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Social Contagion

Jun 6, 2010 • Behavioral Economics, Labor, Thinking Economically • 128 Views    No Comments

If unemployment creates unhappiness, then will people be less unhappy if their friends are also unemployed? According to a recent IMF paper, not only are people less unhappy when they and their friends are unemployed, but also, they then tend to be jobless for a longer time period.

Somewhat similarly, a Harvard medical sociology professor discovered that people gain weight when their friends gain weight. Saying that weight gain was similar to the spread of a virus, he observed that obesity spread through social networks.    

The Economic Lesson

Economically speaking, we are looking at “utility differences”. An individual who is very unhappy being unemployed gets satisfaction (utility) from job hunting although it requires considerable effort. By contrast, a less unhappy person will discover that the job hunting effort does not elevate his or her happiness level enough to be worth the effort.

 

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