Social Interactions and Economic Behavior

This paper is a critical introduction to the new wave of economic literature on the effect of social interactions on individual behavior and aggregate economic outcomes. I refer to this research program, also known as new social economics, as the socioeconomic analysis of behavior, to distinguish it from the more popular economic analysis of social behavior. I discuss the main features of so-called interactions-based models, and I show how they help us to understand substantive economic phenomena. In order to restrict the focus, I choose five possible applications: matching in the labor market, welfare participation, poverty traps and inequality, investor behavior, and consumer behavior. Then I dwell upon two key undecided questions: (i) why economic behavior is affected by social interactions, and (ii) how the social context is shaped by rational individuals. Finally, I briefly discuss the main empirical routes so far used.new social economics, social interactions, neighborhood effects, social networks, social norms, social multiplier

When do Theories Become Self-fulfilling? Exploring The Boundary Conditions of Performativity

Management researchers increasingly realize that some theories do not merely describe, but also shape social reality; a phenomenon known as "performativity." However, when theories become performative or even self-fulfilling is still poorly understood. Taking this gap in the research as our starting point, we develop a process model to show that new theories will only become self-fulfilling (1) if they motivate experimentation, (2) if experimentation produces anomalies, and (3) if these anomalies lead to a practice shift. On that basis, we identify six boundary conditions that determine whether theories will shape social reality. To illustrate our argument, we explore the conditions under which theories that postulate a positive link between corporate social performance and corporate financial performance may become self-fulfilling