The Economics of Spite

What are the motives behind spite? Why are individuals willing to take on large costs in order to exact “revenge” on other? Is spite unique to humans?

In an episode of the Freakonomics radio show called Spite Happens, an economics approach is used to explain spite and takes a look at the trade-offs behind the spite mentality. Warning! The beginning of this show contains a graphic example that includes sexual violence. If you’d wish to skip this, jump to 4:12.

Imagine an experiment where individuals sit down in front of computers and are randomly paired up with another player. The players do not know each other and will not see each other again. Each player is given ten dollars and an option. One may lower their partner’s ten dollars to five dollars, by giving up one of their own dollars. The experiment found that 10% of the time, players would take this option. The experiment was repeated and varied many times by economist Benedikt Herrmann, and he found this phenomenon to be consistently prevalent. Players who were willing to destroy some of their own potential income to bring down others were termed “difference maximizers”, and support the idea that humans are relative animals. At our core, we only care about being better than those around us.

So economics says that we are competitive animals. Sophisticated, but competitive all the same. Time after time, we observe instances where individuals will hurt themselves to see others worse off. Economics is the dismal science, what else is new? Well it turns out spite has a flip side; altruism. While the two may seem like polar opposites, from an economic prospective, altruism and spite are remarkably similar. Just listen to what Steven Levitt has to say about it in the show.

     “..Both make you feel really good, it can feel good to help people sometimes and it feels so good to punish people who have wronged you. I think they are both completely consistent with the idea of people doing the best they can do.”

The show also includes interviews in topics like sports, evolutionary biology, city policy, and how they relate to economic ideas. It’s a great resource for understanding some of the more abstract economic ideas like altruism, types of public goods, and even the complex problem of how to incentivize people to “do the right thing.”

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