Altruistic giving and risk taking in human affairs

Abstract

The purpose of this paper is to provide a general proposition of the relationship between altruism and risk taking. As explained in the body of the paper, we diverge from a result reported in Stark et al. (2022) and provide an expansion and a generalization of a preliminary result reported in Stark (2024). In a broad utility framework, we study the risk aversion of an altruistic person who is an active donor (benefactor) and the risk aversion of a beneficiary of an altruistic transfer. In both cases, we find that altruism lowers risk aversion. The specific case in which the utility functions of the benefactor and of the beneficiary are constant relative risk aversion (CRRA) functions constitutes a vivid example of lesser risk aversion characterization. We conclude that in terms of risk-taking behavior, a “population” endowed with altruism is uniformly more willing to take risks than a comparable “population” devoid of altruism.