Recently, interdisciplinary studies across psychology and economics have flourished (Rabin 1998; 2002; Elster 1998; Tirole 2002; Brocas-Carrillo 2003), but the research is still in its infancy. This paper attempts to take a step further in this direction by drawing arguments to explain the paradox from subfields in psychology and kindred disciplines almost entirely unexplored by economists. Hence, this section puts forward an alternative explanation by grounding its arguments on this extra-economic literature, while the next section will provide a formal explanation.
Defining relational goods
The key concept in explanation of the paradox is that of ‘relational goods’, which attempts to capture the most salient human aspects in the interaction among persons. The concept of relational goods has been used, at least cursorily, by a number of classical and modern economists (see the survey by Bruni 2000; Gui 2000; see also the collections of papers edited by Bruni-Porta 2005, and by Gui-Sugden 2005), but it is not always used with the same meaning. This paper starts with the seminal work by Uhlaner (1989), who points out that “relational goods […] arise as a function of a relationship with others […] only by mutual agreement”, that they “cannot be acquired by an isolated individual”, and that they “are thus unlike private goods, which are enjoyed alone, and standard public goods, which can be enjoyed by any number. [They] are a subset of local public goods, as they enter two or more persons’ objective functions” (254).
Questions concerning the definition of relational goods are whether they are a characteristic of other market goods, whether they are an externality in consuming the other goods, whether they are distinct and instrumental for producing and exchanging other goods, or whether they are distinct and final, so that they directly enter people’s utility functions (Gui 2000). The bulk of the economic literature on relational goods regards them as depending on, or as instrumental for, market goods, doing so mainly in order to treat the problems of transaction costs and imperfect competition in a market economy.
This paper instead assumes the last definition and considers relational goods to be distinct and final, i.e. as excluded from, and unrelated to, the production and exchange of market goods. Although this assumption excludes interesting problems like satisfaction with colleagues at work, it allows the analysis to focus on relational goods both in parallel with and in contrast to other goods (see Ash 2000). Relational goods can be treated in parallel to other usual goods, in that inputs, a technology, and an output can be distinguished (Gui 2000; 2005). Among the inputs, this paper considers time, and a disposition to personal relationships, which includes feeling, disclosure and responsiveness, and which may be regarded as an ability specific to each individual, and as mainly spontaneous.
The technology of relational goods is the interaction among people when there is reciprocity in the pursuit of intimacy, i.e. a mutual perception of understanding, validation, and caring. The output can be partially observed by a third party as a complex set of communications between the persons involved in the relationship. Obviously, relational goods may have different effects on the well-being of the partners to a relationship. Relational goods contrast with market goods because they cannot be marketed. The economic literature observes, in fact, that monetary incentives to produce relational goods destroy their quality, thus undermining demand for relational goods itself (Ng 1975; Gui 2000).
The psychology literature proposes a deep and far-reaching explanation for this contrast. Deci- Ryan (1985; 1991), who follow the humanistic/organismic tradition begun by Maslow (1954), maintain that relatedness with others is a basic and innate psychological need which drives human motivations. These motivations are intrinsic because the reward is satisfaction of the need itself. An external reward like a monetary incentive, which implies an exchange, is called an extrinsic motivation. A basic need cannot be satisfied by an extrinsic motivation, unless the need is complementary with material utility. On the contrary, intrinsic motivations are often frustrated if extrinsic motivations are superimposed (Deci et al. 1999; Lane 1991:chs.11, 18).
A further contrasting feature of relational goods particularly emphasised in this paper is their imperfect observability, especially by the people involved in the relationship in normal settings. Economists admit that relational goods may include an affective component (Gui 2005; Sugden 2002); nevertheless they assume that individuals can satisfactorily manage this component to maximise utility (Cauley-Sandler 1980; Glaeser et al. 2002). By contrast, some psychologists argue that human communication is largely non-verbal and unintentional (Watzlawick et al. 1967; DePaulo-Friedman 1998). Neuroscience has provided much evidence that emotions arise as spontaneous reactions by the body (Damasio 1994, 1999; LeDoux 1996, 2002),[11] and psychologists generally agree that emotions and affects are aroused mostly within personal relationships (Berscheid-Reis 1998:226).
Moreover, neuroscience shows that information can be unconsciously acquired by humans (Zajonc 1980; Damasio 2003; Merikle- Daneman 2000), and psychologists stress the difficulty of forecasting future affective states (Gilbert-Driver Linn 2002; Loewenstein et al. 2003). Therefore, it seems safe to assume that relational goods are less observable and less predictable than market goods, which, in fact, can be more easily evaluated by individual and social learning. The final definitional question, as Gui (1996) points out, is whether relational goods have a stock or a flow dimension. Much literature, and this paper with it, adopts the flow dimension, although the related concept of social capital, which includes occasional relationships, has a stock dimension (Coleman 1988; Glaeser et al. 1999).
However, disposition to personal relationships, which is an input to relational goods has a stock dimension, and, as explained below, it may be changed by relational goods themselves in a feedback. The possibility of a feedback has been already analysed by some studies and found not to be subject to choice by the individual (Gui 1996; van Dijk-van Winden 1997; Gui 1996; Antoci et al. 2001). In addition, this paper maintains that the disposition to personal relationships, besides relational goods, is imperfectly observable.
This is confirmed by psychologists, who argue that affective states like sentiments and feelings, and even the self are only partially known by people (Schooler et al. 2003; Wilson-Dunn 2004; Lane 2000:285), and by neuroscientists, who argue that personal identity is built day by day on both conscious and unconscious bases (Boncinelli 2002; Damasio 1994, 1999; LeDoux 1996, 2002).
The importance of relational goods for happiness
The importance of personal relationships, especially of intimate ones, for well-being has been documented not only by several subfields of psychology but also by psychiatry, sociology and anthropology, and, very recently, by economics.[12] The research methods employed for this purpose include surveys, experiments, cross-cultural comparisons, case studies (see the surveys by Argyle 1999; Diener et al. 1999; Myers 1993), and, finally, econometrics. On surveying a wide spectrum of the psychology literature on almost 300 items, Baumeister-Leary (1995) conclude that the desire for interpersonal attachments is a fundamental human motivation. They do so on the following grounds.
First, it is spontaneous, and it does not need material advantage; rather, people appear to devote much time and effort to fostering supportive relations with others. Secondly, interpersonal attachments exhibit diminishing returns (see also Lane 2000). Thirdly, “people strongly and generally resist the dissolution of relationships […T]his resistance appears to go well beyond rational considerations of practical or material advantage”. Fourthly, deprivation of stable, good relations has been linked to a wide array of pathological and aversive consequences, from physical and mental illness to traffic accidents and suicides. Fifthly, attachment is essential because of its character of companionship and intimacy, which thus requires the qualities of both relatedness and interaction. Simple affiliation and generic social support appear to be less important (see also Lane 2000:27). Sixthly, “the evidence for brain mechanisms is supportive but inadequate to prove innateness”. These conclusions are important from an economic point of view, i.e. vis-à-vis market goods and material well-being.
In fact, individuals appear intentionally to pursue personal relationships, and they employ time for this purpose. Personal relationships seem to be essential, and to function as imperfect substitutes for material goods, and similarly with diminishing returns. The quality of relationships appears crucial, but it is not pursued simply according to rational behaviour, nor simply according to an innate drive. The importance of personal relationships has also been recently confirmed by various econometric studies. These show that marital status is the single most important (partial) correlate to self-reported SWB index (Blanchflower-Oswald 2004; Frey-Stutzer 2002; Helliwell 2003; Di Tella et al. 2003; Alesina et al. 2004).[13]
Easterlin (2004) further points out that the change in marital status is not completely eroded by adaptation. However, marital status is not the best proxy for evaluating the importance of personal relationships. In fact, “home life” seems an even stronger partial correlate, depriving marital status of significance (Radcliff 2001), while associationism, civic virtue, trust, democratic participation also capture significant positive effects of relationships on well-being (Helliwell 2003; Frey-Stutzer 2002).
The deterioration of relational goods for happiness
Unfortunately, several studies in sociology, psychology, and epimediology show that social and personal relationships have deteriorated in recent years for significant groups of people. All the indices used incur some bias, but the quantity and the variety of evidence for deterioration is substantial indeed. Despite the increasing frequency of divorce, whose incidence shows no signs of diminishing even recently in the US (Glenn-Weaver 1998), the marriages that survive appear to be less happy (Lane 2000:24), especially if marital interaction and time spent together are considered across generations (Duane et al. 2002; Rogers-Amato 1997; Amato et al. 2003; Glenn-Weaver 1998).
Increasing cohabitation, from 10% to 50% during 1972-94 in the US, which would imply that getting married is a more informed choice, appears instead to have worsened the quality of marriage, and to have destabilised it (see Kamp Dush et al. 2003, for the US; and Halli-Zimmer 1991, for Canada). Surprisingly, having children does not seem to improve a couple’s well-being. On the contrary, the evidence available from econometric studies shows a significant, although small, negative correlation both for the US and for Europe (Alesina et al. 2004; Di Tella et al. 2003). Within family tragedies occur with increasing frequency in the US. The homicide rate of babies aged 1 year or less rose from 51 per million-population in 1974-78 to 84 in 1995-99 (Pritchard-Butler 2003). Equally worrying are the data on increased homicides among adolescents (Merrick et al. 2003).
Other signs of malaise among children and adolescents are a threefold increase in their psychotropic medication, and in particular in treatment of Attention Deficit Hyperactivity Disorder between 1987 and 1996. The possible objection that greater income means that people can afford more medication seems contradicted by the fact that ADHD is more frequently treated among poorer groups (Olfson et al. 2002; 2003). Worrying rises in the incidence of “pervasive developmental disorder”, depression, and suicides among young people have also been found in the UK (Fombonne 1998; Fombonne et al. 2003). Sociologists observe that loneliness is a typical malaise of recent times (Bauman 2002), while psychologists point out that loneliness crucially correlates with suicide (Baumeister-Leary 1995), as well as with depression (Peplau-Perlman 1982; Weeks et al. 1980)
11 Economists usually recommend that the emotions should be kept under control when dealing and deciding on market goods (Elster 1998). However, psychologists warn that this practice erodes well-being, with even psychological and physical damage (Ryan and Deci 2001:151).
12 Personal relationships also display as dark side when they hurt. But Bacon’s observation that in company pains are divided and pleasures are multiplied reveals the positive bias of relationships (Sugden 2002).
13 Blanchflower and Oswald (2004) tentatively estimate that, in the US, approximately 100,000 of 1990$ extra per annum would be necessary to ‘compensate’ an individual for a marital separation, while the corresponding figure for an unemployed man is $60,000. This relative importance is confirmed by cross country evidence (Helliwell 2003). The fact that marital status influences SWB rather than the other way around also finds some confirmation (Diener et al. 1999:290; Lamb et al. 2003).
By Prof. Maurizio Pugno
Next: The shift from relational goods to market goods
Summary: Index