How do the extrinsic circumstances of individuals interact with their intrinsic motivation and choices?
Traditional economic theory assumes that both extrinsic circumstances and psychological factors like aspirations are taken as given when individuals make choices. However, work by social scientists such as Appadurai (2004), on poverty traps and social exclusion would seem to indicate that the extrinsic circumstances of individuals impact on both intrinsic motivation and choices. This issue is clearly important for policy purposes: when should policy address the extrinsic circumstances of individuals (like initial wealth social status, health) and when should policy address the psychological factors (like aspirations, self-confidence, willpower) of individuals? What is the appropriate policy mix for alleviating chronic poverty? The basic objective will be to formulate and analyze a formal model of social interaction with multiple welfare-ranked equilibria and develop an equilibrium selection argument via adaptive, stochastic play which attaches to a specific social outcome a probability
