In one sentence
In economics, altruism refers to preferences that place positive weight on others’ wellbeing, helping explain giving, volunteering, and cooperation that standard “self-interest only” models struggle to capture.
How economists model altruism
Pure altruism
One common representation is that your utility depends on others’ utility:
$$
U_i = u(c_i) + \alpha\,u(c_j)
$$
If $\alpha>0$, person $i$ values person $j$’s wellbeing.
“Warm glow” (impure altruism)
People may get utility directly from the act of giving:
$$
U_i = u(c_i) + v(g_i)
$$
where $g_i$ is own giving. Warm glow helps explain why people keep giving even when their gift does not change total provision much.
Reciprocity and fairness
Beyond altruism, many models include social preferences such as reciprocity (“kindness for kindness”) and inequality aversion, which can generate cooperation in games and real-world settings.
flowchart LR
A["Social preferences"] --> B["Giving / volunteering"]
A --> C["Cooperation in groups"]
A --> D["Support for redistribution"]
B --> E["Public goods provision"]
C --> E
D --> F["Policy design"]
Why it matters for public policy
Altruism changes predictions about:
- public goods: how much private giving occurs and when government provision crowds it out,
- redistribution: support for taxes/transfers can reflect concern for others, not only self-interest,
- charitable incentives: matching grants and tax deductions interact with warm glow and social norms.
In a pure altruism model, government provision can crowd out private giving more strongly than in warm-glow models, because the donor cares about the total public good level rather than the act of giving itself.
- Utility: A measure of satisfaction or happiness derived from consumption or actions.
- Rational Choice Theory: The hypothesis that individuals choose actions that provide the greatest benefit and satisfaction.
- Public Goods: Goods that are non-excludable and non-rival in consumption, often leading to discussions about altruism in their provision and maintenance.
- Warm Glow: Utility derived from the act of giving itself, distinct from caring about total outcomes.
- Reciprocity: Responding to others’ actions with kindness or punishment, shaping cooperation.
Quiz
### Altruism primarily involves:
- [ ] Seeking personal profit
- [ ] Financial investments
- [x] Selfless concern for others
- [ ] Market competition
> **Explanation:** Altruism is typified by selfless concern for the well-being of others.
### What challenges traditional economic assumptions about self-interest?
- [ ] Market prices
- [x] Altruistic behavior
- [ ] Supply and demand
- [ ] Inflation
> **Explanation:** Altruistic behavior defies the traditional assumption that individuals always act out of self-interest.
### Which term best aligns with altruism but involves mutual benefit?
- [ ] Profit maximization
- [ ] Self-interest
- [x] Reciprocity
- [ ] Inflation
> **Explanation:** Reciprocity involves mutual benefit, unlike altruistic actions that do not seek a direct return.
### Altruistic actions can be exemplified by:
- [x] Charitable donations
- [ ] Corporate mergers
- [ ] Buying stocks
- [ ] Price fixing
> **Explanation:** Charitable donations are a prime example of altruistic behavior.
### Is altruism always entirely selfless?
- [ ] Always
- [x] Not necessarily
- [ ] Never
- [ ] Rarely
> **Explanation:** Critics argue some form of utility or good feeling could result, questioning pure selflessness.
### Who coined the term "altruism"?
- [ ] Adam Smith
- [x] Auguste Comte
- [ ] John Maynard Keynes
- [ ] Karl Marx
> **Explanation:** Auguste Comte coined "altruism" in the 19th century.
### Which organization studies and promotes charitable activities?
- [ ] WTO
- [ ] IMF
- [ ] NASA
- [x] Charities Aid Foundation (CAF)
> **Explanation:** The Charities Aid Foundation (CAF) is focused on promoting charitable activities globally.
### What philosophical or cultural traditions emphasize altruism?
- [x] Religious teachings
- [ ] Market competition theories
- [ ] Taxation policies
- [ ] Production mechanisms
> **Explanation:** Many religious and cultural philosophies advocate for altruism.
### Which book provides insight into the biology of altruism?
- [ ] "The Wealth of Nations"
- [ ] "Capital in the Twenty-First Century"
- [ ] "The Selfish Gene"
- [x] "The Altruistic Brain"
> **Explanation:** "The Altruistic Brain" investigates altruism from a biological perspective.
### True or False: Altruism is entirely opposed to economic rationality.
- [ ] True
- [x] False
> **Explanation:** Although altruism challenges self-interest focused models, it can still fit within broader definitions of rational behavior.