Market and Social Norms

 

 

It was interesting hearing about the differences between social and market norms in society. As a refresher, social norms include friendly  favors  that are  non-monetary , while market norms are payments in monetary amounts.

After reading this section in Predictably Irrational, I really started thinking about the differences between these norms. If I am ever doing a favor for a friend, I prefer to be paid with a favor or gift such as a drink or dinner. In the book they used an example of a dinner party as a social norm situation. It is always polite to bring over a desert or bottle of wine to a dinner party. This shows the host that you are contributing and care about the dinner's success. However, it would be extremely rude to pay the cook for dinner, which would be a market norm. Although the bottle of wine may have been cheap and not come close to the actual value of the dinner, it is much better received and appreciated.

This concept of social norms are very strange, yet understandable. Even as a poor college student, I would even prefer a cheap bottle of wine instead of a monetary amount for a dinner party. How do these forms even originate?

From a personal stand point, it is very hard to place a monetary value on an intangible service or act of kindness or rudeness for that matter. This is some of the reasoning for social norms. Instead of trying to calculate the value of something intangible, it is efficient to return the social norm with a intangible response. Although we can easy look at the receipt for the bottle of wine, it would not measure the care or effort the person spent picking out it out.

Social norm understanding can lead to solving problems, especially in the customer service industry. If you have ever seen  "What Happens in Vegas", I am sure you remember the part when Ashton Kutcher and Cameron Diaz first meet when their room gets double booked. When the front desk tries to solve the mishap, they don't say "This caused you this dollar amount of trauma, so here is a compensation of equal value." This would be a completely rude and ineffective way to solve the problem, because the guest would probably not agree on a monetary amount of trauma. Instead, the front desk compensated them with fancy hotel rooms and VIP packages to clubs and events. This option makes the guest, Ashton Kutcher and Cameron Diaz, much happier and avoids the topic of agreeing on a monetary value.

Overall, sticking to social norms can save people a lot of trouble. It can also improve relationships with friends and co-workers. When a problem arises it may be more effective to solve it with a more intangible product than a monetary amount.