Kjell Arne Brekke

An Economic Model of Moral Motivation

In this paper, we present an economic model of moral motivation. Consumers prefer regarding themselves as socially responsible individuals. Voluntary contributions to public goods are motivated by this preference. The self-image as socially responsible is determined by a comparison of ones actual behavior against an endogenous moral ideal. Public policy influences voluntary contributions through its effects on relative prices and budget or time constraints, but also indirectly through the policys effect on the moral ideal. This implies that economic incentives may have adverse effects on contributions. We present survey data on recycling behavior and voluntary community work, which is consistent with the model predictions.

Optimal Switching in an Economic Activity Under Uncertainty

This paper considers the problem of finding the optimal sequence of opening (starting) and closing (stopping) times of a multi- activity production process, given the costs of opening, running, and closing the activities and assuming that the state of the economic system is a stochastic process. The problem is formulated as an extended impulse control problem and solved using stochastic calculus. As an application, the optimal starting and stopping strategy are explicitly found for a resource extraction when the price of the resource is following a geometric Brownian motion.

Social Interaction in Responsibility Ascription: The Case of Household Recycling

Duty-orientation implies a warm glow of giving as well as a cold shiver of not giving enough. If duty-oriented consumers learn their moral responsibility by observing others’ behavior, social interaction in contribution behavior arises. However, since moral responsibility is a burden, duty-oriented consumers may be less willing to accept responsibility if their information about others’ behavior is uncertain. Data from a survey on households’ glass recycling indicates that perceived responsibility is a major determinant for reported recycling, that responsibility ascription is influenced by beliefs about others’ behavior, and that people are, indeed, reluctant to accept responsibility based on uncertain information. (JEL D64, Q53)

Moral Hazard and Moral Motivation: Corporate Social Responsibility as Labor Market Screening

Morally motivated individuals behave more cooperatively than predicted by standard theory. Hence,if a firm can attract workers who are strongly motivated by ethical concerns, moral hazard problems like shirking can be reduced. We show that employers may be able to use the firm’s corporate social responsibility profile as a screening device to attract more productive workers. Both pooling and separating equilibria are possible. Even when a substantial share of the workers have no moral motivation whatsoever, such screening may in fact drive every firm with a low social responsibility profile out of business.

Status-seeking and material affluence: evaluating the Hirsch hypothesis

Abstract When individuals hold a preference for high relative consumption, competition to achieve social status can lead to inefficiently high levels of production and consumption, contributing to natural resource depletion and environmental degradation. In the 1970s, Fred Hirsch argued that an increasing portion of expenditure is allocated to status-seeking as average income rises. This paper critiques this hypothesis from two points of view. First, we note examples from the historical and anthropological literatures suggesting that status-seeking is often important in societies with relatively low incomes. Second, we consider a set of analytical models that focus on the economic consequences of status-seeking. When social status is defined in terms of the algebraic difference between an individuals consumption of a status good and the average consumption level in society, Hirschs hypothesis holds true, and growth in the level of productivity and output can lead to declines in human welfare. If, on the other hand, status is linked to the ratio of individual and average consumption, Hirschs hypothesis is valid only if social status and non-status goods are poor substitutes. The paper also considers two cases in which social status is defined in terms of the amount of time people devote to status-oriented activities. Under this assumption, productivity growth leaves time use unchanged, though the value of time devoted to status signaling increases in proportion to total expenditure.

Net National Product as a Welfare Indicator

The question of whether changes in net national product (NNP) will measure changes in welfare is investigated in this paper. M. Weitzman (1976) demonstrated that, under specific conditions, NNP is proportional to discounted consumption. The result requires NNP to be measured in current prices in utility units. Changes in real NNP measured using given prices from a base year will not represent a complete account of welfare changes. Copyright 1994 by The editors of the Scandinavian Journal of Economics.

Do numerical simulation and optimization results improve management?: Experimental evidence

A laboratory experiment is used to investigate the practical usefulness of two types of models or decision tools employed in social planning. The case is quota setting in a two-species fishery. We find that advice from both a simplistic two-species stochastic optimization model and from two single-species simulation models improve management. The tools are complements rather than substitutes. The optimization model helps subjects to set targets more efficiently, and the simulation model helps subjects to avoid destabilizing overreactions. However, the tools are only approximations, and subjects do not adjust fully for weaknesses of the tools.

Allowing disagreement in evaluations of social welfare

There is no consensus on how to measure interpersonally comparable, cardinal utility. Despite of this, people repeatedly make welfare evaluations in their everyday lives. However, people do not always agree on such evaluations, and this is one important reason for political disagreements. Thus, to keep in control of the normative premises, decision makers may prefer information which can be used as input to an arbitrary social welfare function to information which is the output from a social welfare function specified by the analyst. In this paper we try to identify and simplify sufficient welfare indicators; information which enables decision makers to arrive at welfare evaluations of social states or projects, according to their own ethical beliefs. Our conclusion is that providing factual information about different population groups, their social state, size, and characteristics, may be better for this purpose than the more traditional approach of focusing on ordinal utility information.

Reluctant Recyclers: Social Interaction in Responsibility Ascription

Several studies have demonstrated that individual contributions to public goods are increasing in others’ contributions. The underlying causes for this, however, are not yet fully understood. We present a model of duty-orientation in which moral responsibility is learned through observations of others’ behavior. Since, in our model, responsibility is a burden, we hypothesize that individuals will be reluctant to accept responsibility based on uncertain information. Econometric analysis of data from a survey on households’ glass recycling indicates that perceived responsibility is a major determinant for reported recycling; that responsibility ascription is influenced by beliefs about others’ behavior; and that people are indeed reluctant to accept responsibility based on uncertain information.

Sustainability when capital management has stochastic consequences

Abstract. Sustainability is usually defined as a requirement of each generation to manage its stocks of man-made and natural capital such that the utility that it ensures itself can be shared by all future generations. Here we extend this definition to the case where capital management does not have deterministic consequences. A characterization is offered where the sustainability of one generations behavior can be determined by comparing its utility with the utility of the succeeding generation, provided that the latter behaves in a sustainable manner. The properties of the definition are investigated and illustrated.