Can Contract Theory Explain Social Preferences?

The social exchange theory controls our behavior as well as the reinforcement for our actions because before we act in most circumstances, we will weigh the rewards and costs of the behaviors. The behavior that we use is the one believed to produce the highest reward and the lowest cost. What we may perceive to be acceptable or unacceptable in the relationship is our comparison level that we weigh the rewards and costs against. The comparison level of alternatives is when we weigh the rewards and costs relative to the perceived alternatives. People also have a comparison level for the alternative relationships. With a high comparison level, we may believe the world is full of lovely people just waiting to meet us. When this level is low, we may stay in a high-cost relationship simply because we believe we could not find any better elsewhere. Molm (1991) shows that in recent research on individual judgments losses have a greater effect on people then gains.

The processes that lead to social order are considered as intricate and premeditated, and not spontaneous. The construction of social order is the result, in reference to Blau’s Exchange Theory, of trust and solidarity achieved through repeated social exchange. This paper will explain how and why social exchange occurs and the significance of continual social exchange between two counterparts.

Sound institutions will boost confidence across the board and encourage investment so long as no one has to factor into the equation the huge levels of gratuitous uncertainty that stem from useless government intervention. We have to accept that external circumstances will create good and bad times. No economic theory can ward off hurricanes, disease, or war, even if sound social institutions can contain some of their adverse effects. But the purpose of government is not to eliminate all the uncertainties of nature and politics. It is to not add to the confusion by creating baroque structures of taxation, regulation, and government spending that add fresh layers of uncertainty through mechanisms that expend real resources in order to reduce social output.

Contract law has set out to provide a healthy trade environment. Contracts are promises enforced by the law, with the support of something of value that has a legal purpose. It is an agreement between parties, formed by the elements: offer and acceptance, with all parties having the capacity to perform obligations enforceable by law. There are instances where the enforcement of a contract would bring about gains or losses to society and commerce.

Public opinion plays a huge role in the development of democracy. “A society is unlikely to maintain democratic institutions over the long term, unless democracy has solid support among the public” (Andersen 2012). Most research on the issue demonstrates a positive link between economic development and support for democracy(Andersen 2012). Some researchers also consider social trust (Putnam 1993) and social tolerance (Andersen and Fetner 2008) to be a major factor of support of democracy. Most Americans see unequal economy as a result of individuals work ethics and talent rather then a flaw in the economic system. However, most Americans accept inequality because they believe everyone has the same chances in life to make the best. A properly running government is supposed to make positive that all the citizen are equal. By believing in equal democratic rights Americans support everyone citizen having the same level of equality and the same equal voice in representative government. Since citizens don’t feel that they can trust the government to create and equal ground for all they are much less likely to be involve and participate in political field. Concerned citizens have the right to be worried about the health of our democracy. It seems that the government resounds more often and effectively to the more privileged group in society then to needs of the

According to Adam Smith’s, The Wealth of Nation, the best economic benefits for all can be achieved when an individual concerned with their own interests. Self-interest is when an individual makes decisions that are in their own benefit or best interest over any other parties involved (Book 1 chapter 2 §2). Smith argues that the idea of individual continuously make decisions that benefits their own situation will eventually lead to achieving better quality of life for everyone. Hence, people wouldn’t have to depend on other to make the decisions for them and encourages division of labour within the society (Book 1 chapter 2 §3). Withal the theory of self-interest is alike with selfish in our words, therefore the following essay explores how these two concepts differ. Nevertheless, Smith is also aware that the theory of self-interest may cause dispute between master and workers, thus he suggests a resolution to this kind of dispute. Accordingly, along with an example of worker’s dispute, this essay evaluates whether the resolution that Smith suggested is feasible in the modern society.

In order to understand this, I will clarify what is meant by the “social contract.” The “social contract” is a type of unwritten agreement in which everyone in a particular society participates and agrees to live together under common “rules”. The “rules” are “those principles

The social contract was an important factor because this theory tried and should have done more to help Bartleby. The theory of a social contract is an agreement among individuals of a society in order to cooperate for social benefits. This theory became popular in the sixtieth century, seventh century, and eightieth century, especially among the leading theorists of their time such as Thomas Hobbes, John Locke, and Jean-Jacques Rousseau. These theorists used this as a means of explaining the birth of government and the responsibility of the people. In Bartleby, the Scrivener, this

Social Capital is defined as the networks of relationships among people, enabling that society to function effectively. James Coleman’s “Social Capital in the Creation of Human Capital” examines the many benefits of social capital in a society. However, most forms of social capital are public goods and do not primarily profit the person who has to bring it about. Therefore, it’s not in his interest to bring it leading to a shortage. Coleman wants to apply economics’s principle of rational action to the social perspective to increase people’s willingness to socialize. On the other hand, Alejandro Portes’s “The Two Meanings of Social Capital” challenges Coleman’s concept by arguing that people shouldn’t

The personal discount rate is a measure of the extent to which a person prefers current to future income, while the social discount rate is a measure of the value of funds spent on social projects. Estimating the benefits of social projects requires making ethically subtle choices about the benefits to others, however measuring personal values needs to consider other factors. When the capital market is not perfect, personal attributes could affect personal discount rates though their influence on intertemporal preferences. Personal discount rates might be associated with personal attributes such as income, education, age, sex, race, and marital status. Also they are clearly sensitive to tax adjustment of the break-even discount

The sway of public perception in the negative direction can be detrimental to one’s political campaign. That’s why blasting spam mail that can alter the results of an election is something of questionable moral standards. A few pieces of information were omitted that could have helped form a more complete answer: which political party is being hurt? What is in the email? How detrimental was the content to the injured candidate? Knowing that I am politically biased, I know I would agree with the decision if I supported one candidate and it led to him or her winning; however, I will look into the issue ignoring this idea.

Adam Smith: we are motivated by self interest, and through the invisible hand comes free market competition. This naturally to social utility. / Butcher-brewer-baker quote demonstrates that the exchange of goods if for the benefit of both parties, without no ethics involved in the exchange. / Though competition, comes social harmony and utility. The market is a self correcting mechanism because it forces us to be truthful and honest, we should not scam people because this is not beneficial to us in the future.

Gary Becker in “An Economic Way if Looking at Life” claims that economic way of looking at life reflects the relationship between day to day economy and human behavior; their way of thinking and reasoning when handling social aspects such as crime, family, marriage, discrimination among others. Economic way of looking at life discusses various methods of economic analysis. It raises individuals into a different thinking level during decision making and the understanding of the today’s economic market and society in general. Basically economics helps in analyzing different human behaviors and especially on monetary issues (Becker, 1993).

In my paper, I discuss how the varying amount of ethnicities in a country leads to trust and in-group bias, which points to the differentiation in welfare state spending. I analyze two countries that have varying percentages of ethnicities and different sized welfare states. Denmark has an extremely large social welfare state, and a very small amount of ethnic diversity. Brazil, on the other hand, has high ethnic diversity with a very small welfare state. This paper proves that there is a direct connection between why having a small ethnic diversity in a country creates differing amounts of interpersonal trust, which creates a large welfare state, and vice-versa.

The four elements of a valid contract are offer and acceptance, meeting of the minds, consideration and competent parties. The contract must cover a legal purpose or objective as well (Binder, 2012). The objective theory of contracts holds that contract formation is dependent on what is communicated, rather than what is thought by one of the parties (Barnes, 2008).