Robin Hanson is an American economist who recently blogged about an elegant way to help others at little personal cost. The logic goes like this:
*When making decisions people usually try to do the thing which is best for them. We can call this the ‘private optimum’.
* However, a choice that is best for them is not always the best decision for society as a whole – what we can call the ‘social optimum’.
* Around the ‘private optimum’, small changes in either direction don’t make a big difference to the person involved. For instance, imagine that you are having a meal and deciding how much to eat. At the point where you are consuming ‘just the right amount’, the benefit of eating more is perfectly balanced by its cost. In economic language you are ‘indifferent’ between eating a little more and a little less. By contrast, if you are desperately hungry, or painfully stuffed with food, the benefits and costs of eating are far apart. In one case you really want to eat more, in the other case you really want to eat less; when you are so far away from where you ideally want to be, each extra mouthful matters much more.
* As a result, the bigger the difference between the private and social optimums, the more valuable it is to take given step towards the social optimum (see the Figure below).1 Therefore, in cases where the private and social optimums are far apart, people who push us a bit towards the social optimum can do a lot for general well-being.
* This means that in these cases you can take actions that involve a small private loss but have a big social gain. That sounds like an ideal project for an ‘effective altruist’!
This is an neat observation because it involves so few assumptions:
- People are trying to choosing the point which is best for them along a continuum.
- The best point for society is not the same as the best point for them, and we know in which direction it lies.
The upside of trying to use this insight is that it promises a big ‘benefit to cost’ ratio. Given how many decisions we make, it seems like there should be many such situations where we could shift our behaviour a little towards the benevolent one. These actions might include being a bit friendlier to waitstaff when you are overseas, who in turn should provide you with somewhat better service than they need to, given that you won’t be coming back. Or it could be deciding not to drive during bad traffic – leaving a bit more room for everyone else.
Unfortunately, there are downsides too. For one, by its nature this approach cannot effectively absorb many resources. The more you move away from your private optimum, the more the incremental cost to you rises and the incremental benefit to others falls. I don’t know if this technique could effectively use 0.5% or 5% of an individual’s income, but I would be very surprised if it went higher than that. Another problem is that it’s not always easy to know in which situations the private and social optimums are far apart, or even in which direction you should be moving. If you happen to have a good idea of how the world works that will help! It might even be worth studying a bit more to help you make these judgements. But most of our consumer decisions are much more mundane. Are you better off spending a bit more time with your friends, or a bit more time at work? Should you buy a bit more, or a bit less, coffee? Should you go on more overseas trips, or fewer? Given the effort required to work out the answers to these questions, I would worry that dealing with all of these micro-decisions would draw your attention and motivation away from the crucial macro-decisions.
However, this isn’t the case for everyone. Those who own or operate businesses make major decisions about the quality and price of products that will be used by many people, or how they treat their employees. A compelling example offered by Hanson is a company choosing how tall to build its apartment blocks. There is a general consensus among public policy experts that we would be better off with taller buildings, and adding extra floors to the design is a decision that changes how hundreds of thousands of dollars are spent – not just the small change you would redirect at the supermarket. Similarly, a business which is a bit more compassionate to its employees when they are in need would lose little overall, while potentially improving their workers’ quality of life a great deal.
This is a good foundation on which to build the idea of effective ‘corporate social responsibility’. Unfortunately, the main goal of corporate social responsibility is for businesses to look good to their customers. Most of these incremental changes to product quality and price or kindness to employees are invisible, and so can’t be used for such showing off. How could you ever prove that you would have had one less floor on your apartment if only you weren’t such a nice guy?
This is no surprise after all. People are already motivated to engage in showy acts of kindness, whether they help others or not. The low hanging fruit usually involves doing something a little less conspicuous!
On the other hand, there is an upside to such choices being hidden. Not only can’t the public see that you had their back in a toss-up decision at your business – your managers or shareholders won’t be able to tell either! So, if you want to be a undercover hero and happen to work in a big organisation, it’s easy to start nudging us towards a kinder world.
Thanks to: Andrew Kane.
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This is a necessary result of the mathematics of optimising continuous functions and is also fairly obvious from the figure. ↩