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Abstract

The paper deals with evaluating the adequacy of the assumption that in economic transactions people are self-interested insofar as they are motivated solely by the concern of maximizing their own utility, and in particular with assessing how this assumption affects within-group behaviour. Policy and incentive structures based on the assumption of exogenous and self-interest motivation can undermine other sources of motivation and have negative effects both on co-operative behaviour and also on economic efficiency. The paper sketches the motivational assumption of homo aconomicus: in the classical formulation, in rational choice theory and in Becker's later work which introduces personal and social capital into individual utility function. It then challenges the position that homo aconomicus contains an adequate characterization of human motivation for co-operative within-group behaviour. It introduces alternative motivational behaviours: philia and altruism, identity and self-expression, moral rules, intrinsic motivation and social norms. It argues that motivations are complex and multiple; a single assumption of utility maximization is insufficient for policy purposes. As the individual is always a social being, how she behaves will be dependent on the social context in which she is acting. If motivations are endogenous, and if under certain conditions maximizing motivation displaces other sources of motivation, then these indirect effects, and their long-term consequences for efficiency and equity, should be taken into account in framing economic policies.

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