We develop a theory of prosocial behavior that combines heterogeneity in individual altruism and greed with concerns for social reputation or self-respect. Rewards or punishments (whether material or imagerelated) create doubt about the true motive for which good deeds are performed and this "overjustification effect" can induce a partial or even net crowding out of prosocial behavior by extrinsic incentives. We also identify the settings that are conducive to multiple social norms and more generally those that make individual actions complements or substitutes, which we show depends on whether stigma or honor is (endogenously) the dominant reputational concern. Finally, we analyze the socially optimal level of incentives and how monopolistic or competitive sponsors depart from it. Sponsor competition is shown to potentially reduce social welfare.Keywords: altruism, rewards, motivation, esteem, crowding out, overjustification effect, identity, social norms, morals, greed, psychology JEL Classification: D64, D82, H41, Z13. People commonly engage in activities that are costly to themselves and mostly benefit others. They volunteer, help strangers, vote, give to political or charitable organizations, donate blood, join rescue squads, or even sacrifice their life for strangers. In experiments, many subjects also display altruistic or reciprocal behaviors. At the same time, a number of important phenomena and puzzles cannot be explained by the sole presence of individuals with other-regarding preferences. What is therefore the broader set of motives that shape people's social conduct, and do how these interact with each other and the economic environment? Contact InformationA first puzzle is that providing rewards and punishments to foster prosocial behavior sometimes has a perverse effect, reducing the total contribution provided by agents. Such a crowding-out of "intrinsic motivation" by extrinsic incentives has been observed in a broad variety of social interactions (see Bruno

A central tenet of economics is that individuals respond to incentives. For psychologists and sociologists, in contrast, rewards and punishments are often counterproductive, because they undermine "intrinsic motivation". We reconcile these two views, showing how performance incentives offered by an informed principal (manager, teacher, parent) can adversely impact an agent's (worker, child) perception of the task, or of his own abilities. Incentives are then only weak reinforcers in the short run, and negative reinforcers in the long run. We also study the effects of empowerment, help and excuses on motivation, as well as situations of ego bashing reflecting a battle for dominance within a relationship.

Society's demands for individual and corporate social responsibility as alternative responses to market and distributive failures are becoming increasingly prominent. We draw on recent developments in the psychology and economics of prosocial behaviour to shed light on this trend and the underlying mix of motivations. We then link individual concerns to corporate social responsibility, contrasting three possible understandings of the term: firms' adoption of a more long-term perspective, the delegated exercise of prosocial behaviour on behalf of stakeholders, and insider-initiated corporate philanthropy. We discuss the benefits, costs and limits of socially responsible behaviour as a means to further societal goals.

We analyze the value placed by rational agents on self-con dence, and the strategies employed in its pursuit. Con dence in one's abilities generally enhances motivation, making it a valuable asset for individuals with imperfect willpower. This demand for self-serving beliefs (which can also arise from hedonic or signaling motives) must be weighed against the risks of overcon dence. On the supply side, we develop a model of self-deception through endogenous memory that reconciles the motivated and rational features of human cognition. The resulting intrapersonal game of strategic communication typically leads to multiple equilibria. While "positive thinking" can improve welfare, it can also be self-defeating (and nonetheless pursued).Believe what is in the line of your needs, for only by such belief is the need ful lled . . . Have faith that you can successfully make it, and your feet are nerved to its accomplishment [William James, Principles of Psychology].I have done this, says my memory. I cannot have done that, says my pride, remaining inexorable. Finally-memory yields [Friedrich Nietzsche, Beyond Good and Evil].I had during many years followed the Golden Rule, namely, that whenever a published fact, a new observation or thought came across me, which was opposed to my general results, to make a memorandum of it without fail and at once; for I had found by experience that such (contrary and thus unwelcome) facts and thoughts were far more apt to escape from memory than favorable ones [Charles Darwin in The Life of Charles Darwin, by Francis Darwin]. INTRODUCTIONThe maintenance and enhancement of self-esteem has always been identi ed as a fundamental human impulse. Philosophers, writers, educators, and of course psychologists all have emphasized the crucial role played by self-image in motivation, affect, and social interactions. The aim of this paper is to bring * This paper was previously titled "Self-Con dence: Intrapersonal Strategies [1999]." For helpful comments and discussion we are grateful to Dilip Abreu, Olivier Blanchard, Isabelle Brocas, Edward Glaeser, Daniel Gilbert, Ian Jewitt, David Laibson, George Loewenstein, Andrew Postlewaite, Marek Pycia, Matthew Rabin, Julio Rotemberg, and three anonymous referees. We also thank conference and seminar participants at the University of Chicago, Columbia University, Cornell University, the Massachusetts Institute of Technology, the National Bureau of Economic Research, Northwestern University, New York University, the Oxford Young Economists' Conference at Oxford University, the University of Pennsylvania, Princeton University, Stanford University, and Yale University. Bénabou gratefully acknowledges nancial support from the National Science Foundation (SES-0096431). 871 these concerns into the realm of economic analysis, and show that this has important implications for how agents process information and make decisions. Conversely, the tools of economic modeling can help shed light on a number of apparently irrational behaviors documented by psychologists...

This paper develops a theory of inequality and the social contract aiming to explain how countries with similar economic and political "fundamentals" can sustain such different systems of social insurance, fiscal redistribution, and education finance as those, of the United States and Western Europe. With imperfect credit and insurance markets some redistributive policies can improve ex ante welfare, and this implies that their political support tends to decrease with inequality. Conversely, with credit constraints, lower redistribution translates into more persistent inequality; hence the potential for multiple steady states, with mutually reinforcing high inequality and low redistribution, or vice versa.

We develop a theory of prosocial behavior that combines heterogeneity in individual altruism and greed with concerns for social reputation or self-respect. Rewards or punishments (whether material or imagerelated) create doubt about the true motive for which good deeds are performed and this "overjustification effect" can induce a partial or even net crowding out of prosocial behavior by extrinsic incentives. We also identify the settings that are conducive to multiple social norms and more generally those that make individual actions complements or substitutes, which we show depends on whether stigma or honor is (endogenously) the dominant reputational concern. Finally, we analyze the socially optimal level of incentives and how monopolistic or competitive sponsors depart from it. Sponsor competition is shown to potentially reduce social welfare.Keywords: altruism, rewards, motivation, esteem, crowding out, overjustification effect, identity, social norms, morals, greed, psychology JEL Classification: D64, D82, H41, Z13. People commonly engage in activities that are costly to themselves and mostly benefit others. They volunteer, help strangers, vote, give to political or charitable organizations, donate blood, join rescue squads, or even sacrifice their life for strangers. In experiments, many subjects also display altruistic or reciprocal behaviors. At the same time, a number of important phenomena and puzzles cannot be explained by the sole presence of individuals with other-regarding preferences. What is therefore the broader set of motives that shape people's social conduct, and do how these interact with each other and the economic environment? Contact InformationA first puzzle is that providing rewards and punishments to foster prosocial behavior sometimes has a perverse effect, reducing the total contribution provided by agents. Such a crowding-out of "intrinsic motivation" by extrinsic incentives has been observed in a broad variety of social interactions (see Bruno

Even relatively poor people oppose high rates of redistribution because of the anticipation that they, or their children, may make it up the income ladder. This "prospect of upward mobility" (POUM) hypothesis is often advanced as one of the factors limiting the extent of redistribution in democracies. But is it compatible with all voters holding rational expectations? This paper establishes the formal basis for the POUM mechanism. There is a range of incomes below the mean where agents oppose lasting redistributions, if (and, in a sense, only if) tomorrow's expected income is increasing and concave in today's income. The coalition against more redistributive policies is larger, the more concave the transition function, and the longer the policy horizon. We illustrate the general analysis with an example where, in every period, 3/4 of families are poorer than average, yet a 2/3 majority has expected future incomes above the mean, and therefore desires low tax rates for all future generations. Using mobility matrices from the PSID, we also make a …rst pass at an empirical assessment of the POUM mechanism. We …nd that this e¤ect is indeed present in the data, but probably dominated by the demand for insurance.

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