The Shadow Price of Social Change and Its Evaluation

Abstract

This paper analyzes the “shadow price” of social transformation. For the first time, an attempt was made to determine the approaches to measuring this value with regard to nonmarket phenomena and processes, and to apply these approaches in an empirical analysis, based on a representative survey in Russia (N = 1,000) using experimental situations.

Specifically, it quantitatively evaluates (1) the degree of divergence between the real and the ideal structure of the time budget of several important domains of social life; (2) the ratio of social ills to social benefits; (3) individual public welfare functions; and (4) the social cost, legitimated by citizens, of reproducing two fundamental public goods: “the capacity to maintain ‘superpower’ status” and “the well-being of the future generations.”

The authors introduce and operationalize the novel concept of the socially suboptimal product of labor, that is, the product resulting from alienated (or unwilling) labor, and conversely, the product that could potentially result from using unutilized willing labor. In doing so we support the idea of distinguishing productive and unproductive forms within both the notion of labor and the notion of leisure. Aggregated estimates of these values show the share of gross domestic product (GDP) that could be optimized due to a redistribution of the time budget of the population between the main areas of life, according to ideal social preferences.

The balance of social benefits and social ills resulting from the life experiences and activities of individuals is empirically evaluated. We consider this balance, which is the sum of impacts of the social environment on the individual, as a suitable model for explaining how individuals make decisions about whether or not to participate in public life.

“Individual public welfare functions” are assessed empirically, demonstrating that individual utility depends on personal and collective consumption. Empirical testing covered a wide range of nation-building areas with public investment in relevant types of merit and public goods.

Then the authors propose and test on empirical data an opportunity cost approach to evaluating socially legitimate amounts of funding for the fundamental social benefits “superpower” or “additional power” of the nation.

The cost of the public good “well-being of the future generations” is calculated for the Russian sample.

Finally, the estimates of the discount rates of human lives and “healthy and prosperous years of life” were obtained for Russia for the first time.

The findings of the study are relevant for the efficient management of complex socioeconomic systems. The authors strongly believe that revealing the structure of existing social preferences and estimating their impact on various areas of social life will help improve policymaking by explicitly taking into account the specifics of the real social contract between the state and society.

Keywords:

• social contract
• civil society
• NGO
• social change
• public goods
• socially important goods
• social preferences
• social discount rate

Notes

^1. H. Katz refers to the works (Carroll 1992; Persaud 2001, p. 65; Sassoon 1982).

^2. For an example of the structure of GP, see the work Pannozzo, Colman, Ayer, Charles, Burbidge, Sawyer, Stiebert, Savelson, Dodds (2008).

^3. In the questionnaire, respondents were asked to indicative negative and favorable characteristics of their place of residence and/or work, which had over the past year led either to unplanned expenditure, or unexpected economy of time or money. The questionnaire contains a closed list of hypothetical characteristics of life space, from which respondents had to choose only ones which they had encountered directly. The list was a description of paired (opposite in their impact on the life of the individual) characteristics of their work, safety, and ecological, infrastructural, social, and cultural components of their living space.

An example of a pair of positive and negative external effects that respondents were asked to identify as being present in their lives is:

(–) “Additional or unforeseen expenses on protective or preventive measures because of an unfavorable ecological situation or noise pollution in your area (because of the proximity of your home to highways, factories, radiation sources) vs. (+) Next to the place where you live or work, there are well-kept parks, pristine forests and ponds, unique ecosystems.”

(–) “The moral and material harm or loss of time connected with discrimination from people around you because you belong to a certain social category (by your state of health, appearance, age, nationality, habits or other individual characteristics) vs. (+) Economy of time and energy thanks to the responsive attitude toward you by the people around you because you belong to a certain social category (by your state of health, appearance, age, nationality, habits or other individual characteristics).”

^4. In a somewhat modified form (in accordance with the design of our experiment) this is carried out according to the ideas of D.M. Kreps (Kreps 1990, pp. 159–60) and A.D. Nekipelov (Nekipelov 2006, pp. 258–62)