Think of a big decision you've made lately. The final call was most likely yours, but how did external factors weigh in? Did you talk it over with a spouse or a close friend, think about your upbringing, your economic status, or how the final outcome might affect your future and your community? So much about our social networks affects our decision making process.
Matthew Jackson is a professor of economics at Stanford University, and he also wrote the book The Human Network: How Your Social Position Determines Your Power, Beliefs, And Behaviors.
Matthew and Greg sit down to talk about what Matthew calls Social Economics, how social context could help solve structural problems, the friendship paradox, and borrowing contagion models from epidemiology to track how ideas travel through social networks.
Episode Quotes:
Why social aspects are important in economics:
As we know, people don't act fully rationally. They don't have unlimited capacity for calculating and making decisions and processing information. And moreover, we're embedded in our social structures. Our networks, we listen to our friends, our acquaintances, our family. These are the people that help us make decisions.
These are the people that give us information. They give us opportunities, they give us access to things. They control our norms. And if we don't have that context, we miss about 80 to 90% of what influences people's decision-making. And so bringing that social structure in, makes a huge difference in understanding why people end up making what we would think of as economists, as suboptimal decisions.
What is the Friendship Paradox:
If somebody has 10 friends and somebody else has one friend, then that person who has 10 friends has 10 times the influence. They get noticed a lot more by people than the person who has fewer friends. And on average, when you look at a society, that means that these people who are very, very popular are people that are influencing many more people, and that means that we end up with distorted views.
How letting one person become too influential can change the future of an industry:
In settings where we know that somebody is going to begin to influence prices and the forward development of an industry, we have to pay attention to that person. And that makes it feedback in a positive way.
I mean, “positive” in quotes, right? Because now he can shake the industry up and down. So it's positive in some ways and negative in others.
Show Links:
Guest Profile:
Faculty Profile at Stanford University
Professional Profile at Coursera
Matthew Jackson on Twitter
His work:
Matthew Jackson on Google Scholar
The Human Network: How Your Social Position Determines Your Power, Beliefs, and Behaviors
Social and Economic Networks
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