The Cost of Social Norms

Humans operate in two distinct economic modes. Market norms are about money, contracts, and explicit exchange. Social norms are about relationships, favors, and unspoken reciprocity. The chapter's central argument is that mixing the two is destructive — once money enters a social transaction, the social mode is hard to recover.

The lab experiment had participants help with a tedious task. Some were paid a small amount, some were paid a large amount, some were asked as a favor with no payment. Predictably, the well-paid participants did the most work. Less predictably, the unpaid favor-participants did almost as much as the well-paid ones. The small-paid participants did the least — once money was on the table, the social motivation evaporated and the small payment was insufficient to replace it.

The chapter generalizes the finding. AARP offered to pay lawyers reduced rates to help low-income retirees; lawyers refused. The same lawyers, asked to volunteer for free, agreed. The introduction of payment shifted the activity from social favor (which had high value to the lawyers) to market transaction (in which the reduced rate looked insultingly low). The social norm could absorb the request; the market norm could not.

The implication for organizations is significant. Bringing money into previously social relationships (workplace, volunteer organizations, communities) often destroys the social motivation that was carrying the work. The fix is not always more money; it is often keeping money out of the relationship in the first place, or being clear about which mode the relationship operates in. The mixed-mode relationships are the most destructive because they get neither the loyalty of social norms nor the efficiency of market norms.