Social norms are the unwritten (or sometimes written) rules of society that differ from culture to culture, and make up what’s seen as normal, acceptable, respectful behavior. Peer pressure, family traditions, local customs are behind a lot of the choices we make. Psychologists and sociologists think a lot about social norms, but they also guide a lot of our ‘economic’ decisions. Economists sometimes think about people as if they lived their entire lives in markets—buying everything we receive and expecting money for everything we give away. But a lot of our relationships with people are governed by social norms, not prices and money.
For example, if you move into a new building and your neighbor brings you cookies, you wouldn’t compensate them by paying them the price of those cookies in cash. You’d probably invite them over for dinner instead. This might cost you more time and money, but would definitely be more socially acceptable and enjoyable. Similarly, when we give gifts for a birthday or holiday, we like to give something personal, even if cash might be more useful!
Social norms govern most of our relationships with our family members as well. Our parents put a ton of time and money into raising us, but it’s pretty unusual to get a bill at some point for how much we’ve ‘cost’. Instead, in a lot of cultures children are expected to help take care of their parents when they get older – this exchange is sometimes called ‘the caring economy’. While you’ might be expected to pay a family member back for a big loan, for most smaller things families are expected to just take care of each other.
The parts of our lives governed by social norms might not seem particularly ‘economic’, but they directly affect the economic decisions we make. If your family is expected to take care of you well into your 20s, it might be easier to stay in school and get an extra degree. If you are expected to take care of children, you might be less likely to get a job outside of the home. Cultures with different norms can end up with very different economies, so it’s important for economists to take culture seriously when they think about why things are they way they are.