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Chapter 1
“possible to capture altruistic choices with quasi-concave utility functions for individuals – altruism is rational” (Andreoni and Miller 2002, p. 750). Andreoni and Miller (2002) understand rationality as consistency with the neoclassical principles of rational choice. At the same time, there is no insight into the nature and mechanism of giving. From this perspective, Giving according to GARP is not radically different from the “first generation” of neoclassicism-spirited studies described earlier, since the process of social preferences formation is completely neglected (which is typical of the neoclassical framework – Berg and Gigerenzer, 2010). In other words, pro-social/altruistic behaviour is assumed to be implied by the “built-in” features of the self-optimizing agents, perfectly suiting the orthodox framework. Fisman et al. (2007) propose the modified version of the Giving according to GARP experiment. The authors distinguish between preferences for giving and social preferences. The former is described as the pattern of allocating resources between self and others (ps and po, respectively) while the former denotes the pattern of allocating resources between others (pA and pB, when π o =[π A , πB ]). The independence of the preferences for giving and social preferences (so, if π o π′o for some ps, then π o π′o for all ps) is the crucial assumption (p. 1860). Fisman et al. (2007) report that well-behaved preferences characterize the majority of participants; moreover, the participants tend to exhibit so-called social welfare preferences when the utility is positively dependent on both ps and po26.
1.3. The procedure specifying public choice and its criticism Bergson (1938) defines social welfare as the function of “the amounts of each of the factors of production, other than labour, employed in different production units, the amounts of various commodities consumed, the amounts of different kinds of work done, and the production unit for which this work is performed by each individual in the community during that period of time” (p. 311). Criticizing the utility calculus approach based on value judgements, Bergson (1938) argues that four conditions are sufficient for social welfare maximization, namely: Social welfare preferences can be described using Becker’s (1981) “effectively altruistic” preferences. The remaining broad types of preferences reported by Fisman et al. (2007) include i) competitive preferences (when utility increases in the difference between payment to self and payment to others); ii) narrow selfish preferences (when utility depends solely on the payment to self); iii) difference aversion (when utility increases in payment to self, but decreases in the difference between payment to self and payment to others); and iv) lexself preferences (lexicographic preferences, consistent regarding payment to self solely).
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