The Empathy Economy and the Cost of Centering Others
“Both sympathy and empathy are concepts that have been used in economics at least since the eighteenth century (Fontaine 1997, 2001). Sympathy is generally taken as the concern for the welfare of others, whereas empathy is conceived of as the capacity to put oneself in someone else's shoes and thus to share the sentiments or thoughts of that person. Despite the early interest of Smith (1759 [1976]) and Hume (1740 [2000]), it would not be true to say that both concepts have a particularly developed tradition in economics, especially insofar as empathy is concerned. It is standard to characterize the historical interest in empathy by referring to Smith's view that we can place ourselves in another person's situation by imagination and thus understand what it is like to be the other person in particular circumstances, as explained in his Theory of Moral Sentiments. However, as Fontaine (1997) shows, empathy plays a much more general role in Smith's work and also figures in his Wealth of Nations, simply because it is conducive to a successful trade between economic agents. Indeed, if one wanted to make an offer, one must do so in a way that appeals to the self-love of the trading partner. For this to happen, the traders must put themselves in the shoes of the other person and see how they would react in those circumstances. Yet, there is little evidence that subsequent economists took up this point about an advantageous change in perspectives (Fontaine 1997).
One might well ask why considerations of empathy disappeared for so long from the economics literature. One answer is that as economic theory developed and became formalized in the twentieth century, almost all of the emphasis was put on the idea of anonymous individuals satisfying specific axioms of rationality and interacting only through the market. In such a view, there was no place for the idea that individuals might want, or need, to put themselves in the place of others. However, with the development of game theory, such an idea became central. Here, the idea is that individuals interact directly and consciously with each other. Indeed, the basis of game theory is that this interaction is strategic. In that framework, unlike the standard economic model, there is what is usually referred to as the ‘common knowledge’ assumption (Aumann 1976; Binmore 1990), which means that the individuals involved reflect on the actions of the others with whom they interact and know that the others do the same. It is clear, of course, that this is a different idea from the more standard idea of empathy as an affective understanding of the emotions of another. Singer & Fehr (2005) make a distinction between the two ideas and refer to this conscious taking into account of the other as ‘mentalizing’.
But, if, as authors such as Binmore suggest, we are to build our model of society and its functioning on the basis of the strategic interaction between individuals, then we must keep this aspect of empathy as a central consideration. As Binmore (1994, p. 289) points out, empathy must not be considered as ‘some auxiliary phenomenon to be mentioned only in passing’, but rather as something basic to humanity which can enable us to understand the nature of strategic interactions between individuals. Hence, ‘Homo economicus must be empathetic to some degree’ (Binmore 1994, p. 28). This empathy, if it is to condition the way in which individuals anticipate each other's actions and coordinate, must be based on experiences with other people. It is these experiences that allow the empathizing person to better understand the position in which the other person may be. The notion of empathy in this mentalizing sense provides an important reason as to why economists have recently become more interested in this capacity.”
You have just read an excerpt from Alan Kirman’s and Miriam Teschl’s published article, “Selfish or selfless? The role of empathy in economics.” In this article, they argue that while empathy has been included in research and practice in the field of economics in some capacity throughout history, as with other policy areas, it has largely faded from the field over the last several decades.
As someone largely consumed by the study and understanding of empathy, the idea that empathy not only was an included aspect of the field of economics, but that it is no longer included at the rate it once was, troubles me. As we know, the assumptions we hold about how economic value is created plays a considerable role in policy and political decisions, as well as how goods and services are produced and valued. At a policy level, this can impact how government funding is allocated and even how social decisions like prison reform, public transportation routes, and even the addition of bike lanes are decided. And when there is a lack of empathy in these decisions, real people are often negatively affected, even without the intent to do so.
“This empathy, if it is to condition the way in which individuals anticipate each other's actions and coordinate, must be based on experiences with other people. It is these experiences that allow the empathizing person to better understand the position in which the other person may be.”
So let’s return to Binmore’s appeal above regarding empathy and Homo economicus. In A Treatise of Human Nature (1739-1740), philosopher and historian, David Hume, argued that “a necessary condition for coordinated activity was that agents all know what behavior to expect from one another.” And according to game theorist, Ken Binmore, this type of “empathetic identification” (Binmore 1994, p. 288) is foundational for flourishing human societies. Without it, he argues, individuals would be unable to achieve and sustain a level of equilibria in their interactions with others or what Binmore refers to as the “Game of Life”.
Those who know me well know that my not being able to take the infamous Game Theory course in graduate school remained for a long time a deep regret from my otherwise amazing graduate school experience. It was my assumption that by mastering game theory, I would become a decision making machine for the remainder of my life. For readers unfamiliar with this theory, game theory is a theoretical framework for conceiving social situations among competing players. More plainly, game theory is largely the science of strategy, or at least the optimal decision-making of independent and competing actors in a strategic setting (for more on game theory, see my previous article, "The Third Way: Game Theory and the Gift of Sacrifice").
The focus of game theory is, well, the game, which serves as a model for an interactive situation among individuals involved in it. The key to game theory is that one player's payoff is contingent on the strategy implemented by the other player. The game identifies the players' identities, preferences, and available strategies and how these strategies affect the outcome. As such, game theory is utilized in areas of psychology, conflict, politics, economics, and business.
What I didn’t understand then as I do now, is that game theory has a strong connection to the field of Empathic Intelligence. By identifying the player’s identities, preferences and available strategies, including how those strategies affect the outcome, game theorists are essentially creating an empathy map of the players in order to better predict what decisions those individuals will make as a result of their own circumstances.
Empathy: A Cost Benefit Analysis
So what does all of this have to do with empathy and the cost benefit analysis of centering others in today’s polarized and divided world? Quite a lot, in fact. When we make decisions, including economic ones, in the absence of empathy or empathic intelligence, we are helping to create a future that largely benefits us and people like us. By extension, it should not be a surprise to learn that it takes little sacrifice on our part to participate in creating a world – or society, or community even – that largely benefits us alone. It means thinking little about how it might impact or affect someone else’s life, and it certainly does not require sacrificing something that could essentially make our lives easier or better. But is that the economic system we really want to participate in?
If our lack of empathy only produces benefit for people who look, think, believe, or vote like us, then I would argue that not only have we fallen back to our most base, tribal nature, there is little chance that a diverse nation like the U.S. can continue to exist as a result. The idea of America is predicated on the notion that it is because of our diversity that we remain a strong, united states, not in spite of it. It also means that there is an economic value that is produced when we sacrifice for the greater good rather than our own. That good can look like fewer homeless living in tents under bridges and in cars in darkened parking lots. It can look like fewer children going to sleep hungry or without heat in their homes. It can also look like neighbors coming together to clean a neighborhood park or create a neighborhood garden. And not because it helps remove “those people” from in front of my home or out of my neighborhood, or because I will have to walk past children begging on the corner outside of my favorite restaurant, or that by building a neighborhood park, I will no longer have to hear kids playing in the street late on a summer night when I have to be at work early the next morning. The economic value that is created through empathy is bestowing good on others in a manner that sometimes directly bypasses us as individuals or even whole communities.
When we make decisions, including economic ones, in the absence of empathy or empathic intelligence, we are helping to create a future that largely benefits us and people like us.
But there is also an economic price that we pay when empathy is largely absent a society or people group. That price means the suffering of some continues unabated. It means that some go uneducated or unhoused. It means we normalize large percentages of human beings behind bars irrespective of their crime or why they committed it. It also means that we continue to live as a divided nation where we intentionally look to build community with people who are just like us. More importantly, it means that we stop “seeing” others as worthy of our sacrifice or blessing. And not only are we paying that price here at home, places like Ukraine are paying an even dearer one as a result of a world order largely driven by a “me or us first” mentality.
To love our neighbors is to empathize with them. To do that means that we must care about the circumstances of others, especially those whose lives, histories, and experiences are foreign to us. For when we care about others, we pay attention to how our own actions influence them. We remain in proximity to them and their stories, whether physically or cognitively. We seek to understand how the lives we lead intersect theirs, including how our desires, actions, and decisions impact them. And finally, when we understand that there is much we can do to help them overcome the challenges of life, we act on their behalf. You see, in the empathy economy, there is risk. The risk of empathizing too much, even to our own detriment. To become burdened by the circumstances and pains of others. There is also no equilibrium this side of heaven that the empathy economy can ever achieve. But if we act first from a posture of empathy, there is always the hope that we can get close to the stability we are seeking after for our communities, our nation, and our world.
