When Punishment Doesn’t Pay: Cold Glow and Decisions to Punish

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Economic theories of punishment focus on determining the levels that provide maximal social material payoffs. In other words, these theories treat punishment as a public good. Several parameters are key to calculating optimal levels of punishment: total social costs, total social benefits, and the probability that offenders are apprehended. However, levels of punishment are often determined by aggregating individual decisions. Research in behavioral economics, psychology, and neuroscience shows that individuals appear to treat punishment as a private good (cold glow). This means that individual choices may not respond appropriately to the social parameters. We present a simple theory and show in a series of experiments that individually chosen punishment levels can be predictably too high or too low relative to those that maximize social material welfare. Our findings highlight the importance of the psychology of punishment for under-standing social outcomes and for designing social institutions.

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