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HANDBOOK ON THE ECONOMICS OF RECIPROCITY AND SOCIAL ENTERPRISE

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Handbook on the Economics of Reciprocity and Social Enterprise

Edited by

Luigino Bruni Professor of Economics, Lumsa University, Rome, Italy

Stefano Zamagni Professor of Economics, University of Bologna and Johns Hopkins University, Bologna Center, Italy

With editorial assistance from Dr Antonella Ferrucci

Edward Elgar Cheltenham, UK • Northampton, MA, USA

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Š Luigino Bruni and Stefano Zamagni 2013 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical or photocopying, recording, or otherwise without the prior permission of the publisher. Published by Edward Elgar Publishing Limited The Lypiatts 15 Lansdown Road Cheltenham Glos GL50 2JA UK Edward Elgar Publishing, Inc. William Pratt House 9 Dewey Court Northampton Massachusetts 01060 USA

A catalogue record for this book is available from the British Library Library of Congress Control Number: 2012952651 This book is available electronically in the ElgarOnline.com Economics Subject Collection, E-ISBN 978 1 84980 474 5

ISBN 978 1 84980 463 9 (cased) Typeset by Servis Filmsetting Ltd, Stockport, Cheshire Printed by MPG PRINTGROUP, UK

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Contents

List of figures List of tables List of contributors Acknowledgments

viii ix x xvii

Introduction Luigino Bruni and Stefano Zamagni 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15.

1

Altruism Luca Zarri Altruistic reciprocity Herbert Gintis Anti-utilitarianism and the gift-paradigm Alain CaillÊ Business ethics Russell G. Pearce and Brendan M. Wilson Capitalism Nicolò Bellanca Catholic social teaching Helen Alford Catholic social thought Albino Barrera Cooperative enterprise Derek C. Jones and Panu Kalmi Cooperative entrepreneurship Stefano Zamagni Do dictator games measure altruism? Daniel John Zizzo Economy of communion Lorna Gold Egotism: making sense of social preferences Elias L. Khalil Ethical finance: an introduction Leonardo Becchetti Fair trade Leonardo Becchetti Fraternity Adrian Pabst

9 20 44 49 59 69 77 85 94 108 112 121 134 144 153

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vi 16.

17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. 37.

Handbook on the economics of reciprocity and social enterprise From arts patronage to cultural philanthropy: collaborating with granting foundations Elisa Bortoluzzi Dubach and Pier Luigi Sacco Gifts and gratuitousness Serge-Christophe Kolm Humanistic management Cristian R. Loza Adaui and André Habisch Identity John B. Davis Law and religion Amelia J. Uelmen Liberalism Adrian Pabst Microfinance Antonio Andreoni Mutualism Vera Negri Zamagni Pecuniary externalities and fairness Albino Barrera Philanthropy beyond the sectoral approach Ricardo Abramovay Poverty Andrea Brandolini Prizes and awards Bruno S. Frey and Susanne Neckermann Rationality Shaun P. Hargreaves Heap Regard Avner Offer Relational goods Benedetto Gui Social and civil capital Paolo Vanin Social enterprise Carlo Borzaga Social preferences Samuel Bowles and Herbert Gintis Spiritual capital André Habisch Spiritual humanism and corporate economics Luk Bouckaert Subsidiarity and new welfare Pier Luigi Porta The common good Antonio Argandoña

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163 179 191 201 208 217 227 238 244 251 261 271 277 285 295 306 318 327 336 344 354 362

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Contents 38. 39. 40. 41. 42. 43.

The economics of corporate social responsibility Lorenzo Sacconi Third sector Jacques Defourny Trust Vittorio Pelligra Values based organizations Alessandra Smerilli Virtue ethics and economics Jean Mercier Ythier Voluntary organizations Dennis R. Young, Lewis Faulk and Jasmine McGinnis

Index

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vii 372 400 411 421 430 441

453

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Figures

2.1 2.2 2.3 2.4 2.5 2.6 14.1 16.1 33.1 33.2 38.1 38.2 39.1 40.1 40.2 43.1

The double auction The cost-of-effort schedule Relation of contracted and delivered effort to worker wage (141subjects) Average contributions over time in the partner, stranger, and perfect stranger treatments when the punishment condition is played first Countries judged highly democratic Antisocial punishment leads to low payoffs The social and environmentally responsible (SER) product differentiation and the asymmetric costs of SER distance Use of social media/Web 2.0 services by foundation leaders A prisoner’s dilemma: single-period payoff to help (H) and don’t help (D) Public goods game with punishment, average contributions over time The repeated game equilibrium set XAE The Binmore-Rawls egalitarian social contract The third sector in the welfare triangle The basic trust game The generic trust game Classification of economic goods

23 27 28 32 39 40 151 168 328 330 388 391 407 413 414 445

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Tables

12.1 28.1 28.2 28.3 31.1 40.1

Taxonomy of action Prisoner’s dilemma Assurance game Prisoners’ dilemma with team reasoning An introductory taxonomy of social capital Fiduciary interactions: a taxonomy

129 278 279 281 307 414

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Contributors

Ricardo Abramovay is Professor of Economic Sociology at the Department of Economics and the Institute of International Relations of the University of São Paulo, Brazil. His major research area includes sustainable development and social participation in the transition towards a low carbon economy. Helen Alford is Dean of the Faculty of Social Sciences at the Pontifical University of St Thomas (Angelicum) in Rome. Her research interests focus on business and economic ethics, corporate social responsibility and Christian social thought. Antonio Andreoni is Assistant Professor in Ethical Banking and Microcredit at the University of Bologna, Doctoral Researcher at University of Cambridge and International Consultant for the United Nations Industrial Development Organization, Vienna and co-founder of micro.Bo and Make a Change. His research focuses on development and institutional economics, structural change and production economics, manufacturing development and industrial policies, microfinance and cooperatives. Antonio Argandoña is Professor of Economics and holder of the ‘la Caixa’ Chair of Corporate Social Responsibility and Corporate Governance at IESE Business School, University of Navarra. He is a member of the Royal Academy of Economics and Finance of Spain and has been a member of the Executive Committee of the European Business Ethics Network (EBEN), and Secretary General of EBEN-Spain. His main fields of interests are macroeconomics and monetary economics, business ethics, corporate social responsibility and corporate governance. Albino Barrera is Professor of Economics and Theology at Providence College, Rhode Island (USA). He has published in the areas of economic ethics, globalization, and theological ethics. His books include Market Complicity and Christian Ethics (Cambridge University Press, 2011), Globalization and Economic Ethics (Palgrave MacMillan, 2007), Economic Compulsion and Christian Ethics (Cambridge University Press, 2005), and God and the Evil of Scarcity (Notre Dame, 2005). Leonardo Becchetti is Professor of Economics at the University of Rome Tor Vergata. President of the Ethical Committee of Banca Popolare Etica, Director of www.benecomune.net. He is the author of around 345 published works and his main research interests are ethics and economics, sustainable development and subjective well-being. Nicolò Bellanca is Associate Professor of Economics at the University of Florence and a member of the lab ARCO (Action Research for Co-Development). His recent research has focused on the logic of collective action, comparative institutional analysis, capability approach, relationship between economic development and post-representative democracy. Dr Elisa Bortoluzzi Dubach is a consultant in the fields of communication, foundations and sponsoring. She has broad experience as a leader of cultural and social sponsoring x

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projects, has contributed to the creation of large grantmaking foundations and is an advisor to CEOs and Presidents of the Board of international companies. She is also a lecturer in sponsoring and foundations at several European universities and institutions. Carlo Borzaga is Professor of Economic Policy at the University of Trento. He is President of the European Research Institute on Cooperative and Social Enterprises (Euricse). His scientific interests are labour economics, the economic analysis of cooperatives, social enterprises and non-profit organizations and the evolution of this sector in Europe. He is also concerned with welfare systems and the provision of social and health-care services. Luk Bouckaert is emeritus Professor of ethics at the Catholic University of Leuven (Belgium). He started the interdisciplinary Centre for Economics and Ethics at Leuven (1987) and is founder-president of the European SPES Forum (2004). His most recent publication is The Palgrave Handbook of Spirituality and Business (co-edited with L. Zsolnai (2011)). Samuel Bowles is Research Professor at the Santa Fe Institute where he heads the Behavioral Sciences Program. He is also Professor of Economics at the University of Siena. His recent studies on cultural and genetic evolution have challenged the conventional economic assumption that people are motivated entirely by self-interest. His recent books include Poverty Traps (Princeton 2006), Globalization and Egalitarian Redistribution (Princeton, 2006), A Cooperative Species: Human reciprocity and its evolution, co-authored with Herbert Gintis (2011), Machiavelli’s Mistake: Why good laws are no substitute for good citizens, (Yale University Press, forthcoming 2013). Andrea Brandolini is director of the Department for Structural Economic Analysis at the Bank of Italy. He is associate editor of the Journal of Economic Inequality and chaired the International Association for Research in Income and Wealth from 2008 to 2010. His research interests include income and wealth distribution, poverty, measurement of economic well-being. Luigino Bruni is Professor of Economics at the Lumsa University in Rome, and at the Sophia University of Loppiano (Florence). During the last 15 years his research has covered many areas ranging from microeconomics, ethics and economics, history of economic thought, methodology of economics, sociality and happiness in economics. He has also demonstrated great interest on the civil economy and economic-related categories, such as reciprocity and gratuitousness. His current research focuses on the role of intrinsic motivation in economic and civil life. Alain Caillé, formerly trained as an economist is emeritus Professor of Sociology at the University Paris Ouest Nanterre La Défense. He is the director of La Revue du MAUSS (Mouvement anti-utilitariste en science sociale, Anti-Utilitarian Movement in Social Science), an international and interdisciplinary review in sociology, anthropology, economics and political philosophy. His main interest is in general social theory, especially in the wake of Marcel Mauss’ Essay on the Gift and Karl Polanyi. John B. Davis, Professor of Economics, Marquette University, and Professor of Economics, University of Amsterdam, is author of Keynes’s Philosophical Development

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(Cambridge University Press, 1994), The Theory of the Individual in Economics (Routledge, 2003), Individuals and Identity in Economics (Cambridge University Press, 2011), and co-author with Marcel Boumans of Economic Methodology: Understanding Economics as a Science (Palgrave, 2011). He is co-editor with Wade Hands of the Journal of Economic Methodology. Jacques Defourny is Professor of Economics at the University of Liege (Belgium) where he is also a director of the Centre for Social Economy. From 1996 to 2010, he acted as the founding coordinator and then the president of the EMES European Research Network which gathers 12 university research centres working on the third sector and the emergence of social enterprise. His work currently focuses on comparisons of social enterprise models across the world and on conceptual and quantitative analysis of the third sector in developed as well as developing countries. Lewis Faulk is an Assistant Professor in the Department of Public Administration and Policy in the School of Public Affairs at American University. His research focuses on non-profit competition, organizational capacity, resource development, and performance. Bruno S. Frey is Professor at the University of Zurich, Distinguished Professor of Behavioural Science at the Warwick Business School, University of Warwick, UK, and holds honorary doctorates at the University of Gothenburg and four other universities. He has published extensively on public choice and non-market economics including happiness and economics, motivation and knowledge transfer, and arts and economics. Dr Lorna Gold is Policy and Advocacy Manager for Trócaire, the Irish Catholic International Development Agency. She writes extensively on ethics and public policy, with special focus on international cooperation. She has published two books and numerous articles on the Economy of Communion and is a former member of the international commission for an Economy of Communion. Herbert Gintis is External Professor at the Santa Fe Institute (Santa Fe, NM) and Professor of Economics, Central European University (Budapest, Hungary). His recent books include, A Cooperative Species: Human Reciprocity and Evolution co-authored with Samuel Bowles (Princeton: Princeton University Press, 2011), The Bounds of Reason: Game Theory and the Unification of the Behavioral Sciences (Princeton: Princeton University Press, 2009); Game Theory Evolving (Princeton: Princeton University Press, 2009). His recent work on market dynamics includes ‘The Emergence of a Price System from Decentralized Bilateral Exchange’, Contributions to Theoretical Economics 6(1), p. 13 (2006); ‘The Dynamics of General Equilibrium’, Economic Journal 117, pp. 1289– 1309 (2007). Benedetto Gui is Professor of Economics at the University of Padova (Italy). His research interests include: the economic behaviour of cooperative, non-profit, and social enterprises; the economic implications of interpersonal relations; and the role of noninstrumental motivations in economic organisations. He is a member of the management board of Annals of Public and Cooperative Economics.

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Contributors xiii André Habisch is a trained economist and Catholic theologian and teaches Business Ethics, Social Entrepreneurship and Catholic Social Thought at the Faculty of Business and Economics in the Catholic University of Eichstätt-Ingolstadt. As Associate Research Director of EABIS – The Academy of Business in Society (Brussels) – he coordinates the interreligious Project‚ ‘Practical Wisdom in Management from the World Spiritual Traditions’; moreover, he advises the Federation of Catholic Entrepreneurs in Germany. Shaun P. Hargreaves Heap is Professor of Economics at the University of East Anglia. His recent research has been on the social influences on individual decision making, using experiments, and on media pluralism. He has written previously on hysteresis and wage in equality in macroeconomics, on rational choice in a social and historical context and on the method of experimental economics. Derek C. Jones is Morris Professor of Economics at Hamilton College, Clinton, New York; Research Director at the Mondragon Co-operative Academic Community; and Faculty Fellow and Mentor, Rutgers University. His research interests include employee ownership and cooperatives, personnel economics and economics of transition. Panu Kalmi is Professor of Economics at the University of Vaasa, Finland. His research interests include financial institutions, personnel economics and cooperatives. Elias L. Khalil specializes in behavioural and evolutionary economics. He focuses on rational choice theory with regard to four areas: i) creativity and entrepreneurship; ii) evolutionary change of institutions and technology; iii) emotions and ethical judgments; iv) behaviour of organisms. His articles have appeared in Economic Inquiry, Behavioral and Brain Sciences, Southern Economic Journal, History of Political Economy, and Economics and Philosophy. Serge-Christophe Kolm is professor and director at the Ecole des Hautes Etudes en Sciences Sociales, Paris. His main fields of research include normative economics and social ethics (e.g., the comparison and measure of inequalities, 1966; Justice and Equity, 1971; Modern Theories of Justice, 1996; Macrojustice, 2004); public economics (e.g., The State and the Price System, 1970; The Theory of Value Constraints, 1970; Optimal Public Prices, 1968; Mass Services, 1970); giving, altruism and reciprocity (e.g., General Reciprocity, 1984; Reciprocity, 2008); and Oriental philosophy and psychology (e.g., Happiness-Freedom, 1982). Cristian R. Loza Adaui is a Doctoral Researcher at the Ingolstadt School of Management of the Catholic University of Eichstätt-Ingolstadt, a research fellow and project manager at EABIS – The Academy of Business in Society and a researcher of the Center for Corporate Citizenship e.V. (Germany). His research focuses on business ethics, corporate social responsibility, corporate citizenship and Catholic social thought and spirituality in management. Jasmine McGinnis is an Assistant Professor at The George Washington University. Her research interests include philanthropy, international grantmaking, governance and issues of wage equity in the non-profit sector. She has published articles on foundation giving and comparisons of non-profit/for profit wage differentials for Generation Y and female employees.

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Jean Mercier Ythier is Professor of Economics at Sorbonne University (Panthéon-Assas) and permanent member of the Institut d’Economie Publique. His main fields of interest include the economics of gift-giving, general equilibrium, social contract theory, public economics, and topics of economic anthropology. Dr Susanne Neckermann, Dipl.-Vw., MBA, studied economics at the University of Cologne, Germany and business administration at the Eastern Illinois University, Charleston, USA. She earned her PhD at the University of Zurich in 2009. From 2009 to 2012 she was a post-doctoral fellow at the Center for European Economic Research and the University of Mannheim. From September 2012 she has been an Assistant Professor at the Erasmus University in Rotterdam. Vera Negri Zamagni is Professor of Economic History at the University of Bologna. Adjunct professor of European Economic History at the Bologna Centre of the Johns Hopkins University. Publications include more than 80 essays, 10 volumes and 14 edited volumes. They cover the economic history of Italy from 1860 to the present in the context of European and world economic history of the last two centuries, with special reference to the reconstruction of national income estimates, regional disequilibria, income distribution and wages, state intervention, business history, evolution of the cooperative movement, and European integration. Avner Offer is Chichele Professor of Economic History and a Fellow of All Souls College at the University of Oxford, emeritus. He has worked on land tenure, the economics of war, consumption and well-being, and obesity. He is currently investigating the Nobel Prize in Economics as part of a study of the transition from social democracy to market liberalism. Adrian Pabst is Lecturer in Politics at the University of Kent, Canterbury, and Visiting Professor at the Institut d’Etudes Politiques de Lille (Sciences Po). His research focuses on political thought, political economy and religion. Currently he is writing (together with John Milbank) The Politics of Virtue. He is also a Trustee of The ResPublica Trust, London, where he works on alternative political economies. Russell G. Pearce is the Edward & Marilyn Bellet Professor of Legal Ethics, Morality & Religion at Fordham University School of Law. His current research explores the implications of relational ethics for legal, economic, and political culture. Vittorio Pelligra is Assistant Professor of Economics at the University of Cagliari (Italy), research fellow of CRENoS and invited professor at the International University Institute ‘Sophia’ (Loppiano-Florence). His researches, both theoretical and experimental, deal with the individual, strategic and institutional consequences of non-self-interested behaviour. He has written extensively on trust, reciprocity, empathy and social emotions. Pier Luigi Porta is Professor of Economics at the University of Milano-Bicocca. He is a Life Member of the Istituto Lombardo (Accademia di Scienze e Lettere) and a Visiting Fellow of Wolfson College at the University of Cambridge. He is the Editor-in-Chief of the International Review of Economics (IREC), published by Springer Verlag. His main fields of research are classical political economy, welfare economics, and civil economy.

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Pier Luigi Sacco is a Professor of Cultural Economics at IULM University, Milan, where he serves as Dean of the Faculty of Arts, Markets, and Heritage. He also teaches Creative Industries at the University of Italian Switzerland (USI), Lugano. He is the author of more than 150 papers on the topics of economic theory, game theory, cultural economics, cultural and creative industries, and cultural policy design at the urban, regional and national level. Lorenzo Sacconi is Professor of Economics and Unicredit Chair in Economic Ethics and Corporate Social Responsibility at the University of Trento (Italy). He is also the scientific director of EconomEtica, the inter-university center of research for economic ethics and CSR at the University Milano Bicocca. His research areas focus on ethics and economics, institutional economics, behavioural and experimental game theory, theory of the firm and incomplete contracts, corporate governance and business ethics. Alessandra Smerilli is Associate Professor of Economics at PFSE-Auxilium of Rome. Among her publications: ‘We-thinking and vacillation between frames: filling a gap in Bacharach’s theory’, Theory and Decision, Springer, 73(4), pp. 539–560; with Bruni Luigino: ‘The value of vocation. The crucial role of intrinsically motivated people in values-based organizations’, Review of Social Economy, 67, pp. 272–281. She is interested in we-rationality, cooperation, evolutionary game theory. Amelia J. Uelmen is a Visiting Lecturer at Georgetown University Law Center. From 2001 to 2011 she served as the Director of the Fordham Institute on Religion, Law & Lawyer’s Work. Her current research explores the implications of relational ethics for tort law, legal ethics, legal education, and debates about religion in the public square. Paolo Vanin is Assistant Professor of Economics at the University of Bologna. His research interests include the implications of social capital and social interaction for growth, time allocation and crime. He has also worked on the economics of moral values, international trade and asymmetric information. Brendan M. Wilson is an attorney at the law firm of Caplin & Drysdale Chartered in Washington, D.C. He specializes in representing tax-exempt organizations and hybrid enterprises that use business to address social and environmental problems. Dennis R. Young is Bernard B. and Eugenia A. Ramsey Professor of Private Enterprise and Director of the Nonprofit Studies Program at Georgia State University. He is editor of the journal Nonprofit Policy Forum. His research interests focus on finance, management and governance of non-profit organizations and social enterprise. Stefano Zamagni is Professor of Economics at the University of Bologna and Adjunct professor of International Economics at Johns Hopkins University, Bologna Center. He is the author of several books, including Microeconomic Theory (Oxford: Blackwell, 1987); The Economics of Common Good (Rome; Citta’ Nuova, 2010); Avarice (Bologna: Il Mulino, 2009). He co-authored History of Economic Thought (Oxford: Oxford University Press, 2005) with E.Screpanti; Relational Complexity and Economic Behaviour (Bologna, Il Mulino, 2006) with P. Sacco; Civil Economy (Oxford: Peter Lang, 2007) with L. Bruni; Dictionary of Civil Economy (Rome: Citta’ Nuova, 2009) with L. Bruni;

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Cooperative Enterprise (Cheltenham: Edward Elgar 2010) with V. Zamagni; Family and Work (Milan: San Paolo, 2012 (ed.). Luca Zarri is Associate Professor at the Economics Department of the University of Verona. He held the position of visiting scholar at Carnegie Mellon University in 2008 and 2010. His current research interests include behavioural economics and experimental economics, with a special focus on social preferences, social norms and their interplays with incentives and institutions. Daniel John Zizzo is Professor of Economics, Head of the School of Economics and Associate Dean (Research) in the Faculty of Social Sciences at the University of East Anglia. He is a member of the Centre for Behavioural and Experimental Social Science (CBESS) and Coordinating Editor of Theory and Decision. His primary research areas are experimental and behavioural economics.

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Acknowledgments

This handbook is a collective action, fruit of hundreds of relationships. Therefore it is impossible to acknowledge all our intellectual debts, and express all our gratitude to the many who have contributed indirectly to this joint work. Of course, our first thanks go to the 47 authors of the entries of the handbook, who have written their chapters with a genuine academic spirit of gratuitousness. We also want to thank the various protagonists of the many areas of civil and social economy which have inspired most of the pages of this volume. Last but not least, a sincere and deep thank you to Dr Antonella Ferrucci, the editorial assistant: without her committed and hard work this Handbook would have not be possible.

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HANDBOOK ON THE ECONOMICS OF RECIPROCITY AND SOCIAL ENTERPRISE  

Ricardo Abramovay: Philanthropy beyond the sectoral approach

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