www.csua.org/u/j09 -> economistsview.typepad.com/economistsview/2007/06/social-norms-an.html
June 24, 2007 Social Norms and Economic Behavior Gelf Magazine looks at research on how social norms affect economic behavior, eg how conventions about how to split a restaurant bill change what people order.
Money-Grubbing, by Hadley Robinson, Gelf Magazine: What's the best way to split a restaurant bill? Should each diner pony up personal costs, taking into account tip and tax? Or is it better and easier to just split the check evenly? The finding: How you're going to pay directly affects what you order. Research subjects chose the cheapest grub when they were paying individually. When splitting the bill evenly, they ordered pricier items. When paying nothing at all, their consumption went up even further. Gelf caught up recently with Uri Gneezy, one of the three economists who conducted this experiment.
In this case, the fact that I consume more has some externality--it has some effect on you based on the additional cost that you have to pay for it. UG: I don't think it's because you care more, but because you know you can get away with it once, but next time ... That's why I expect it to be different with people you know well. UG: In economics there is a big discussion about negative externalities: ... That may be true in the lab, but that is not what we are finding when we go out in the field. I think we show that there is more to the original economic theory than new experiments claim: that people are in fact selfish and react strongly to economic incentives. Here's an example of another study: Imagine that you have kids in a daycare and you need to pick up kids before 4 pm... Parents tend to come later and later, and the teacher wants to improve on that, so she gives a fine to parents that come more than 10 minutes late. Before that, the social norm was to be on time, but when we made it some sort of market transaction, it became OK to be late. The effect of the fine was to make more parents come late.
You put a price on the social norm and the social norm is much weaker than it was before. Every child can tell you that social norms are important, but how does this affect economic behavior? You go out to dinner with friends, you hope they won't change what they consume just because you are going to pay part of it. Sometimes people care a lot about social preferences, but when you go to the financial market, people care about it much less. GM: What variations might there be in behavior based on geography, age, culture, or anything else? In Germany, for example, they count down to the last penny.
essay written for the Palgrave Dictionary on social norms. Broadly speaking there are three different mechanisms by which norms are held in place. If it is the norm to drive on the left, I adhere to the norm in order to avoid accidents. If gold is the commonly accepted currency, it would be a waste of time to try to conduct my business with glass beads. These are "social" phenomena, because they are held in place by shared expectations about the appropriate solution to a given coordination problem, but there is no need for social enforcement. Other norms are sustained by the threat of social disapproval or punishment for norm violations... If queuing is the norm, I will be censured if I try to push my way to the front. If dueling is the proper response to an insult, I will lose status in the community if I do not challenge the one who insulted me. If I am expected to avenge the murder of my brother and fail to carry it out, I may be ostracized by other family members. If it is the norm not to litter, I will avoid littering even in situations where no one can see me. If I eat a meal in a foreign city and fail to tip the waiter, I need not fear the consequences because there is no continuing relationship; nevertheless I may think the worse of myself for having done it.
June 24, 2007 at 04:47 AM real person from the real world says... Whenever I go somewhere with someone else paying the bill or splitting it with me, I try to choose something similar or that same as what the other people are ordering. If I go with someone splitting the bill evenly, usuallly, but not always, I am with friends who would order something similar. Other times, people generally opt for separate bills, as no one likes to pay for someone buying caviar while everyone else buys salad. However, I have some experience: I worked as an AD for a big advertising firm, at one time, and once a year we were given money by the company and our group would go out to eat. I had no complaint about the fancey restaurant our CD insisted we go to, but usually ordered the cheapest thing on the menu, while some guys would order huge pitchers of beer that would, of course, be added to the finally bill. One year, another AD had the guts to complain, and I did too. Yes, some people will seek any opportunity to get extra advantage at someone else's expense. Sorry, but despite the games to see how people psychologically react, it is RUDE.
This article is a good example of the last step in the scientific method, which is, what conclusions should be drawn from the result? In this case, the results make perfect sense, but the conclusions stated in the lead paragraph of the magazine article (and even in the published study itself) are far too broad. The study only made use of groups of 6 complete strangers. Thus the correct lead should be "What's the best way for complete strangers to split a restaurant bill?" Indeed, further down in the interview the author concedes that among people who aren't strangers, his results probably don't hold. a wealth of laboratory evidence has questioned the descriptive validity of the selfish agent assumption.... We find that, in line with the classical model's prediction, subjects consume more when the cost is split, resulting in a substantial loss of efficiency. These findings have implications in the design of institutions. Even when individuals prefer to be in a "different game" (eg, pay the bill individually instead of splitting it), when forced to play according to a less preferred set of rules, they will minimize their individual losses by taking advantage of others. I see nothing in these results not explained perfectly well by the idea of "strong reciprocity" (the idea that individuals hate to be taken advantage of, and will take action to their own immediate detriment to ensure that doesn't happen). rather, they took steps to make sure they themselves were not taken advantage of. In this study, the three choices, in likely order of preference, were: order modest meal, pay fair price. Strong reciprocity means that people will take steps to ensure that outcome doesn't happen. When everybody chooses , everybody pays a fair price and nobody is taken advantage of. Moreover, the day care example appears to contradict the entire premise of the article. Correct me if I'm wrong, but doesn't classical economic theory predict that increasing the cost of showing up late will decrease that behavior? The daycare example also nicely demonstrates a point I made about classical economic theory not being "falsifiable." Our experimenter, faced with the contra-indicated daycare result, simply says, "Aha! What has really happened is that one cost (social disapproval) has been replaced with another cost ($2). The actual cost is now cheaper, so the behavior increases.
The open question is does such selfish behavior also exist when the stakes are higher and does one's "conscience" play a bigger role? The negative social pressure on those who consume energy wastefully (think SUV's) is increasing as is the opposition to NIMBY concerns over things like wind farms. Cigarette smoking is also a good example, it has taken 50 years for the attitudes of the majority of Americans to shift on this. Perhaps this shows that attitudes don't really change, just that those holding the old ideas die off and are replaced by those holding the newer ones. If that is true than it shows the importance of socially responsible education. Robert Altemeyer's work has demonstrated how the attitudes of conservative college freshman can become more liberal as they move through school if they are exposed t...
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