vs. implied by choice rankings of the
principles of justice
26
RESULTS
Type of tasks
2. Preferences with and without justice
considerations
no difference in direct rankings in two groups
pure choice group and pure ranking group
27
CONCLUSIONS
  • Preferences for the principles of justice differ
    depending on task in direct ranking (merely
    expressing an opinion) the highest average rank
    received principle of Minimizing the Income
    Range, while this principle was the least popular
    in choice situations (with financial
    consequences).
  • Justice consideration can influence preference
    for principles of justice in choice situations
    with financial consequences.

28
trust
  • humans value trusting and cooperating with
    members of ones in-group.
  • a betrayal of trust produces a great deal of
    outrage.

29
declared vs. actual trust
  • asking people in a survey whether most people
    can be trusted?
  • do people behave as if they trusted others?

30
  • When you ask people in a survey whether most
    people can be trusted a high percentage of
    respondents answers no
  • Thus, we can conclude that people distrust others

31
Trust game
  • You receive from the experimenter 10 and are
    asked whether you keep it, or give it to an
    anonymous person
  • If you give money to the anonymous person, this
    sum is tripled he/she receives 3 x your
    money
  • Then, the anonymous person decides about the
    amount of money (from his tripled amount) to be
    returned to you.

32
Findings by Fetchenhauer and Dunning (2008)
  • found that that 64 of subjects send 10 to an
    anonymous individual.
  • Thus, contrary to what people say when asked
    whether people can be trusted, in a trust game
    being a prototype of an economic interaction
    they behave as if they trusted others

33
  • Subjects were also asked to estimate the
    percentage of participants of the game who would
    keep all the money for themselves vs. giving half
    of this to the sender.
  • Moreover, half of the participants were assigned
    to a group of receivers and they made decisions
    to split money equally and to give back half of
    them to the sender or keep all the money for
    himself.
  • Here are the results
  • predicted trustworthiness 45
  • actual trustworthiness 79

34
Compare
  • actual rate of trust 64
  • predicted trustworthiness 45
  • actual trustworthiness 79

35
  • When comparing (1) and (3), i.e. given objective
    reality, one can claim that experimental subjects
    trusted too little
  • On the other hand, when comparing (1) and (2),
    i.e. given predicted trustworthiness, one can
    claim that experimental subjects trusted too
    much

36
Conclusions
  • Objectively subjects were irrational they could
    earn more if they send 10 to an anonymous
    individual.
  • Subjectively subjects were also irrational
    given their beliefs, they risk too much!

37
Macko, Malawski Tyszka (in preparation)
  • conducted two experiments one with a group of
    potential entrepreneurs (candidates for starting
    up their own business), another one with
    prisoners. Two modifications to the trust game
    were introduced

38
  • an individual could send (1) no money to the
    receiver, or (2) to send the half of their money,
    or (3) to send whole amount of their money.

39
  • the receiver was introduced either as (1)
    prisoner, (2) bus driver (meaning ordinary
    people), (3) monk (meaning perhaps trustworthy
    person).

40
Results Potential Entrepreneurs
  • Ca. 90 participants sent money to the
    receivers. However, only 37 decided to send
    whole amount of their money, 43 decided to send
    the half of their money
  • The type of receiver - prisoner, bus driver or
    monk had significant effect on predicted
    trustworthiness
  • prisoners 45
  • bus drivers 38
  • monks 58.
  • However had no effect on the actual rate of trust
    (the amount of money send to receiver).

41
Interpretation
  • In the trust game (Intelligent) people, such as
    Potential Entrepreneurs, were not maximizing the
    profit!
  • Sending half of the endowment is certainly
    irrational If it is rational/ irrational to send
    half of the money, it is equally rational/
    irrational to send the whole amount.
  • Predicted trustworthiness had no effect on actual
    trust!

42
Alternative explanation
  • Even at the expense of the financial loss
    participants tended to preserve their moral
    self-image.
  • Interestingly, participants in their predictions
    were not able to imagine that receivers would
    also follow moral norm, that of reciprocity.

43
Conclusions
  • Large discrepancy between people's stated and
    actual trust in others can be observed people
    say they distrust others, while in their economic
    interactions with others, such as trust game,
    they behave as if they trusted others.
  • In the trust game people do not maximize the
    profit.
  • Both senders and receivers follow certain norms
    (1) senders follow reciprocity norm (2)
    receivers even at the expense of the financial
    loss, tend to preserve their moral self-image.

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