The Socially Optimal Level of Altruism∗

It is already recognized that altruism may sometimes have socially counterproductive effects. This paper presents a sequential punishment model – akin to an infinitely-repeated stage game, but sufficiently simple to allow determinate optimal penal codes to be derived and used to sustain a socially efficient equilibrium. High levels of altruism are shown to break this equilibrium. Although the model is a stylized representation of social interaction, the key effects that drive the results should appear in many more specific examples. These are the temptation effect (more altruistic individuals are less tempted to do harm to others), the willingness effect (more altruistic individuals are less willing to inflict punishment), and the severity effect (some punishments, such as a fine where the revenue is redistributed, are less severe for more altruistic individuals). 1 Introduction- A Parable [W]hen altruism improves static non-cooperative outcomes, it lessens the severity of credible punishments. An altruist may well be perceived as a “softy ” and his threats may not be taken seriously