Other-Regarding Preferences and Social Norms

Abstract

Legal scholars have become keenly interested in approaches to law that recognize that real people do not always behave in a rationally selfish fashion. For example, numerous recent papers examine how human choice can be distorted by endowment effects, anchoring effects, availability biases, and other cognitive deficiencies. There is a curious imbalance to this behavioral law and economics literature, however. Contemporary critiques of the rational selfishness model of human behavior tend to focus far more on the first modifier - the assumption of rationality - than on second - the assumption of self interest. This essay reverses that emphasis. It argues that the human tendency to act in an other-regarding fashion (to sacrifice in order to help or harm others) is far more pervasive, powerful, and important than generally recognized. In support of this claim, it reviews the extensive empirical evidence that has been accumulated over the past four decades on human behavior in social dilemma games, ultimatum games, and dictator games. This evidence establishes that in the right circumstances, experimental subjects routinely behave as if they care about costs and benefits to others. (In the parlance of economics, their behavior reveals other-regarding preferences.) Moreover, subjects' decisions to act in an other-regarding fashion seem driven primarily not by their own payoffs but by social context - their perceptions of what others believe, what others expect, and how others are likely to behave. These findings are important not only to our understanding of individual behavior, but also to our understanding of a wide variety of social institutions. To illustrate, this essay considers how the reality of socially-contingent, other-regarding behavior may offer insight into the nature and workings of social norms. In particular, it considers how the phenomenon of other-regarding preferences sheds light on a variety of questions that have been debated in the norms literature. These include the questions of what sorts of behaviors are most likely to solidify into norms; why people follow norms; and how policymakers and other norm entrepreneurs can best use norms to change behavior.