An Economic Theory of Greed, Love, Groups, and Networks

452 Pages·2013·2.55 MB·English

by  Professor Paul Frijters

more information - www.cambridge.org/9781107026278

An Economic Theory of Greed, Love,
Groups, and Networks
Why are people loyal? How do groups form and how do they create
incentives for their members to abide by group norms? Until now, eco-
nomics has only been able to partially answer these questions. In this
groundbreakingwork,PaulFrijterspresentsanewunifiedtheoryofhuman
behavior. To do so, he incorporates comprehensive yet tractable defini-
tionsofloveandpower,andthedynamicsofgroupsandnetworks,into
thetraditionalmainstreameconomicview.Theresultisanenhancedview
of human societies that nevertheless retains the pursuit of self-interest at
itscore.Thisbookprovidesadigestiblebutcomprehensivetheoryofour
socioeconomicsystem,whichcondensesitsimmensecomplexityintosim-
plifiedrepresentations.Theresultbothilluminateshumanity’shistoryand
suggests ways forward for policies today, in areas as diverse as poverty
reductionandtaxcompliance.
professor paul frijters is a professor of Economics at the
University of Queensland. He was elected “Best Economist under 40 in
Australia” by the Economic Society of Australia for 2009–2011, and his
workconsistentlyranksinthetop4percentofdownloadedandcitedeco-
nomicresearchintheworld.ProfessorFrijtershasundertakenresearchin
awidevarietyoffields,includinghappinessandwell-being,migrationin
China, behavioral economics, and health economics. The findings of his
researchfeatureregularlyintheglobalmedia.
gigi foster isaseniorlecturerintheSchoolofEconomicswithinthe
AustralianSchoolofBusinessattheUniversityofNewSouthWales.Her
research focuses primarily on decisions related to human capital, with a
particularemphasisonsocialinfluenceandbehavioraleconomics.

An Economic Theory of
Greed, Love, Groups,
and Networks
paul frijters with gigi foster
cambridge university press
Cambridge,NewYork,Melbourne,Madrid,CapeTown,
Singapore,SãoPaulo,Delhi,MexicoCity
CambridgeUniversityPress
TheEdinburghBuilding,CambridgeCB28RU,UK
PublishedintheUnitedStatesofAmericabyCambridgeUniversityPress,NewYork
www.cambridge.org
Informationonthistitle:www.cambridge.org/9781107678941
©PaulFrijtersandGigiFoster2013
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permissionofCambridgeUniversityPress.
Firstpublished2013
PrintedandboundintheUnitedKingdombytheMPGBooksGroup
AcataloguerecordforthispublicationisavailablefromtheBritishLibrary
LibraryofCongressCataloguinginPublicationdata
Frijters,Paul.
Aneconomictheoryofgreed,love,groups,andnetworks/PaulFrijters
withGigiFoster.
pages cm
Includesbibliographicalreferencesandindex.
ISBN978-1-107-02627-8–ISBN978-1-107-67894-1(pbk.)
1. Avarice. 2. Economicman. 3. Reciprocity(Commerce) 4. Socialgroups.
5. Socialnetworks. I. Title.
BJ1535.A8F752013
306.3–dc23 2012043730
ISBN978-1-107-02627-8Hardback
ISBN978-1-107-67894-1Paperback
CambridgeUniversityPresshasnoresponsibilityforthepersistenceor
accuracyofURLsforexternalorthird-partyinternetwebsitesreferredtoin
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Contents
Listoffigures page ix
Preface xi
Acknowledgments xv
Introductionandpreview 1
Part I Greed and love 39
1 Individualmaterialism,organizations,andpower:
Theviewfrommainstreameconomics 41
1.1 HomoEconomicus:Humansasindividualrational
wealthmaximizers 41
1.2 SocioeconomicphenomenaexplainedbytheHomo
Economicusview 51
1.3 Love:Thefirstadditiontothemainstreamview 57
1.4 Power 60
1.5 Networksandmarketfrictions:Thethirdaddition
tothemainstreamview 68
1.6 Conclusions 71
2 Love:Themissingbuildingblock 74
2.1 Theplanofthechapter 76
2.2 Lovestories:Ourlovesandhowtheycometobe 77
2.3 Analysis:LoveandtheLovePrinciple 86
2.4 Thebasicscienceoflove:Introductionandpreview 89
2.5 Thehumanbrain 91
2.6 Emotionaldevelopmentandregulation 98
2.7 Categorizationandemotionalactivation 102
v
vi Contents
2.8 RevisitingtheLovePrinciplefromanindividual
perspective 113
2.9 Comparinglovewithgreed 129
2.10 Whydoesloveexist?Anevolutionaryperspective 132
2.11 Conclusions 141
Part II Groups, power, and the development
of institutions 143
3 Groupsandpower 145
3.1 Anoteonmethodologyandorganization 145
3.2 Ataxonomyofgrouparchetypes 151
3.3 Groupsinpractice 160
3.4 Examplesoftheriseandapplicationofgrouppower 174
3.5 Theevolutionofdistinctgrouptypestosolve
distincteconomicproblems 197
3.6 Individualtraitsandtheevolutionofgrouptypes 204
3.7 Relationwithexistingtheoriesofgroupformation
andpower 206
3.8 Conclusions 223
4 Networksandmarkets 226
4.1 Powerandmarketeconomics:Theroleofcontinuous
contactmakers 227
4.2 Casestudy:TheEasternEuropeaneconomic
transition 249
4.3 Implicationsforeconomictheories
oflong-termgrowth 266
4.4 Out-of-sampleevidence 279
4.5 Moderndemocracyandnetworking 283
4.6 Relationwithexistingtheoriesofnetworks 289
4.7 Conclusions 296
Part III Implications and examples 299
5 Theaggregateview 301
5.1 Markets,groups,andpower 301
5.2 Themaingame:Loveandgreed 307
5.3 Aheuristicforreadingdynamicsocialsituations 313
Contents vii
5.4 Furtherthoughtsoneconomics 332
5.5 Conclusionsanddiscussion 342
6 Theoreticalappendix:Formalmodelsandextensions 349
6.1 Model1:Loveandgreedattheindividuallevel 349
6.2 Model2:Stylizedgroupsandgrouppower 357
6.3 Model3:Theoperationofcentralauthorities 372
6.4 Model4:Politics,socialcapital,
andeconomicgrowth 389
References 397
Index 423