Wednesday, November 25, 2009

Social Dilemmas

This post hopefully opens a thread on "social dilemmas" and I will be posting on this over the next few months. This is just to get some thinking started.

A couple of people who read this blog will remember getting a phone call from me one hot summers day trying to ascertain where to bring a lost dog. I found the labrador while on a rare excursion out of the office. He seemed to me to be dehydrated and lost and while many people looked at him with some worry, nobody was stopping. I walked on as my bus was coming but before boarding I cursed silently and went back to the dog. Not knowing what else to do I bought him a bottle of water and then went back to see where he would go. He eventually went into the shade of some trees in a nearby estate but he really looked tired and I was gripped by the horrifying thought that he might actually die of thirst if I just walked on. At this stage, I began ringing people to find out what to do with a lost dog. The options in general did not seem good including the potential that the dog would be put-down. As it turned out (after some door-knocking), I was able to figure out that the dog was actually in his own neighborhood and I was wrong about him being lost. In fact, in retrospect, the dog may have just stayed with me to make sure I wasn't lost (labradors have very good natures) but it did give me a lot of time to reflect on the nature of social dilemma in modern cities.

How many times do you say no to a teenager who claims to need a euro to get the bus home? What would you do if someone banged loudly on your apartment door claiming to need assistance at three in the morning? You see an older person who is clearly lost and disorientated still standing at the train station after the last train has left. Such social dilemmas are a regular reality particularly for people living in cities. For many of us who grew up in environments where practically every single person we met was known to us, such dilemmas can be particularly upsetting. How we behave in these situations will partly depend on our personal characteristics. In economics-speak, attributes such as our degree of risk aversion, tendency towards loss aversion, social preferences and so on will clearly generate individual differences. Similarly, the characteristics of the potential beneficiary will likely have an effect. Clearly though, there is a market in which such acts take place, a market that is likely broken in several respects with respect to things like adverse selection, asymmetric information, coordination failures and so on. Most of would help the teenager needing the euro if we were sure that their case was genuine. A euro versus a young person without a phone or money missing a last bus and potentially being left on their own in an unfamiliar city is not a big sacrifice. But we would hate to be contributing the hundreth euro of the evening to a drugs fund. Similarly, nobody wants to think that a person is in need of medical help outside one's apartment door but nobody wants to open the door to find a gang of thugs laughing at how easily we were tricked.

Most readers probably remember the remarkable scene from a few weeks back. A woman stumbles on to the track in the boston subway and is saved by the frantic efforts of a fellow traveller in alerting the oncoming driver to stop. You could argue that the altruism shown is not very costly but it looks clear to me that there is an impulse to help this woman and that the chief helper is taking a non-trivial risk of falling on the track himself. Nobody is that altruistic and risk loving that they actually try to physically take her from the track but this looks extremely difficult given the timing and its not clear that a benevolent social planner would recommend this given the risk it would have placed on anyone trying to do this. In general though, the girl did get help. The basic reaction was one of trying to make sure she wasn't harmed even though she was completely unknown to the crowd, who also mostly did not know one another.

There are a number of strands of literature that have attempted to put structure on these problems. Social psychological research has looked in depth at potential triggers for altruistic acts. Game theorists have attempted to model the formal structure of social dilemmas. Experimental economists have examined how people actually play such games in lab conditions. The more recent literature on social capital has looked in detail at the degree to which non-market transactions operate to improve human welfare. If ever a large endeavour of the human mind needed to be plucked from the sky and applied directly in our day-to-day lives, it is this area of research. In particular, looking more closely at field experiments that address particular "market failures" in altruism in urban environments is something that I will be blogging about as I learn more. This may be a good area for students thinking of final year projects. Even examining the potential welfare losses from coordination problems in social dilemmas in dublin itself would be a nice starting point. Are there pareto-improving mechanisms for allowing people to reveal altruism in these settings? I'm sure there are but I'm not fully sure that dog wouldn't have starved had my initial thoughts been correct that day.


Peter Carney said...

Interesting post. It's something i've been thinking about a lot recently. I've no doubt there is potential for pareto improvement in many of these situations. If i'm following correctly what you are saying then the main failure really is asymmetric information. The true nature of the need and request and the likelihood that your help will actually improve the situation is not clear with obvious incentives for misrepresentation. This impacts on procedural utility - the fairness of the exchange - and thus sub-optimal levels result.

In relation to homelessness and street-poverty, probably the most salient social dilemma in Dublin, the "Big Issues" initiative is interesting (but not without it's problems). I think it works by overcoming most of the familiar fairness and trust concerns. I've no doubt that developing these type of initiatives would be useful.

On another side, i've noticed a lot of people who, rather than dropping coins in a damp cup, actually buy food, coffee, etc., for people in need. Clearly this limits the benefactor's choice set but that's probably the whole point. In limiting the choice set they can lessens the dilemma of potentially fueling a ruinous drug problem and associated circle of dependency. Without getting into the moral or political philosophy of limiting choices, I think this type of help can lead to a pareto improvement and could be developed.

Perhaps these two observations will ignite a few welfare-improving ideas. I'll posting anything else I see - be great to develop this post.

Anything from the Nudge school of thought on this? That might be a good avenue to explore

Liam Delaney said...

Asymmetric information clearly but also things like coordination problems e.g. you see someone being mugged by someone who you would not be able to overpower individually. there are five people around including you but none of you know the other. part of this is an information problem but there are other aspects. i like your examples which relate mostly to transfers to enable consumption. the examples in the post were mostly cases of emergency with the idea being that social institutions provide an imperfect form of insurance.

i will post a fuller review of the social capital literature at some stage.