(DP 1984-05) Morale, Synergy and Welfare

Abstract

Moral is a proverbial hidden variable in models of social games. Its importance is unquestioned but it ordinarily defies operational definition. We attempt here to parameterize its role and trace how it impacts on social production and welfare in a Nash-like bargaining games. Synergy is introduced through a production function with special simple properties. Society attains its highest welfare in the "pure energy solution". At this point, welfare egalitarianism obtains. Society is worst off within the bargaining milieu in the "pure exchange solution". When some members perceive that they are getting less within the bargaining milieu than they would under an alternative set-up, they may quit the game. Synergy and welfare rise when individuals perceive (a) a strong matching generosity current and (b) a strong synergy current. The present morale crisis in the country is then interpreted in this light.