Along with many of my fellow economists, I am drawn to the study of the nonmarket foundations of the market process. We find that examining the nature and significance of social capital, norms of trust and reciprocity, and conventions of fair play — combined with the traditional concerns of private property, the rule of law, and free trade — greatly improves our understanding of how social cooperation works or doesn’t work. A good example of this is the research of Elinor Ostrom, who won the Nobel Prize in economics in 2009.
One of the concepts I often run across in this work is “social distance.” This is an important concept because social coordination – that is, the “invisible hand” as applied to large numbers of people as well as cooperation in smaller groups such as families – depends on constantly forming and reforming connections, closing social distance, among all those involved.
The idea of social distance seems simple: It’s how “far” individual A is from individual B socially not physically. It gets tricky when you try to come up with the proper metric with which to measure that distance.
Kinds of Social Distance
I always tell my students that Wikipedia, the web-based collaborative encyclopedia, is an excellent place to begin research but a terrible place to end it. Well, I’m going to violate that dictum here because its entry on “social distance” is useful and short. It gives three definitions, which itself indicates the rather unsettled state of the concept; each in its own way makes sense.
The first is “affective social distance,” which has to do with how close you feel emotionally toward another person. You typically feel closer in this way toward a family member than to a neighbor, whom you may have perhaps known longer. The second is “normative social distance”: the extent to which you accept someone as part of your group. This typically depends on whether the other person shares your norms or values, or whether, for example, she is a coreligionist or of the same ethnicity. The third is “interactive social distance”: the frequency with which you have contact with another person and the level of intimacy.
Closing social distance in one of these senses doesn’t imply closing it in either of the other two. For example, while the social distance between A and B may close in the sense that A has greater affect toward B, that implies neither that A and B belong to the same normative group nor that they have frequent contact with each other. I experience a certain tribal connection to a stranger wearing a Yankee’s cap and an undeniable antipathy towards anyone I see wearing a Red Sox cap (normative social distance) even though I may have no contact with them at all.
While these “dimensions” of social distance may not necessarily overlap, they certainly can. In particular, it’s hard for me to imagine having either affective or normative closeness toward another without some minimum personal interaction or contact (that is, interactive social distance).
A Personal Example
Shortly after my wife and I were married, we thought we found a lovely apartment to rent on the top floor of a modest townhouse owned by an elderly woman. Unfortunately, the real estate agent told us that the landlady would not rent to us because, he strongly suspected, she didn’t like Asians, which both my wife and I are. Angry and disappointed, we kept looking but without success.
A few weeks later the agent told us the landlady changed her mind and would rent to us, suspecting this time that her vacant apartment was costing her too much in lost rent. After thinking it over very hard, we decided that the cost of passing up this opportunity would have been greater than any satisfaction from indulging the slightly hard feelings we harbored toward her. After a few months this woman who apparently had deeply rooted suspicions of Asians was inviting us down for tea and conversation — and even blessed our son when he was born!
We didn’t become close friends or start going to church together, but things worked out much better than we could have hoped. I’m not saying this happens every time — it doesn’t — but it did in this instance, and I believe it does as a rule. Yet it wouldn’t have happened if the opportunity for mutual gain hadn’t given us the chance to overcome the cost of prejudice or of holding a grudge. We weren’t forced to rent from her, nor was she forced to rent to us. We simply found it to our mutual advantage to do so. Markets close social distance.
The Large and Small of Markets
The market order is often described as “impersonal.” For example, while getting hired or fired is an undeniably intensely personal experience, what ultimately determines whether one or the other happens in free markets is the demand for the product and the level of competition, not the whim of the employer (who is himself subject to these same forces). Harsh as it may be, being impersonal is a virtue compared to the alternative: having to adopt the particular attitudes and values of someone who, in the absence of markets, bears no cost of her bigotry.
In small-numbers situations like the one with our landlady, personal interactions and face-to-face contact are indeed guided by the norms and feelings of the people involved. It’s in the intimate order, however, that the personal experiences which can narrow (or widen) social distances take place. Whether they actually do so, in turn, depends crucially on whether or not they take place in a free market. Profit-seeking typically encourages us to interact with people with whom we would not ordinarily associate, or whom we would even dislike.
As it often turns out, however, we find we have values and feelings in common that we weren’t aware of; or, more important, we develop levels of tolerance and trust that we wouldn’t have had but for the pressures of an impersonal market. The free market, in the large and the small, not only closes social distance in the ways I’ve touched on here; it also creates new contacts that will likely form connections and create opportunities that we never could have imagined. Competition is indeed a discovery process.
You can read a Portuguese version of this article here.