What are social norms?

Social norms are the informal rules, expectations, and standards of behavior that are accepted and followed by members of a society or group. These norms govern how people behave in specific social situations and are often understood implicitly, even though they are not formally written or codified. Social norms help maintain order and cohesion in society by shaping people's actions and interactions.

Key Features of Social Norms:

1. Shared Understanding: Social norms are widely understood and accepted within a particular culture or society.
2. Expectation of Compliance: People are generally expected to follow social norms, and failure to do so can result in social sanctions, such as disapproval, criticism, or exclusion.
3. Context-Specific: Norms can vary by culture, community, or social setting. What is considered normal behavior in one society may be different in another.

Examples of Social Norms:

1. Greeting People:
   • In many cultures, it is a social norm to greet others with a handshake, a bow, or verbal greetings like "hello." For example, shaking hands is common in Western cultures, while bowing is a common greeting in Japan.
2. Queueing:
   • In many societies, it is a social norm to form a queue (line) when waiting for something, such as boarding a bus or paying at a supermarket. Jumping ahead in the queue is generally seen as rude and unfair.
3. Table Manners:
   • Social norms surrounding dining etiquette vary by culture. For example, in many Western cultures, it is considered polite to eat quietly and not talk with your mouth full, while in some Asian cultures, making slurping sounds when eating noodles is a sign of appreciation.
4. Respecting Personal Space:
   • There are unwritten rules about how much physical distance people should maintain during social interactions. In many cultures, standing too close to someone can make them uncomfortable, while keeping a polite distance is seen as respectful.
5. Tipping in Restaurants:
   • In the United States, it is a social norm to leave a tip for the server in a restaurant, usually around 15-20% of the bill. In other countries, like Japan, tipping is not expected and may even be seen as disrespectful.

Social Norms and Enforcement:

• Social Sanctions: People who break social norms often face informal sanctions, such as being judged, criticised, or excluded. For instance, someone who cuts in line or talks loudly in a quiet place may receive disapproving looks or comments.
• Evolution of Norms: Social norms are not static; they evolve over time. For example, norms around gender roles, dress codes, and technology use have changed significantly in recent decades.

Social norms play a crucial role in guiding behaviour, helping to create predictability and harmony in social interactions.

Key Ways Social Norms Influence Economics:

1. Influencing Consumer Behaviour:

• Social norms can shape consumer preferences and purchasing decisions, often more effectively than price signals. For example, in many cultures, certain brands or products become popular because they are seen as socially desirable. Consumers may buy these products not just for their utility, but because owning them aligns with societal expectations or enhances social status.
• Example: Sustainable products like eco-friendly clothing or electric cars have gained popularity due to social norms around environmental consciousness. As more people value "green" behaviors, companies have responded by offering products that cater to this demand, even if they are priced higher than conventional alternatives.

2. Labour Markets and Work Behaviour:

• Social norms influence how people view work, their expectations for fair pay, and their behavior in the workplace. These norms can affect productivity, labor supply, and wage negotiations.
• Example: In some cultures, it is socially expected to work long hours, leading employees to stay at work beyond what is required, even when not financially compensated. Similarly, norms around gender roles can influence labor force participation, with certain norms discouraging or encouraging women to work outside the home.

3. Market Transactions and Trust:

• Economic transactions often rely on trust, which is heavily influenced by social norms. In many cases, formal contracts are insufficient to enforce all aspects of a deal, and social norms (such as honesty, fairness, and reciprocity) play a critical role in ensuring cooperation and smooth transactions.
• Example: In informal markets or communities, social norms of trust can reduce the need for formal legal systems. For instance, small business owners in local communities may rely on word-of-mouth and reputation, adhering to norms of fairness and quality to maintain long-term business relationships.

4. Public Goods and Collective Action:

• Social norms are crucial in addressing collective action problems, particularly in managing public goods and common resources (like clean air, water, or public parks). Economic theory predicts that people will "free-ride" and under-contribute to public goods, but in practice, social norms of cooperation and fairness often encourage individuals to act in the collective interest.
• Example: Recycling programs and reducing water consumption during droughts often rely on social norms rather than strict enforcement. When people perceive that others are also contributing to the public good, they are more likely to follow suit due to social pressure and norms of environmental responsibility.

5. Regulation and Compliance:

• Governments often rely on social norms to complement formal regulations and policies. Laws and economic incentives alone may not be enough to ensure compliance if they conflict with prevailing social norms. By aligning policies with established norms, governments can increase the effectiveness of regulations.
• Example: During the COVID-19 pandemic, public health measures like mask-wearing and social distancing were more effective in places where social norms supported these behaviors, even in the absence of strict enforcement. Similarly, tax compliance improves when there are strong social norms around paying taxes as a civic duty.

6. Inequality and Redistribution:

• Social norms can also affect the way societies view economic inequality and redistribution. In societies where norms favor equality and fairness, there is often greater public support for welfare programs and progressive taxation. On the other hand, in societies where norms prioritize individual success and meritocracy, there may be less tolerance for wealth redistribution.
• Example: Scandinavian countries, where norms of equality and social welfare are strong, tend to have higher tax rates and more generous social safety nets. In contrast, countries with a stronger norm of individualism, like the United States, may prioritize lower taxes and less government intervention in wealth redistribution.

7. Economic Development and Social Capital:

• Social norms contribute to the formation of social capital, which refers to the networks, relationships, and trust that facilitate economic cooperation and development. Communities with strong social capital are often more economically prosperous because norms of trust and reciprocity reduce transaction costs, encourage investment, and foster collaboration.
• Example: Microfinance institutions in developing countries often rely on social norms of peer accountability and trust within local communities to ensure loan repayment. Borrowers are more likely to repay loans when they are embedded in social networks where norms of trust and reputation play a role.

Why Social Norms Matter in Economic Theory:

1. Realistic Behavioural Models: Social norms help economists build more realistic models of human behaviour. Unlike the assumption of perfect rationality, norms account for the influence of culture, ethics, and social pressures on decision-making.
2. Complementing Incentives: Social norms can complement or substitute for traditional economic incentives like prices or laws. For example, in situations where it is difficult to enforce legal rules (such as in small, close-knit communities), social norms can encourage desired behavior more effectively than financial incentives or formal regulation.
3. Policy Design and Effectiveness: Policymakers often need to take social norms into account when designing and implementing policies. Understanding social norms can help ensure that economic policies are accepted and followed by the public. For instance, successful campaigns for public health or environmental sustainability often tap into existing norms or aim to change them over time.