Social Norms vs Market Norms
We simultaneously live in two different worlds — Social and market norms.

Whether you know it or not, we simultaneously live in two different worlds — Social norms and market norms. Hidden forces pushing and pulling us into each world drive behaviours, emotions and thoughts.
Social norms norms can be described as friendly requests
For example:
- Can you help me with my taxes?
- Can you help me move this weekend?
These norms are derived from our need of community and don’t have an instant payback. You may help your friend move into a new house, but it doesn't mean your friend has to instantly help you out right after. This transaction offers instant gratification for both parties and reciprocity is not immediately required.
Market norms are completely different. Interactions include prompt payments and imply comparable benefits. In simple terms, it can boil down to “you get what you pay for”. For market norms to emerge, it is sufficient to mention money (even if no money changes hands).
For example:
- A 90 point bottle of Buehler Chardonnay Russian River Valley costs $18.00
- A car dealership charges $90/hour for labour.
When these two norms stay in their lanes, we fair well. But when these two norms are combined, social norms depart and market norms takeover.
If you ran a non-profit supporting veterans and asked a lawyer to help retirees in need for $30/hour, you probably wouldn’t get a response. But if you asked that same lawyer to help them for free, overwhelmingly the lawyer may say yes. People will work for free or a fair wage, but offer an offensively small payment (market norm) and they will say no. Once market norms enter, social norms depart, creating this irrational human behaviour. $30 an hour compared to the market average of $500 an hour is seen as a bad decision. When no money is mentioned, the lawyers use social norms to volunteer their time. Why couldn’t the lawyer receive $30 an hour and still feel like he/she was giving back to the community? It is derived from the market norm and the perceived value of the lawyers hour.
So what happens when a business crosses a social norm with a market norm — Can they make the switch back?
..Sunnyside Daycare had a problem with parents picking up their kids late causing workers to stay later than scheduled. Because of this, the daycare decided to implement a fine every time a child was picked up after hours. Thinking it would change, things actually got worse. Parents thought the price to pick a child up late was worth the fine. Not knowing what to do, the daycare took the fine away hoping to eliminate the issue. After the fine was removed, nothing happened. Parents continued to pick up their kids later. From this study, we can understand that once a relationship transitions from a social to market exchange, it’s hard to reverse (or takes a long time).
If companies and people want to benefit from social norms, they need to be cultivating triggers that set them off. Companies must understand an employees long term commitment — If employees cancel family obligations, work hard to achieve deadlines, or get on an airplane at a moments notice they must get something similar in return. In social exchanges, people believe if something goes awry, the other person will be there for them. Companies cannot have it both ways and expect employees to drop everything and not provide anything in return (aside from money)— Short term profits, outsourcing and cost cutting are examples that push companies into employee and employer market relationships.
So how can a business benefit from social norms? Can they increase productivity? Without context, the simple answer is yes. Once companies understand how people react to the two different norms, there are many ways to benefit. Market norms can erode the pride and meaning people get from work. To create a healthy working environment, businesses must instill a sense of purpose and mission in job roles.
Business improvements can be made by re-thinking job functions and linking them to social exchanges. If a teacher wanted to increase student engagement in his/her class, a good place to start would be to re-think their curriculum and link it to social, technical and medical goals as things we care about in society (such as eliminating poverty, boosting renewable energy and cures for cancer).
What about cash incentives — Should you give an employee a bonus of $2,000 or a gift worth $2,000? Ask the employee and the majority will say the cash. Although it is sometimes not understood, the gift has value and can provide a boost to the social relationships of an employer and employee. Consider how you would feel and behave after receiving the $2,000 bonus or after a relaxing week in the Caribbean? Which would make you feel more committed to your job and provide more enjoyment in your work? Hands down, the vacation would beat the cash. Once companies realize the differences in these norms, if applied properly, they can build loyalty and make people want to extend themselves within their work though flexibility and a willingness to say yes. Money is the most expensive way to motivate people and will only take you so far. On the other hand, social norms have the power to make a long term difference (and often cheaper).
In essence, you could compare a bonus to a gift. So what about a birthday gift for personal relationships with friends and families? Gifts are methods of exchange that keep us within the social norms (even small gifts). No one is offended by a small gift because it stays within a social exchange; however, if you mention costs of the gift, you now enter the realm of market norms and the gift may have little to no impact.
It can also work the other way on you. Your date may not realize how much the meal set you back or your mother-in-law may assume the bottle of wine you brought was $10 when it was actually $70. Yet, if you mention the price, you will shift these relationships from social to market norms. This can jeopardize the relationship and..
a. set the price paid as a standard (if the cost is high)
b. ruin the perceived value of the gift and compare it to the market (if the cost is low)
c. eliminate the social exchange (gratitude, happiness, etc) and pull the relationship into a market exchange (price comparison, product comparison, etc). These hidden forces have a big effect on human behaviour.
Think about it this way. One week you ask a neighbour to help shovel your driveway. The work took 3 hours and once finished, you pay him $20 for his help. The next week you ask another neighbour to help. It takes you 3 hours and once finished, you give him a bottle of $10 whisky (your neighbour has no idea it cost you $10). The next time you need help, who would you ask? The person you paid $20 to is going to evaluate if $20 is worth 3 hours of their time. But if you ask the person you gave the bottle of whisky to.. Who’s more likely to say yes? The guy who you gave the whisky of course!
But what if you get a gift that someone doesn't like? Maybe it’s Christmas and you decide to give your family money so they can buy what they want. It seems like a great idea. Everyone's happy they get what they want; yet..
Sometimes a waste of money can turn out to be worth a lot.
Taking the chance on a gift (it may turn out to be a flop of a gift), is a much better way to enhance your relationship than offering cash and entering market norms. Relative to what people want, most people actually don’t know their preferences that well so they are susceptible to all these hidden forces.
When introduced, money can remove the best of humans in interactions. If understood, social norms can play a far greater role than they are currently being used for today. From friendships to relationships and employers or employees — Don’t mention price the next time you look at a menu. Stay in the social exchange and witness the benefits of the social norm.
