Relational goods

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Relational goods are non-material goods that can only be produced and consumed within groups, and which are intrinsically linked to relationships and interaction. [1] [2] Popular examples include the enjoyment of a football game in a stadium, where the collective enjoyment of the game adds a relational good in terms of excitement and enjoyment to all in the stadium. This constitutes an experience that cannot be had when watching alone. Other examples include group charity work, friendship or reciprocal love. [3] Relational goods can be necessary for the optimization of an activity like the football game example. On the other hand, like Nussbaum suggest, a relational good may be the relationship in itself, with the good being dependent on the existence of the relationship. Friendships is an example of a relationship in which the value that come from the relationship are tied up in the existence and maintenance of the relationship.

Contents

This parade is an example of a relational good as the participants and the spectators both must engage in order for the experience to be successful. Parade in Hjoerring Denmark 2004 ubt.jpeg
This parade is an example of a relational good as the participants and the spectators both must engage in order for the experience to be successful.

The essential point tends to consider relational goods as goods that are produced and consumed simultaneously by those interacting in the relationship. [2]

Background

Adam Smith, in his 1759 work The Theory of Moral Sentiments , first outlined the idea of non-instrumental relational positives. [4] The 18th century Italian tradition of Civil Economy put the concept of the inner relational nature of the person at the core of the economic science. The idea was largely abandoned until the 1970s by the mainstream (although we can find intuitions in Mill, Marshall, the Austrian school, Keynes, Hirschman), when the discussion of happiness again came to light with the first analysis of the Easterlin Paradox. A solid concept of relational goods was built in the following years in an attempt to reconcile this paradox, and to answer the issue of why voter turnout is higher than rational choice theory suggests. Thus relational goods as an economic concept became more researched in the late 1980s when economists Benedetto Gui wrote From Transactions to Encounters: The Joint Generation of Relational Goods and Conventional Values (1987), and Carole Uhlaner penned Relational Goods and Participation: Incorporating Sociality into a Theory of Rational Action (1989). They aimed to change the way economist think of relationships, and viewed them as non-instrumental goods that have value within themselves.

This idea was adopted from other fields that understood human interaction as a fundamental part of human life, [5] with social deprivation being incredibly harmful to human well-being. Economists adopted this concepts, and began to involve relational analysis to study what creates happiness for individuals. [6]

While commodities may be exchanged or consumed during an encounter, it is the utility that comes from the encounter specifically, rather than the utility of the goods consumed, that is considered a relational good. A shopkeeper may sell a good to a customer, but the relational good in that instance is the interaction, the potential enjoyment, sharing and emotional connection that is swapped which is relevant. Due to the highly intangible nature of this connection, relational goods and their value is difficult to measure, and thus study. [7] Many studies instead measure social interactions (volunteering, clubs, church events, parties and gatherings etc.) against self-proclaimed levels of happiness, thus identifying some impacts of socialization. What is infinitely clearer is that deprivation of human interaction can have drastic negative effects physiologically, which aids the hypothesis that relational goods at the very least have health-related utility. [5]

Theories on relational goods can have many policy implications for governments. Policies that increase Gross Domestic Product while negatively effecting an individual's ability to consume and produce relational goods, may have negative long-term impacts on society as a whole. [6]

The production of relational goods

In mainstream economics, the production of commodities employs manufactured capital (tools and implements), natural capital, human capital, and financial capital. All of these contribute to the creation of a good or service valued for its mostly observable physical properties. In contrast, relational goods are produced in sympathetic, empathetic, trusting, and high regard relationships referred to here and by others as social capital. Social capital rich exchange partners exchange what Robison and Flora (2003) [8] refer to as intangible socio-emotional goods (SEGs), which are capable of satisfying socio-emotional needs. When SEGs become embedded in or associated with commodities and other objects, they create an attachment value for the object in addition to its value connected to its physical properties. The result of embedding objects with SEGs is the creation of a relational good referred to as an attachment value good (AVG) that may be tangible or intangible. Though not always called by that name, AVGs are abundant in social life: wedding rings, meaningful songs, family photos, hometowns, artifacts in museums, religious symbols, mementos of emotionally charged experiences, and prized family heirlooms.

Happiness and relational goods

In their 2009 paper Income, Relational goods and Happiness, Becchetti, Londono Bedoya and Trovato [9] were able to study 100,000 people from 82 countries and concluded that increased consumption of relational goods is strongly linked to happiness. They were also able to reflect on the "fellow feelings" theory [10] which stated that relational goods increase in their ability to generate happiness with:

  1. Increased time and experiences the interactors share
  2. The mutual consent of the interactors

This hypothesis suggests that closer, warmer relationships garner more happiness, than colder relationships. They were able to see that time spent with close friends or fellow religious congregation members more strongly increased a person's happiness than did spending time with colleagues outside of working hours. This strengthens the view that time and depth of experience has an impact of the value of a relational good. [11]

Relational good-happiness-income connection

The question of whether income generate happiness is one that has plagued economists since Richard Easterlin (1974) published research that showed that increased income didn't generate the same proportional increase in wealth. Easterlin theorized that crowding out concept, where pursuit of increased wealth has a negative effect on non-material goods like maintaining relationships. Becchetti, Londono Bedoya and Trovato [9] found in 2009 that at the highest income levels, time for relationship is negatively affected. However, they also found that this effect is reversed in other income groups as raised income levels increases the amount of free time available to dedicate to relationships. Meanwhile, others, like economist Justin Wolfers dispute this and place a much higher importance on money and financial security. [12] Where Easterlin found that happiness didn't necessary correlate to money, Wolfers found in a study of 155 countries that richer countries and people are also generally happier. On this issue, Becchetti, Pelloni, Rossetti (2007) discovered that relative income is also a relevant factor. They found that an increase in income of a member of social group relative to your own income can actually have a negative effect on happiness. [7]

Regardless of the dispute on how important money is, what is less in dispute is that money is not the only factor. Traditionally, happiness, a notoriously difficult concept to measure, is defined economically as utility and is expressed as an extension of choice, i.e. the more choices available, the more happiness you can/do attain. The study of relational goods suggests that happiness can be correlated to the consumption of relational goods.

Relational goods and television

The average American watches about 5 hours of TV per day. [11] In their paper Watching alone: Relational goods, television and happiness (2008) Bruni and Stanca were able to show that increased television watching time reduces consumption of relational goods as individuals use television as a substitute for relationships, thus crowding out relationships. This supports previous research that has shown that increased television time is negatively correlated to life satisfaction. One a direct level, Bruni and Stanca were able to show that increased television time takes away from time spent socializing, and also that television reduces communications within gatherings. Secondly television, through advertisement, has the indirect effect of propagating the consensus that material goods improve life satisfaction to a greater degree than do relational goods. [13]

People watch increasing amounts of television. This potentially takes time away from forging relationships Children watching TV.jpg
People watch increasing amounts of television. This potentially takes time away from forging relationships

Despite the reality that television correlates to unhappiness, the habit propagates because firstly, television is a cheap medium that requires no effort for a proportionally high degree of entertainment, compared to the higher degree of effort necessitated in socialization. Furthermore, television is highly addictive. The golden age of television has successfully created a pseudo-reality that people can escape to, alienating them from others. On the other hand, evolutionary psychologist Robin Dunbar has shown that gossip evolved as an aid to social bonding, and about 2/3 of our conversations can be boiled down to gossip (defined as discussions on social topics). Discussing television shows is arguably a sub-set of this, and can thus help in forming relationships. [14]

Policy implications of relational goods

Other research, such as the work of Blessi et al., has shown that people prefer cultural social activities of a non-instrumental nature, where relational goods can easily be shared, these types of activities in turn tend it improve one's well-being. This has several implications to government policy. If relational goods are currently under-consumed, then it may need organizational provision from government. [15]

Policies like increasing access to public spaces for collaboration, providing opportunities for volunteering or other sociable activities, all help that may improve well-being. [16] [17] This can help improve total happiness which as many positive consequences for overall stability and productivity within a nation. [18] The United Nations General Assembly has also suggested that nations measure their citizens’ Gross National Happiness, and use it to extrapolate policy. [18] Research suggests that increasing relational goods consumption will also increase happiness.

Unfortunately, relational goods and their direct impact is hard to measure, making investments into increasing their consumption hard for governments to make tangible. [19] However, policies that encourage engagement tend to have positive effects can also be (socially) profitable. Consider for example, the provision or promotion of group volunteer opportunities.

Consumption of Relational Goods in varied demographics

In general, it has been found that relational good are not equally shared among peoples. It has been found that females consume and produce more relational goods in general. This is concurrent with other research that has proven women to be more empathetic, an emotion that lends itself well to socialization and may be considered a relational good. [7]

Furthermore, it has been found that older people as well as less educated people are happier and consume more relational goods. [7] This may be an issue of choice, where they are less capable of doing solo activities, and are generally more dependent on a framework of people. Therefore, relationships are more vital, and thus they reap the rewards of relational good. Others have suggested that older people are happier due to an improved level of emotional intelligence. [20] As for less educated people, findings about relational goods being more widely consumed within that demographic supports statistical evidence that shows that less educated people aren't necessarily less happy. [7] [21] This is an economical issue as choice and happiness are often correlated. While education significantly improves choice in material goods, the traditional yardstick for happiness, it does less to improve your options in relational goods, and may in fact reduce your options as more educated people tend to work longer hours, [22] thus leaving less time for relationships.

See also

Related Research Articles

In economics, utility is a measure of the satisfaction that a certain person has from a certain state of the world. Over time, the term has been used in at least two different meanings.

In economics, capital goods or capital are "those durable produced goods that are in turn used as productive inputs for further production" of goods and services. A typical example is the machinery used in a factory. At the macroeconomic level, "the nation's capital stock includes buildings, equipment, software, and inventories during a given year."

The theory of consumer choice is the branch of microeconomics that relates preferences to consumption expenditures and to consumer demand curves. It analyzes how consumers maximize the desirability of their consumption, by maximizing utility subject to a consumer budget constraint. Factors influencing consumers' evaluation of the utility of goods include: income level, cultural factors, product information and physio-psychological factors.

<span class="mw-page-title-main">Giffen good</span> Product that people consume more of as the price rises

In microeconomics and consumer theory, a Giffen good is a product that people consume more of as the price rises and vice versa, violating the law of demand.

<span class="mw-page-title-main">Normal good</span> Good that increases in demand when incomes rise

In economics, a normal good is a type of a good which experiences an increase in demand due to an increase in income, unlike inferior goods, for which the opposite is observed. When there is an increase in a person's income, for example due to a wage rise, a good for which the demand rises due to the wage increase, is referred as a normal good. Conversely, the demand for normal goods declines when the income decreases, for example due to a wage decrease or layoffs.

<span class="mw-page-title-main">Veblen good</span> Luxury good for which the demand increases as the price increases

A Veblen good is a type of luxury good, named after American economist Thorstein Veblen, for which the demand increases as the price increases, in apparent contradiction of the law of demand, resulting in an upward-sloping demand curve. The higher prices of Veblen goods may make them desirable as a status symbol in the practices of conspicuous consumption and conspicuous leisure. A product may be a Veblen good because it is a positional good, something few others can own.

Welfare economics is a field of economics that applies microeconomic techniques to evaluate the overall well-being (welfare) of a society. This evaluation is typically done at the economy-wide level, and attempts to assess the distribution of resources and opportunities among members of society.

<span class="mw-page-title-main">Economic materialism</span> Excessive desire to acquire and consume material goods

Economic materialism can be described as either a personal attitude that attaches importance to acquiring and consuming material goods or as a logistical analysis of how physical resources are shaped into consumable products.

<span class="mw-page-title-main">Consumption (economics)</span> Using money to obtain an item for use

Consumption is the act of using resources to satisfy current needs and wants. It is seen in contrast to investing, which is spending for acquisition of future income. Consumption is a major concept in economics and is also studied in many other social sciences.

<span class="mw-page-title-main">Genuine progress indicator</span> Enhances Economic / Well-Being indicators

Genuine progress indicator (GPI) is a metric that has been suggested to replace, or supplement, gross domestic product (GDP). The GPI is designed to take fuller account of the well-being of a nation, only a part of which pertains to the size of the nation's economy, by incorporating environmental and social factors which are not measured by GDP. For instance, some models of GPI decrease in value when the poverty rate increases. The GPI separates the concept of societal progress from economic growth.

Utility maximization was first developed by utilitarian philosophers Jeremy Bentham and John Stuart Mill. In microeconomics, the utility maximization problem is the problem consumers face: "How should I spend my money in order to maximize my utility?" It is a type of optimal decision problem. It consists of choosing how much of each available good or service to consume, taking into account a constraint on total spending (income), the prices of the goods and their preferences.

Positional goods are goods valued only by how they are distributed among the population, not by how many of them there are available in total. The source of greater worth of positional goods is their desirability as a status symbol, which usually results in them greatly exceeding the value of comparable goods.

The economics of happiness or happiness economics is the theoretical, qualitative and quantitative study of happiness and quality of life, including positive and negative affects, well-being, life satisfaction and related concepts – typically tying economics more closely than usual with other social sciences, like sociology and psychology, as well as physical health. It typically treats subjective happiness-related measures, as well as more objective quality of life indices, rather than wealth, income or profit, as something to be maximized.

The Easterlin paradox is a finding in happiness economics formulated in 1974 by Richard Easterlin, then professor of economics at the University of Pennsylvania, and the first economist to study happiness data. The paradox states that at a point in time happiness varies directly with income both among and within nations, but over time happiness does not trend upward as income continues to grow: while people on higher incomes are typically happier than their lower-income counterparts at a given point in time, higher incomes don't produce greater happiness over time. One explanation is that my happiness depends on a comparison between my income and my perceptions of the average standard of living. If everyone's income increases, my increased income gives a short boost to my happiness, since I do not realize that the average standard of living has gone up. Some time later, I realize that the average standard of living has also gone up, so the happiness boost produced by my increased income disappears. It is the contradiction between the point-of-time and time series findings that is the root of the paradox: while there is a correlation at a fixed point, there is no trend over multiple points. That is, in the short run, everyone perceives increases in income to be correlated with happiness and tries to increase their incomes. However, in the long run, this proves to be an illusion, since everyone's efforts to raise standards of living lead to increasing averages, leaving everyone in the same place in terms of relative income. Various theories have been advanced to explain the Paradox, but the Paradox itself is solely an empirical generalization. The existence of the paradox has been strongly disputed by other researchers.

Prosperity is the flourishing, thriving, good fortune and successful social status. Prosperity often produces profuse wealth including other factors which can be profusely wealthy in all degrees, such as happiness and health.

In economics, and in other social sciences, preference refers to an order by which an agent, while in search of an "optimal choice", ranks alternatives based on their respective utility. Preferences are evaluations that concern matters of value, in relation to practical reasoning. Individual preferences are determined by taste, need, ..., as opposed to price, availability or personal income. Classical economics assumes that people act in their best (rational) interest. In this context, rationality would dictate that, when given a choice, an individual will select an option that maximizes their self-interest. But preferences are not always transitive, both because real humans are far from always being rational and because in some situations preferences can form cycles, in which case there exists no well-defined optimal choice. An example of this is Efron dice.

Life satisfaction is an evaluation of a person's quality of life. It is assessed in terms of mood, relationship satisfaction, achieved goals, self-concepts, and self-perceived ability to cope with their life. Life satisfaction involves a favorable attitude towards one's life—rather than an assessment of current feelings. Life satisfaction has been measured in relation to economic standing, degree of education, experiences, residence, and other factors.

Subjective well-being (SWB) is a self-reported measure of well-being, typically obtained by questionnaire.

This glossary of economics is a list of definitions of terms and concepts used in economics, its sub-disciplines, and related fields.

Money worship is a type of money disorder. The core driver of this behaviour is the belief that having more money will lead to greater happiness in the afterlife.In modern society, "money is revered, feared, worshipped, and treated with the highest respect". It is doubted that money cannot buy everything when people sell their organs, souls, and even children for money. Individuals with this disorder are obsessed with the idea that obtaining more money is necessary to make progress in life and, at the same time, convinced that they will never have enough money to fulfil their needs or desires.

References

  1. ↑ Donati, Pierpaolo (2019). "Discovering the relational goods: their nature, genesis and effects". International Review of Sociology. 29 (2): 238–259. doi:10.1080/03906701.2019.1619952.
  2. 1 2 Uhlaner, Carole Jean (1989-01-01). ""Relational Goods" and Participation: Incorporating Sociability into a Theory of Rational Action". Public Choice. 62 (3): 253–285. doi:10.1007/bf02337745. JSTOR   30025077.
  3. ↑ "The Fragility of Goodness". Cambridge University Press. Retrieved 2015-11-03.
  4. ↑ Bruni, Luigino; Stanca, Luca (2008-03-01). "Watching alone: Relational goods, television and happiness". Journal of Economic Behavior & Organization. 65 (3–4): 506–528. CiteSeerX   10.1.1.452.9331 . doi:10.1016/j.jebo.2005.12.005.
  5. 1 2 "Why Loneliness Is Bad for Your Health". U.S. News & World Report. 2008-11-12. Retrieved 2015-11-03.
  6. 1 2 Bruni, Luigino. "Relational Goods, A new tool for an old issue". ECOS - Estudos Contemporâneos da Subjetividade. 3 (2): 173–178. ISSN   2237-941X.
  7. 1 2 3 4 5 Becchetti, Leonardo; Pelloni, Alessandra; Rossetti, Fiammetta (2008-08-01). "Relational Goods, Sociability, and Happiness" (PDF). Kyklos. 61 (3): 343–363. doi:10.1111/j.1467-6435.2008.00405.x. hdl:2108/20208. ISSN   1467-6435.
  8. ↑ Robison, L.J.; Flora, J.L. (2003). "The Social Capital Paradigm: Bridging Across Disciplines". American Journal of Agricultural Economics. 85 (5): 1187–1193. doi:10.1111/j.0092-5853.2003.00528.x.
  9. 1 2 Becchetti, Leonardo; Trovato, Giovanni; Londono Bedoya, David Andres (2009). "Income, relational goods and happiness". Applied Economics. 43 (3): 273–290. CiteSeerX   10.1.1.483.6976 . doi:10.1080/00036840802570439.
  10. ↑ Adam Smith. The Theory of Moral Sentiments.
  11. 1 2 "Average American watches 5 hours of TV per day". NY Daily News. Retrieved 2015-11-03.
  12. ↑ Poppick, Susie (June 10, 2014). "The Money-Happiness Connection". Money.com . Archived from the original on May 16, 2021. Retrieved 2015-11-03.
  13. ↑ Frey, Bruno S.; Benesch, Christine; Stutzer, Alois (2007-06-01). "Does watching TV make us happy?" (PDF). Journal of Economic Psychology. 28 (3): 283–313. doi:10.1016/j.joep.2007.02.001.
  14. ↑ Rim, Dunbar (June 2004). "Gossip in evolutionary perspective — PSY". Review of General Psychology. 8 (2): 100–110. CiteSeerX   10.1.1.530.9865 . doi:10.1037/1089-2680.8.2.100 . Retrieved 2015-11-03.
  15. ↑ Blessi, Giorgio Tavano; Grossi, Enzo; Sacco, Pier Luigi; Pieretti, Giovanni; Ferilli, Guido (2014-01-01). "Cultural Participation, Relational Goods and Individual Subjective Well-Being: Some Empirical Evidence". Review of Economics & Finance. 4: 33–46.
  16. ↑ Rasciute, Simona; Downward, Paul; Greene, William H (2017). "Do Relational Goods Raise Well-Being? An Econometric Analysis". Eastern Economic Journal . 43 (4): 563–579. doi:10.1057/eej.2015.46.
  17. ↑ Capecchi, Stefania; Iannario, Maria; Simone, Rosaria (2018). "Well-Being and Relational Goods: A Model-Based Approach to Detect Significant Relationships". Social Indicators Research . 135 (2): 729–750. doi:10.1007/s11205-016-1519-7.
  18. 1 2 Sahadi, Jeanne (2014-06-30). "Should gross national happiness define a nation's success". CNNMoney. Retrieved 2015-11-03.
  19. ↑ "2 - From transactions to encounters: the joint generation of relational goods and conventional values - University Publishing Online". ebooks.cambridge.org. Retrieved 2015-11-03.
  20. ↑ Worl, Justin. "Here's Where People Are Happiest Growing Old". TIME.com. Retrieved 2015-11-03.
  21. ↑ Michalos, Alex C. (2007-07-07). "Education, Happiness and Wellbeing". Social Indicators Research. 87 (3): 347–366. doi:10.1007/s11205-007-9144-0. ISSN   0303-8300.
  22. ↑ "Why is everyone so busy?". The Economist. ISSN   0013-0613 . Retrieved 2015-11-03.
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