How does society shape the preferences of individuals?
Jul 2026
Thought Supply
Episode summary
Ernst Fehr has spent decades studying what really motivates human behavior – fairness, reciprocity, and the social preferences that standard economics long ignored. He asked questions that the discipline was not yet ready to embrace – and when his ideas met resistance, he looked for new ways to test them. In the latest episode of Thought Supply, he sits down with colleague Roberto Weber to reflect on his research, his intellectual journey, and the questions that still keep him up at night.
How does society shape the preferences of individuals? It is a question that could come from a philosopher, a sociologist, or a young student wrestling with the world's injustices for the first time. It comes, in fact, from Ernst Fehr – at 70, one of the most influential behavioral economists of his generation, celebrated this summer at a conference in his honor at the University of Zurich.
Sitting down with fellow behavioral economist Roberto Weber, Fehr reflects on the intellectual journey that shaped his research agenda and the questions that continue to motivate his work. Weber begins where the story naturally starts: what drew Ernst Fehr to economics in the first place, and what kept him there when the field pushed back?
Early obstacles, lasting convictions
Fehr's path into economics was not shaped by an inspiring professor or a single transformative lecture. As a young man, he became increasingly aware of the vast inequalities and injustices that existed in the world and noticed that many of them were closely linked to economic phenomena. He wanted to understand them – and ultimately to help find remedies. When he arrived at the University of Vienna in the mid-1970s, he encountered a discipline that was, by his own description, “pretty narrow”: dominated by competitive price theory and general equilibrium models, with relatively little empirical research. He was largely self-directed, drawing inspiration less from his professors than from authors who crossed disciplinary boundaries and connected economics to broader social questions.
That independent mindset was tested early. In the late 1980s, Fehr wrote a paper on fairness in labor markets, building on efficiency wage theories and George Akerlof’s gift exchange model. He wanted to incorporate fairness directly into the utility function. The paper was rejected everywhere. Rather than abandoning the idea, he drew a different conclusion. “It is not important for scientific progress whether a theory is elegant or whether it is beautiful,” he recalls. “The only thing that matters is whether a theory is empirically true.”
That conviction led him toward experimental economics. Not as a career strategy, but as the most rigorous way to test whether the phenomenon he believed existed could actually be observed. His first labor-market experiment, later published in the Quarterly Journal of Economics, produced findings that challenged prevailing assumptions. Many employers in the experiment voluntarily offered wages above the competitive level, and workers reciprocated with higher effort.. Fairness concerns did not simply disappear in competitive markets. They persisted even in environments characterized by competition and repeated interaction. For Fehr, it was an uphill battle, but one grounded in evidence that proved remarkably durable.
The researcher’s instinct
For Fehr, the most exciting moments in research have never been the ones that confirmed what he already suspected. Scientific progress, as he describes it, is often less a linear journey than a series of productive detours. “What I found most exciting in my research career,” he says, “is those situations where I want to go to A, I discover something along the road to A, and the thing I discover is much more important or interesting than A.”
One of his most influential research programs began with exactly such a detour. When Weber asks about the origins of Fehr’s work on altruistic punishment, the answer comes immediately. “The interesting thing is: the idea was born in a failed experiment.” In the mid-1990s, Fehr conducted a labor-market experiment with Austrian soldiers during a summer school. The setup deliberately created an imbalance of power. Workers faced excess supply, wages fell to very low levels, and employers captured most of the gains. Communication between participants was forbidden. Then one participant broke the rules. Frustrated by the low wages, he shouted across the room: “Let us form a union.” The experiment no longer proceeded as intended. Trade collapsed for several rounds. Yet the post-experiment survey revealed something unexpected. Participants were angry not only at employers who offered low wages, but even more strongly at fellow workers who had accepted those offers and undermined collective action.
The observation sparked a new line of inquiry. If people felt such strong resentment toward free-riders, perhaps they were willing to incur personal costs to punish them. That insight eventually led to the cooperation and punishment experiments that would become some of Fehr’s most influential work. The findings showed that cooperation can be sustained when individuals have the opportunity to sanction those who violate collective norms, even when punishment itself is costly. For Fehr, the episode illustrates an essential principle of research: remain open to the unexpected.
Beyond individual behavior
Throughout the conversation, one idea repeatedly surfaces. To understand social outcomes, it is not enough to study individual preferences in isolation. What matters is how those preferences interact with institutions. Whether the topic is labor markets, cooperation, inequality, or corporate governance, Fehr returns to the same fundamental insight: institutions help determine which motives and which types of individuals ultimately shape collective outcomes.
This perspective also informs one of his critiques of contemporary behavioral economics. While the field has grown enormously over the past decades, he worries that it has become increasingly focused on individual decision-making, often through surveys and highly simplified settings. For Fehr, one of the greatest strengths of experimental economics lies elsewhere: its ability to study how individuals interact within institutions and how those interactions generate collective outcomes. In his view, this potential remains underutilized.
The big unanswered question
Despite decades of research, Fehr believes some of the most important questions remain unresolved. Foremost among them is the question that gives this article its title: how does society shape the preferences of individuals? Economists have learned a great deal about how preferences influence behavior. Much less is known about where those preferences come from in the first place. What experiences make children more prosocial? How do schools shape cooperation and trust? Which social environments encourage fairness, reciprocity, or civic engagement? For Fehr, understanding the micro-foundations of preference formation represents one of the most promising frontiers in economics. Social preferences, he argues, play a role in almost every domain of life – from families and workplaces to schools, politics, and civil society. Yet how these preferences emerge and evolve remains one of the field’s most important unanswered questions.
The institution builder
The same themes that shaped Fehr’s research also informed his approach to academic leadership. For more than a decade, he served as chairman of the Department of Economics at the University of Zurich, helping transform it into one of Europe’s leading economics departments. The challenge, he explains, was institutional. Reforming the department’s traditional chair system required persuading established professors to give up resources for the benefit of the department as a whole – a collective-action problem of the kind he had spent years studying in the laboratory. Looking back, the same questions run through both Fehr’s research and his leadership: fairness, cooperation, collective action, and the role of institutions. Or, as he puts it: “What you always need is a few entrepreneurial individuals who have a vision of where they want to go and who build a coalition and push for change.”
Ernst Fehr has spent decades studying what really motivates human behavior – fairness, reciprocity, and the social preferences that standard economics long ignored. He asked questions that the discipline was not yet ready to embrace – and when his ideas met resistance, he looked for new ways to test them. In the latest episode of Thought Supply, he sits down with colleague Roberto Weber to reflect on his research, his intellectual journey, and the questions that still keep him up at night.
How does society shape the preferences of individuals? It is a question that could come from a philosopher, a sociologist, or a young student wrestling with the world's injustices for the first time. It comes, in fact, from Ernst Fehr – at 70, one of the most influential behavioral economists of his generation, celebrated this summer at a conference in his honor at the University of Zurich.
Sitting down with fellow behavioral economist Roberto Weber, Fehr reflects on the intellectual journey that shaped his research agenda and the questions that continue to motivate his work. Weber begins where the story naturally starts: what drew Ernst Fehr to economics in the first place, and what kept him there when the field pushed back?
Ernst Fehr on Google Scholarbrowse
Quotes
What I think is a big unresolved question is: How does society shape individuals’ preferences?
It is not important for scientific progress whether a theory is elegant or whether it is beautiful, the only thing that matters is whether a theory is empirically true.
The most exciting moments in research are those where I want to go to A, discover something along the way, and realize that it is more important than A.
In honor of Ernst Fehr
Ernst Fehr has always seen what others missed – the connections between disciplines, the institutions that research needs to thrive, and the partnerships that make lasting impact possible. As he celebrates his 70th birthday, the UBS Center takes this as an opportunity to highlight a career that has shaped behavioral economics as a field, and Zurich’s Department of Economics as a world-class institution. Explore a selection of work, conversations, and tributes that reflect the breadth of his contribution.
Ernst Fehr has always seen what others missed – the connections between disciplines, the institutions that research needs to thrive, and the partnerships that make lasting impact possible. As he celebrates his 70th birthday, the UBS Center takes this as an opportunity to highlight a career that has shaped behavioral economics as a field, and Zurich’s Department of Economics as a world-class institution. Explore a selection of work, conversations, and tributes that reflect the breadth of his contribution.
Profile
Professor of Economics, Affiliated Professor at the UBS Center
Ernst Fehr received his doctorate from the University of Vienna in 1986. His work has shown how social motives shape the cooperation, negotiations and coordination among actors and how this affects the functioning of incentives, markets and organisations. His work identifies important conditions under which cooperation flourishes and breaks down. The work on the psychological foundations of incentives informs us about the merits and the limits of financial incentives for the compensation of employees. In other work he has shown the importance of corporate culture for the performance of firms. In more recent work he shows how social motives affect how people vote on issues related to the redistribution of incomes and how differences in people’s intrinsic patience is related to wealth inequality. His work has found large resonance inside and outside academia with more than 100’000 Google Scholar citations and his work has been mentioned many times in international and national newspapers.
UBS Foundation Professor of the Economics of Corporate Culture, Business Ethics and Social Responsibility
Roberto A. Weber is Professor for the Economics of Corporate Culture, Business Ethics and Social Responsibility at the Department of Economics and the Director of the Zurich Graduate School of Economics at the University of Zurich. He was previously a Full Professor of Social and Decision Sciences at Carnegie Mellon University. Weber received his doctorate from the California Institute of Technology. Prof. Weber is a CESifo Research Network Fellow and a Department Editor for Behavioral Economics and Decision Analysis at Management Science. He has published extensively on topics such as ethical behavior, social responsibility, leadership and economic decision-making in leading journals across economics, political science, psychology and management. In 2023, his commitment to supervising and supporting students was honored with the UZH Mentoring Award, an accolade based on nominations by young researchers at the University of Zurich.
Professor of Economics, Affiliated Professor at the UBS Center
Ernst Fehr received his doctorate from the University of Vienna in 1986. His work has shown how social motives shape the cooperation, negotiations and coordination among actors and how this affects the functioning of incentives, markets and organisations. His work identifies important conditions under which cooperation flourishes and breaks down. The work on the psychological foundations of incentives informs us about the merits and the limits of financial incentives for the compensation of employees. In other work he has shown the importance of corporate culture for the performance of firms. In more recent work he shows how social motives affect how people vote on issues related to the redistribution of incomes and how differences in people’s intrinsic patience is related to wealth inequality. His work has found large resonance inside and outside academia with more than 100’000 Google Scholar citations and his work has been mentioned many times in international and national newspapers.
UBS Foundation Professor of the Economics of Corporate Culture, Business Ethics and Social Responsibility
Roberto A. Weber is Professor for the Economics of Corporate Culture, Business Ethics and Social Responsibility at the Department of Economics and the Director of the Zurich Graduate School of Economics at the University of Zurich. He was previously a Full Professor of Social and Decision Sciences at Carnegie Mellon University. Weber received his doctorate from the California Institute of Technology. Prof. Weber is a CESifo Research Network Fellow and a Department Editor for Behavioral Economics and Decision Analysis at Management Science. He has published extensively on topics such as ethical behavior, social responsibility, leadership and economic decision-making in leading journals across economics, political science, psychology and management. In 2023, his commitment to supervising and supporting students was honored with the UZH Mentoring Award, an accolade based on nominations by young researchers at the University of Zurich.