The Economics of Human Relationships

Behind my reciprocation of a friend's gift may lie both instrumental reasons (I expect further future gifts) and `communicative' reasons (I want to establish or confirm a friendship per se). In a theory of rational individual action, such `communicative' reasons can be incorporated as an argument of an agent's objective function. This chapter starts by reviewing a recent literature that takes this direction and introduces `relational' concerns through the concept of `socially provided goods'. From a `relational' perspective, however, individual intentions are not all that matters: a relation is characterized by the two (or more) persons linked and by the kind of link they have. This perspective, which in our view should complement the more traditional, individualistic one, is particularly suited to embed individual motivations in their social context and to study their co-evolution. In particular, we focus on the conditions under which reciprocity and altruism may survive and even spread over as social norms. Drawing from the literature on the dynamics of social norms, we argue that the combination of individual incentives and the forces of social selection may lead to a contraposition between a society's material success and its well-being, i.e., between its `vitality' and its `satisfaction'. Finally, we consider that the recent literature on the economic analysis of human relationships invites to a new reading of the `classics' of economics and of moral and political philosophy. Both the new and the old literature point at the need to broaden the scope of economic modeling, to lay down the building blocks of a new, up-to-date approach to political economy that is equipped to tackle the challenges posed by advanced industrial societies in their social, cultural and economic selection dimensions.