Socially embedded individuals

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Chapter 6 in The Behavioral Economics of John Maynard Keynes, 2022, pp 113-124 from Edward Elgar Publishing

Abstract: Preferences are not predetermined fin isolation but rather develop in a social context. Humans care about fairness, conspicuous consumption, positional goods, and nominal and relative wages indicating social position. Money wages are an essential reference in the society we live in, affecting labor supply which is not exclusively determined by the balance of the marginal utility of leisure against the disutility of work and real wage (goods), respectively. For neoclassical economists trained to think in models of socially isolated individuals for whom money is simply a veil covering the real wages (the classical dichotomy), the nominal wage orientation merely is an "irrational" money illusion. However, the findings in Behavioral Economics confirm the importance of Keynes' observations on the relevance of money wages.

Keywords: Economics and Finance (search for similar items in EconPapers)
Date: 2022
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