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Social Norms, Inflation And Stabilization

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  • Daniel G. Arce M.

Abstract

This study presents a socio-economic game of inflation and distributive conflict where inflation is derived from, and stabilization is implemented via, social norms. We apply the `Theory of Social Situations' (Greenberg 1990) to contrast rational choice outcomes predicted by Nash equilibrium vs those derived as social norms under our normative criteria (von Neumann-Morgenstern stability). We then analyze `heterodox' stabilization policies, which seek to address both the economic and sociological criteria for stabilization. Our conclusion is that social pacts constitute a viable normative approach to stabilization because they address the social conflict underlying chronic inflation in order to derive stabilizing norms.

Suggested Citation

  • Daniel G. Arce M., 1996. "Social Norms, Inflation And Stabilization," Rationality and Society, , vol. 8(3), pages 277-294, August.
    • Handle: RePEc:sae:ratsoc:v:8:y:1996:i:3:p:277-294
    DOI: 10.1177/104346396008003003
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    References listed on IDEAS

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