Why does profit-seeking precede altruistic behavior?

In this blog post, we’ll discuss why profit-seeking precedes altruistic behavior.

 

There’s something about taking classes in college that leaves some people feeling dissatisfied and, if it’s severe enough, leads to overt conflict. It’s group work. You can see this in the fact that each member of the group has a different level of willingness to participate, so some end up working harder, others contribute less, and so on. And this is where the problem of group assignments is magnified: the problem of free riding. Since group work is evaluated equally across the entire group, some people don’t participate in the work because they get the same score as their teammates without actually participating in the work.
The best thing you can do to combat this free-rider problem is to do the following. First, let’s assume that you’re in a typical group of four and that everyone wants to avoid getting an F. In this situation, after the first round of four-person groups, have each group rank themselves from first to fourth in contribution. Then have the first-place finishers form a group, and do the same for the second-, third-, and fourth-place groups. In this case, the group of four people who ranked fourth becomes a free pass for the entire group. If everyone continues to free ride, no one will get an F for not doing the work, so they will work harder to avoid the F and eventually give up free riding. And if you continue to shuffle the groups in the same way at the end of each task, each member will contribute more to the task than before because getting a high rank will benefit them by meeting new members who are more capable of performing the task, thus improving their overall participation in the task.
However, even if a member remains a free rider in a group of free riders mentioned above, there is a limit because someone else will put in the effort and complete the task. Therefore, a three strikes and you’re out system, which means that if you’re voted fourth three times in a row, you get an F for any reason, will minimize the problem of free riding.
But what are the underlying causes of free riding? Obviously, social convention dictates that it’s the “right choice” to take equal responsibility for the assignment since you’re in a group. However, the reason for free riding is simple. It’s in your best interest. The above measures to combat free-riding are based on the idea that individuals act in a self-interested way (i.e., in a way that minimizes penalties), so by continuously imposing penalties, we are preventing free-riding behavior, not just doing what is socially correct. In this way, a person’s decision to act is based on whether it is beneficial to them. Of course, if it’s beneficial and the right thing to do, people will do it willingly. The discussion then centers on the individual’s judgment when an action is not beneficial but is the right one. In the following three examples, we will show that individuals prioritize the pursuit of profit over the pursuit of right behavior.
First, we can define living rightly as living altruistically. But what if doing the right thing penalizes an individual, and there is no real penalty for doing the opposite? An example is cash payments. If you go to your local hair salon, you’ll often hear the hairdresser ask, “Do you have any cash on you?” when you try to pay with a card. In addition, department stores often offer discretionary discounts for paying with cash. The reason why merchants and service providers want you to pay in cash is that cash payments are not recorded and therefore not taxed. This is a win-win situation: the producer benefits from not having to pay taxes, and the customer benefits from getting goods and services at a discounted price. However, this is far from “altruistic” behavior. First of all, legally, it’s not right because it’s a way to avoid taxes. Not only that, but other taxes have to be collected to make up for the lost revenue, and you’re just shifting the taxes you owe to other people. However, from a consumer’s perspective, paying cash is economically beneficial, you’re not really caught, and even if you are, the producer who encouraged you to pay cash is punished, and people around you are envious of you for getting such a good deal. In fact, many people take advantage of it if that’s what they can afford. In this example, we can see that there are situations where people prefer to act altruistically when there are no penalties.
But what if there are side effects of acting unselfishly, but the benefits outweigh the downsides? Consider the case of Company A. A few years ago, Company A needed to promote their product, but lacked the funds to do so through mass media such as TV or newspaper ads. Their strategy was to post flyers in a large area. As a result, Company A was fined for installing illegal outdoor advertisements, but the publicity it received from the small fine was far greater than that of expensive mass media advertisements. Clearly, this marketing technique is not an altruistic choice. For one thing, individuals were exposed to ads that they didn’t need, and it wasn’t a level playing field, but Company A benefited, and Company A has since been recognized by the public as a company that tried something different. In this way, individuals will do unselfish things that inevitably result in losses if they can bring about greater gains, and society will not discourage them, as it did with the marketing technique.
Finally, there are times when the cost of acting unselfishly for gain can be quite high, but it doesn’t always happen. For example, if you steal money from your employer. The benefit would be the stolen money, and the cost of getting caught would be the loss of your job, fines, loss of trust, and loss of honor. Obviously, the cost of getting caught is greater than the benefit, but that’s only if you get caught, so you also need to consider the probability of getting caught in this situation. If the probability of getting caught is low, then the equation (gain) > (individual’s perceived probability of getting caught) X (penalty of getting caught) will be relatively beneficial, so it may be tempting to do the wrong thing. Of course, the probability of getting caught is not something that can be accurately measured and will depend on how much risk an individual is willing to take. However, if we look at society today and see people getting caught for crimes like embezzlement, it’s clear that there are individuals who are willing to take a chance and do things that aren’t right for the sake of gain. As such, we can see that there are indeed risk-takers, and that they may do things that are not right for the sake of gain.
In the three categories above, we’ve argued that it’s okay to act unselfishly if the benefits outweigh the costs, especially if, as the first and second examples suggest, other people in society don’t discourage it and even encourage it. However, the intangible benefits of society as a whole, such as the increased trust and happiness of the society as a whole when each member behaves correctly, are not fully considered, so if these factors can be taken into account, the interpretation based on the nature of rational human beings who pursue profit can be improved in a way that is more appropriate to reality. In addition, as the assumption of “rational human beings” in economics has been proven to be incorrect, there is room for a more comprehensive discussion that can include individual conscience, beliefs, etc.