Chen, Daniel L. (2016) Markets, Morality, and Economic Growth: Competition Affects Utilitarian Judgment. TSE Working Paper, n. 16-692

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Abstract

Scholars since Hume and Smith have debated possible causal connections between market experiences and moral beliefs. Of particular interest today are questions related to incentive designs: for example, could the structure of employment affect moral attitudes? Here, I study the impact of employment structure on three normative issues: utilitarian versus deontological values, other-regarding preferences, and charitable donations. Through a labor market intermediary, I randomly assigned workers to competitive or piece-rate work conditions. The groups were given a moral question posing a conflict between utilitarian and deontological values, and offered a choice to make a charitable donation. The moral question was accompanied by an illustration that made salient outgroup considerations. Four results emerge: Competitively structured work experiences increased deontological value choices, deontological commitments towards outgroup members, and donations by productive workers relative to non-productive workers; and the effects on deontological value choices differ over economic development. I reconcile these results with a formal model based on experimental findings in affective moral psychology. When competition is perceived as unfair or unfamiliar, negative affect triggers deontological value choices, but when it is perceived as familiar or even fun, positive affect increases utilitarian attitudes. If utilitarian attitudes lead to market-oriented policies, multiple steady states arise where some countries sustain high utilitarianism, market-orientation, and economic growth, and vice versa. This perspective helps explain the intellectual history of the doux commerce thesis.