Social Networks and their Role in the Economy

Network of connections is an informal institution, which affects agents’ decisions as well as their outcomes. Dominant neoclassical paradigm has neglected the role of connections and links, due to its atomistic view, while social networks can play a crucial role with regards to economic and social phenomena, such as migration, job finding, crime network, learning, financial crisis contagion, microfinance, risk sharing and so on. In recent years, economic-social networks have attracted economists’ attention, nonetheless, for some reasons, it is not well considered in Iran yet. Accordingly, this paper aims to not only introduce some fundamental and mathematical concepts on economics of networks, but also review several central questions correspondingly. Indeed, all issues and topics can be categorized under the four following questions. How can analyzing structure and topology of networks help economic analysis? How does social network affect agents’ outcomes? How does social network form from economic point of view? How can one estimate such effects?