A sideways look at economics

A few weeks ago, UK scientists reported that they had given laboratory-grown blood to humans for the first time ever. Their clinical trial is aimed at boosting the supply of very rare blood types, and helping those suffering from blood conditions such as sickle cell anaemia. Amazing, right? But it also got me thinking about how incredibly dependent the healthcare system is on the willingness of average citizens like you and me to roll up our sleeves and donate blood regularly. Considering that we humans aren’t very prone to acts of altruism, at least according to standard economic theory, it is interesting that such a system (more or less) works!

So, how have we pulled this off? How come enough people are willing to donate to make up 100% of all medical blood supply? Some countries offer incentives for blood donors, including Poland and the Czech Republic which offer tax benefits, and Greece and Bulgaria, which offer 1–2 days off work. Then there are some countries that offer payment in return: in Germany and the US, for example, there are private companies that pay people to boost donations. But according to the World Health Organisation (WHO),[1] 79 countries collect over 90% of their blood supply from voluntary, unpaid blood donors, compared to the 71 countries that received over 50% of their blood supplies from family/replacement and paid blood donors in 2013.

If we accept the definition of “Homo economicus” — the rational, self-interested person whose main focus is to maximise their own utility (happiness) — adding a financial incentive should in theory encourage people to donate blood. But in reality, as the chart above shows, a large proportion of countries don’t need to use financial incentives. And not only that — some studies on blood donation have shown that offering a monetary reward for a blood donation can actually reduce the amount of blood donated. This sounds counterintuitive, but when viewed through the lens of behavioural economics it starts to make a lot more sense.

In 1970, Richard M. Titmuss famously argued that financial incentives for blood donation would crowd out “altruistic motivations”; the act is not as moral and “good” to us anymore, and so we get less satisfaction from doing it. He argued that this could reduce the supply of blood donors overall. His theory is supported by a study by Gneezy and Rustichini (2000);[2] their test subjects were a group of high-schoolers in Israel who were asked to go out and collect charitable donations. The first group was informed they would receive no money for it; the second group was to be paid 1% of what they collected, and the third was to receive 10%. It was made clear to the groups that any payment to them was financed by the study, and not taken out of the donations to the charity. They found that the group that was not getting paid collected the most, the group getting 1% the least, and the group getting 10% was in the middle. Hence, when financial rewards are introduced for an altruistic act, that can make us less likely to do it, because it doesn’t make us feel like good people anymore. We lose some of the ‘warm glow’ effect, the satisfying feeling we get after doing what we think is the right thing. The focus of the action becomes a monetary transaction instead, and unless we get enough money, that will not boost our motivation sufficiently to make up for the loss of the altruistic perspective.

Another study[3] identified a second reason why a person might be less likely to donate blood, or behave pro-socially in general, when rewarded with money; it will alter others’ perception of the act. Image motivation is when a person is motivated by what the act will signal to others; in this case: “I donated blood! Look what a good person I am!”. When money is involved it distorts that signal, making the act lose some of its image motivation value. The paper found that when there was no financial incentive, people were more likely to donate in public settings where others could see than they were in private ones. Once payment was introduced, no change happened in the public donations but privately people donated more. A study[4] focused on a town in Italy supports these findings — it found that when donors were publicly rewarded they were more likely to donate. It is common for healthcare systems to lean into this, and offer things like stickers or mugs which show that a person has donated – enabling virtue-signalling, and hence motivating more donors.

So, when we are offered financial incentives to donate blood, it crowds out our altruistic motivations and doesn’t make us feel as good, and it distorts the signalling value of the act to others — as a result we are less interested in helping out. This paints a slightly depressing picture of how humans work, and although it definitely has some truth to it, I would still like to think that we sometimes do good things simply to help others. But then again, it could be argued that I wrote this whole blog post just as an excuse to show this picture of myself after donating blood last weekend. Look what a good person I am!

Despite the advances made with artificial blood, healthcare systems will rely on donors for a long time to come. The NHS recently had to issue an “Amber alert” as blood supplies had fallen to a critically low level in England, stating that they are in urgent need of donors. If you want to become a blood donor you can sign up here.

 

More by this author:

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[1]             https://apps.who.int/iris/bitstream/handle/10665/254987/9789241565431-eng.pdf

[2]             https://www.jstor.org/stable/2586896

[3]             https://docs.iza.org/dp2968.pdf

[4]             https://docs.iza.org/dp3771.pdf