Relationships, Human Behaviour and Financial Transactions

Abstract

It is widely known that relationships and human behaviours such as trust, reciprocity and altruism that are observed in the human societies are capable of facilitating financial transactions. This paper proposes a theoretical model to argue that though these elements can facilitate financial transactions, they may not always ensure efficiency in the sense of creation of additional wealth. As financial resources are scarce, the paper argues that the financial transactions induced by relationships, trust, reciprocity and altruism may lead to inefficient allocations of resources.