Friendship is a fundamental and universal human need. This form of social connection cultivates mutual affection, trust, interdependence, and joy. According to one of modern social science’s longest ongoing studies, the social connections of friendship enrich and even extend our lives by enhancing well-being, reducing loneliness, boosting creativity, and fostering a sense of belonging and value. Active networks of friendships amplify prosocial behaviours and outcomes in our communities, too, as friends can help us access resources, knowledge, and networks of influence that we might not be able to access on our own.

Lifeboat, a now defunct non-profit organization that investigated the value and power of friendships, published a report in 2013 that found that most people were not fully happy or confident with their current friends. The number of close friends, rather than the total number of friends, correlated with higher life satisfaction and happiness across all generations. People across different groups wanted similar qualities in their friends, such as loyalty, goodness, and support. Having more close friends increases life satisfaction and happiness, regardless of age, gender, or social media use.

Seriously, social media friends, according to science, are false friends. Or, more accurately, social media friends are the high-calories, low-nutrition kinda friends.

Most importantly, especially for the purposes of this article, the Lifeboat study suggested that to improve their friendships, people should invest more time and energy in their loyal and honest friends, communicate their expectations clearly, and be open to diversity.

So, what if we looked at friendship as an economic concept?

After all, friendship contains several socioeconomic elements. It can be a form of exchange, where we give and receive attention, advice, support, feedback, affection, ideas, and so on. We invest in friendships by allocating scarce resources, such as time, trust, energy, and feelings to build and maintain relationships for future returns or exchanges, which might be realized through longevity, safety, and happiness.

Economic models of friendship

A few economic models can help us understand, or at least expand our perspective on, friendship:

• The market model, where friendship is seen as an exchange of goods and services that are determined by the interaction of friends (free marketers might call us “buyers and sellers”) without any external interference. This is contrasted with a regulated market, where the government (maybe parents?!) regulates the relationship.
• The game theory model, where friendship is seen as a strategic interaction between rational (and emotional) players, who can cooperate or defect, depending on their preferences, expectations, and goals.
• The network model, where friendship is seen as a structure of nodes and links, that can generate network effects, such as diffusion, activation (or ripples), and influence.
• The behavioural model, where friendship is measured by psychological and social factors, such as biases, heuristics, norms, and emotions, that can affect our decisions and behaviours.
• The doughnut model, where friendship considers the balance between meeting the essential needs of all people (social boundaries) and respecting the ecological limits of the planet (planetary boundaries).

Applications

Applying economic models to friendship helps us understand the patterns, dynamics, and outcomes of our relationships. This outside-the-box way of analyzing relationships might also provide us with tools and frameworks to optimize our social interactions and become even better prosocial humans.

If I’m being honest, though, applying economic models to friendship has some obvious drawbacks, too, such as oversimplifying the complexity and diversity of friendship, ignoring the ethical and moral aspects of human relationships, and commodifying and instrumentalizing interactions with our pals.

Being the Economist of Friendship makes it weird for everyone.

Let’s be careful and critical when using economic models to analyze and evaluate our relationships by always remembering that friendship is more about human vibes than transactions.

Three semi-economic takeaways

Be a giver

Adam Grant’s book (and fine TED Talk) Give and Take reveals that the most successful people are “givers” who contribute to others without expecting anything in return. Grant shows how givers can build trust, influence, and reputation in their communities and across their relationships. He also highlights how to avoid the drawbacks of being a giver (it can be exhausting and eroding if not managed effectively). He also gives practical advice and examples on how to be a more effective giver, and challenges the idea that selfishness is the best way to succeed. Great friends give time, energy, and vibes to strengthen relationships.

Be a cooperative (or cooperator)

The cooperative model offers many ideas for building great friendships. It is, after all, the most human-centric economic model.

Cooperatives are more adaptable and sustainable than other enterprises, which makes their economic approach an apt metaphor for friendship. The graphic above, co-created by Karen Miner and Sonja Novkovic, highlights two reasons that a co-op, or perhaps a friendship, might exist. Friendships often respond to a specific need, such as seeking companionship when we’re new to a community, or they might enable transformation by co-creating new cultural or emotional experiences.

The guiding principles for the cooperative economy emphasize democratic governance (all friends have a say in what happens), economic participation (resources are exchanged, not extracted by one friend), and a commitment to learning (great friendships stretch and grow people).

Be a co-creator

Bonnitta Roy argues that the value of friendship is realized through co-creation. When power is balanced equitably, friendships can evolve from “tit-for-tat transactions”, which Roy argues generates a form of debt, into an “open and authentic is a state of mutual interplay, allowing everything as self or as other, to participate in the co-creation of emergent experience.”

Here is how Roy wraps up her 2016 article about “The Open Organization”, which focuses on organizations, as opposed to friendships:

Atoms connect to each other and create elements, mass relates to mass and creates the fabric of space-time. Persons connect and engage each other, inter-relate and co-create the social fabric. “A person,” said the philosopher Alfred North Whithead, “is a society of cells.” Animals and plants, rivers and tides, sunlight and atmosphere — relationships upon myriad relationships from which emerges the participatory ecology we call “earth.” Abundance is all about remembering we are born of relationship, and as interconnected participants we co-create our future through continuously shifting patterns of connecting and relating.

This is an objectively and poetically beautiful description of how a friendship evolves over time.

Post-pandemic friendships

Daniel A. Cox’s analysis of the May 2021 American Perspectives Survey generated insights that align with Lifeboat’s 2013 findings, such as the unfortunate reality that Americans have fewer and weaker friendships than before. The pandemic made some people lose touch with their friends, but also helped some people make new ones. The survey also found that getting married later, moving around more, and spending more time with kids are reasons why people have less friends. Interestingly, today people are most likely to make new friends at work.

Perhaps the one investment to make after reading this article is to make a best work friend. According to Gallup, when we have a best friend at work we are more likely to be more engaged and perform at a higher level, so perhaps share this article with a colleague and arrange a time to discuss it.

Such an investment is just logical and artful economics.