Question

1. How do social preferences shape society and the economy?
2. Where do social preferences play an important role in the economy? Give an example and explain.
3. Can you think of an example of social preference that is harmful to certain groups of people? Explain.
4. Are social preferences and social norms related? If so, how? If not, why?

Answer 1

Question: How do social preferences shape society and the economy?

Answer: Social preferences are a part of behavioral economics. It is a type of economics in which it is assumed that self interest is supplementary to other preferences which are interdependent. It helps shape the economies. It is different among different nations. These type of preferences are of two types- Reciprocal social preferences and distributive social preferences. Distributive preferences are the preferences which are shaped over the final distribution and reciprocal preferences are those which intend to benefit or opposite to others beyond what happens after. It means people try to punish others who hurt them even if leads to loss of some money. There are many games and models which experiment social preferences and shows how they shape the economy. It is although different across cultures and it remains however a big debate as economists says that social preferences in different areas lead to contradictory results.

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