Excerpted from Predictably Irrational, Dan Ariely, HarperCollins Books, 2008
“Social norms include the friendly requests that people make to one another … and reciprocity is neither immediate nor required … just because you help your neighbor move his couch doesn’t mean he has to run right over and help you move your’s. The social actions themselves provide pleasure for both the giver and the receiver.”
“Market norms are all about [valuing] benefits and making prompt payments. When you play in the domain of market norms, you get what you pay for … there’s nothing warm and fuzzy about it.”
“Money is very often the most expensive way to motivate people.” As soon as money is introduced to a transaction … any existing social contract is violated, market norms take over, and you get what you pay for,
Example: AARP
AARP asked some lawyers if they would offer simple legal services to needy retirees at low prices — something like $30 an hour. Most lawyers said no.
Then, AARP asked lawyers if they would offer the same services free of charge to needy retirees. Overwhelmingly, the lawyers said yes. A market norm was transformed into a social norm — very successfully.
Example: Late Day Care Pickups
A day care center started fining parents who arrived late to pick up their children. Counter-intuitively, the number of late pickups increased.
Why? Because a social norm — the embarrassment of showing up late to pick up your children — was replaced by a market norm — the amount of the fine. So, with the social stigma removed, parents could simply decide whether it was worth it to them to pay the fine and show up late.
Eventually the day care center stop collecting fines, and started publishing the names of late parents.
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Bottom line: Don’t underestimate the power of social norms, or overestimate the power of market norms and monetary compensation.
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