Utility Maximization and Interpersonal Relationships
Anything which is of value to us gives us utility. Utility can be thought of as a benefit or as a sense of satisfaction we derive from it. From ancient times, humans have bought and consumed things which provided them utility. Money, as a matter of fact, is important only because it helps buy things which provide utility. But material goods are not the only things which satisfy the needs of people and thus provide utility.
Interpersonal relationships constitute the emotional side of human beings. It ranks third in Maslow’s need hierarchy theory and includes the need for acceptance and belongingness among individuals. But why is a discussion on these needs important?
A discussion on these …show more content…
As long as an individual is taking all the decisions according to his own self-interest (not considering the peculiar case we talked about in 1), he is well capable of maximizing his utility, quite easily. But when the maximization of utility is dependent on the behaviour of others, the process becomes quite complicated. (Even more complicated if we consider the peculiar case in 1)
Let us consider an example here-
You have 4 friends. Your friends share a close bond with you as well as with each other. One day when you were not present at the weekend meet, your friends plan a trip to France in the coming month. In the next meet they ask you about the same. What will you say?
Further consider that you have been running on a tight budget for past two months and the upcoming month looks the same. You have some savings which will cover the cost of the trip but you will have to cut back on your expenses in the coming months. You are also not the kind of person who likes to exceed his budget (via borrowing). You and your friends share essentially the same income …show more content…
For example- If you refuse to go on the trip and lose out on the bonding made during the trip, there can be a permanent change in your utility function (of those derived from friends). This change can have long term impacts on group dynamics. So such opportunity costs also need to be considered while making a decision in such cases.
• Human beings usually look for long term relationships. One of the major reasons to believe that marginal utility from a specific interpersonal relationship might actually be increasing. In this sense a permanent change in utility function can have a huge long term impact on an individual’s utility maximization objective.
So, utility maximization problem in case of interpersonal relationships is much more complex than in case of goods and commodities. This is primarily due to absence of money and the presence of increasing marginal utility in case of interpersonal relationships. Decisions in such cases and under such circumstances of choice (as given in the example) will require a much better understanding of human behaviour.
Anything which is of value to us gives us utility. Utility can be thought of as a benefit or as a sense of satisfaction we derive from it. From ancient times, humans have bought and consumed things which provided them utility. Money, as a matter of fact, is important only because it helps buy things which provide utility. But material goods are not the only things which satisfy the needs of people and thus provide utility.
Interpersonal relationships constitute the emotional side of human beings. It ranks third in Maslow’s need hierarchy theory and includes the need for acceptance and belongingness among individuals. But why is a discussion on these needs important?
A discussion on these …show more content…
As long as an individual is taking all the decisions according to his own self-interest (not considering the peculiar case we talked about in 1), he is well capable of maximizing his utility, quite easily. But when the maximization of utility is dependent on the behaviour of others, the process becomes quite complicated. (Even more complicated if we consider the peculiar case in 1)
Let us consider an example here-
You have 4 friends. Your friends share a close bond with you as well as with each other. One day when you were not present at the weekend meet, your friends plan a trip to France in the coming month. In the next meet they ask you about the same. What will you say?
Further consider that you have been running on a tight budget for past two months and the upcoming month looks the same. You have some savings which will cover the cost of the trip but you will have to cut back on your expenses in the coming months. You are also not the kind of person who likes to exceed his budget (via borrowing). You and your friends share essentially the same income …show more content…
For example- If you refuse to go on the trip and lose out on the bonding made during the trip, there can be a permanent change in your utility function (of those derived from friends). This change can have long term impacts on group dynamics. So such opportunity costs also need to be considered while making a decision in such cases.
• Human beings usually look for long term relationships. One of the major reasons to believe that marginal utility from a specific interpersonal relationship might actually be increasing. In this sense a permanent change in utility function can have a huge long term impact on an individual’s utility maximization objective.
So, utility maximization problem in case of interpersonal relationships is much more complex than in case of goods and commodities. This is primarily due to absence of money and the presence of increasing marginal utility in case of interpersonal relationships. Decisions in such cases and under such circumstances of choice (as given in the example) will require a much better understanding of human behaviour.