Cognitive Dynamics Lab


Neuroeconomics of Public-Good Decisions

Recently I began a collaboration with the economist Bill Harbaugh in which we look at the cognitive, affective, and neural basis of individuals' decisions about contributions to the public well being. Such contributions usually come in form of charitable donations or taxation. In our first study we wanted to examine to what degree such contributions are motivated by altruistic motives (Harbaugh, Mayr, & Burghart, 2007). We gave people $100 and then scanned their brains while they observed tax-like transfers of the money to a local food bank, and also while they made voluntary decisions about giving the money to the charity or keeping it for themselves.

In our results, we show three things. First, paying taxes to support a good cause activates the same evolutionarily ancient areas in the brain that respond to basic rewards like sweets, nutrients, or positive social contact. In other words, paying taxes can make people feel good.


Reward activity in the ventral striatum in response to money going to oneself (yellow), the charity (blue), and both (green).
Second, we were able use brain imaging to classify people as "egoists" or "altruists", depending on whether their brain responded more to money for themselves or more to money for the charity. Those who cared more about money going to the charity than to themselves – as measured by their brain activation – were about twice as likely to give money voluntarily. Thus, activity in the reward areas reflects a basic trade-off between neural benefits from money for oneself and money for the public good. Third, we found that charitable gifts of money produce more activity in the reward parts of the brain than occurs when people pay the same amount as a tax – so active giving produces an extra neural benefit over taxation.

Neurally defined "altruists" (right of the dashed line) give about twice as much to a charity as neurally defined "egoists" (left of the dashed line).

Every society needs to figure out how to provide goods that benefit everyone – such as education, environmental protection, defense, and aid for the needy. The fact that increases in the tax money going to the charity produces reward-related brain activity provides the first neural evidence for one basic motivation to provide public goods, called "pure altruism" by economists. At the same time, the fact that voluntary giving produces even larger reward-related activity shows that philanthropists get an extra neural benefit, referred to by economists as "warm glow". It would be tempting to conclude from this latter result that we should rely more on charitable giving, and less on taxes. However, in our experiment, people often decided not to give, and the charity got 10% less when they were free to give or not to give than when they were taxed. This "free-riding" on donations by others is why we need taxes. What our results do show is that people who give voluntarily don't just help out the cause they contribute to. Philanthropists get an extra, and measurable, neural benefit for themselves as well. How much societies should rely on taxes and how much on voluntary giving is a balancing act with real consequences for society, and we show that this balancing act is also detectable within the reward circuits in peoples' brains.

In extension of this work, we are now working on an NIA-funded project (PI: Mayr and Harbaugh) in which we look at changes in altruistic behavior across the adult life span.

 

Harbaugh, B.T., *Mayr, U., & Burghart, D. (2007). Neural responses to taxation and voluntary giving reveal motives for charitable donations. Science.*

* Joint lead authorship.

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