Crawl Across the Ocean

Monday, May 25, 2009

12. Self-Interest (part 1)

Note: This post is the twelfth in a series. Click here for the full listing of the series.

Here’s a question which sounds straightforward but can be hard to nail down – what does it mean for someone to act in their ‘self interest’?

In trying to research the answer to this question, the best answers I found were these two (Danny Shahar, Alonzo Fyfe) similar blog posts on the topic.

Here, Danny explains the typical economists usage of the phrase 'self-interest',

"I am told that within the discipline of economics, what it means to say that a person "acted in her own self-interest" is that a person "acted according to her own interests." The idea here is that all action demonstrates preference, and that this necessarily means that the actor preferred the action that was taken to all other actions. So if I jump on a grenade in order to save my friends, what I have demonstrated is that I preferred to jump on the grenade over all other alternatives that I considered, and it's fair to say that I wanted to jump on the grenade; that out of all available alternatives, the one I consider the best is the one where I jump on the grenade so that my friends live. I'm down with that.

When I jump on the grenade because I want to save my friends, I take it to be uncontroversial that I do so according to my own interests. How could it be otherwise? And if what we mean by "self-interest" is simply that I act according to my own interests, then yes, my jumping on the grenade is self-interested."

Of course if you're like me, or most people I suspect, you don't associate the phrase 'self-interest' with jumping on a grenade to save the lives of your friends.

As Danny points out, there is a dramatic difference between the economic usage of the expression and the English language usage of the phrase, and this causes trouble.

On the one hand, the economic usage refers to self-interest meaning any interest that the self has, whereas in normal English, the phrase self-interest means taking an interest in oneself or taking an action where the object of that action is yourself.

Danny notes,
"So if my sister were sick, I might go get her some medicine. To say that my getting the medicine is "self-interested" would mean, to the lay person, that I get the medicine in order to promote some self-directed end. That is, I get the medicine because, perhaps, I am happier when my sister is not sick, or my sister is irritating when she's sick, or there's a cute pharmacist who will think I'm sweet for taking care of my sick sister. The lay-person, then, would call "non-self-interested" or "selfless" an interest with an object which does not directly involve the actor. So I act selflessly if the reason I go get the medicine is that I value my sister's health for its own sake, and am willing to take on the costs necessary to promote her health."

To the economist, however, all action is self-interested. Since every action you take was presumably taken for a reason, and that reason reflects your interest in taking that particular action.

Alonzo describes the two different meanings, as follows:

"(a) "Interests in self" [the typical 'laymans' usage of the term]

(b) "Interests of self" [the economic usage of the term]"

Sometimes people will muddy the waters further by referring to (a) as 'narrow' self-interest and (b) as 'enlightened' self-interest, but this isn't really helpful.

Alonzo describes the confusion caused by the two conflicting meanings as follows:

"I am going to assert that most people who hear or read the phrase, 'rational self-interest' immediately call to mind the narrower 'interests in the self' definition. To make matters worse, the 'rational self-interest' theorist often asserts this same definition. Then the listener/reader starts to raise all sorts of objections to this 'interests in the self' concept. In responding to this, the 'rational self-interest' theorist equivocates. He switches to the concept of 'interests of the self' to defend himself from objections to the 'interests in the self' concept, claiming that this is what he meant all along. Yet, when asked for a specific definition, the defender of rational self-interest goes right back to using the 'interests in the self' definition.

After which, the listener walks away mumbling to himself, 'those guys are nuts.'"

Danny makes a similar objection, and further notes that in the economist's conception of the term, the possibility of altruistic or selfless acts has been defined out of existence, which is not helpful since there are a wide range of actions that are routinely categorized by people as being 'selfless'.

He also notes that economists themselves, being English speakers before they were Economists, are prone to confusing the two meanings themselves.

There is some usefulness in the economic meaning of the term since it can remind us that just because people are in a group or organization of some sort, doesn't mean that they suddenly take on the motivations of the group for their actions, they are still 'self-interested' in the sense that they follow their own reasons in deciding what to do, but this is a pretty marginal usefulness compared to the much richer distinction made in the regular English usage in which self-interested acts are made with regard to the effect on the self, and selfless acts are made with regard to the effect on someone else.

So for this series of posts (and in general) I will attempt to use the phrase 'self-interested' solely in the English sense of meaning actions with regard to the effect on the self, i.e. not selfless. If I find the need to use the economic definition, I'll make it explicit what I am referring to.

In order to make this all a bit clearer, let's return to the example of the Prisoner's Dilemma.

Two suspects are arrested by the police. The police have insufficient evidence for a conviction, and, having separated both prisoners, visit each of them to offer the same deal. If one testifies (defects) for the prosecution against the other and the other remains silent, the betrayer goes free and the silent accomplice receives the full 10-year sentence. If both remain silent, both prisoners are sentenced to only one year in jail for a minor charge. If each betrays the other, each receives a five-year sentence. Each prisoner must choose to betray the other or to remain silent. Each one is assured that the other would not know about the betrayal before the end of the investigation. How should the prisoners act?

If we assume that the Prisoners are self-interested, meaning that they place no weight on what happens to the other Prisoner, then the payoffs are as follows (each pair of brackets represents the jail time of Prisoner 1 followed by that of Prisoner 2):

                                                      Prisoner 2
                                                   No Confession Confess
Prisoner 1   No Confession:      [1,1]                 [10,0]
                               Confess :      [0,10]                [5,5]

If both prisoners are purely self-interested and don't care about the other prisoner, then we will end up with both confessing and they both serve 5 years.

Now consider what happens if both Prisoners are purely selfless, in the sense that they care 100% about the other Prisoner, and care nothing about their own fate. Now the payoffs look like the following:

                                                      Prisoner 2
                                                   No Confession Confess
Prisoner 1   No Confession:      [1,1]                 [0,10]
                               Confess :      [10,0]                [5,5]

This time, both prisoners refuse to confess while hoping that the other prisoner will so that the other prisoner will get away with no sentence. Their actions prevent this, however and we end up with neither confessing and they both serve one year.

Finally, let's say that both prisoners apply a fairness rule which says that all people are valued equally so they equally weight their own potential jail time and the other prisoners potential jail time. Now the payoffs look like the following:

                                                      Prisoner 2
                                                   No Confession Confess
Prisoner 1   No Confession:      [1,1]                 [5,5]
                               Confess :      [5,5]                [5,5]

Here, the values in the brackets represent the average sentence given to the prisoners (since they weight each prisoner the same, a sentence of 10 years to one and 0 to the other, is equivalent to 5 each) and we can see that both prisoners have a clear motivation not to confess.

Oddly enough, if you change the rules a little so that if one prisoner confesses and the other doesn't, the jail time for the one who doesn't confess is 20 years, then you get the following:

                                                      Prisoner 2
                                                   No Confession Confess
Prisoner 1   No Confession:      [1,1]                 [10,10]
                               Confess :      [10,10]                [5,5]

Now this has become a coordination game where the two prisoners need to ensure that whether they confess or don't confess, the main thing is that they both pick the same option.

I'm not sure if that has any significance, I just thought it was kind of odd.

To sum up, I'll refer to self-interested or selfish actions as those which place weight in making the decision solely or primarily on the consequences for the self, with altruistic or selfless actions referring to those which take into account the consequences for others as well.

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