Studies on Culture and Social Norms VI

Economists believe that sanctioning is an inherent part of social norms. Fehr and Fischbacher (2004) use third-party punishment to study the functioning and content of social norms. A third party who can take costly action to punish selfish behavior is introduced into the dictator game and the prisoners’ dilemma game. About two thirds of the third parties punished selfish offers of the dictators in a third-party dictator game, and about 60% punished defectors in the prisoners’ dilemma game. Their experiment indicates that third-party sanctions are important for the functioning of social norms. Indeed, it may well be that this third-party punishment itself is prescribed by a social norm.

Social norms can be used to explain some interesting experimental results. Xiao and Houser (2009) found that rejection of unfair offers is significantly less frequent in an ultimatum game when receivers can express their feelings to the proposer. The authors conclude that costly punishment may be just a way to express negative emotions. Using the social norms theory, we can speculate the social norm prescribe to show antipathy when the proposer acts unfairly. When it is possible to use negative emotions to demonstrate an aversion to the unfair behavior, the receiver does not feel necessary to engage in costly punishment. The possibility for the receivers to express negative feelings also makes the proposers more likely to give fair offer, possibly because it exerts focusing influence and draws the attention of the proposers to the social norm.

Xiao and Houser (2005) studied the effect of emotional expression in a one-shot dictator game. Their results confirm that avoiding written expression of disapproval, or negative emotion, plays an important role in promoting fair decision making. Proposers act more generously when the receivers can respond with written messages, although monetary sanctions are more effective when we compare the results from the dictator game and the ultimatum game. These results imply that others' pinion may serve the same function as sanctions in the operation of social norms.

Studies on Culture and Social Norms V

Some experiments have shown that people’s preferences on conformity to social norms may depend on context. Psychologists maintain that norms only influence behavior when one’s attention is drawn to them (focusing influence) and a norm has greater impact on one’s behavior when one observes others behaving in alignment with that norm (informational influence). Krupka and Weber (2009) use a simple one-shot binary dictator game to test this theory. In the experiment, the dictator can choose either X, which leads to a fair allocation ($5, $5), or Y, which gives rise to an unfair allocation ($7, $1). In descriptive focusing treatment, before assigning roles and making decisions, each subject was asked to guess the percentages of subjects who chose X and Y in a previous session. In Bicchieri (2005)’s terms, the subjects were focused on empirical expectations. In the informational focusing treatment, the subjects were asked to guess what percentages of subjects in a previous session had stated X and Y should be chosen, and hence focused on normative expectations. In informational treatment, each subject observed the choices made by four previous participants. Compared to the baseline treatment, subjects exhibited significantly more prosocial behavior in the focusing treatments. The informational treatment shows that individuals are more likely to engage in prosocial behavior when they observe others doing so, which is consistent with the results from Bicchieri and Xiao (2008). This experiment shows that contextual cues that remind the individual the existence of social norms greatly increase pro-social behavior. Hence norm compliance exhibits a focusing effect, and norms only impact behavior when an individual’s attention is drawn to them.

Cason and Mui (1998) also demonstrate the functioning of social influence similar to Krupka and Weber (2009)’s informational treatment in the setting of a sequential dictator game. In their experimental design, 4 subjects, denoted as subject 1 to 4, form a group. In stage 1, all subjects first indicate the amount of money P1 they want to take from the $40 pie in a dictator game with market setting. The information on the decision is then exchanged between subject 1 and 3, and between subject 2 and 4 in the Relevant Information treatment, while the information about the subject’s date of birth is exchanged in the Irrelevant Information
treatment between odd-numbered subjects and between even-numbered subjects. In stage 2, all subjects indicate the amount of money P1 they want to take from the $40 pie. The role of proposer and the receiver is then assigned randomly, either odd-numbered players or even-number players would be the sellers, and each seller can be the seller of only one stage, which are also randomly determined. Their results show that receiving relevant information makes subjects less likely to move to more self-regarding choices. They also find that subjects who exhibit more self-regarding behavior on their first decisions are less likely to change choices in the second stage, implying the sensitivity to social norms is heterogeneous among subjects.

Studies on Culture and Social Norms IV

Rabin (1993) notices reciprocity is a common phenomenon in human interactions. In order to model reciprocity, he uses psychological game theory, incorporate beliefs and intentions into people’s preferences. In this model, people’s intentions are reflected by the action they take. But for situations like the dictator games where there is only one decision maker, the model is inadequate as we don’t have a measure on the other person’s intentions. A more generalized model proposed by Charness and Rabin (2002), even though incorporates social welfare concern, inequality aversion and reciprocity, is still not capable of explaining the above experimental results, because none of these components can explain the fact that people exploit moral wiggle room to behave selfishly.

The inadequacy of current theories on other-regarding preferences implies the importance to incorporate social norms into individuals’ preferences. Bicchieri (2005) is among the first that propose a norm-based utility function. The utility function she proposed has two parts: the monetary payoff and the norm-related utility. A social norm in her model is defined as one prescribed action in a situation, and disutility results when the agent violates the norm. The disutility is related to the reduction in others’ payoffs caused by this violation.

While this model provides better explanation for the above experiments compared to other models with prosocial preferences, it does not consider the case where multiple actions are equally appropriate, and its definition of norms makes it incapable in explaining results from experiments such as the multi-player dictator game studied by Dana et al. (2007).

Krupka and Weber (2013) propose a more refined definition of norms. Instead of defining a single appropriate action prescribed by the norm in a situation, they consider each action has some level of social appropriateness. They design a coordination game to elicit and quantify social norms. In their norm elicitation game, the subjects are asked to rate "social appropriateness” of an action in a specific situation on a scale of 4. The subjects get rewarded if their ratings are the same as the modal rating of the group. Using the elicited norms, Krupka and Weber analyzed the experimental results of various games, including famous games studies by other authors (List, 2007; Dana et al., 2006, 2007; Lazer and Pentland, 2009). Their experimental results show that social norms can provide a good prediction of individual decision making, and
subjects have a stable willingness to sacrifice money and take socially appropriate actions. Their research contributes to the endeavor to develop a theoretical model of social norms.

Studies on Culture and Social Norms III

Croson and Buchan (1999) use a trust game to investigate how gender interacts with cultures to influence individual behavior. The results are similar across cultures: no significant effect of gender is found on the amount send by the proposers, but women reciprocate significantly more than men. Beside cross-cultural studies, many other experimental studies emerging in recent years have shed light on how social norms function. Bicchieri and Xiao (2008) designed an experiment to test Bicchieri (2005)’s theory and test the relative importance of normative expectations and empirical expectations. In their dictator game, they tried to manipulate the subjects’ empirical expectations and normative expectations by showing them dictators’ decision or/and expectations in previous sessions. The expectation elicitation was made incentive compatible by rewarding the dictators based on the accuracy of the expectations they reported. The results show that subjects’ choice are influenced by both normative and empirical expectations, and when there is a conflict between the two expectations, empirical expectations are more important in predicting individual behavior.

Dana et al. (2006) show that people take into account other’s expectations while making decisions. They added one twist to the standard dictator game: the dictators can pay \$1 to exit the game with the advantage that the receiver will never know that the game has been played. About one third of dictators decided to quietly exit the game. In another private game setting where the receiver never knows about the game or where the money received is from, almost not exit was chosen. This implies that some dictators choose to give not because they care for fairness or others’ well-being, but simply because they don’t want to violate others’ expectations.

In another experiment, Dana et al. (2007) used binary dictator game to lend evidence to a similar argument: people behave generously mainly because they dislike appearing unfair to others. In their baseline treatment, the dictator can either choose A, which results in a self-interested allocation (\$6, \$1), or choose B, which leads to a fair allocation B (\$5, \$5). For the other three treatments, the level of transparency is reduced using different designs. In the hidden information treatment, the dictator can again choose A to receive $6 or B to receive $5, but the payoffs for the receiver are uncertain ex ante: with probability 0.5 the payoffs are the same as the baseline treatment (\$1 and \$5 respectively), and with probability 0.5 the payoffs for the receiver flip (\$5 and \$1 respectively). The dictator can choose to reveal the real payoffs or not. Many subjects chose not to reveal the really payoffs and took the selfish action. In their multiple dictator treatment, two subjects play the role of dictator and only when both of them choose A the allocation is inequitable (\$6, \$6, \$1), otherwise it will be a fair allocation (\$5,\$5,\$5). In their final treatment, the plausible deniability treatment, a "cutoff” feature is added to the baseline game: the computer will randomly choose an allocation if the dictator does not choose an action by the end of the cutoff period. Hence the receiver in this game would never know whether the allocation is chosen by the dictator or by the computer. The proportion implementing fair allocation in the three treatments that relax transparency, as the experimental results show, drops significantly compared to the baseline treatment. It seems that when the subjects have the moral wiggle room, they are more likely to behave according to self interest. People are willing shun away from a social norm, even at a cost, in order to make “justified” self-interested decision.

The above experiments have clearly shown that social norms play an important role in individual decision making and the expectations of other people matter. Current theories on prosocial preferences, such as inequality aversion, are inadequate in explaining these results (Fehr and Schmidt, 1999; Bolton and Ockenfels, 2000). In the game studied by (Dana et al., 2006), it is clear that the allocation (\$9,\$1) is preferred to (\$9,\$0) according to the inequality aversion model, but many subjects chose (\$9,\$0) given that the receiver would not know the proposed ever made any decision on the allocation. Similarly, the binary dictator game with hidden information in (Dana et al., 2007), revealing the payoff information for the receiver will aid the proposed in making decisions and increase her expected utility according to the inequality aversion model, but subjects chose to be ignorant on the other party’s potential payoff. Inequality aversion is outcome-based preferences. For the same reason, social welfare concerns, which drive people to maximize the total welfare of all the players, are not enough to explain the above experimental regularities.

Studies on Culture and Social Norms II

One way to understand the functioning of social norms is to study behavioral differences across cultures. In the area of experimental economics, several cross-culture experiments have been conducted, the results of which show how culture can make a difference in individual behavior. Roth et al. (1991) conducted a cross-cultural experiment, comparing related two person bargaining game and multi-person market environment in Japan, Yugoslavia, Israel, and the United States. While the market outcomes converged to equilibrium, the outcomes in the bargaining game varied greatly across culture: the Japanese and Israeli offers are lower, but rejection rates are not higher in these two countries. The similar rejection rates indicate that countries have different sharing norms as to what constitutes a reasonable offer and those norms are well accepted in each country.

Henrich et al. (2001) ran an experiment using ultimatum game in 15 small societies. Their results reveal dramatic differences across cultures: in some societies, people show rational behavior predicted by traditional game theory, and in other societies “hyper-fair” offers are common, which can be interpreted as competitive gift-giving insults. Average offers in each society are strongly correlated with the degree of market integration. Contrary to most people would expect, in cultures with the most market integration, people exhibit more prosocial behavior. This implies that either market experience gives rise to norms of equal division or the norms of fairness promote the development of markets. Henrich et al. (2006) uses ultimatum game and third-party punishment game to study punishing behavior in the same 15 societies. They find that although people from all societies show some willingness to take costly action to punish unfair behavior, the magnitude of the punishment varies a lot across cultures. They also find that costly punishment is positively correlated with altruistic behavior across societies. The study of Henrich et al. (2010) shows that community size positively correlated with punishment and participation in religion is also likely to be associated with fairness. Using third-party dictator game played in 12 societies, Marlowe et al. (2008) also show that people from a larger and more complex society are more likely to engage in “altruistic” punishment. These results suggest that prosocial behavior is not just the product of an inherent psychology but also shaped by norms and institutions that have evolved over the human history.

Buchan et al. (2006) examine cultural difference using a trust game. The game was played in China, Japan, Korea and the United States. They asked the participants to fill out a questionnaire in order to get a measure of their cultural orientation (collectivist or individualist) in the context of the trust game. Their data show that people from different countries exhibit different level of other-regarding behavior: Chinese are most trusting and trustworthy while the Japanese are least so 7. Also, the influence of social distance on a person’s other-regarding behavior varies across country. This implies that individual’s cultural orientation may interact with other factors to influence behavior.

Studies on Culture and Social Norms I

Culture can be defined as the shared values among a group. It consists of unwritten rules of social interactions. In a social group, people depend on these shared cultural values to interact with others. Hofstede et al. (2010) consider culture as “the software of mind”, the collective mental programming that distinguishes one group from another. They characterize seven different cultural dimensions that capture the values of different cultures: power distance, individualism, masculinity, uncertainty avoidance, long term orientation, indulgence versus restraint, and monumentalism. Social norms are an intrinsic part of culture (Elster, 1989, 2009; Bicchieri and Xiao, 2008). They are shaped by culture and serve an important channel through which culture operates. There are an increasing number of academic researchers coming to realize that culture and norms are important in explaining the behavior of individuals, the functioning of organizations, and the difference in economic growth rates across countries (Hofstede et al., 2010; Harrison and Huntington, 2001).

Social norms are a manifestation of cultural values and attitudes in a specific context. Even in the same culture, norms can vary across different group. Cultural values define what is good versus bad; social norms describe which actions are appropriate and which are not in a specific situation. Cultural values are the core of culture, and social norms are the applications of cultural values to different situations. If cultural values are the root of the tree, then social norms are the trunk and leaves. They both belong to the same tree of culture. Loosely speaking, culture is just a collection of social norms in a society. We do need to notice that norms are context dependent, and even in the same culture, different groups may have different norms (Akerlof and Kranton, 2000).

Economists have proposed theories on social norms, and they generally agree that norms are values and beliefs shared among people in a group. Ostrom (2000) defines social norms as shared understandings about actions that are obligatory, permitted, or forbidden. Elster (1989) maintains that social norms are just product of shared expectations and serve no particular purpose. He emphasizes that social norms prescribe actions, rather than outcomes. The functioning of social norms depends critically on the individuals being observed by others, and sanction mechanisms play an important role in the operation of social norms. Fehr and Fischbacher (2004) also emphasizes the role of informal social sanction in the enforcement of social norms. Young (1998) claims that social norms are coordinating device for social games, and define social norms as equilibria of coordination games. Applying stochastic process theory, he illustrates social norms welfare-improving are more likely to appear in the long run. Bicchieri (2005) points out that social norms transform social dilemma game to a coordination game by modifying people’s preferences. She emphasizes the importance of expectations in the working of social norms, and identified two distinct types of expectations. Empirical expectations refer to what one observed or know about the behavior of others in similar situations. Normative expectations are second-order expectations, referring to what we believe others think we ought to do in a situation.

External Incentives vs. Intrinsic Motivation

In economics, we have the rational choice model, which assumes that people are rational, self-interested, and they respond to incentives. The incentives are usually a monetary reward or punishment. If you want to change people’s behavior, just change the incentives.

But reality is not always that simple. Steve Levitt, the author of the book Freakonomics, once mentioned an interesting story about how he potty trained his toddler daughter Amanda. After Amanda's mom got frustrated at the results even after she had tried all the methods she read from the books, Steve decided to take over and handle this as an economist: let incentives to work its way. He promised Amanda that every time she went to pee in the potty, she got a bag of M&M's. It worked perfectly! Well, for the first couple of days. Eventually, this incentive scheme backfired: Amanda would go to the potty, trickle several drops, ask for a bag of M&M's, and go to the potty again, trickle several drops and ask for another bag of M&M's, and more potty, and more M&M's. Incentives can backfire, even in the case of a toddler.

Most social scientists agree that people have the intrinsic motivation to abide by norms, to care for others and to behave virtuously. Even economists agree that intrinsic motivation plays a role. But given intrinsic motivation, incentives should also work, right? Adding external incentives can only reinforce the behaviors driven by existing intrinsic motivation stronger, isn't it obvious? Well, the obvious may not always be true. Behavioral economists start to find more and more evidence that monetary incentives can crowd-out people’s intrinsic motivation (Frey and Jegen, 2001; Bohnet et al., 2001; Fehr and Gächter, 2001). Proposing pecuniary payment, for instance, reduced Swiss citizens’ willingness to host a nuclear waste facility (Frey and Oberholzer-Gee, 1997). Imposing a fine on parents who arrive late to pick up their children from a day care center actually increased the number of parents arriving late, and removal of the fine did not decrease the number (Gneezy and Rustichini, 2000b). Offering a monetary compensation for blood donors reduces the supply of prospective blood donors, especially among women (Mellström and Johannesson, 2008).

The assumption of self-interested individuals may be a self-fulfilling prophecy. Everyone who is in a marriage knows that the best way to kill a  marriage is to consider the other person as lazy, unhelpful, and ungrateful. Doing that will make the your partner act that way. When you consider others as selfish egoists, it is very likely that they would start to act like one. Imposing incentives in situations like this can impair people’s intrinsic motivation.

If you want to change people’s behavior, you should not rely exclusively on rewards, regulations or punishment. People, like water, can always find cracks in any set of regulations. Sometimes, and more than often, the most effective way to change people's behaviors is to resort to their intrinsic motivation like ethics and norms.