You may have a huge roster of Facebook friends, but that’s not going to help you if the fiscal cliff plunges the United States back into recession next year.
If your social network is made up of hundreds of people you haven’t had a real-life conversation with in years, you’re worse off if the economy tanks than people with just a handful of close friends.
Emoticon-based friendships aren’t strong enough to act as a safety net in an unstable economy, University of Virginia psychology professor Shigehiro Oishi wrote in “Optimal Social-Networking Strategy Is a Function of Socioeconomic Conditions,” a study published last month in the journal Psychological Science.
“In unfavorable economic conditions, under which individuals often need serious practical and material help from others, having a large number of friends might drain all of your time and resources,” he wrote. In other words, you’re not going to lend money to or offer to babysit for someone whose interaction with you largely consists of “Like" this post, and they wouldn’t do these things for you, either.
Using a computer model and a survey of nearly 250 people, Oishi and co-author Selin Kesebir of the London Business School found that investing in few, deep friendships is beneficial when money is tight and you have little chance of moving somewhere better.
In the survey, respondents rated their current sense of well-being and the nature of their social network, which Oishi and Kesebir compared to the income level and the degree of mobility in their zip code of residence. They found that people living in high-income environments, regardless of how often they move, benefit more from having loose ties with a lot of people. They also are better off with these shallow, broad networks when they move around a lot, whether in wealthy or poor situations.
In contrast, lower-income households that didn't move as often were happier with a small circle of close friends than with a large number of more superficial relationships.
Americans used to move roughly once every five years, but that has fallen to every nine years, said Jed Kolko, chief economist at Trulia.com. The rate of mobility had been dropping bit by bit since the 1980s, and it really took a hit when the economy went south.
“Mobility goes down when the economy does worse,” Kolko said. “When the economy’s in recession, people tend to move less. There are fewer jobs available for people to move to, and if home prices fall, people can go back underwater or be more underwater and be less likely to sell.”
"If we fully go over the fiscal cliff, it’s likely to slow down or even reverse economic growth," Kolko said. When it comes to housing, "it would definitely slow down and possibly reverse. It would severely affect demand," he said, which means people are more likely to stay put.
Even the people who are moving these days are sticking closer to home, which presumably undercuts the benefit of a far-flung social network. Compared to a decade ago, the number of people who move but stay in the same town is roughly flat, but the number of people relocating across state lines has dropped by 35 percent.
“Having narrow, deep ties is more advantageous in residentially stable environments, particularly if crisis probability is high...," Oishi wrote. "In such a condition, investing in a small number of friends seems sensible and adaptive.” These hypothetical parameters would be reality if economists’ worst-case predictions for the fiscal cliff come true.
So, don’t just tweet this story or post it to your Facebook wall. Pick up the phone and tell your closest friend about it — it could help you survive a fall off the fiscal cliff.