Warm-glow giving

Warm-glow giving is an economic theory describing the emotional reward of giving to others. According to the original warm-glow model developed by James Andreoni (1989, 1990), people experience a sense of joy and satisfaction for "doing their part" to help others. This satisfaction - or "warm glow" - represents the selfish pleasure derived from "doing good", regardless of the actual impact of one's generosity. Within the warm-glow framework, people may be "impurely altruistic", meaning they simultaneously maintain both altruistic and egoistic (selfish) motivations for giving. This may be partially due to the fact that "warm glow" sometimes gives people credit for the contributions they make, such as a plaque with their name or a system where they can make donations publicly so other people know the "good" they are doing for the community. Whereas "pure altruists" (sometimes referred to as "perfect altruists") are motivated solely by the desire to provide for a recipient, impure altruists are also motivated by the joy of giving (warm glow). Importantly, warm glow is distinctly non-pecuniary, meaning it arises independent of the possibility of financial reward. Therefore, the warm glow phenomenon is distinct from reciprocal altruism, which may imply a direct financial incentive. Warm-glow giving is a useful economic framework to consider public good provision, collective action problems, charitable giving, and gifting behavior. The existence of a warm glow helps explain the absence of complete crowding-out of private giving by public grants, as predicted by classical economic models under the neutrality hypothesis. Beyond economics, warm glow has been applied to sociology, political science, environmental policy, healthcare, and business. Conceptually, warm-glow giving is related to the notion of a "helper's high" and appears to be resilient across cultures.

Background in moral philosophy

Warm glow is built upon the idea of impure altruism: the blend of both altruistic and egoistic desires to help others. Philosophers have debated this idea since the time of the ancient Greeks. 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. However, in Nicomachean Ethics and Eudemian Ethics, Aristotle considers both the possibility and necessity of altruism to fulfill high-order eudaimonic goals, thus setting the stage for an ongoing philosophical debate. Hobbes, Kant, Nietzsche, Bentham, J.S. Mill argued against the possibility of pure altruism 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, implying perfect substitutability between private and public contributions. The neutrality hypothesis assumes rational economic agents are indifferent to whether a cause is funded by the private or public sector; only the level of funding is relevant. 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. This is consistent with Andreoni's conceptualization of "pure altruism"; however, it is inconsistent with impure altruism or pure egoism. Thus, warm glow and the failure to act as purely altruistic present fundamental challenges to the neutrality hypothesis and Ricardian equivalence. In economics, violations to the neutrality hypothesis pose serious concerns for macroeconomic policies involving taxation and redistribution; and microeconomic theories for collective action and public good provision. Several of Andreoni's contemporaries simultaneously provided evidence against neutrality-driven crowding-out effects, including Kingma (1989) 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.

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