You are connected by “Six Degrees of Separation” to almost everyone. This surprising amount of connectedness was brought home to me when I realized that I knew a person who knew Lady Gaga (One Degree of Separation). The connection had nothing at all to do with my career or that of Stefani Germanotta, but only with our respective networks of family and friends. Economists have gotten as excited as anyone else by social networks. A previous blog post talked about intra-ethnic-group networks that are useful for enforcing contracts and deterring cheating. Another important social network function is spreading information. A paper forthcoming in the American Economic Review by Tim Conley and Chris Udry describes how Ghanaian farmers were more likely to succeed at growing pineapples for export the more successful were neighbors already growing pineapples. Pineapple growing is very sensitive to having too much or too little fertilizer, so it was useful that farmers could adapt their fertilizer use based on what had worked for their neighbors.
A similar paper finds that farmers in Mozambique are more likely to adopt a profitable new crop (sunflowers) if someone in their family and friends network had done so. They were somewhat less likely to do so if somebody in the village of the same religion (mainly Catholic v. Protestant) was an adopter, while it had no effect if someone in the village of a different religion was an adopter.
The conclusion is that social networks are a great way to spread success (although I have yet to benefit from Lady Gaga’s knowledge of how to do a music video that gets 175 million hits on YouTube). Unfortunately, networks can also explain persistent poverty, since the poor are out of luck if there is no success to spread in poor people’s social network.