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We have a great deal of evidence that social norms are crucial for the success of organisations. Groups typically face free-rider problems where individual members have an incentive to shirk from the tasks that advance the group’s goals. Outside of economics, social scientists have steadily gained a deeper understanding of the functional purposes of social norms for groups and how they can overcome the problem of free-riding. The empirical work of Elinor Ostrom in particular has shown how social norms can realign incentives to encourage group members to patrol the actions of their peers informally but effectively, and thus overcome free-riding.
Much research in social science views group members as individuals who attempt to press their own personal interests but lack a clear understanding of the common interest. Insofar as group interest is involved, existing work tends to focus on a form of altruism in which we are in effect “hard-wired” to be altruistic or “fair.” The meta-analyses of experimental data by Levine (1998) and by Fehr and Schmidt (1999), and by subsequent economics researchers are of this type. This project aims to understand the ways in which norms are chosen collectively by a group to achieve group goals in particular environments. Our specific hypothesis is that people will modify their behaviour and their corresponding norms to reflect their circumstances and the problems that they face. A social norm that might be suitable for a small village in India will not work well at a dot com startup, for example. Remarkably the country of Japan upon discovering in the mid-1800s the tremendous technology gap with the West reinvented practically all of its cultural and social norms during the ensuing forty years.
From the point of view of economics, the relevant theory is that of mechanism design: a social mechanism is a choice of social norm that is optimal for a group’s collective objectives but subject to the fact that individual group members will, to a large extent, act in their own self-interest - that is, they will attempt to free ride. One key insight from mechanism design theory is that optimal mechanisms and their accompanying social norms can be delicate and thus enhanced by modest amounts of altruism.
Monitoring is often necessary to ensure compliance with norms and monitors may have a stake in the outcome. For example, we may be able to easily observe our friends but at the same time be reluctant to report their misdeeds. And even if society provides incentives for individuals to report a certain amount of rule-breaking, when monitoring is costly individuals can decide not to bear those costs and instead report randomly. It is here that a small amount of altruism or commitment to the social norm can have a disproportionate effect: it makes us willing to bear small costs of monitoring and to tell the truth about what we observe, enabling the use of peer pressure and other incentives to bring about compliance with social norms.
Interdisciplinary work and collaboration
Collaborative research across disciplines is essential to the project. Economists specialize in studying public goods problems. They provide the paradigm of preferences, learning and equilibrium and interactions in the form of “games.” Psychologists specialize in understanding the human element through laboratory experiments. Computer scientists specialize in developing sophisticated simulation models that can capture the human element as observed in the laboratory.
Importance for the UK
We will help the UK become a leader in a new field of research which will in turn transform the future development of established fields, such as group dynamics and political economy. The knowledge developed by the project and its dissemination through students and post-doctoral fellows will provide the academic infrastructure that will place UK universities at the centre of a rapidly evolving field that integrates the incentives of individuals into the construction of social norms.
The project’s findings will lead to many downstream applications including, for example, encouraging voter turnout, reforming the police and developing better methods of providing foreign aid, and public policy in the UK will be the first to benefit from these developments.
To give a concrete example of how this research can potentially lead to institutional reform, social mechanism theory indicates that labour groups such as police forces naturally evolve a social norm in which wrong-doing by group members are not reported to higher ups. This shields “wrong-uns” among the police leading to a social problem. Economic theory suggests that competition among different police forces can align group incentives more closely with social incentives and help to combat this problem. But does this work? An obvious place to start asking this question is in the laboratory, and if success is obtained to move to small scale pilot programs.
