Publications
Publications
- 2014
- Annual Review of Economics
Models of Caring, or Acting as if One Cared, About the Welfare of Others
By: Julio J. Rotemberg
Abstract
This paper surveys the theoretical literature in which people are modeled as taking other people's payoffs into account either because this affects their utility directly or because they wish to impress others with their social-mindedness. Key experimental results that bear on the relevance of these theories are discussed as well. Five types of models are considered. In the first, the utility of people is increasing in the payoffs of another. The more standard version of these preferences supposes that only consumption leads to payoffs and has trouble explaining pro-social actions such as voting and charitable contributions by poor individuals. If one lets other variables determine happiness as well, this model can explain a much wider set of observations. The second class of model that is surveyed involves people trying to demonstrate to others that they have pro-social (or altruistic) preferences. In these models, altruistic acts need not have a direct effect on utility. Third, I consider models of reciprocity where people's altruism depends on whether others act kindly or unkindly towards them. Fourth are models where inequality has a profound effect on altruism, with individuals being spiteful towards people whose resources exceed their own. Fifth and last, I discuss how specifications of altruism might have to be modified to take into account how people behave when they are able to transfer lotteries to others.
Keywords
Citation
Rotemberg, Julio J. "Models of Caring, or Acting as if One Cared, About the Welfare of Others." Annual Review of Economics 6 (2014): 129–154.