Reference no: EM131830944
The economic theory of public goods makes a very clear prediction: If the benefits of some action go to strangers, not to yourself, then you won't do that action. Economists have run dozens of experiments testing out this prediction. (You can find a readable article by Nobel laureate Elinor Ostrom summarizing the results in the summer 2000 issue of the Journal of Economic Perspectives.)
A typical "public goods game" is quite simple: Everyone in the experiment is given, say, $5 each, theirs to take home if they like. They're told that if they donate money to the common pool, all the money in the pool will then be doubled. The money in the pool will then be divided equally among all players, whether they contributed to the pool or not. That's the whole game. Let's see what a purely self-interested person would do in this setting.
a. If 10 people are playing the game, and they all chip in their $5 to the pool, how much will be in the pool after it doubles?
b. So how much money does each person get to take home if everyone puts the money into the pool?
c. Now, suppose that you are one of the players, and you've seen that all nine other players have put in all their money. If you keep your $5, and the pool money gets divided up equally among all 10 of you, how much will you have in total?
d. So are you better or worse off if you keep your money?
e. What if none of the nine had put money into the pot: If you were the only one to put your money in, how much would you have afterward? Is this better or worse than if you'd just kept the money yourself?
f. So if you were a purely self-interested individual, what's the best thing to do regardless of what the other players are doing: Put all the money in, put some of it in, or put none of it in? Do the benefits of donating go to you or to other people?
g. If people just cared about "the group," they'd surely donate 100%. In part f, you just said what a purely self-interested person would do. In the dozens of studies that Ostrom summarizes, people give an average of 30% to the common pool. So, are the people in these studies closer to the pure self-interest model from part f, or are they closer to the pure altruist model of human behavior?