Are the Rich Really Less Generous Than the Poor?
Our latest Freakonomics Radio episode is called “Are the Rich Really Less Generous Than the Poor?” (You can subscribe to the podcast at Apple Podcasts or elsewhere, get the RSS feed or listen via the media player above.)
A series of academic studies suggest that the wealthy are, to put it bluntly, selfish jerks. It’s an easy narrative to swallow — but is it true? A trio of economists set out to test the theory. All it took was a Dutch postal worker’s uniform, some envelopes stuffed with cash, and a slight sense of the absurd.
Below is a transcript of the episode, modified for your reading pleasure. For more information on the people and ideas in the episode, see the links at the bottom of this post. And you’ll find credits for the music in the episode noted within the transcript.
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Before we get to the episode, one quick thing: I wanted to announce some new dates for our live podcast, Tell Me Something I Don’t Know. We’re back in New York City on June 9 and 10 and June 15 and 16, all at Symphony Space. We’ve also just announced more New York City dates in the fall — at Joe’s Pub, part of the Public Theater. We’ll be there on October 5, 6 and 7. Pencil in those dates and you’ll be able to get tickets on their website or, again, ours, TMSIDK.com. Also: the first two seasons of the Tell Me Something I Don’t Know podcast already have 8 million downloads, so I hope you’ll get on board if you’re not already.
Season 3 drops Sunday, June 4, the first of 10 new episodes. Our special guests this season include Eugene Mirman, Krista Tippett, Che “Rhymefest” Smith, Major Garrett and my Freakonomics friend and co-author Steve Levitt.
Steve LEVITT: Are the males who are pretending to be female, males who would be unlikely to have mates if they went the usual road?
That’s Tell Me Something I Don’t Know.
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Jim ANDREONI: What inspired this is a discussion that has come up in the last four or five years about the growing income disparity — the rich growing richer, the poor are poorer.
That’s Jim Andreoni.
ANDREONI: I’m a professor of economics at the University of California in San Diego.
The discussion he’s talking about — I’m guessing you’ve had this discussion yourself. The rich, as the data have shown, are getting richer …
ANDREONI: It’s important to know whether the rich are going to work in the best interest of the whole society.
One obvious question to ask: how does wealth affect how a given person treats other people? The scientific evidence to date has been not very encouraging:
Lori HARFENIST in a clip for RT America: No. It’s not just you. Science also agrees that the more money a person has, the more likely she is to be an inconsiderate, rude jerk.
[MUSIC: Dominik Hauser, “Marionettes On Halloween” (from Halloween)]
We took to the streets to see how widely held this view is. We asked a simple question: who do you think are more selfish: rich people or poor people?
WOMAN: That’s a tough question, because I’ve known both …
MAN: Rich people are more selfish. Because if you livin’ comfortable, and you see the next man out here not livin’, and you can’t help him? That is selfish!
YOUNG WOMAN: I would say the poor person is more willing to give, because they know what it’s like to not have …
YOUNG MAN: I don’t think it depends on your wealth. It depends on the type of person you are and the way you were raised …
YOUNG WOMAN 2: Maybe rich people? May be more of the stigma, I don’t know if they actually are. But I think rich people.
MAN 2: I don’t know the answer to that. I know a number of rich people who are extremely generous, but at the same time I have seen homeless people be very generous with each other. It depends on the individual. I don’t necessarily think it’s an economic determination.
We’ve been told, however, that it is an economic determination.
Paul SOLMAN in a clip from PBS NewsHour: In a country more and more polarized by inequality, Paul Piff led a series of startling studies …
Paul PIFF in a clip from PBS NewsHour: Wealthier participants took two times as much candy from children as did poor participants.
ANDREONI: There were a lot of studies that came out saying that in some domains, [in] a lot of ways, the rich people seemed to be less prosocial.
Jan STOOP: There’s this view in society that the rich are super selfish.
That’s Jan Stoop, another economist.
STOOP: Even in the Bible there is this quote that it is easier for a camel to crawl through the eye of a needle than it is for a rich man to enter the kingdom of heaven. Even in pop songs, you hear about how selfish the rich are.
Leonard COHEN in his song “Everybody Knows”: Everybody knows the fight was fixed. The poor stay poor, the rich get rich …
But here’s something important to keep in mind. A lot of the scientific evidence for the rich being selfish came from lab experiments.
Nikos NIKIFORAKIS: But there are differences between our lab setting, and the field.
That’s Nikos Nikiforakis, another economist.
NIKIFORAKIS: It’s important to go and check your intuition in the field.
And that’s exactly what Nikiforakis, Stoop and Andreoni did — they ran a field experiment.
NIKIFORAKIS: “Why don’t we just go and throw these letters to houses of the rich and the poor people and see who is nicer, who is more prosocial?”
All it took was a Dutch postal worker’s uniform, some envelopes stuffed with cash, and a slight sense of the absurd. Today on Freakonomics Radio: what’d this experiment show?
STOOP: For us, the results were quite shocking.
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Stephen J. DUBNER: Would you consider yourself an altruistic person [or] not altruistic?
ANDREONI: When you study altruism, people always presume that’s because you are altruistic. That opens you up to lots of people hanging around you in your cocktail hour time, hoping you’re going to pay for the drinks.
DUBNER: I would think you could make the opposite argument, which is, “Plainly, I can’t buy you a drink because that would establish a set of priors that would show a bias in my research.”
ANDREONI: Yes. That’s what I say. If I understood this altruism stuff, I wouldn’t have to study it.
Jim Andreoni was a pioneer in developing what’s known as the economics of altruism.
ANDREONI: The idea that studying people who are governed by care and concern for others and who work hard to give their money away all seemed outside of economics. That was something that was for the sociologists to understand, maybe some psychologists, but it’s really not economics.
DUBNER: Why didn’t you leave it to the sociologists? What was it that led you to become interested?
ANDREONI: There was a paper that I read when I was in graduate school by a guy named Russell Roberts. He drew some conclusions that didn’t quite make sense to me. He assumed that people care about the total supply of charity irrespective of where it comes from. So if the government comes and takes money from your pocket and gives that to the charity, then you should dollar for dollar withdraw donations to the charity.
DUBNER: Was this about the notion of crowding out, and how one kind of dollar would crowd out another?
ANDREONI: Yes. That’s what we’ve come to call the crowding-out hypothesis in economics: that you don’t care where the dollars come from or how they get to the charity, you just care what the final consumption of the charity, and the final consumption of yourself, and any path to that is just the same. If you have that as your assumption, you’re going to be able to draw conclusions like, the government should just get out of the business of helping poor people, because if we’re altruistic, then the private sector will take over that responsibility all on its own.
DUBNER: What made you care enough about that to want to do something about it, to challenge it?
ANDREONI: Because I’m stubborn, basically. When I see something that is I think isn’t right, I have to go figure it out, and figure out what’s not sitting with me, until I produce a paper about it.
The paper that Andreoni produced, in 1988, showed that government contributions did not completely crowd out private gifts. That is, in contrast to the direct, dollar-for-dollar reduction model, a $1 increase in government contributions decreased private giving by only 5 to 28 cents. This led to the next question: why do so many people give away so much money when they’re not obligated? Andreoni called this phenomenon “warm-glow altruism.”
ANDREONI: …the idea that people are motivated to give to charities for reasons other than the output or the production of the charity itself. I’m happier when it’s coming out of my wallet. But what makes me happier when it comes out of my wallet? There’s just a huge list of things at stake here.
DUBNER: Name some.
ANDREONI: My personal impact. Some guilt that I’m relieving. Some pride. Sympathy for the person who’s being helped. Reputation boost that helps me in other domains. All those things are motivations. Some of those stories are more complicated than others to tell.
DUBNER: A lot of people would hear that and say, “But wait a minute. Altruism is meant to be pure, giving, selfless and you’re saying there’s utility derived from giving?” How do you square that circle?
ANDREONI: We call it impure altruism. I’m not going to give to an organization that I don’t think is doing good work, and that I want to support. Just like I’m not going to eat food that I am not hungry for. But the actual food that I choose, I choose because it tastes good.
Andreoni was arguing that pure altruism is very rare. Much more common are “impure” or “warm-glow altruism,” which reward the giver along the recipient. Now, you might argue this presents humanity in a bad light — that even when we give to charity, we want something for ourselves. But that’s what the data seemed to indicate. Moreover, if you really care about raising money for charity, wouldn’t you like to understand a giver’s true motivations? And, more valuable, what, specifically, are the invisible forces lying behind altruistic behavior?
ANDREONI: In the last 25 years or so since I published that paper, there’s been a huge, rich literature trying to answer that question.
Andreoni and other economists have explored all kinds of angles on altruism: the power of matching funds, and prizes; the role played by guilt, and the herd mentality; and how blonde women raise more money than anyone else, by a long shot. If you want to hear more about this, check out an earlier Freakonomics Radio episode, called “How to Raise Money Without Killing a Kitten.” In the last several years, as income inequality has become a hot topic, there’s been more and more work on the relationship between income and altruism, and other forms of what’s called prosocial behavior. You may have heard about this research …
Paul SOLMAN in a clip from PBS NewsHour: Experimental evidence that rich people are more likely to break the law while driving, cheat in a game of chance, also to lie during negotiations, and endorse unethical behavior, including stealing at work. The academic paper that resulted made headlines everywhere …
The paper making headlines was by Paul Piff.
PIFF: I’m an assistant professor of psychology and social behavior at the University of California, Irvine.
The evidence he presented was disturbing, to say the least.
PIFF in a clip from PBS NewsHour: People all the way at the top, who made a hundred and fifty, two hundred thousand dollars a year, were actually cheating four times as much as someone all the way at the bottom, who made under $15,000 a year — just to win credits for a $50 cash prize.
But how compelling was the evidence?
STOOP: There’s a difference between what we call a behavior or preferences.
That again is Jan Stoop.
STOOP: I am a behavioral economist at the Erasmus School of Economics in the Netherlands.
And the reason this matters, the difference between a behavior and preferences …
STOOP: The reason why this matters is that situations give different incentives to behave differently.
ANDREONI: We call it the endogeneity problem.
Jim Andreoni again.
ANDREONI: Are the rich fundamentally different people than the poor? Or do the rich face fundamentally different choices than the poor?
STOOP: For example, there are studies that show that the rich tax evade more. Does that make them more selfish?
ANDREONI: A rich person is more likely to have self-employment income, going to itemize their taxes, be able to overstate some deductions here, hides some things there, and more easily get away with cheating. But if you’re poor, you probably have a job that pays a wage and your employer reports your income and your taxes to the IRS. There’s really no choices, no opportunities for you to cheat on your taxes.
STOOP: The previous literature, for example, about the rich speeding more, or cutting off other pedestrians …
ANDREONI: A rich person might say, “$200. It’s not a pittance, but it won’t materially affect my life.” Whereas as a poor person would say, “If I get that $200 traffic ticket, I’m not going to be able to pay my daycare worker this month.”
STOOP: To conclude from this behavior that the rich have more selfish preferences — that seems like a bit of a stretch.
ANDREONI: That made us wonder .
They wondered, in part, because many of the findings about the rich being more selfish were derived from surveys, or lab experiments. It can be tricky to measure something like altruism in the lab, for several reasons.
STOOP: The term is the experimenter demand effect. If subjects know that they [are] participat[ing] in an experiment, they may behave a little bit differently than they would otherwise.
ANDREONI: If they think you’re studying generosity, they don’t want to be seen as not being generous.
STOOP: Also, many of the studies — for example by Paul Piff — use student subjects, and they then use a trick where they prime these subjects to either think that they are poor or to think that they’re rich. They do that by having them compare themselves to the richest or the poorest people in the country, something like that. But from an objective standpoint, they’re a homogenous group, right? They’re about the same age, and about the same wealth.
NIKIFORAKIS: What we found is that the highest earners were actually substantially less likely to give to help others.
Nikos Nikiforakis again.
NIKIFORAKIS: I’m a professor of economics at N.Y.U. in Abu Dhabi.
He’d run his own lab experiments.
NIKIFORAKIS: We had individuals come into the lab, perform a task and earn a non-trivial amount of money. Then, we paid them according to their relative performance and asked them at the end whether they would like to share some of their earnings with other people who may have earned less in the lab.
His findings were similar to Paul Piff’s: people with more money were less likely to share.
NIKIFORAKIS: But, of course, the problem here is that people outside the laboratory earn their wealth in very different ways. Some people just inherit their large fortunes, or they just are born with a gift and they have a brilliant idea that makes them very wealthy.
Why else might lab findings not reflect reality?
NIKIFORAKIS: Another reason is in our lab, the most competitive people would inevitably earn more. In reality, we also have vetting processes in organizations such that we reward competitiveness. But you also want to make sure that the person you put in a key position is not some mean-spirited selfish person who just wants to extract resources from the organization.
And … the third reason?
NIKIFORAKIS: Of course, the third reason is that this laboratory studies are done with students who earn, in our case, a considerable amount of money. But when we’re talking generalizing these results, the rich people are at least millionaires.
STOOP: There are studies that use panels.
Jan Stoop again. And “panels” being a group of people who’ll sign up to participate in a study.
STOOP: With this trick you can get rich or poor households to get involved in your experiments. But here then we have another problem. What we call the selection bias. It could be a certain type of household that signs up to participate in such panels. Those could be the more prosocial, scientific, do-gooders households. It’ seems there’s always a problem, right? No matter what experimental method you use, there is a problem …
ANDREONI: The actual experiment you’d like to do is get Eddie Murphy in here and Dan Aykroyd and trade places, right?
As in the movie Trading Places.
ANDREONI: Make the rich one poor and the poor one rich, and see if they adopt each other’s behaviors.
Eddie MURPHY as Billy Ray Valentine in Trading Places: I’d wait until you get to 64 and then I’d buy. You’ll have cleared out all the suckers by then.
Dan AYKROYD as Louis Winthorpe III in Trading Places: I was poor and no one liked me. I lost my job. I lost my house. Penelope hated me!
ANDREONI: But we can’t do that experiment in reality. We have to see if we can measure things about the environment or about the choices people can make that would allow us to run this experiment in our minds and through our data. If we can put something in the field, we can do it in a way where people don’t actually know they’re being studied. That’s the best, because that’s the actual behavior that we’re trying to study.
[MUSIC: Johnny Fiasco, “I’ve Lost My Floppy”]
Coming up on Freakonomics Radio: how Andreoni, Stoop and Nikiforakis, pulled off this field experiment.
STOOP: When I did this, I was super nervous!
And of course, we’ll tell you their results.
NIKIFORAKIS: When I first saw the results, I thought, “We failed.”
That’s right after this break.
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The economists Jim Andreoni, Nikos Nikiforakis and Jan Stoop wanted to run a field experiment to find out if the rich are more selfish than the poor. Here’s Stoop:
STOOP: There’s this laboratory experiment, which is pretty famous in our community called the Dictator Game.
STOOP: In the dictator game, there are two players. One is the dictator. He gets an amount of money, typically $10, and he can split that between himself and the recipient.
Split it by, say, putting some of the money in an envelope and giving it to the other person.
But this kind of lab experiment, as we discussed earlier, has a lot of limitations — especially the subjects’ awareness that they’re in an experiment, which might increase their desire to appear generous.
STOOP: I was thinking, “How can I have such a game in the real world, where money comes falling from the sky and people can choose to divide it between themselves and someone else?” Then I thought of this envelope trick.
Not the envelope trick from the Dictator Game. A different kind of envelope trick.
STOOP: There’s this household, and all of a sudden they receive an envelope with cash. It’s not theirs. But they have the power to give it back, yes or no. It is a little bit like they play the dictator game, but in real life and without people knowing that they [are] participat[ing] in an experiment.
NIKIFORAKIS: When Jan phoned me up, he said, “I have this technique.” I said, “Why don’t we just go and throw these letters to houses of the rich and the poor people and see who is nicer, who is more prosocial?”
ANDREONI: We found poor households and rich households in the Netherlands. We did it there because we can get a lot more data about the households, so we can know how rich they are and know how poor they are.
That’s because European governments like the Netherlands’ have much more open policies about collecting data for research purposes. Plus which, Jan Stoop happened to live there.
STOOP: I said, “Look guys, let me conduct all the treatments here in Holland, because I know that you’re probably too busy to do it, and I know that I would love to do it!” I think it’s a win-win for everyone.
The idea was to intentionally misdeliver a letter that was addressed to a real person, with real money in it, and see whether people kept the letter or sent it on to the rightful recipient by dropping it into a mailbox on the street.
[MUSIC: Pearl Django; “Le Quatre Cinq”(from With Friends Like These)]
ANDREONI: We picked a little greeting card that was signed to be coming from somebody’s grandpa.
STOOP: The front side was a picture of a windmill, just something that the grandfather could choose, right? Then, on the other side of the envelope, we had a message: “Dear Joost, Here is €20 for you. Grandfather.” And then there was a note of €20.
Joost, the addressee, was a real friend of Jan’s, and the envelope listed his real street address, so that it could be easily forwarded. It also had a real-looking post-marked stamp, courtesy of some skillful photoshopping. There was only one weird detail: the envelope was semi-transparent — so you could clearly read the card and see the cash.
STOOP: Because then our subjects in the experiments — the rich household or the poor household — they can see that Grandfather intends to send €20 or €5 to Joost.
For experimental purposes, there would be two cash treatments — either €5 or €20.
STOOP: I get this question a lot, right. Who sends out money in a transparent envelope? That is weird, right? But from a scientific standpoint, we are interested in treatment differences. We always use this same envelope, so that means that the weirdness of it is the same in all treatments!
Okay, so the recipient can clearly see the cash inside the envelope …
ANDREONI: Now this is something that’s a benefit to the proper owner, but it’s also a benefit to the accidental recipient.
They also loaded some envelopes not with cash but with bank transfer cards — something like a check, which therefore can only be cashed by the person it’s made out to — again, in denominations of both 5 and 20 euros.
ANDREONI: … which is worthless to the accidental recipient, but it’s still worth 20 euros to the intended recipient. If you’re altruistic, you still have the same incentive because you’re going to help the intended recipient just as much in both cases. If you’re selfish, you’re going to benefit much more when it’s got cash in it.
STOOP: We try to map where all the rich people live and where all the poor people live, and then we randomize them into treatments. Our observations are not only filled with people that we want, but there’s also there is no selection bias.
They identified 360 households: 180 rich, 180 poor. The poor houses were identified by public-assistance and subsidized housing records.
ANDREONI: Rich households, we identified those by the market value of the houses that were on sale in that neighborhood.
And, after the envelope stunt was over, they’d be able to get hold of government data to confirm each household’s level of wealth.
STOOP: We know how rich and how poor they are. The average wealth of the rich is about 2.5 million and the average wealth of the poor is about 25,000. That’s a factor of almost 100.
From October through December of 2013, Stoop delivered the envelopes at regular intervals. Again, there were 360 envelopes, all addressed to little Joost, all containing either cash or transfer cards worth either 5 or 20 euros, and all intentionally misdelivered to specifically identified rich or poor households.
STOOP: Through friends of friends of mine, I was able to acquire an official outfit of the mail company that we have in the Netherlands. That means I had a polo, and I had a bag, and I even had a cap. I would be dressed up and cycle through the city on my way to a rich household or a poor household.
For the record, Freakonomics Radio does not endorse impersonating a postal worker, even in the name of scientific research.
STOOP: When I did this, I was super nervous! Whenever I misdelivered an envelope at a mailbox I tried to get out as fast as possible. The rich, they tend to have huge driveways, right. Therefore, most of them have a mailbox at the side of the street. I love those villas because that’s a hit and run, right? Obviously, I got chased by a dog once. But I got away. No one saw me, but that was pretty cool as well!
ANDREONI: Then we just waited to see what it would show up!
DUBNER: The big question, then, is what did you find? What did you learn about rich people versus poor people in this creative, interesting, albeit very unusual form of what we might call altruism?
ANDREONI: Given the research that we had been reading from Paul Piff and others like that, we expected the rich people to be less likely to return these envelopes. What we found was in fact the opposite.
STOOP: For us, the results were quite shocking. The rich returned way more than the poor — in fact, they returned twice as much. Return rates of the rich were roughly 80 percent and return rates of the poor were roughly 40 percent.
ANDREONI: The rich didn’t care whether there was money in the envelope or not, cash versus the check, they returned them at about the same rate.
STOOP: We find that roughly 25 percent of the cash came back from poor families, whereas roughly 75 percent of cash came back from the rich families. But, for us, the biggest shock was in observing that the non-cash envelopes were also not returned by the poor families.
ANDREONI: It’s looking to us, when we first get the results, that the rich people are actually much more altruistic than the poor.
NIKIFORAKIS: I thought, ”We failed. We found the wrong result.” In a sense, I did expect that the poor would greatly outperform — in terms of kindness — the rich.
DUBNER: Since rich people and poor people may differ on dimensions other than income, what were some of the potential confounding factors that might influence or pollute your findings?
STOOP: When the experiment was over, we got data from statistics Netherlands that provided us with details on all our subjects houses: their education level, their age, that’s for all people in each household. We include all of these in this regression analysis. Basically, we can see, statistically, if all these factors matter. Quite to our surprise, none of them seem to have an effect.
ANDREONI: But then we noticed a couple other things: first of all, the envelopes that the rich got were being returned much faster than the envelopes of the poor folks.
STOOP: And it is here actually where Steve Levitt played a big role.
Steve Levitt is my Freakonomics friend and co-author. He’s an economist at the University of Chicago.
Steven LEVITT: Yeah, here I am.
Hey Levitt. You can go back to what you were doing, thanks.
STOOP: the first time I presented this paper was at a seminar at the University of Chicago. I was telling this story about how the rich and poor differ in selfishness. this slide came up where I present the figure of the return rates. And Steve Levitt said, “Jan, you’re mistaken. You tell us the story that you’re measuring prosocial behavior of the rich and the poor. But this is not what you’re actually measuring. You’re measuring the incapability of the poor to return an envelope.” For me, that was such a new, fresh insight!
ANDREONI: This reminded us of a discussion that’s been very popular lately, about poverty actually being a causal factor in people not being able to get stuff done as efficiently.
DUBNER: I guess there are other factors like, a poor person is more likely — I’m assuming — to have a longer commute time, and therefore less just time on the clock, right? A lot of things like that.
ANDREONI: Yes. That might be true as well. More strict hours at work, perhaps, probably more likely to be single parents. All kinds of things that are correlated with being poor that add to the stress that people have, preoccupy their minds, make it harder for them to keep their priorities.
STOOP: There’s this famous study where a bunch of researchers from Harvard go to India to poor farmers. These farmers have a harvest once per year. That means that, once per year, they have a big bag of money because they sell everything. But as the year progresses, their bag of money becomes less and less. Hence, their financial stress increases and increases. Ehat [the researchers] did is they [administered] an IQ test at the moment when the poor were at their richest, and when they were at their poorest. They found that in the IQ test, they had [the] lower score when the poor were at their poorest. This story inspired us to look at our data through a different lens.
[MUSIC: Justin Marcellus, “Assemble the Crew” (from The Adventures of Haynesworth)]
ANDREONI: If we look at the distance, from the payday, we can maybe see a difference between the behavior of the poor and the rich, expecting that as we get farther from payday, we’re going to get more stress in the poor households, and fewer things added to their to do list.
STOOP: If you cut up a month in four weeks, then in Holland at least, typically people get paid their salaries or their unemployment benefits or pensions in the last week of the month. We then looked at how much returned one week later, two weeks later, and three weeks later. For the rich, we found no pattern at all. They don’t care. They return all envelopes equally spread out over the month. But not so much for the poor!
ANDREONI: They were returned at a very high rate at the week of that paycheck arriving. Then, the probability of being returned went down, down, down, down, practically zero and it was the rate right before payday. It’s a very striking pattern. That’s consistent with this idea that as the month goes on — and your budget gets tighter and your constraints get harder and your stress builds — you have difficulty accomplishing small chores or prioritizing things.
STOOP: But this holds for the non-cash envelopes. It did not hold for the cash envelopes, which is also a puzzle.
ANDREONI: Now, to us, it tells an interesting story, though. If you’re poor and you get an envelope that has a €20 in it by mistake, that €20 is very valuable to you. You have to ask yourself, “Am I a responsible parent, for instance, if I don’t take this €20?” That’s a real moral dilemma there.
[MUSIC: Johnny Fiasco, “Mariah”]
STOOP: Yes, exactly, the marginal utility of money. An extra €100 for a rich family does not give as much pleasure as for someone who was poor. Yeah? We call that diminishing marginal utility of cash.
ANDREONI: Those are our three variables. One, we call our basic propensity for altruism, one we call our basic need for cash, and the other is the stress of being poor. Then, we try to factor out the different environmental factors between the rich and the poor so we get at the true value of that basic underlying altruism.
STOOP: Right. We, then, need a theoretical model, to map behavior to preferences. We model it as follows: a household returns an envelope if A (its altruism towards Joost, the intended recipient of the card) minus N (the neediness of the contents of the envelope) minus P (the financial pressure, the stress costs) is greater than zero. When altruism outweighs the neediness (N) and the stress (P), then the household returns the envelope. With the data that we have, we can actually estimate the A, the N [and] the P.
ANDREONI: When we account for those, what we find is that the basic tendency to want to do the right thing is the same for the rich and the poor. But it’s the fact that rich and poor affects these other aspects of the decision and affects the outcome.
STOOP: What we find is, not surprisingly, that the N differs between the rich and the poor. Meaning that the poor need the money [more] than the rich. Also, in line with this relatively new literature on financial stresses of the poor, we find that P, the financial pressure, is greater for the poor for the rich. Then we have A, altruism, and we find that these are the same between the rich and the poor. I consider this to be really a hardcore economic insight. As economists, we always say that incentives shape behavior, and this is another example of that. There are many other studies that look only at behavior. So far, it seems as if our study is the only study that has disentangled behavior from preferences.
[MUSIC: Mark Ullrich, “You And Me”]
So what does this study — for all its cleverness, and novelty, and thoughtfulness — actually have to teach us?
NIKIFORAKIS: We know that poverty has lots of social costs. Our study actually suggests there is one more, and potentially an important one. It means that when someone loses, let’s say, some of their income, this doesn’t only affect them personally, but it also affects people around them who otherwise may have benefited from prosocial actions, altruistic actions of that person who’s now poor. When we’re thinking about the benefits and the cost of poverty programs, we need to take that factor into account: the financial pressure may make the poor behave more selfishly than they would have in different circumstances.
STOOP: It’s true we don’t know how this will translate to different countries. What we did was a study in a medium-sized city — in Holland — in 2014. The question is, “How does this translate to behavior in Japan in 2027, for example?” That’s hard to say. There’s this hypothesis that income inequality matters a lot. The more income inequality that there is, the more selfish the rich behave. That could be the case, because in Holland, after all, income inequality is pretty low.
Because this study challenged the conventional academic wisdom on the selfishness of the wealthy, we thought it’d be worth hearing from Paul Piff, the psychologist whose research has helped build that conventional wisdom.
PIFF: Okay! My name is Paul Piff and I study the origins of human kindness and how inequality — and, in particular, economic inequality — shape relations between individuals and within groups and society.
So what does Piff make of the argument that a field experiment like this one, with real rich and poor people and real money, is more robust than a lab experiment?
PIFF: The first thing I would say is the field experiment that Andreoni and colleagues ran is a really compelling and well-thought-out experiment. This study and other studies that are emerging are all a piece of the complex mosaic that’s emerging. Which is to say that how wealth and poverty shape the mind is complex; it’s multifaceted. Those relationships aren’t categorical, or essential, but are nuanced.
Piff does have a couple qualifications:
PIFF: The first qualification I would make is that any single study, like any single stroke of the brush on a canvas, won’t give you a full sense of the picture. Prosociality is really broad. It broadly refers to times, instances, actions that prioritize the welfare of someone else, or the well-being of other people, at sometimes a cost to yourself. Like giving up a seat for someone else on the bus, or giving up your place in line when waiting at a coffee shop, or stopping for a pedestrian who’s waiting to cross at a crosswalk, or volunteering your time to help someone else, or giving to charity.
In each of these different situations, you can imagine that a specific behavior or decision could be influenced by any number of factors.
PIFF: There are all sorts of other incentives that play into human decision-making. One of those things is social incentives. People from less advantaged backgrounds have less money by definition. Their ability to, say, rely on a friend to get by when times are tough, that is ever more salient. That’s a primary coping mechanism for people who are poor, who are relatively disadvantaged. Where there’s an opportunity to connect with someone, when there’s an opportunity to invest in a relationship — in those instances, we would predict you’re most likely to find these rich-poor differences in prosociality that align with what we’ve been finding.
The scenario we’ve been talking about today, meanwhile, the Dutch field experiment …
PIFF: … is less a social context, and more one where those social incentives have been removed from the picture. It also involves a prosocial behavior, or a dependent variable that people rarely encounter in their daily lives. In fact, if you were to ask a friend of yours or someone off the street, “When is the last time you received an envelope that was see-through with cash in it that was mistakenly put in your inbox, but that was actually addressed for someone else?” Most people would say, “That’s never happened to me.” That’s not to say that that you can dismiss the results of Andreoni and his colleagues’ paper at all. But it needs to be interpreted within the limitations of the measure.
That said, Piff seems to appreciate the economists’ contribution.
PIFF: It’s important to get outside the lab and complement your laboratory work with field experiments, but also to complement your field experiments with laboratory work. There’s an approach of complementarity that I want to stress that is really important. Both kinds of approaches are really important. This being among the first, really careful field experiments that’s been run, [it] is a clear contribution.
In the end, perhaps the most salient lesson from the Dutch field experiment is just how hard it is to generalize about any group of people — male/female, liberal/conservative, rich/poor. Because we humans are, plainly, far more than the sum of our biological parts. We’re a dynamic bundle of preferences, decisions, and behaviors — some of them observable, others not. Jim Andreoni again:
ANDREONI: The moral of this story is, “Try to think [a] little bit deeper about how the very fact of being rich or being poor affects the choices that you’re able to make and the incentives you have to change your behavior.” Before you draw the conclusions that rich people are either better or worse than poor people, you need to ask whether you’ve accounted for all the ways in which being rich or poor itself affects your behavior. Science requires you to do that.
[MUSIC: Mark Ullrich, “Dream Awake”]
Coming up next time on Freakonomics Radio: they’re an American tradition …
They’re incredibly abundant:
Cristina MILESI: That’s about 40.5 million acres of turf.
They’re also incredibly labor- and resource-intensive:
Ted STEINBERG: Every square foot requires 28 gallons of water.
We love our lawns — but are they worth the trouble? And the cost — financial, environmental and otherwise? And: what would we be doing with our yards if we didn’t turn them into manicured parkland?
Jim KOVALESKI: It could be a hundred different leafy greens.
As part of our occasional Stupid Stuff series, we take a long, hard look at lawns. That’s next time, on Freakonomics Radio.
Freakonomics Radio is produced by WNYC Studios and Dubner Productions. This episode was produced by Stephanie Tam. Our staff also includes Shelley Lewis, Christopher Werth, Merritt Jacob, Greg Rosalsky, Eliza Lambert, Alison Hockenberry, Emma Morgenstern, Harry Huggins and Brian Gutierrez; we had engineering help this week from Rick Kwan. Special thanks to Scott Andrews and Mariarosa Lunati at O.E.C.D. You can subscribe to Freakonomics Radio on Apple Podcasts, Stitcher or wherever you get your podcasts.
Here’s where you can learn more about the people and ideas in this episode:
- Jim Andreoni, professor of economics at the University of California, San Diego.
- Nikos Nikiforakis, professor of economics at New York University in Abu Dhabi.
- Paul Piff, assistant professor of psychology and social behavior at the University of California, Irvine.
- Jan Stoop, associate professor of applied economics at the Erasmus School of Economics.
- “Altruism in Experiments,” entry from New Palgrave Dictionary of Economics, 2nd Edition, by James Andreoni, William Harbaugh, Lise Vesterlund (2007).
- “Are the Rich More Selfish Than the Poor, or do They Just Have More Money? A Natural Field Experiment,” James Andreoni, Nikos Nikiforakis and Jan Stoop (2017).
- “Experimenter Demand Effects in Economic Experiments,” Daniel John Zizzo (2009).
- “Exploring the Psychology of Wealth, ‘Pernicious’ Effects of Economic Inequality,” Paul Solman, PBS NewsHour, (July 21, 2013).
- “Higher Social Class Predicts Increased Unethical Behavior,” Paul Piff, Daniel Stancato, Stéphane Côté, Rodolfo Mendoza-Denton, Dacher Keltner (2011).
- “Impure Altruism and Donations to Public Goods: A Theory of Warm-Glow Giving,” James Andreoni (1990).
- “A Positive Model of Private Charity and Public Transfers,” Russell Roberts (1984).
- “Poverty Impedes Cognitive Function,” Anandi Mani, Sendhil Mullainathan, Eldar Shafir, Jiaying Zhao (2013).
- “Privately Provided Public Goods in a Large Economy: The Limits of Altruism,” James Andreoni (1987).
- “Relative Earnings and Giving in a Real-Effort Experiment,” Nisvan Erkal, Lata Gangadharan, Nikos Nikiforakis (2011).
- Taxpayer Compliance, Volume 1: An Agenda for Research by Jeffrey Roth, John Scholz and Ann Dryden Witte (University of Pennsylvania Press 1989).
- “Unbelievable Stories About Apathy and Altruism,” chapter from SuperFreakonomics, by Steven Levitt and Stephen Dubner (2009).