Striving for Balance in Economics: Towards a Theory of the Social Determination of Behavior

This paper is an attempt to broaden the standard economic discourse by importing insights into human behavior not just from psychology, but also from sociology and anthropology. Whereas the concept of the decision-maker in standard economics is the rational actor, and in early work in behavioral economics it is the quasi-rational actor, in some of the recent work in behavioral economics it could be called the enculturated actor. By the enculturated actor, we mean an actor whose preferences and cognition are subject to two social influences that go beyond the context of the moment of decision-making: (a) the social contexts to which the actor has become exposed and, especially accustomed; and (b) cultural mental models–including categories, narratives, and worldviews. We trace how these factors shape individuals’ behavior through the endogenous determination of both preferences and the lenses through which individuals see the world—their perception, categorization, and interpretation of situations. We offer a tentative taxonomy of the social determinants of behavior and describe results of both controlled and natural experiments that only a broader view of the social determinants of behavior can plausibly explain. The perspective suggests new tools to promote well-being and economic development.