Economic Analysis of Social Interactions

Economists have long been ambivalent about whether the discipline should focus on the analysis of markets or should be concerned with social interactions more generally. Recently the discipline has sought to broaden its scope while maintaining the rigor of modern economic analysis. Major theoretical developments in game theory, the economics of the family, and endogenous growth theory have taken place. Economists have also performed new empirical research on social interactions, but the empirical literature does not show progress comparable to that achieved in economic theory. This paper examines why and discusses how economists might make sustained contributions to the empirical analysis of social interactions.