Towards a rational explanation for irrational economic behaviour'

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Towards a rational explanation for irrational
economic behaviour.

• Ted Flack, Centre of Philanthropy and Nonprofit
  Studies
• Queensland University of Technology

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The previous assumption

• Homo economicus is seen as "rational" in the
  sense that well-being as defined by the utility
  function is optimized given perceived
  opportunities. That is, the individual seeks to
  attain very specific and predetermined goals to
  the greatest extent with the least possible cost
  (Persky, 1995)

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But the evidence from everyday life suggests that
this is not always so.
Old response cultural man where mankind is a
creature of culture.. in which what they do, is
what they learn to do from others around them
(Watson 1925)
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But humans cooperate as much as they compete!

• A new perspective - Evolutionary psychology (EP)
• From game theory, genetics, biology psychology
  and economics

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Some EP authors

• Axelrod (1984), The Evolution of Cooperation
• Frank (1988), Passions within Reason The
  Strategic Role of Emotions
• Ridley, M. (1996). The Origins of Virtue
• Diamond, (1997) Guns, Germs Steel

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and now from medical science

• Moll, et al., (2006)
• Volunteers were are asked to make choices about
  donations, whilst being scanned by the latest MRI
  equipment
• Some donations are pleasurable
• Some donations are altruistic (painful)
• Some decisions are related to emotions about
  close family ties

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Conclusion

• The economics of philanthropy is expanding
  rapidly
• Multi-disciplinary approaches will inform
  fundraising practice and lead to a greater
  understanding of how to encourage and support
  philanthropy.
• Take the time to read one of these easy to read
  books!

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Questions?