Envy Leads to Workaholism, Pride Leads to Anticonformism

Although it is widely accepted that social emotions are an important determinant of individual behaviours, that the individual decision making process is influenced by the social consequences of the choice made and by the choices made by other individuals, theoretical economics does not systematically take these factors into account.

Fabio Maccheroni, Massimo Marinacci (Department of Decision Sciences) and Aldo Rustichini (University of Minnesota) in the paper "Social Decision Theory: Choosing within and between Groups", forthcoming in the Review of Economic Studies, argue that emotions should be emphasized when studying individual decision making in contemporary societies. They propose a new choice model which studies individual preferences and decision making in relation to the choice made by peers. In their framework, attitudes towards social gains and losses are modelled through two social emotions which play an important role in shaping individual personalities: envy – the negative emotion that agents experience when their individual outcomes fall below those of their peers – and pride – the positive emotion experienced when they have better outcomes than their peers.

The authors show that, when attitudes towards the peers' choices are incorporated into the individual preferences, the best options that agents would take tend to adjust to the average (or some other index) of the distribution of outcomes in society.

Furthermore, peculiar economic phenomena may arise when social preferences are considered. Indeed, if the optimal consumption choice that an agent makes lies below the social optimum, the agent would tend to raise his consumption to conform to his peers' choice. Thus, the social equilibrium might be characterized by overconsumption mechanisms, while when the choice concerns the number of hours worked, the model explains the existence of workaholism mechanisms.

Moreover, if envy prevails among individuals with respect to their consumption profile, then agents, concerned that their outcomes would not be worst than everybody else's outcomes, will all choose the same level and type of consumption, in other words, there will be conformism in consumption choices. On the contrary, if pride prevails the social equilibrium will be characterized by anticonformism and consumption diversification. Societies where pride prevails (like the United States) should be thus characterized by a comparatively high diversity in consumption and income, while a more egalitarian one should characterize societies where envy is more significant than pride (like the European countries).