Human beings are irrational and sometimes do things that aren't in their economic best interest out of principle or ethics. Think about it: if I murder somebody, then offer you $100 not to tell anyone, would you take the money? I certainly hope not.
And yet, from a strictly economic perspective, that's a fundamentally terrible decision. Not only will you lose $100, but you'd lose tons of time you could be working talking to the police, testifying in court, etc.
It seems that no one has mentioned that the effect of relative wealth might be severe also from a rationality point of view. In a more primitive environment, if your neighbor becomes too powerful, he might enslave or even kill you, so better keep him in his place.
Similarly, if you take the $100 and are silent, and protect the killer, you risk severe punishment if you are caught. Even if I agree that the decision is made based on moral conscience for most people rather than economic calculation (which might be the case for sociopaths), there is a rational basis for this. Fundamentally, to make sure that I don't get murdered myself by the murderer later, I better not comply with him, as he is proven to be ruthless.
In addition, because other people are moral beings as well, $100 is a very small compensation for risking jail and being shunned for the rest of your life, a very bad economic decision.
> Human beings are irrational and sometimes do things that
> aren't in their economic best interest out of principle
> or ethics.
Humans might be irrational sometimes, but this isn't one of those times. "Rationality" has no meaning outside of the context of a goal . . . the sentence I quoted makes it seem like you're saying people should only care about their economic (do you mean financial/material?) interests.
You also said
> Think about it: if I murder somebody, then offer you $100
> not to tell anyone, would you take the money? I certainly
> hope not.
so it does seem you aren't actually suggesting that.
Talking about these things from a strictly economic perspective is always tricky, because it assumes that the economic value of things like morals and ethics are zero.
I think the problem is that it's somewhat difficult to set a monetary value on the value of abstract concepts such as morals and ethics more than anything else.
Either way, it sounds like we agree that there's a social contract that may cause individuals to act in a manner that isn't immediately economically advantageous.
And yet, from a strictly economic perspective, that's a fundamentally terrible decision. Not only will you lose $100, but you'd lose tons of time you could be working talking to the police, testifying in court, etc.