Gifts and exchanges

Citation: Kenneth J. Arrow (1972) Gifts and exchanges. Philosophy and Public Affairs (RSS)
DOI (original publisher): 10.2307/2265097
Semantic Scholar (metadata): 10.2307/2265097
Sci-Hub (fulltext): 10.2307/2265097
Internet Archive Scholar (search for fulltext): Gifts and exchanges
Tagged: Economics (RSS) gift economy (RSS), incentives (RSS), commercialization (RSS), altruism (RSS), motivation theory (RSS), crowding out (RSS), sociology (RSS), crowdingout (RSS)

Summary

Gifts and Exchanges is framed largely as a sort of critical book review of Richard Titmuss' book The Gift Relationship and was published in 1972, a year after Titmuss' book was published. The article was presented first at a conference on altruism and economics. It represents the major volley and response from the side of economics in what are sometimes called the "blood wars." Arrow has generally positive things to say about the Titmuss' book, but makes several pretty fundamental critiques of the work.

Titmuss' book, in summary, was about blood donation in the US and the UK and he makes a number of arguments against the commercialization of blood and focusing on the negative consequences. Titmuss makes one key argument that the commercialization of blood leads to "worse" blood. In particular, when people are paid for blood, there is a much greater incidence of blood donated with Hepatitis. At the time, there was no way to test for the virus in donated blood. He also makes the argument that less blood is donated when people are paid.

Arrow's response is largely based on the second suggestion that payment reduces altruistic behavior. Arrow argues that he both doesn't think this is likely and that Titmuss doesn't produce evidence that this is in fact the case. Even if blood donation in the commercialized context in the US is lower than the UK, there are many more complicated things going on. He argues that the introduction of an incentive is unlike to reduce a person's desire to do something, but it might incentivize different groups of people. In particular, he offers an economic description of how it is truth-telling about a Hepatitis infection that they really want and that without payment, there is no incentive to lie, and with payment, there is. He argues that is around the truth-telling about infection that incentives are off, not around blood donation in the first place.

The term "crowding out" had not been coined yet, but Arrow argues, and seem to imply that mainstream economics is likely to agree with him, that the very phenomena seems somewhat unlikely and at odds with accepted economic theory.

Although he puts much less emphasis on the fact, Arrow also takes issues with a number of Titmuss' empirics and with the way that some of his results are presented.

Theoretical and Practical Relevance

The article plays an important role in framing subsequent work in economics on crowding out and motivation theory more broadly. Arrow is skeptical about the idea of crowding out, but is careful to treat it as an empirical question that, intuition aside, might or might not be true. That said, this provides the go-to citation for people looking for an article in economics skeptical of crowding out and provides one of the two major pieces in one major academic fight between sociology and economics.