Survival of Altruistic Preferences in a Large Population Public Goods Game

Journal: Economics Letters

Abstract: The traditional economic theory assumes that individuals are motivated solely by self-interest. As a result, in large population models where all agents interact, altruistic preferences would not survive, and societies would not be able to sustain socially beneficial outcomes when cooperation is necessary. Yet, many large societies do manage to preserve and protect their environment and natural resources like forests and freshwater resources and provide vital physical and social infrastructure like transport, health, and education services. Moreover, there is experimental evidence that individuals may have altruistic or other-regarding preferences e.g., Andreoni et al. (2010) and Drouvelis (2021). The main aim of this paper is to explain why and how altruistic preferences can survive in large population games. The paper argues that more altruistic agents generate greater positive externalities in Nash equilibrium, and the strength of institutions determines the benefits to agents from externality. This implies that stronger institutions confer an evolutionary advantage on more altruistic preferences. Therefore, empowering institutions can enable the growth of altruistic preferences in society.