SOCIAL NORMS, INFLATION AND STABILIZATION

Daniel Arce

Rationality and Society, 1996, vol. 8, issue 3, 277-294

Abstract: This study presents a socio-economic game of inflation and distributive conflict where inflation is derived from, and stabilization is implemented via, social norms. We apply the `Theory of Social Situations' (Greenberg 1990) to contrast rational choice outcomes predicted by Nash equilibrium vs those derived as social norms under our normative criteria (von Neumann-Morgenstern stability). We then analyze `heterodox' stabilization policies, which seek to address both the economic and sociological criteria for stabilization. Our conclusion is that social pacts constitute a viable normative approach to stabilization because they address the social conflict underlying chronic inflation in order to derive stabilizing norms.

Keywords: coalition-proof; conflict inflation; social norms; stabilization policy; theory of social situations (search for similar items in EconPapers)
Date: 1996
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Persistent link: https://EconPapers.repec.org/RePEc:sae:ratsoc:v:8:y:1996:i:3:p:277-294

DOI: 10.1177/104346396008003003

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