Perverse Incentives: Paying People More to Make Life Ugly than To Make it Beautiful

“We allow people to make huge profits doing any number of things that will hurt the poor, but we want to crucify anyone who wants to make money helping them,” Dan Pallotta told the New York Times.

Surely we value the work of those who help the poor, and yet charity, like art, falls into the category of things that we expect people to do for love rather than money.

To put that in a Pallottian soundbite: We allow people to make huge profits by making the landscape more ugly, but we are uncomfortable with paying people to create beauty.

A team of researchers at Yale University call this the “tainted altruism effect.” They found that ”

People evaluated efforts that realized both charitable and personal benefits as worse than analogous behaviors that produced no charitable benefit. This tainted-altruism effect was observed in a variety of contexts and extended to both moral evaluations of other agents and participants’ own behavioral intentions (e.g., reported willingness to hire someone or purchase a company’s products). This effect did not seem to be driven by expectations that profits would be realized at the direct cost of charitable benefits, or the explicit use of charity as a means to an end. Rather, we found that it was related to the accessibility of different counterfactuals: When someone was charitable for self-interested reasons, people considered his or her behavior in the absence of self-interest, ultimately concluding that the person did not behave as altruistically as he or she could have. However, when someone was only selfish, people did not spontaneously consider whether the person could have been more altruistic.

In other words, the researchers confirmed what Pallotta observed anecdotally. If you make a million dollars feeding the homeless people will judge you more harshly than they judge the man or woman who made a million dollars and didn’t feed the homeless. Put another way, the guy who got rich by foreclosing on people’s homes (creating the homeless) probably seems more respectable than the guy who took a large salary for running a homeless charity.

Why are people so uncomfortable about the idea of people making lots of money helping people, caring for people or creating art? It is what I would call a prostitution anxiety. Money is a depersonalizing force, as a universal medium of exchange, it replaces the need for an ongoing relationship between people who engage in commerce.

To really understand this it helps to know a bit about the history of money.  Most people have a notion that money evolved out of barter.  The idea is that the guy who owns a cow trades the milk for some eggs for the guy who has chickens. But what if the guy with chickens is lactose intolerant? How does the cow owner obtain eggs? Money was invented to solve this dilemma. (This notion of the origin of money is used in this 1947 educational film by RCA.)

Economic anthropologist David Graeber calls this “the founding myth” of economics. In an interview posted on the blog Naked Capitalism, Graber explained:

Obviously what would really happen, and this is what anthropologists observe when neighbors do engage in something like exchange with each other, if you want your neighbor’s cow, you’d say, “wow, nice cow” and he’d say “you like it? Take it!” – and now you owe him one. Quite often people don’t even engage in exchange at all – if they were real Iroquois or other Native Americans, for example, all such things would probably be allocated by women’s councils.

So the real question is not how does barter generate some sort of medium of exchange, that then becomes money, but rather, how does that broad sense of ‘I owe you one’ turn into a precise system of measurement – that is: money as a unit of account?

I owe you one. I helped you and so we are in a relationship together. You are socially obligated to return the favor in some way at some point. Money, as the author James Buchan says, is “frozen desire.” Those who accumulate it can use it for whatever they see fit. You can go into a shop, hand over some paper or coins or electronic digits, and you can walk out with as many gallons of milk and cartons of eggs as you like and you are under no obligation to the person who owned the cow, or the chickens, or the person who leases the building, or the clerk who works behind the register. Money ends the transaction and dissolves the relationship. You can go back to the store if you like, but you are not obligated to. Likewise the store clerk has no obligation to remember your birthday or acknowledge you in any way after she leaves her place of employment. Money is a depersonalizing force.

Buchan’s book, Frozen Desire, says that in ancient times there was “a contest between the moneyless and moneyed forms of social organizations…Money is normative. So pervasive is its influence on our lives that it makes less moneyed ages incomprehensible, consigning them to barbarism or folklore. Yet history is not inevitable: antiquity did not aspire to our present condition and might have generated a quite different present.”

After the fall of the Roman Empire, Buchan says, Britain for a time shifted to a non-monetary economy.  That means that in the time of Jesus and his contemporaries, the money model was not yet set in stone. We read accounts of Jesus telling his followers to take nothing with them, not to use money, and to rely on the kindness of others. This concept, in our time, has to be much more radical than it was in his. In villages like Galilee, there was probably little use for money, except when dealing with outsiders like the colonizing Romans. Amongst themselves, locals most likely still relied on systems of trust and mutual obligation.

Buchan, in his chapter which specifically addresses Jesus says it is “as if Jesus recognizes money as a competitive authority: that in embodying happiness and reward in tangible, earthly form, money is more persuasively heaven than Heaven.”

We have come so far from these times that we can barely even conceive of getting along without the tool of money. Yet we intuitively retain some sense of what money replaces– relationship. Thus we fear allowing it into certain areas. We make it illegal in most places to pay someone for sex because we fear what would happen if sexuality were completely divorced from emotional attachment. Likewise, we get uncomfortable about people taking money in order to do compassionate work because we fear what would happen if people only acted compassionately if they were paid to do so. We believe real artists create for love and dismiss artistic projects that have commercial success as selling out because we want art to be a relationship between the artist and other souls.

Thus begins a strange and vicious cycle. It is precisely because we value the human element so much that we fear contamination of them by money. We are afraid that money will make compassion, inspiration, and care disappear. The sad consequence is that we, in effect, starve them out.

We use money to attract “the best and brightest” to banking, but those who would like to make a living in the non-profit sector or the arts must commit to a kind of vow of poverty. In turn, we discourage humanities education because its practitioners do not make any money. (The link above is to a quite interesting article on misconceptions about liberal arts education, especially English literature as exhibited in the movie Dead Poet’s Society.) We argue for the relevance of music education by saying it improves performance in math rather than by saying children should study music because we value music.

What the market does not value, we do not value– except that, in our heart of hearts, we value it quite a lot. We value music, literature, painting and charitable work so much that we are afraid to contaminate it with the one thing that would ensure its thriving.

It seems unlikely that we are going to go back to a non-monetary social structure any time soon.Therefore, if we want charity and arts to survive we need to find a way to reset our priorities.

People tend to think of self-interest and other-interest as opposite poles. You can do something for the love or for the money but not both. This is obviously not true, you can love caring for the elderly or writing novels and be financially rewarded for it.

Is there a way to reverse people’s thinking on this? The authors of the Yale study offered one glimpse of hope. It comes down to how information is presented. Here is how James Choi summed up the researchers’ findings on his blog:

Their experiment on Gap (RED) presented four conditions: in the control condition, participants were simply given information about the Gap. In the altruism condition, participants read about the Gap and the (RED) campaign, through which 50 percent of profits were donated to charity. In the tainted-altruism condition, participants read about the Gap (RED) campaign, its donations, and the fact that the other 50 percent of sales profited the company. Finally, in what they called the counterfactual condition, after reading that Gap (RED) raised money for charity and earned a profit, participants were reminded that the Gap did not have to donate to charity… whereas people would have typically judged charity paired with self-interest more negatively than no charity at all, by mentioning that Gap could have simply kept all the money, this perspective disappeared.

Dan Pallotta could have devoted himself to earning money by not helping people, would that be better for society? Our artists could devote themselves to earning money by not making art. Does that make our world a better place?

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