CEDE Seminar - Rachid Laajaj

This work emphasizes the central role of skill and altruism in development, understood as an increase in social welfare. In the basic model, skill expands the set of feasible payoffs, while altruism governs the private–social tradeoff in the decision maker’s choice. Higher altruism consistently increases social welfare. By contrast, higher skill needs not: capability expansions combine a positive frontier effect with an ambiguous reallocation effect, potentially toward actions that are privately attractive but socially harmful. When altruism is absent or low, whether more skill contributes to development is therefore subject to a “lottery of technology.” Hence altruism acts as a guardrail, limiting misuse of technology, thus when altruism is sufficiently high, skill improvement unambiguously raises social welfare. The rest of the paper discusses possible counterarguments to the central role of altruism in development. Endogenous technological change makes altruism more influential in the long-run. The effect of institutions is subject to a “lottery of alignment of interests” (between policymakers’ objectives and social welfare), unless the altruism of policymakers is high enough to ensure the good use of institutional power. Allowing altruism to be group-specific highlights that only universal, indiscriminate altruism guarantees development and the effective use of skill improvement. This basic setting appears to speak to many contemporaneous and historical events, and the role of altruism leads to the conclusion that ensuring long-term development requires a selection of altruistic leaders and a shift in the distribution of altruism.