Relational Goods and Happiness PDF

Relational Goods and Happiness Homo oeconomicus The economy starts in its models from some foundational assumptions about human behavior. What is the purpose of life of the individuals? Individuals pursue the maximization of their personal utility Economic science (neoclassical) and utilitarianism a...

Relational Goods and Happiness Homo oeconomicus The economy starts in its models from some foundational assumptions about human behavior. What is the purpose of life of the individuals? Individuals pursue the maximization of their personal utility Economic science (neoclassical) and utilitarianism are deeply connected Homo oeconomicus Each individual is described by a set of preferences that map individual utility concerning their consumption of goods and services. The preferences are: - complete (the individual always knows how to choose) - transitive (they are coherent in the sense that if A ≻ B and B ≻ C then A ≻ C) - monotonous (non-satiable (A ≻ B if basket A contains at least one more good than B). Homo oeconomicus The homo oeconomicus: pursues the maximization of utility (vs. other purposes in life) is perfectly rational (vs. cognitive limits) has perfect self-control (vs. bounded willpower) is perfectly self-interested (vs. social preferences) How happiness is measured (whatever it is) Overall, how happy do you feel on a scale of 1 to 10? 1 2 3 4 5 6 7 8 9 10 [gallup, WVS (also scale 1-4)] Currently, how satisfied are you with your life as a whole? 1 2 3 4 5 6 7 8 9 10 [ISTAT aspects of daily life] The Easterlin Paradox Easterlin paradox (from the 70ies). In US, since 1973 to 2003, the GDP double while happiness remains constant. Indeed, beyond a certain subsistence income level, additional income doesn’t mean additional happiness! The World Happiness Report Homo psychologicus Do you prefer me to give you € 10 immediately or € 15 in 6 months? - We procrastinate unpleasant decisions, or as in this case, we immediately want inconvenient rewards. Cf. perfect self-control. - Strong empirical evidence that we place too much weight on the present over the future. - Another definition: what we do today is not always consistent with what we wanted to do yesterday. - Significant consequences on retirement savings, substance abuse, gambling addictions, improper eating habits, etc. Homo psychologicus is pro-social The Dictator Game Homo psychologicus is pro-social The Ultimatum Game Homo Socialis The Trust Game L’homo incitatus Do we have to pay blood donors? The case of Haifa nursery schools and paid fundraising Economic incentives can crowd-out intrinsic motivations Relational perspective  Economics can be understood as the study of interactions among individuals.  Markets, firms, prices, even finance, are essentially networks of relationships  The key issue, then, is not: economics does not see relationality; but: *why* economics is so poor in analysing dimensions of relationality different than the instrumental ones?  We can uncover many historical and methodological reasons The main reason The main reason behind the lack of non-instrumental relationality in Economics is the underlying hypothesis that the only significant dimension of relationality in economic interactions is the instrumental one: intrinsic, symbolic, expressive dimensions of human relationality (and rationality) are important for other domains of life, but not – or very little – in economic matters. Relational goods  Civil economists (not only) are convinced that non-instrumental relationality is *very* important even in typical economic domains.  One theoretical tool – or better rhetorical device – has been in the last few years the introduction of the so-called ‘relational goods’. A new ‘good’ Relational goods introduced by the philosopher Martha Nussbaum (1986), the sociologist Pierpaolo Donati (1986), and the economists Benedetto Gui (1987) and Carole Uhlaner (1989). Carole Uhlaner defined them as goods that “can only be ‘possessed’ by mutual agreement”” (1989, p. 254). Benedetto Gui defined relational goods as “not material goods, which are not services that are consumed individually, but are tied to interpersonal relations” (1987, 37). Why ‘good’? It is a controversial choice to describe (some) human relationships as “goods”, even ‘economic goods’. Is it possible? Useful? A bit of history of the idea of ‘good’ In the Classical era of Political economy (both Civil and Political), the idea of good was directly connected to the Classical (Aristotle/Aquinas) tradition of bonum: goodness. Then: consumption of goods is “good” because commodities are “good” things, that increase human welfare or wellbeing – The Wealth of Nations: wealth (not riches), based on human labour – The Public Happiness (Italian): here the link is even stronger Classical idea of good Aristotle, in the Politics (I,3) calls “goods” the means necessary to life and wellbeing of man. Aquinas, Ambrogius, called goods things useful to our wellgeing (bona): In 18th century: Dupont, Necker, and also J.B. Say all defined goods thing satisfying human needs. The German Roscher specifies: “good is all necessary for a “true” human need” (1853). – Deep connection with the ethical dimension of goodness The neoclassical revolution The real shift occurred during the neoclassical revolution, when the emphasis was placed on subjective tastes. Ophelimity, preferences. There is no objective goods, neither capabilities or basic functioning. Carl Menger (1840-1921)  Chapter II of Principles of Political Economy (1870) by Carl Menger, one of the founders of neoclassical economy, was entitled “The general theory of goods”. The chapter opens with this sentence: “Those things that are the attitude to satisfy the human need are, in the meaning of our science, useful things … These useful things are called goods”. External/internal Menger realized that his definition of good was too broad for the definition of the subject of economics. So, Menger, furthermore, distinguished between external goods (subject of economics) and the internal ones, i.e. “friendship, happiness, health”: these latter are not economic goods (but just goods). Alfred Marshall (1842-1924) As Menger, Marshall is influenced by the distinction between internal/external goods. Then his definition of economic goods: “all those things, external to a man, which (1) belong to him, and don’t belong equally to his neighbours, and therefore are distinctly his; (2) are directly capable of a money measure” (1890, 57). Money measurement was a key element Relational goods: excluded From such a (narrow: no “commons”, for instance) definition, it derives that for Marshall: “it excludes his personal friendship, in so far as they have no business value”, because are “internal” goods, without any money measure. Economic good is “anything the other would offer for the satisfaction of his want” (p. 55, footnote 1, quotation from Hermann). Eight features of rel. goods  Civil Economy use of ‘relational goods’ is therefore a return to the pre-neoclassical idea of good (as something satisfying needs, that are ‘good’ for the person).  (a). Identity: the identity of the individuals involved is a fundamental element. This is why Carole Uhlaner states that “goods which arise in exchanges where anyone could anonymously supply one or both sides of the bargain are not relational” (1989, 255). (b). Reciprocity and fragility  Reciprocity: inasmuch as they are goods made of relationships, they can only be enjoyed reciprocally. “Mutual activity, feeling, and awareness are such a deep part of what love and friendship are that Aristotle is unwilling to say that there is anything worthy of the name of love or friendship left, when the shared activities and the forms of communication that express it are taken away” (M. Nussbaum).  The fragility of relational good: depends on others’ efforts, motivations and actions: is not a contract (c) Motivations  In genuinely reciprocal relationships the motivation behind the behaviour is an essential component. The same encounter — for example, a dinner — may create only standard goods or relational goods as well, based on the motivations of those involved. If the relationship is not an end, but only a means to something else (e.g. doing business), it does not qualify as a relational good. (d) Gratuity  An essential characteristic of relational goods is gratuitousness, in the sense that a relational good is such if the relationship is not “used” for anything else, if it is lived out as a good in itself, and derives from intrinsic motivations.  Non-instrumental (f) Simultaneity  Differently from normal market goods, whether private or public, where production is technically and logically separate from consumption, relational goods (such as many personal services) are simultaneously produced and consume. The good is co-produced and co-consumed by those involved. Although the contribution to the production of the meeting may be asymmetric (consider the organization of a party among friends or the management of a social cooperative), in the act of consuming a relational good a pure free rider is not possible. To be enjoyed, the relational good requires that one become involved in a relationship with the characteristics that we are listing. (g) Emergent phenomenon  The relational good emerges within a relationship. Perhaps the category of “emergent phenomenon” captures the nature of a relational good more than economic category of “production”. its emergent nature highlights that the relational good is a “third” that exceeds the contributions of those involved, which in many cases was not among the initial intentions. This is why a relational good can emerge within a normal market transaction, when at a certain point, right in the middle of an ordinary instrumental market relationship, something happens leading those involved to transcend the reasons for which they had met. (h) Uniqueness  Once you have consumed a real relational good you cannot enjoy again that specific good, you can only remember it. Furthermore real relational goods are always different according to the agents that are consuming the good (one friend is not equal to another). Digital relational goods?  Profile (rather than identity)  A-simultaneity: a digital relation does not need co-production and co-consumption. The consumption and production phases can occur in separated times. We can think about chats, posting, photo sharing. The “simultaneity constraint” is overcome (Antoci, Sabatini & Sodini, 2011).  A-spatiality: two agents do not need to stay in the same place in order to consume the same relation. Nevertheless, there is a decrease in perceptions. Only two senses are used for digital relations: sight and hearing (Roberts & Dunbar, 2011)  No/reduced emergent factor: Digital relational goods rely only on the contribution of the participants. There is not fortuity.  Standard: Relations are unique, contacts are not. There is a limited number of relations (Hill & Dunbar, 2002), but there is a potentially infinite number of contacts (Dunbar, 2012). The marginal cost of having new relations online is very low probably because they do not have a specific value. It is possible that all the digital relations have the same value, they can be customized (ex.: gaming online). Relational goods and Happiness Empirical evidence: 1. Volunteers: report higher well-being (other-things-being-equals) than non-volunteers (Wilson and Musick 1999; Meier and Stutzer 2004). 2. The more time people spend watching TV, the lower is their reported happiness, just because of the crowding-out of relational goods (Bruni and Stanca 2008) Some evidences form Psychology  Deci and Ryan (2001): ‘relatedness’ as a basic human need.  Ryff and Singer (2001): positive relations predict physiological functioning and health outcomes. A qualitative reasoning for a relational vision of happiness  Let suppose that Happiness of Anne (Ha) depends on both consumption (Ca) and Relational goods (Rab): Ha = h(Ca, Rab), Where: “Ca” refers to all kind of “extrinsic” activities (that can be bought in the market) “Rab” are relational goods. ➔ Note: Rab depends also on B’s contribution that A cannot fully control (fragility) A qualitative model (1) + Happiness + effort + Ca (2) ? Happiness Rab Note: The relative weight of (1) and (2) depends on the level of Ca: The sum (1+2) can become negative “beyond” a threshold value of Ca Happiness-income (without Rab): Ha = h(Ca) Happiness Ca Introducing relational goods: H = f(C,Rab) Happiness Threshold value Scitosky's zone Ca Tibor Scitovsky Tibor Scitovsky’s (1976) makes a distinction between comfort and stimulation goods. Comfort goods give immediate stimulations that last short, because they depend hugely on “treadmill effects” (hedonic and satisfaction ones). Stimulation goods, instead, have an opposite characteristic: their marginal utility is normally increasing. As our income increases, we consume more comfort goods and less stimulating goods (commodity substitutes relations). A “relational” narrative of the happiness paradox  Markets tend to substitute true stimulation goods with comfort goods presented as stimulation goods.  In affluent societies, people consume too much comfort, since it appears as stimulation goods in disguise, but offered at a much lower cost (in terms of effort and risk) than true stimulation goods.  Advanced market tends to offer relational goods in disguise. Relative cost  Furthermore, economic and technological development works in two directions, both of which are relevant to this discussion. First, technology tends to reduce the cost of standard market goods, while it does not do likewise with relational goods, whose “technology” costs and risks have been more or less the same over the last millennium.  Cultivating meaningful relationships with others is very costly in modern market economies, because substitutes for relational goods can be found at tremendously lower costs. Some paths of research  1. Job satisfaction (the role of relational goods at workplace)  2. Institutional design (how to foster, or crowd-out, relationality in institutions?)  3. Urban life (shops, commerce, squares, children, elderly people …)  4. Territorial banking (people “demand” also relational goods?)  5. Family business (how is it possible to understand in a family business without taking into consideration rel. goods?)  6. Happiness studies and “socialized” economy (volunteering, gift …)  7. relational marketing: is it possible to sale instrumental relational goods?  8. Indicators of relational goods: contingent evaluation?