Friday, August 15, 2008

Social Norms vs. Market Norms

I was reading Dan Ariely's Predictably Irrational the other day and found his discussion of social and market norms to be very interesting. He introduces the topic in a short video on his blog. I'll just be making a few comments on the topic.

Social norms are those norms which govern our social relationships. They operate in our social exchanges that take place all the time. A friend has invited you over for dinner as a favor. You ask for help in moving a couch into your new apartment. These things are simple favors, and most people have no problem doing them for others. These favors establish a respect in other people, good feelings in the volunteer, and the simple give and take of social relationships that generally show the mutual kinship we have with friends and family.

There also exist market norms. These are the norms upon which work relationships are established - generally with monetary trade. You go to work and exchange your effort for money every hour. You go to the grocery store and agree to trade your money for a certain product.

The two norms don't operate at the same time, however. Here's an example. There was a certain Israeli daycare center that decided to test the effects of these social and market norms. They used the problem of tardy parents as the center of their experiment. Occasionally parents would arrive a few minutes late to pick up their children, and to offset this, they daycare instituted a fee for those who were late to pick up their children. The fee had the opposite effect, however, and the rate of parental tardiness rose dramatically. Suddenly, parents were thinking, "I only have to pay a little bit extra so I can finish this tennis game or some of these errands before picking up my kid." Parents didn't need to feel badly for showing up late because their payment of the fee alleviated that guilt. The social norm that previously told parents that they ought to arrive on time was replaced with a market norm, allowing a monetary value to be placed on their tardiness. Even when the daycare removed the fee, the rate of tardiness remained at the elevated level, the social norms having already been replaced by market norms.

Ariely gives another good example: If I asked for your help in changing a tire, you would probably agree to help. But if I offered you a dollar in exchange for changing the tire, you'd probably refuse, thinking that one buck is hardly worth the work of changing a tire. If there is anything that we can learn from this, it's that in social situations, it's best to not introduce market norms. You probably shouldn't mention the price of gifts given to friends and family, nor should you insist on paying for gifts or favors given to you. And we'd probably be best advised to avoid the temptation of laziness in opting for monetary presents, when we really ought to put some thought into it and just purchase an actual gift.



Mom said...

I'm assuming this means no gift cards from you this Christmas.

The Bon Vivant said...

yes! Predictably Irrational rocks! ;-D