PPE Research Fellow Focus: Byron Tsang

Dr. Byron Tsang, Associate Professor in the Department of Economics, served as PPE Research Fellow in the academic year 2021-2022. He spent his fellowship time working on the moral philosophy of Adam Smith (1723-1776), trying to formalize the ideas of sympathy and impartial spectator into a mathematical model.

Dr. Tsang used his fellowship funds to support an undergraduate research assistant and research materials. Over the academic year, besides writing several pieces on Smith for a general audience, Dr. Tsang spent most of his time working on the project relating to ‘the other book’ by Smith – The Theory of Moral Sentiments.

Dr. Tsang notes: “When I was teaching Smith’s The Theory of Moral Sentiments in class, I realized how much of his system overlaps with models in game theory, network economics, and social dynamics. Given that until recently The Theory of Moral Sentiments was not as well-known to economists as The Wealth of Nations, no one has really made that connection. I wanted to give it a shot and see what I will find.”

One of the main themes of The Theory of Moral Sentiments is that sympathy (which is close to the modern concept of empathy) is behind all our feelings and actions. For example, when you see that someone is angry about something, you will try to put yourself into the position of that person to try to find whether you agree with that sentiment. 

Through the imaginative process of sympathy, individuals are always judging others and at the same time being judged. Based on Smith’s assumption that we all receive pleasure from agreement in sentiments or mutual sympathy, we adapt and adopt our feelings and actions to fit in and, as a result, norms and conventions are formed in our society as a spontaneous order, analogous to how prices are determined in the marketplace.

Dr. Tsang clarifies: “My background in macroeconomics certainly helps me to turn all these ideas into a dynamic model, but beyond that, I am terribly ignorant. To fill that knowledge gap, and to make good use of my time during the pandemic, I read up on moral philosophy, psychology, social norms, conventions, and game theory, which are all subjects that naturally fall into the PPE scope.” 

In the game-theoretic model that Dr. Tsang developed, agents are assumed to meet randomly and play the ultimatum game: one player decides how to split a dollar and the other player either accepts the split or rejects. If the other player accepts, each player gets an amount based on the split. If the other player rejects, both get nothing. 

It turns out that people not only value money, but also care about whether their actions agree with the sentiments of others. Dr. Tsang’s model shows that, when people both maximize their benefit and avoid offending others, then the pleasure of mutual sympathy typically helps society to move toward the establishment of social norms and reducing the number of rejections.

Also, the idea of ‘impartial spectator’ naturally arises in this context as an aggregate of all the people an agent has met. Just like when making a moral choice in life, we often make use of the viewpoints of our parents, close friends, or others who have a great influence on us, as if they were looking over our shoulders.

Dr. Tsang concludes: “Without the generous help of the PPE fellowship, this project would not have been possible. I have learned so much about other disciplines and deepened my understanding of Smith’s moral philosophy. In this academic year, together with my two collaborators (one undergraduate student and one graduate student), I plan to extend the model and consider issues like generational effects, social segregation, cooperation, and education. I also look forward to talking about these ideas in my Adam Smith course in the spring semester 2022!” 

To learn more about the Kellogg Center’s research fellowships, please visit this link.