Motivation and capitalism

People’s Motivation

I believe that people, naturally and deep down, want to make the world a better place.  I don’t think philosophy (let alone economics) can prove that is the right goal, but I do believe it is a good one (whether justified on evolutionary, religious or other grounds).

Trying to make the world a better place is definitely easier said than done.  I believe the biggest challenge is knowledge: knowing how to achieve that goal.  Much of what is wrong in the world can be explained by people taking shortcuts, failing to fully consider the impact of their actions.

For example, it is a lot easier to think about the impact of your actions on your company or family or self, than on the whole world.  That could be blamed on selfishness, but I prefer to believe that these people, if they did look more broadly, would not take actions that they knew to make the world worse.

I often don’t know how to make the world better, and am often guilty of making simplifying assumptions.  While there is a lot of merit in trying to improve my understanding of the world, I believe their is as much to be achieved by acknowledging my assumptions, and where my conclusions are limited (hopefully this comes across in the blog!).

(I’m sure by this point some of you will be thinking, “Isn’t that all obvious?” and some of you be thinking, “how could Guy be so stupid and naive?” – that’s the joy of having a diverse readership!)

 What it means for capitalism

My beliefs about people wanting to make the world better may seem completely at odds with capitalism.  Surely if people were motivated by global and societal improvement, they wouldn’t be motivated by incentives like money?  While I definitely believe it is right to do what makes the world best irrespective of how it changes your personal position, I do think it is right to consider incentives, for three reasons:

  • Given the complexity of our world, and the amount of information we would need to consider in order to decide what made the world better, capitalism operates as a remarkably effective signalling mechanism to direct people to what needs doing.  It isn’t perfect, and we always be ready to not ‘follow the money’, but there is merit in improving the way it signals what society really values.
  • While I believe we are motivated by making the world better, this goal is likely to be overwhelmed if conflicting incentives become too strong.  For example, if you can’t feed yourself or your family except through crime, I’m not going to be shocked if that’s the action you take.
  • While it is nice to think of everyone just doing the right thing without caring about themselves, I care about how money is distributed from a justice perspective (I believe a more just world tends to be a better one).  I don’t have an answer as to what a just distribution would be, but I don’t believe a world in which you are entitled to whatever you can grab in some giant game of Hungry Hippos is a just or a better world.

5 thoughts on “Motivation and capitalism

  1. Thara

    I would add a slightly different perspective on capitalism.

    I find it hard to believe that everyone is genuinely motivated to improve the condition of the world, and it may not be necessary for everyone to be so, in order to make the world a better place.

    One observation from studies in cognitive psychology suggests that human tends to have a narrow view. That is, we are wired to think in a narrow environment. A classic example is sunk cost fallacy. So, by aligning narrow views with the larger views, we do not require people to be altruistic to achieve a desired outcome. For example, by introducing price on carbon, it creates disincentive to emit CO2 into the atmosphere without requiring everyone to care about environment. Aligning both views makes good decisions cognitively easier to make.

    I think capitalism has a role in that, because it is a tool for capital allocation. It is not neither bad or good. That depends on the rules we choose to implement.

    Reply
  2. Guy Lipman

    Thanks for the comment. I agree that we tend to operate under a narrow view, but that doesn’t mean that people don’t ultimately care about a larger view of what is good.

    While I agree that we should align narrow views with the larger view, I don’t think we can ever tell people that it is acceptable or appropriate to ignore the larger view. There will always be inconsistencies despite our best efforts to align them, and in these cases, optimising to the smaller view won’t ultimately make the individual happy, let alone society.

    Reply
    1. Thara

      We should not ignore the larger view. All I am advocating is that we should set up the system so that good decisions are easier to make. I suggest a book called Nudge. It has some interesting ideas.

      Reply
  3. Guy Lipman

    I enjoyed the ideas in Nudge.

    Speaking of books, have you read “The Art of Thinking Clearly” by Dobelli? I found it the best overview of cognitive biases I’ve seen (very readable with great examples from someone who clearly knows the real world).

    Reply

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