It Pays to Be Nice

How emotions shape our economic decisions.

Anyone who has been too scared to sell a falling stock ("But I'll lose money!") or too insulted to accept $3 from someone who intends to keep the other $7 in free money handed out in an experiment ("Why should he get so much more than me?" players of the Ultimatum Game think time and again) knows that emotions play a role in our financial decisions. Often that's to our detriment, as the burgeoning field of neuroeconomics shows. In at least one case, however, letting emotions guide us pays off for all concerned, an intriguing new study concludes—and may explain the "pay it forward" phenomenon, in which being the beneficiary of a kind or generous deed inspires you to act that way toward a third person.

Economists have long held that we treat other people fairly in economic exchanges because we think we should, reasoning that if we don't, then the cheated party will exact revenge on us down the line, or at least ruin our good name, giving us a reputation as a selfish cheat. (OK, this constraint didn't work too well when it came to selling toxic derivatives and other financial products that nearly sunk the global economy last year.) Psychologist David DeSteno of Northeastern University suspects that, instead, we act honorably—to the extent that we do—because we feel we should, not because we think we should. For one thing, emotions are much older, evolutionarily, than the ability to strategize about the future and about how your behavior will affect that of others.

"We argue that emotions must exist that foster cooperative, long-term views in economic exchange," DeSteno told me. "To echo the views of Adam Smith, humans must possess some 'moral sentiments' which lead them to show concern" for people they do business with. But until now, he notes, "little empirical evidence has been put forward to confirm" the idea that emotions underlie whatever fair, even generous, economic behavior we display. To the contrary: a 2000 study found that feeling happy did not necessarily foster economic cooperation.

In a study supported by the National Science Foundation and scheduled to be published in the journal Emotion, DeSteno and colleagues had 85 volunteers play a game in which half were made to feel grateful. In a nutshell, the volunteers finished one long and annoying task only to be told they have to do it all over because the computer recording their answers crashed—but then a fellow volunteer (actually one of the researchers) fixes the computer, at some cost to herself in time and effort but saving the real volunteers from having to redo the test. Presto: the volunteers feel immediate gratitude. (The other half of the volunteers didn't suffer the fake computer crash, so they didn't feel any particular emotion after this part of the experiment.)

All the volunteers then played one round of the " 'give some' dilemma game." Each got four tokens that were worth $1 each to them, but $2 to a partner. They could choose how many to keep and how many to give to the partner, whom they believed was making a similar decision, in another room. The best joint outcome is for each player to give all four tokens to the other, leaving each with $8 for a "communal" profit of $16. Pure self-interest, however, says to give away few or zero, ensuring that you get some or all of your initial $4, plus up to $8 more if the other player gives you all four of his tokens (leaving him with nothing, for a communal profit of $12). Half the volunteers believed they were playing the game with the person who had just helped them; the other half believed they were playing with a stranger.

People who felt gratitude because of their experience in the first part of the experiment gave away 25 percent more tokens than did control volunteers, whose emotions were not manipulated. This held whether the partner was the person to whom they felt grateful or a stranger, showing that their cooperativeness—acting for the greater good rather than out of pure self-interest—was not driven by a sense of reciprocity. Instead, says DeSteno, "the more grateful one felt as a result of receiving assistance, the more cooperatively one acted. . . . [G]ratitude functions to enhance cooperative as opposed to selfish economic behavior."

He speculates that natural selection favored the emergence of gratitude, which some of our ape cousins also seem to feel, because it helped our ancestors form stable "exchange relationships"—"you shared your mammoth with me; here, have some of my berries." But gratitude, this study shows, triggers cooperative, for-the-common-good behavior at the expense of selfishness even when the recipient of that cooperation is not the one you feel grateful to. Gratitude may thus "increase the odds for cooperation" with lots of other people. And thus was born "pay it forward."