A Utility-Maximizing Mechanism for Vicarious Reward

Abstract

Julian Simon correctly argues that people discount what happens to their future selves in a curve more bowed than an exponential curve. His radical assertion that we relate to other people in the same way that we relate to future selves is also supportable, but his equation of social distance with temporal distance is an oversimplification. To show that empathic satisfactions can be treated like conventional economic goods, it is necessary to explain how emotional rewards, although available without fixed stimuli, are actually constrained by some kind of scarce condition. That scarce condition exists precisely because of highly bowed discount curves: maximal satisfaction from emotional rewards depends on their deferral and the consequent buildup of appetite for them; highly bowed discount curves create a relentless urge to harvest these rewards prematurely. Therefore, unless people peg their emotions to occasions that are both optimally unresponsive to their current wishes and optimally surprising, their emotional lives will have the highly satiated quality of daydreams. The richest source of external occasions to gamble on is the apparent experience of other people. This line of reasoning gives a better purchase than Simon's notion of social distance on how occasions for empathic reward are similar to conventional goods and thus can be reconciled with parsimonious economic models.