the missing motivation

Brayden

Tom Bozzo drew my attention to a new AER paper by George Akerlof with the provocative title, “The Missing Motivation in Macroeconomics.” (An earlier version of the paper can be found here.) In the paper Akerlof argues that macroeconomics lacks good micro-theoretical foundations for understanding variation in people’s behavior. Neoclassical macroeconomics is based on very narrow assumptions about individuals’ utility functions. Akerlof says that this view of behavior isn’t very “realistic,” however, because in most observable situations people do not make decisions according to some simple utility function. Rather than making excuses for empirical observations, Akerlof says that economists need better theories about what drives human interest. The answer: sociology, of course.

But as early as the beginning of the Twentieth Century, Vilfredo Pareto pointed out that such characterizations of utility missed important aspects of motivation. According to Pareto people typically have opinions as to how they should, or how they should not, behave. They also have views regarding how others should, or should not, behave. Such views are called norms, and they may be individual as well as social. The role of norms can be easily represented in peoples’ preferences by modifying the utility function to include losses in utility insofar as they, or others, fail to live up to their standards.

Sociology has a further concept that gives an easy and natural way to add those norms to the utility function. Sociologists say that people have an ideal for how they should or should not behave. Furthermore that ideal is often conceptualized in terms of the behavior of someone they know, or some exemplar who they do not know. The standard utility function is then modified by adding a loss in utility dependent on the distance of behavior from that ideal.

Akerlof goes on to review a substantial (for an economics journal) amount of sociology that deals with how norms influence what people see as appropriate or desirable behavior. Included in his review is Randy Hodson’s research on how norms affect employee satisfaction, Bourdieu’s conception of class distinctions as a motivator of consumption, and Weber’s classic take on Protestants’ desire to save rather than spend. The paper’s main objective is to show economists that “norms” (which he sees as the unifying concept of sociology) fundamentally shape people’s interests and thereby determine spending and saving patterns.

Akerlof is speaking to economists and so the conceptual nuances of sociology are not that important to him. For example, most sociologists, especially contemporary cultural sociologists, would probably not use the concept of “norms” to explain behavior as loosely as Akerlof does here. Inasmuch as certain social prescriptions are internalized, they function more like scripts or cultural rules. Other sociologists conceive of norms as situational. Their effectiveness really depends on the relationship of the exchanging actors. Alternatively, some sociologists now espouse that norms are just one kind of cultural resource that can be accessed to help accomplish other goals (e.g. achieving a higher social status). The logic of this argument, somewhat ironically, is much closer to that of rational choice theorists who see interests as inherent and norms/rules/cultural repertoires as serving those interests.

Instead, what Akerlof seems to be doing here is returning to a more elegant version of Parsonian sociology, in which norms shape social action and prescribe certain behaviors. But rather than try to build up a wall or division of labor between economists and sociologists, as did Parsons, Akerlof is calling for a melding of the two disciplines, helping economists to see that sociologists have identified a theoretical mechanism that can feed directly into economists’ view of utility.