The paradigm of Homo Econ — a perfectly rational, self-interested being — may have taken a hit, according to findings from a paper Dwyer et al. (2023). The authors aimed to study how people spend windfall income through a randomized experiment.
We took a rare opportunity to examine the generosity of a diverse sample of adults who received a $10,000 gift from a wealthy pair of donors with few strings attached. As part of a pre-registration study, 200 participants from three low-income countries (Indonesia, Brazil, and Kenya) and four high-income countries (Australia, Canada, the United Kingdom, and the United States) were selected. Participants spent an average of more than $6,400 on items that benefited others, including nearly $1,700 in charitable donations, demonstrating that humans can be extraordinarily generous even when the stakes are high.
One justification for this behavior is that it can improve status. This may not be the case.
To address whether generosity was motivated by reputational considerations, we asked half of the participants to share their spending decisions publicly on Twitter, while the other half were asked to keep their spending private. Generous spending was similar across groups, contrary to our pre-registration hypothesis that heightened reputational concerns would increase generosity.
However, this finding does not fully address the issue of reputation not playing a role here. While one’s reputation on Twitter may not mean much, one’s reputation among recipients and peers clearly does play a role. The authors claim that the $1,700 spent purely on philanthropy was unchanged, but there was a difference of about $500 (private donations = $1,440, donations posted on Twitter = $1954, p=0.154). While not statistically significant, this equates to a roughly 30% increase in donations. It also impressively demonstrates that people are willing to share their wealth. The authors found that family had the greatest influence on spending decisions, but that face-to-face friends and social media played relatively similar roles in decision-making in the randomized group that posted donations on Twitter.
The authors do note that “…participants are aware that they are part of an experiment in which they will report their spending choices…[which] They may be incentivized to spend (or report spending) money in socially desirable ways. “
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