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Brains 2: Taxation Bugaloo

Having read the full paper that I mentioned here, I think some of my initial reservations, which were based on a synopsis, were a little misplaced. Which, frankly, should come as a shock to no one. Maybe the reviewers at Science know more about good science than I do, whoda thunk it? In any case, Harbaugh and his co-authors were looking for the hedonic rewards granted by both voluntary giving and mandatory transfer. They were doing this in an isolated, controlled environment Essentially, by examining the activity in the parts of the brain known to be associated with feelings of satisfaction, they worked to understand the different neural effects of giving to a charity and being made to give to a charity.

By doing this, Harbaugh et al*. were able to look at whether a motive of pure altruism existed, or if the data were consistent with the “warm glow” theory of giving (a good feeling from the sense of agency associated with voluntary giving). Purely altruistic giving may be reduced by government spending, where warm glow giving wouldn’t be. Why people give to charity, therefore, is an important question when it comes to the provision of public goods. If we provide them through taxation, and people are purely altruistic, then you’d expect them to quit donating to private charities as a result. On the other hand, if they are motivated solely by the good feeling they get from the choice of giving, you wouldn’t expect charitable giving to be reduced by taxation.

The study used 19 women&#8212and using just women is pretty common in psychological studies for reasons I can’t remember, so don’t get all upset about not including men&#8212but did many trials with each. And, as the authors were not looking to prove a particular statement about the general population, but rather test for the existence of certain motives for charitable giving, I think my worry about the size of the sample was not really on the mark. I also think whether or not a food bank is a good proxy for taxes is completely irrelevant to the question that the authors were looking to answer with this paper. I will quote their conclusion in hopes that it is clearer than I can be (if that’s a problem, please let me know and I’ll take it down):

In summary, we find that three very different things—monetary payoffs to oneself, observing a charity get money, and a warm-glow effect related to free choice—all activate similar neural substrates. This result supports arguments for a common “neural currency” of reward (25–29) and shows that this model can be applied not just to choice over money, risk, and private consumption goods, but also to more abstract policy choices involving taxation and charitable giving (12). Our results are also important for understanding why people give money to charitable organizations.

First, these transfers are associated with neural activation similar to that which comes from receiving money for oneself. The fact that mandatory transfers to a charity elicit activity in reward-related areas suggests that even mandatory taxation can produce satisfaction for taxpayers. A better understanding of the conditions under which taxation elicits “neural rewards” could prove useful for evaluating the desirability of different tax policies. Second, we show that the opportunity for free choice is associated with increased activity in regions implicated in processing rewards, as well as with higher reported satisfaction. Furthermore, this effect is not entirely accounted for by increased payoffs. In the context of charitable giving, this choice-related benefit is consistent with a warm-glow motive for giving.

In combination, these results suggest that both pure altruism and warm glow are important motives for charitable giving. Future work may reveal whether the free-choice effect found here extends to other situations, and under which conditions taxation elicits “neural” rewards. A related question is whether people who vote for a tax to provide a public good get a warm-glow benefit.

Last, public goods by their very nature are seldom traded in markets, and so we cannot observe the prices people will pay and then use these to measure value. The finding that neural activity predicts voluntary donations suggests that such activity could eventually help measure values and determine optimal levels of public goods.

*Ulrich Mayer, UO Department of Psychology & Daniel R. Burghart, UO Department of Economics

  1. Timothy says:

    “People might like taxes!” is a way bigger attention grabber than, “neuroscience study indicates that charitable giving and mandatory giving to the same cause active the same part of the brain.”

  2. Colin says:

    I too, am finding my initial reactions a bit rash. Well, I made the mistake of actually trusting the science journals where I first read about this to provide unbiased interpretation. As I read the actual study itself – I find it has a lot more about how the brain deals with giving in general. Why the scientific journals and MSM chose to run with the whole taxes angle seems suspect.

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