Warm-glow giving

Warm glow is built upon the idea of impure altruism: the blend of both altruistic and egoistic desires to help others. In the Socratic dialogues, motivation may be traced to an egoistic concern for one's own welfare, thus denying the plausibility of pure altruism. Similarly, Plato's organization of motivations as responses to hunger-based desires highlights the foundational importance of egoism in all social interactions. and advanced the doctrine of psychological egoism, while others (Butler, Hume, Rousseau, Adam Smith, Nagel) argued for the existence of altruistic motives. Conceptually, the warm-glow model represents a stylized compromise between these two perspectives, allowing for individuals to be purely altruistic, purely egoistic, or impurely altruistic. Warm glow is at least tangentially related to the topic of free will, as people should only reap the psychological reward of helping if they freely choose to do so. == Background in economics ==

Departure from Classical theory The normative theory of Ricardian equivalence suggests private spending should be unresponsive to fiscal policy because forward-looking individuals smooth their consumption, consistent with Modigliani's life-cycle hypothesis. Applied to the provision of charities or public goods, Ricardian equivalence and the classical assumption of pure altruism together support the neutrality hypothesis, A consequence of neutrality under perfect altruism is that government grants should completely crowd-out private donations. That is, a dollar given by the government takes the place of a dollar that would have been given by a private citizen. To illustrate, economic agents operating under the neutrality hypothesis would give to a cause until complete provision, beyond which they would contribute nothing. and Khanna et al. (1995). Taken together, these findings offered a strong rebuke of the assumption that public grants crowd-out private donations to public goods. == Background in psychology ==

Many of the advances in warm glow research stem not from economics, but from psychology. In particular, research on motivations and affect have played a key role in defining and operationalizing warm glow for broad application. As illustrated in Shaw's quote, both intrinsic desires of conscience and extrinsic desires of social status may motivate giving. Warm glow has traditionally been restricted to intrinsic motivation, however this distinction is often murky. There has been considerable inconsistency in the literature as to whether a warm glow refers to intrinsic or extrinsic motivation. According to Andreoni (2006), "putting warm-glow into the model is, while intuitively appealing, an admittedly ad hoc fix". Further elaborating on the topic, he and colleagues wrote that the concept was "originally a placeholder for more specific models of individual and social motivations". but many have not. and the "internal satisfaction of giving" suggests an intrinsic drive. The intrinsic component of warm glow is the private emotional benefit to giving. Extrinsic warm glow Much of the ambiguity surrounding the motivational processes of warm glow has arisen from the misclassification of extrinsic rewards to intrinsic processes. Some research has explicitly focused on extrinsic warm glow, such as "relational warm glow". Importance of motivational classification The classification of warm glow as either intrinsic or extrinsic has important ramifications for policy makers. The extent to which extrinsic incentives may be substitutes for intrinsic motivations depends upon the motivational classification of the warm glow model. Furthermore, intrinsic warm glow may be more resilient to satiation effects than extrinsic warm glow. A more recent body of research has identified several important determinants of warm glow, including social distance, vividness to the beneficiary, and guilt avoidance. This is consistent with the moral psychological literature of empathy, most notably as advanced by Batson. Social distance Social distance is an important determinant of warm glow, particularly in the framework of empathy. Consistent with the "identifiable victim effect", research has shown that people express a greater willingness to help when others are known, as opposed to statistical. Parameterizing guilt as a component of warm glow allows for deficit values of warm glow, which was originally constrained to strictly positive values in Andreoni (1989, 1990). In surveys of self-reported guilt, people experience roughly as much interpersonal and societal guilt as they do personal guilt. Furthermore, half of the survey respondents prefer to directly address and resolve their feelings of guilt. Taken together, these findings suggest a substantial component of guilt aversion. == Neurobiological evidence ==

Evidence from neural imaging supports the warm-glow effect. A meta-analysis of 36 studies using functional magnetic resonance imaging demonstrated that the brain's reward networks are consistently activated when choices to give are made. This includes the ventromedial prefrontal cortex (vmPFC). Strategic decisions for which something is hoped for in return activate more anterior regions of vmPFC but decisions where nothing is expected in return activate posterior regions of vmPFC. This provides a biological distinction of decisions to help that depends on the expectation of external rewards. == Applications ==

Voting (CSR) initiatives may give consumers a vicarious warm glow. However, recent research suggests that consumers may expect to overpay when companies engage in CSR due to perceptions of price fairness. The implication that "doing good" carries a financial burden for businesses leads consumers to infer general price markups. This body of research cautions that corporate warm glows may be coupled with "cold prickles" of extra costs. There is also evidence that product warm glows may play a role in a process called "hedonic licensing", in which consumers who perceive a moral surplus subsequently allow themselves more leeway to make selfish purchases. Capital Markets Inefficiency in sustainable investments Warm glow in the context of sustainable investments involves investors deriving a sense of satisfaction from their responsible investment decision-making rather than from the actual impact. Private investors who engage in sustainable investments tend to rely on their emotions rather than adopting a calculated approach to evaluate the impact of their investment. Hence, utility stems from the prosocial act itself and, therefore, does not increase linearly with the level of impact. This implies that investors’ willingness to pay is insensible to the level of impact of an investment. The concept of warm glow stands in contrast to the conventional behavior outlined in decision theory, often referred to as "consequentialism", where the utility of prosocial investors is directly linked to the level of impact generated by their investments. Private investors showing warm glow behavior typically seek opportunities to prevent climate change, leading to a higher willingness to pay for investments with a sustainable impact than investments with no impact. Leveraging warm glow becomes important in attracting funds for sustainable investments, encouraging investors to integrate sustainability considerations into their financial decisions. However, there are drawbacks when investors prioritize optimizing their warm glow over maximizing impact. Companies are incentivized to engage in greenwashing or "impact-washing", promoting "light green" could realign investors' emotional preferences with the quantitative level of impact of a financial product and incentivize firms to offer real "green" products. Philanthropy Avoidance behaviors Common phenomena such as avoiding eye contact with beggars or adjusting one's route to avoid a solicitor may be explained using the warm glow model. One behavioral consequence of warm glow is strategic avoidance of giving opportunities. According to this hypothesis, individuals anticipate their warm glow upon identifying a future giving opportunity. Assuming a functional form that allows warm glow to be negative (driven by a guilt of not giving), people may strategically and effortfully avoid giving situations. The strategic incentive is easily understood through the utility function U_i = U_{i}(x_{i},G,g_{i}), where the warm glow (g_i),is positive for a donation (joy of giving) and negative for not giving (guilt). For an agent who would suffer a disutility of giving at their desired level (g_i^*)because the marginal utility of private expenditure (x_i)exceeds the marginal utility of warm-glow giving, they should prefer to give nothing (g_i^0).Because giving nothing may be associated with guilt, the utility of (g_i^0)will be negative. Therefore, for a rational agent who cannot justify giving, U_i(x_i,G,g_i^*) , can maximize their utility through avoiding a giving situation, effectively dropping the warm glow argument from their utility functions. Moral philosopher Peter Singer mentions warm-glow givers in his 2015 book, The Most Good You Can Do. Singer states that these types of donors "give small amounts to many charities [and] are not so interested in whether what they are doing helps others." He references "empathetic concern" and "personal distress" as two distinct components of warm-glow givers. Inefficiency in charitable selection Warm glow may offer an explanation for some of the observed inefficiencies in charitable giving. For example, United States citizens directed more than 60% of their total charitable contributions to religious groups, education institutions, art organizations, and foundations in 2017; compared to under 7% in foreign aid. According to models of social justice and economic QALYs, highlight the inefficiency of all philanthropy not used to combat global poverty, which offers the highest marginal return. == Criticisms ==

Ad-hoc A common criticism of the warm-glow paradigm is that it seems ad-hoc. Indeed, Andreoni, the father of the original model, stated that "putting warm-glow into the model is, while intuitively appealing, an admittedly ad hoc fix." As the body of research has evolved over nearly 30 years — incorporating philosophical, psychological, and physiological insights{{] Evidence from neural imaging supports the warm-glow effect. A meta-analysis of 36 studies using functional magnetic resonance imaging to observe brains of individuals making decisions to give to others demonstrated that reward networks are consistently activated when giving to others. This includes the ventromedial prefrontal cortex (vmPFC). However, decisions where something was expected in return primarily activate anterior regions of the whereas decisions where nothing was expected in return activated posterior regions of vmPFC. This provided a biological distinction of helping decisions depending on the expectation of exogenous reward. A comparative fMRI meta-analysis of altruistic and strategic decisions to give. == Other applications ==

Public health One application of warm-glow giving is in pay-it-forward sexually transmitted disease (STD) testing. A gay man is given a free STD test alongside messages from the community. After they receive the test, they are asked about donating to support subsequent gay men to receive STD tests. A quasi-experimental study demonstrated that pay-it-forward increased STD testing. – it has become a better descriptive model of behavior. == Extensions ==

Some research has investigated the link between warm glow and the phenomenon of mere exposure, leading researchers to consider warm glow as a heuristic. ==References==