Internalizing Sociality

The previous chapter examined two strategies that combine the traditional atomistic individual conception with accounts of social interaction: Bénabou and Tirole by moving from their model of the self-regulating individual to their unified psychology general game-theoretic analysis and Thaler and Sunstein by explaining how rational experts seek to make Homo sapiens act like Homo economicus. This chapter examines two further behavioral economics approaches that proceed quite differently in that they inject social content and social interaction directly into the standard utility function representation of the individual: George Akerlof and Rachel Kranton’s social groups social identity analysis and the social preferences approach developed by James Andreoni, Matthew Rabin, Ernst Fehr, Klaus Schmidt, and many others. That is, rather than contextualize individuality (and subjectivity) by placing individuals in a world in which they interact with others, they internalize sociality by giving the utility function an unmistakably social dimension. Their general strategy, then, is more radical in that it contests the traditional understanding of atomism itself. How can people be atomistic individuals if they are in some fashion also social individuals? At the same time, it remains a traditional kind of strategy in that the analysis is developed within the utility function framework in which individuals’ preferences, whatever their nature, are still their own preferences.

Neither of the approaches discussed in this chapter, however, is formulated as a response to the multiple selves problem, presumably because in behavioral economics that problem is generally associated with present bias and time inconsistency, and neither of these approaches is specifically concerned with that issue. However, present bias causes only one kind of multiple selves problem, specifically an intertemporal one, and this chapter will accordingly investigate how multiple selves problems resurface in two additional forms in connection with these different strategies for explaining individuals. In particular, in the Akerlof-Kranton analysis the multiple selves problem reappears in connection with individuals having multiple social group identities, whereas in social preferences analysis it arises in connection with uncertainty over whose preferences individuals serve, their own or those of others. In both cases, that is, individuals’ multiple selves are their multiple social selves. Thus, the strategy of internalizing social relationships within the utility function locates different social selves directly within individuals. The question these approaches consequently face is whether it still makes sense to say the utility function constitutes a single individual unity.