Warm Glow Giving

The Basic Idea

Imagine that you’re checking out your items at a shopping store, when the cashier asks if you would like to make a donation to a particular charity. Would you agree to make a donation? If so, would you be doing it because you genuinely want to, because you’ll feel better about yourself if you do, or because you feel like you should?

Warm glow giving is a behavioral economic theory that considers the personal gains – such as emotional rewards – that giving to others evokes.1 According to the theory, “warm glow” is the satisfaction people experience from “doing their part.” However, at the core of warm glow is the selfish pleasure that we feel as a result of our behavior. People’s motivation for their giving behaviors can either be impurely altruistic – motivated by the prospect of awards such as praise and respect – or purely altruistic – motivated by a genuine joy of giving.

It appears to be a matter of fact, that the circumstance of utility, in all subjects, is a source of praise and approbation … It is inseparable from all the other social virtues, humanity, generosity, charity, affability, levity, mercy and moderation.

– David Hume, philosopher and author of An Inquiry Concerning the Principles of Morals

History

The development of the warm glow model is attributed to economist James Andreoni, and was detailed in his 1989 and 1990 articles, “Giving with impure altruism: Applications to charity and Ricardian equivalence,” and “Impure altruism and donations to public goods: A theory of warm-glow giving.1 2 However, the concept of warm glow is rooted in broader philosophical, economic, and psychological principles.

Andreoni noted that models of giving were often based on altruism, influenced by increased pressures from the public to act in a socially conscious and “good” way.1 Impure altruism, a combination of altruistic and egoistic motivations to help others, has long been debated by philosophers and is the idea upon which Andreoni’s model was based. Some philosophers such as Hume and Rousseau have argued for the possibility of pure altruism, while others such as Kant and Nietzche have argued against it.3 Andreoni’s model, then, was a compromise of these opposing perspectives, as it holds that people could either be purely altruistic, purely egoistic, or impurely altruistic.2

Additionally, economic research on charitable giving at the time of Andreoni’s work focused on neutrality hypotheses, which assumed that humans are rational economic agents, indifferent to how a cause was funded.1 This means that under perfect altruism, only the amount of funding would be relevant to decisions of giving money. However, Andreoni had found empirical evidence that contradicted neutrality, which is why he developed the model for warm glow giving. People were assumed to make charitable donations for two reasons:

  1. Altruism
  2. Warm glow

Warm glow is the private benefits that people receive, such as self-satisfaction, for having done their part. Much of the research advancing the warm glow model of giving has come from psychology, especially the realm of intrinsic versus extrinsic motivation. Some researchers focus on how giving results from an intrinsic drive, due to the private emotional benefits associated with giving behaviors.4 5 However, researchers have also acknowledged that extrinsic rewards can be at play, such as the indication of prestige and a gaining of recognition – another aspect of a “warm glow.” 6 Additionally, extrinsic motivation can motivate giving behaviors, such as a fear of being reprimanded.7

While warm glow originated from economic models, the processes underlying the satisfaction associated with giving were left unaccounted for. Research since the development of Andreoni’s model – some even conducted by Andreoni himself – has suggested that warm glow is an extension of empathy. In fact, social distance from the receiver, guilt avoidance, and the perceived significance of the beneficiary have been identified as determinants of how much warm glow is allotted.8 9

People

   

James Andreoni

An economics professor at the University of California, San Diego, James Andreoni coined the term “warm glow giving” as a result of his behavioral economics and altruism research.10 His research has used a combination of experiments, analysis of survey data, and applied economic theory to explore topics such as charitable giving, moral decision making, and time preferences. Andreoni was an Alfred P. Sloan Research Fellow from 1992 to 1994, a program that rewards outstanding academics who demonstrate a potential to “revolutionize their fields of study” early on in their careers.11 Accordingly, Andreoni served as the President of the Economic Science Association from 2007 to 2009, and co-founded the Association for the Study of Generosity in Economics in 2013.12

Consequences

Warm glow giving has important implications for policy makers, especially when it comes to differentiating between extrinsic and intrinsic motivations for altruistic behaviors: extrinsic incentives related to monetary rewards (i.e. tax deductions) can undermine intrinsic motivations, which can result in a decrease in giving performance.13 14 Thus, the extent to which extrinsic incentives provided by policy makers will satisfy and substitute intrinsic motivations depends on whether warm glow is inherently perceived to be intrinsic or extrinsic.

Andreoni’s model has been applied to a variety of fields, such as sexually transmitted infections,15 electoral voting,16 environmentally conscious behaviors,17 18 and product advertising.19 Notably, researchers have also used functional magnetic resonance imaging (fMRI) to support the concept of warm glow: brain regions associated with social giving behaviors have proven to be activated when individuals made donation decisions.20 Additionally, the rewards that come from giving behaviors are neurobiologically similar to those reaped from material rewards. Psychologists and neurobiologists have come to a consensus that helping others – regardless of one’s motivations – makes people happy through the release of endorphins and oxytocin, two “happy” hormones.21

Above all, warm glow has been used to explain charitable behaviors, such as the preference to spread donations across multiple charities, instead of allocating all funds to one cause.7 Since people are likely to experience warm glow regardless of the amount they donate, they prefer to experience it multiple times across different organizations. However, research has suggested that this is inefficient donating behavior when considering the perspective of the organizations at hand, as none are able to reap maximum financial help.22

Similarly, warm glow can be used to explain inefficient decisions when selecting organizations to donate to. The majority of American charitable contributions go to art, education, or religious institutions, while very few contributions are directed to issues such as foreign aid.23 A pure altruist would want their donations to go toward the worthiest cause for social improvement, so inefficient organization selections can be attributed to impure altruists.7 If the goal of giving behaviors is to experience a self-fulfilling warm glow, then such “altruists” may care less about the actual cause.1

Controversies

The warm glow model of giving has been widely accepted and applied, however not without critique. The first criticism is that the model seems ad hoc, created for its targeted purpose of explaining self-motivated prosocial behavior and not generalizable to other contexts.22 Even Andreoni himself has acknowledged this, but as research on warm glow has increased since the model’s conceptualization, it has become a more descriptive model of behavior.

The second criticism is that in order for the model to be true, such that individuals gain emotional rewards from helping behaviors, they must believe their actions to be purely altruistic.7 To this end, everyone who experiences warm glow – assuming the model is accurate – is self-deceiving. However, the criticism should recognize that according to the original model, in order for warm glow to exist, pure altruism is not possible, as it is inherently self-motivated.2

Case Study

Avoidance of charitable donations

In 2017, Andreoni recognized that his warm glow model provided a direction for research on helping behaviors, rather than a complete answer to the question of why people give. Warm glow is relevant, but only an umbrella term under which specific individual and social motivations fall.24

Andreoni and colleagues thus wondered if warm glow could explain both giving and avoiding behaviors. If giving behaviors were motivated by factors that increase empathy in the potential giver, resolving that feeling would either come from giving accordingly and feeling good about it, or by not giving and feeling guilty. If so, could people who were cognizant of their vulnerability to guilt-inducing stimuli (such as other people knowing they did not donate) control their exposure to said stimuli, and thus control their resulting emotions and actions? In other words, maybe if people could avoid guilt-inducing situations like being asked to donate at the grocery store and having to turn down the request, they could avoid guilt-induced behaviors.

Andreoni and colleagues tested this theory by implementing the Salvation Army Red Kettle Campaign, one of the most known fundraising campaigns in the United States.24 Occurring in the weeks leading up to Christmas, volunteers dress up in holiday outfits and ring bells, asking people for donations as they pass by. The campaign is known to raise millions of dollars each year and funds are used to provide food, toys, and clothing for those who can’t afford them during the holidays. As a result, the researchers believed that the campaign would be perceived by participants as a worthy, legitimate cause.

The researchers set up Salvation Army volunteers for the Red Kettle Campaign at a grocery store, where customers experienced one of four conditions.24 The volunteers would either ring the bell, make eye contact with customers and explicitly ask for donations, or they would simply ring the bell to draw attention. Additionally, there were either volunteers at both doors to the store, or there were volunteers at only one door, leaving another empty.

The researchers found that avoidance was higher when there were only volunteers at one door, since customers could then have a “credible” excuse for both themselves and others, if asked why they did not donate: perhaps they just missed the volunteers, and would’ve donated otherwise! Additionally, donations were much higher when customers were explicitly asked.

The researchers used warm glow to explain these results: although warm glow is commonly associated with the positive benefits of donating, people may also want to avoid the negative outcomes of not donating, such as social stigma.24 To avoid the feelings of guilt that occur when one feels like they should donate but don’t want to, people engage in strategic avoidance behaviors to maintain positive self-concepts. With this explanation in mind, the researchers posited that in real life, empathetic people who aren’t able to donate due to financial reasons would have the greatest incentives to avoid donation requests.

Related TDL Content

Selfish altruism: A win-win?

The concept of warm glow giving is inherently tied to selfish altruism, and the notion of “selfish” seems intuitively negative. However, could warm glow giving and selfish altruism be wholly positive, for both giver and receiver? Take a look through this article to consider this question in its application to finance.

The game that keeps on giving

Check out this article that uses the behavioral economics principle of game theory to differentiate between “selfish” altruists (ie. warm glow giving) and “pure” altruists. This distinction can be especially helpful for organizations making donation requests, as they can target their marketing toward the motivation of warm glow givers.

Sources

  1. Andreoni, J. (1989). Giving with impure altruism: Applications to charity and Ricardian equivalence. Journal of Political Economy, 97(6), 1447-1458.
  2. Andreoni, J. (1990). Impure altruism and donations to public goods: A theory of warm-glow giving. The Economic Journal, 100, 464-477.
  3. Doris, J., Stitch, S., Philips, J., & Walmsley, L. (2017). Moral Psychology: Empirical Approaches. The Stanford Encyclopedia of Philosophy, Stanford University.
  4. Evern, O., & Minardi, S. (2013). Warm-glow giving and freedom to be selfish. HEC Paris Research Paper No. ECO/SCD-2013-1011.
  5. Glazer, A., & Konrad, K. A. (1996). A signaling explanation for charity. The American Economic Review, 86(4), 1019-1028.
  6. Tonin, M., & Vlassopoulos, M. (2010). Disentangling the sources of pro-socially motivated effort: A field experiment. Journal of Public Economics, 94(11-12), 1086-1092.
  7. Illingworth, P., Pogge, T., & Wenar, L. (2011). Giving Well: The Ethics of Philanthropy. Oxford University Press.
  8. Small, D. A., & Loewenstein, G. (2003). Helping a victim or helping the victim: Altruism and identifiability. Journal of Risk and Uncertainty, 26, 5-16.
  9. Andreoni, J., Rao, J. M., & Trachtman, H. (2017). Avoiding the ask: A field experiment on altruism, empathy, and charitable giving. Journal of Political Economy, 125(3), 625-653.
  10. Payne, A. A. (2014). Introduction to the special issue celebrating 25 years of warm glow. Journal of Public Economics, 114, v.
  11. Sloan Research Fellowships. (2021). Alfred P. Sloan Foundation. https://sloan.org/fellowships/
  12. Important Dates in ESA History. (2021). Economic Science Association. https://www.economicscience.org/page/history
  13. Lilley, A., & Slonim, R. (2014). The price of warm glow. Journal of Public Economics, 114, 58-74.
  14. Frey, B. S., & Oberholzer-Gee, F. (1997) Cost of price incentives: An empirical analysis of motivation crowding-out. The American Economic Review, 87(4), 746-755.
  15. Li, K. T., Tang, W., Wu, D., Huang, W., Wu, F., Lee, A., … & Tucker, J. D. (2019). Pay-it-forward strategy to enhance uptake of dual gonorrhea and chlamydia testing among men who have sex with men in China: A pragmatic, quasi-experimental study. Lancet Infectious Diseases, 19(1), 76-82.
  16. Riker, W. H., & Ordeshook, P. C. (2014). A theory of the calculus of voting. American Political Science Review, 62(1), 25-42.
  17. Menges, R., Schroeder, C., & Traub, S. (2005). Altruism, warm glow and the willingness-to-donate for green electricity: An artefactual field experiment. Environmental and Resource Economics, 31(4), 431-458.
  18. Van der Linden, S. (2015). Intrinsic motivation and pro-environmental behaviour. Nature Climate Change, 5(7), 6120613.
  19. Andrews, M., Luo, X., Fang, Z., & Aspara, J. (2014). Cause marketing effectiveness and the moderating role of price discounts. Journal of Marketing, 78(6), 120-142.
  20. Moll, J., Krueger, F., Zahn, R., Pardini, M., de Oliveira-Souza, R., & Grafman, J. (2006). Human fronto-mesolimbic networks guide decisions about charitable donation. Proceedings of the National Academy of Sciences of the United States of America, 103(42), 15623-15628.
  21. Dossey, L. (2018). The helper’s high. Explore, 14(6), 393-399.
  22. Null, C. (2011). Warm glow, information, and inefficient charitable giving. Journal of Public Economics, 95(5-6), 455-465.
  23. Giving USA 2020. (2020, June 16). Giving USA. https://givingusa.org/giving-usa-2020-charitable-giving-showed-solid-growth-climbing-to-449-64-billion-in-2019-one-of-the-highest-years-for-giving-on-record/
  24. Andreoni, J., Rao, J. M., & Trachtman, H. (2017). Avoiding the ask: A field experiment on altruism, empathy, and charitable giving. Journal of Political Economy, 125(3), 625-653.

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