Tuesday, October 14, 2014

Kaminska et al On Charity

In this case al is the recent Nobel Prize Winner Jean Tirole.
From Dizzynomics:

In which Tirole predicts the Ice Bucket thang
Looking back at Jean Tirole’s work on liquidity premia gives one a real insight into how his two-sided market theory and agency stuff came about. In particular the role fear plays in leading people to make what seem to be irrational pricing decisions.

But there’s also a treasure trove of stuff on belief-driven markets, and the real motives behind apparently selfless acts of altruism.

Hint, no such thing as a selfless act, although core values do play a role in pricing assets during periods of complete information darkness.

In any case keep in mind the Ice Bucket of 2014 thing when reading the below 2005 paper on prosocial behaviours:
B. Holier-than-thou competition
We saw that competition may reduce welfare by inducing excessive participation in prosocial activities that generate only moderate public-good benefits but have a high visibility. We will now see that it can reduce welfare (relative to a monopolist) even without any change in participation, by leading sponsors to screen contributors in inefficient ways. This result formalizes in particular the idea of religions and sects competing on orthodoxy, asceticism and other costly requirements for membership (e.g., Eli Berman (2000)). Another example of rapidly growing importance is that of charities sponsoring events where agents, instead of simply donating or raising money (or on top of it), engage time-intensive, strenuous activities such as a day-long walk, marathon or other test of endurance.
Public self flagellation is used as a means to disguise, obscure or distance oneself from the real motives of an overly altruistic donation which may be construed as being manipulative. (Oh Augustus and your false piety, what have you done!)

I find these insights particularly interesting because I’ve always wondered why it is that we’ve ended up with a charity system obsessed with linking donation to self flagellation....MORE