Is Altruism Futile? Altruistic Career Choices in General Equilibrium

Abstract

When choosing a career, it is common to care not just about income, but also about contributing to a better world. This paper studies the implications of such altruistic preferences in general equilibrium. I propose a model where firms differ in the negative externalities they generate and some altruistic workers internalize these externalities when choosing where to work. A futility result emerges: when altruistic workers are few, their decision to avoid high-externality firms has zero effect on outcomes. Every altruist who leaves a high-externality firm is replaced by a non-altruistic worker. I then show that three realistic features break this futility. First, with many firms, altruists can overcome futility by concentrating in a single clean firm; this reduces the externality and improves social welfare. Second, a non-profit sector provides an alternative channel: altruists can work at for-profit firms and donate to the non-profit, which produces a positive externality. Third, when workers differ in how well they match with different employers, altruists who leave a high-externality firm are no longer perfectly replaced, so their departure reduces the externality. A unifying "no free lunch" result ties these findings together—altruistic behavior cannot be simultaneously effective in reducing the externality and costless to the altruist: when altruism is effective, it necessarily reduces their experienced well-being. This result extends to existing models of ethical consumption and ESG investing. In the full model, altruists face a three-way choice: working at a low-externality firm, working at the non-profit, or earning to give by working at a high-paying firm and donating. Without heterogeneous match quality, altruists are indifferent between these three strategies in equilibrium. With match quality, indifference breaks and altruists sort into strategies according to their comparative advantage relative to other altruists.

Keywords: altruism, general equilibrium, occupational choice, externalities, non-profit sector, effective altruism, earn to give

JEL Classification: D50, D62, D64, J24, J31, L31