Articles on Islamic Economics

Economics and Pro-Social Behaviour

Salman Ahmed Shaikh

A great number of empirical studies now challenge the position of conceptualising human behaviour only in the framework of a rational, utility-maximizing homo-economicus. Yet, this framework is used for the purpose of simplicity and tractability in situations where abstraction does not result in major loss of focus and information at hand. Nonetheless, it is appropriate to acknowledge selflessness resulting in sacrifices, pro-social behaviour and pure altruism. Excluding China, the Asian economies with rich cultural and religious values feature prominently in the World Giving Index 2016 despite having low per capita incomes. As per World Giving Index 2016, Iraq leads with the highest percentage of people helping strangers, and Turkmenistan, the highest percentage of people volunteering time.

Indeed, if preferences are amenable and social behaviour is learned like other behaviours, then we ought to acknowledge this. This could help in cooperative pro-social campaigns; lasting and fruitful social partnerships; and strengthening of social capital that could potentially relax pressure from the public sector. In weakly governed countries, social networks assume roles typically provided by market-based financial intermediaries or the public sector. In economics education, acknowledging these differences, experiences, success stories and alternate visions of policy, broadens the perspective and enriches the solutions toolbox to meet sustainable development challenges which require strong mutual understanding and efforts of diverse cultures towards a common vision of future.

The causal mechanisms through which culture and institutions mould and constrain human agents remain unexplored in neoclassical economics.  It is worthwhile to be cognizant of the role of cultural factors, social norms and spiritual stimuli in analysing and theorizing economic behaviour. For instance, Confucian beliefs affect one’s outlook about work and consumption habits in East Asia, where individuals tend to work harder and longer, with greater labor force participation rates. As per the Lifecycle Consumption Hypothesis, higher propensity to save depends on the proportion of working age people in a society. From growth theory, we know that savings is the most crucial variable affecting growth, along with other macro and institutional variables. Thus, remaining cognizant of the effects of values, cultures and norms will help avoid missing positive phenomenon.

Values and norms can be positively utilized in achieving development goals where commercial interests are not good stimulators. According to The Hunger Project, 2.4 billion people do not have adequate sanitation, and every day, nearly 1,000 children die due to preventable water and sanitation-related diarrheal diseases. This is partly because sanitation is not good business as compared to cellular services and life’s other comforts and luxuries. Interestingly, according to the 2015 report of Food and Agriculture Organization, globally, per capita food supply increased from about 2,200 kcal per day in the early 1960s to more than 2,903 kcal per day by 2014. Thus, redistribution of resources is vital to enhance income as well as the capacity to earn sustainable incomes. This requires income support programs, basic health and education as well as microfinance to build small enterprises.

Overreliance on Pareto efficiency paralyses equity and ethical concerns of development policy change. According to Pareto efficiency, an unequal or equal distribution of resources is equally efficient if no one can be made better off without making anyone else worse off. Sustainable development goals have assumed poverty, hunger and inequality as important goals. However, economics education by and large outsources the realization of these goals to development agencies and governments. If aid is inefficient as argued by Nobel Laureate Angus Deaton, then the neoclassical toolbox is virtually empty. In a society where people regard ending hunger as the ultimate value to prioritize, then we can end hunger when the aggregate sum of endowments equals what is needed to feed everyone. Else, if we regard consumer sovereignty as the ultimate value to prioritize, like we do today, then no wonder we are setting goals for ending hunger by 2030 despite a global food surplus.

In economics education and discourse, it must be noted that expenditure can be on self-consumption as well as on consumption of others including dependents, family, neighbours, social circle and society in general. If an individual prioritizes certain ethical goals, e.g., contributing money and time in social causes over self-aggrandizement, then theorizing should not assume it away. Furthermore, leisure should not necessarily imply ‘non-work’. People can choose to donate more time in response to increase in wages since they may have a desire and inclination to help others. Situations often enable people to transform these traits into pro-social actions. Thus, leisure is better understood as non-market saving of labor hours which can be spent on self-entertainment as well as on volunteering.

Likewise, philanthropy should not be envisioned in the framework of reciprocity alone. It is not necessary that people dis-save lifetime endowments on self-consumption; they can leave philanthropic bequests and endowments, and are not necessarily following reciprocity in such actions. Rather, they may have a strong desire and willingness to help others even when not reciprocated. There are countless examples of people like Mother Teresa and Abdul Sattar Edhi who lived their whole lives serving humanity. Externalities between utility functions can create envy as well as compassion. Humans have the potential to be envious as well as compassionate. Even as neutral observers of the positive phenomenon, we should acknowledge supporting evidence that people help strangers, pay anonymously in charities, and sacrifice their wealth and even their lives in the pursuit of being a good person.

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