Social Econ Blog

This course explores the role of social interaction in economic outcomes. Traditional neoclassical economic theory has tended to ignore the role of social forces in explaining behavior. While economics is built around the notion agents indirectly affect each other via the pricing mechanism, etc., standard economics assumes that individual actions (or preferences) do not directly affect the behavior of others. That is, economists have long excluded things like culture, norms, and peer pressure from their analysis.

Clearly, though, these things appear to matter. Starting at birth, the environment we inhabit helps to shape individuals’ preferences, constraints, and expectations and thus the choices that they make. Parents, siblings, friends, teachers, and society at large exert a great deal of influence over individuals and their choices/outcomes.

Social influence does not operate in one direction. Individuals exert “pressure” on those around them as well. These efforts are frequently rewarded as some individuals are more successful in social environments. Social attributes ranging from appearance to personality to the number of friends one has (and who they are) have long been argued to affect individual successes.

In this course we will explore the burgeoning economic literature relating to these issues. We will see how social forces can be added to the economic framework, and how their effects might be estimated empirically. In the process, we will examine several related questions: how do social forces affect preferences and behaviors; why do members of the same group behave similarly; how do we select the groups we belong to (marriage units, neighborhoods, clubs, …), and how much (and in what ways) does the group affect me; how does individual identity affect decisions; to what extent do I treat members of different groups differently and why; what are the implications of this for individual and group outcomes; what determines what is fashionable; why do we observe fads; why are there conventions and norms; where do they come from (e.g., why do people in some countries drive on the left side of the road, while in others they drive on the right); what determines status and how does one achieve it; what are the effects of the generation of status in terms of inequality and envy; how do groups (families or societies) deal with equity concerns (that is, what are people entitled to, what is just or fair).

Throughout our examination of these topics, my primary goal is to get you to approach these questions, not solely as smart, observant people, but as economists. That is, the primary goal of this course is to develop your economic reasoning skills (both the theoretical/intuitive ones and empirical ones). By the end of the course, my hope is that when confronted with a question or situation you will be able to make a cogent economic argument about what is going on, and understand (basically) what you would need to be able to convincingly identify the effect you hypothesize empirically.