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10.3 ALTRUISTIC ALLOCATION MODELS

If the assumed individual criterion of a rational donor-altruist is his probability of (economic) survival inclusive of his community memberships, the degree (intensity) of his sense of belonging manifests itself in his decision-making problem as the relative magnitude of his aversion to situations threatening the survival of community members or of the community as a whole. By "relative" here we mean relative to the magnitude of his aversion to situations threatening the survival of the individual himself. A greater sense of belonging to a given community compared to other communities does not necessarily mean that the individual will leave them sooner: it depends on the situation and on the set of feasible solutions to his decision-making problem. A greater sense of belonging to a given community means that leaving that community represents a greater relative loss (relative to other communities) for the individual, which, however, the individual can be forced into by the situation. Therefore, we do not adopt Hirschman's term "loyalty" but use the term "sense of belonging": an individual can (at a given moment in time and under the pressure of circumstance) cease to be loyal to a community but still have an intense feeling for it and perceive his non-membership as a loss (one that will allow him to avoid a greater loss). Belonging is a matter of individual preferences, whereas loyalty is a matter of individual behaviour.[1]

Individuals with a feeling of belonging do not, of course, set their own interests and the interests of the community against each other (like an egoist), but rather set them side by side. They seek a decision that will support the simultaneous survival of themselves and the community or those close to them. They therefore behave altruistically — to the detriment of their own prosperity they provide resources to other individuals who are members of the community or whom they regard as members of the community, be it a for mal or an in for mal one.

In the following text we will give several examples of models of altruism where a rational altruist (donor, sponsor) provides a financial subsidy to recipients and thereby reduces their threat of extinction at the cost of a threat to 127

127 We can illustrate this using the situational risk aversion model in Hlavacek, J., et al: Mikroekonomie sounalezitosti se spolecenstvfm. Praha: Karolinum, 1999, pp. 176-82. An entrepreneur who feels himself to be member of a community of trustworthy [not excessive risk-taking) individuals is forced by the pressure of circumstances (in the interests of maximizing his probability of survival] to renounce his membership of that community and embark on a high-risk project (which offers him at least some chance of survival]. He may perceive this as a greater loss than quitting the community of entrepreneurs, but the latter would not increase his probability of survival. His sense of belonging (the weight of the community in the individual's criterion) is higher with regard to the first community (trustworthy individuals), but the individual nevertheless (as a result of a particular situation, i.e. a particular set of feasible solutions to his decision-making problem) remains loyal to the second community (the association of entrepreneurs).

himself. We will show how the optimum amount of a gift (subsidy) provided to a supported individual or the optimum allocation of a subsidy to individual recipients changes fundamentally depending on the criterion of the donor.

We assume that survival depends exclusively on income and we will again work with the first-order Pareto distribution, which displays zero probability for income at the survival zone boundary and a probability converging to one as income tends to infinity. The symbols used have the following meanings: b0 the extinction zone boundary of the donor, b1 the extinction zone boundary of the recipient, a the amount of the subsidy,

d the donor's income be for e implementing the subsidy.

We assume that the recipient has no income be for e the subsidy is implemented. We therefore assume for simplicity that the subsidy a is his only income.

By applying the first-order Pareto distribution to the survival probabilities of the two individuals under consideration[2] we obtain:

  • [1] We can illustrate this using the situational risk aversion model in Hlaváček, J., et al.: Mikroekonomie sounáležitosti se společenstvím. Praha: Karolinum, 1999, pp. 176–82. An entrepreneur who feels him-self to be member of a community of trustworthy (not excessive risk-taking) individuals is forced by the pressure of circumstances (in the interests of maximizing his probability of survival) to renounce his membership of that community and embark on a high-risk project (which offers him at least some chance of survival). He may perceive this as a greater loss than quitting the community of entrepreneurs, but the latter would not increase his probability of survival. His sense of belonging (the weight of the community in the individual's criterion) is higher with regard to the first community (trustworthy individuals), but the individual nevertheless (as a result of a particular situation, i.e. a particular set of feasible solutions to his decision-making problem) remains loyal to the second community (the association of entrepreneurs).
  • [2] See section 1.3.1.
 
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