George A. Akerlof: Social Distance and Social Decisions
“This lecture will explain why rational choice analysis of social decisions must take into account the externalities involved in social decision-making. In principle, the analysis is an extension of Becker’s earlier work; but in important special cases the incorporation of these social factors into rational choice analysis results in behavior that more closely corresponds to the intuition of sociologists than of economists. For example, the abstract models presented here will explain the existence of social class and linguistic dialect.”
A model of social distance is presented that is useful for understanding social decisions. Status and conformity in previous models are discussed, and then a generalization is described. In this generalization agents have inherited positions in social space and an expected value of trade between two individuals as a function of the difference in their initial positions. An example of this system is constructed in which there is class stability. Agents who are initially close interact strongly while those who are socially distant have little interaction. In this example inherited social position, which may be interpreted as social class, plays a dominant role. The relevance of this model to social decisions such as the choice of educational attainment and childbearing is discussed in the context of specific ethnographic examples. Class position may play a dominant role in these decisions.