The Shadow Price of Social Change and Its Evaluation

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.