Have you ever done a really hard task for a good friend of yours for free? Would it change the way you’d felt about the task if said friend had paid you a dollar? Five dollars? Fifteen? Well, in this essay, I’ll be discussing how economic norms affect how we do business, and I’ll provide theoretical experiments based on prior experience and research to back up my points. First off, it’s vocab time. An economic norm is, in layman’s terms, an unwritten rule of business that states when something is personal, and when it becomes business. For example, doing something out of the kindness of your heart (such as the task mentioned in the first paragraph) would be considered a social norm, but if/when money becomes involved, it goes into the realm of market norms. It’s usually considered taboo to introduce market norms into a situation involving social norms. Dan Ariely gave a good example of this in his book “Predictably Irrational”: You wouldn’t stand up and demand to pay your relatives after a good Thanksgiving meal. It just isn’t right. With that out of the way, on to the theoreticals. Let’s say I have three 22 pound desktop computers (powerful computers weigh a ton) that I need help bringing up from the ground floor of my apartment complex to my sixth floor apartment. Three different people walk by, and ask if I need help. I respond yes to all three, but with different conditions for each person. The first person offers to do it for free, and I accept his offer. He pulls his weight and doesn’t complain. He leaves after completing the job feeling accomplished and with a feeling that he helped someone. I offer the next person who asks a fair amount of money for his trouble (let’s say five dollars). He also does his job well and pulls his weight just as well as the previous guy. At the end, he also feels
accomplished, but instead of that warm, tingly “I just helped someone” feeling, he has gained money, showing that different motivations can lead to the same end result. The third person that offers to help I offer the paltry sum of twenty-five cents. She accepts, but the job is not done as well as before. The person complains constantly on the way up the stairs about the weight of the computer, and on the third floor, she just gives up, feeling the reward is not worth the effort. This shows that even though the person was technically offered a bigger reward than the one that worked for free, market norms dictated that the effort exerted was equal to the reward offered (which it was). Social norms, however, took over with the guy who worked for free, because of the sense of helping someone in need with no money to “greed up” the situation. Anyways, that’s how economic norms can be shown through theoretical experiments. Hopefully you learned something from this.