Social Norms and Other-Regarding Preferences

Abstract

Contemporary 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 the modern behavioral law and economics literature, however. In brief, critiques of the rational selfishness model tend to focus far more on the first modifier - the assumption of rationality - than on second - the assumption of self interest. This book chapter reverses the emphasis. It argues that the human tendency to act in an other-regarding fashion (that is, to sacrifice to help or harm others) is far more pervasive, powerful, and important than is generally recognized. In support of this claim, the chapter 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. In the right circumstances, experimental subjects routinely behave as if they care about costs and benefits to others. In the parlance of economics, subjects reveal other-regarding preferences. Moreover, the decision to act in an other-regarding fashion seems mostly driven not by personal payoffs but by social context - perceptions of what others believe, what others expect, and how others are likely to behave. These empirical 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, the chapter considers how the phenomenon of other-regarding preferences may offer insight into the nature and workings of social norms. In particular, it considers how other-regarding preferences may shed light on a variety of questions that have long troubled the norms literature, including the questions of what sorts of behaviors are most likely to solidify into norms, why people follow norms, and how policymakers and norm entrepreneurs can best use norms to change behavior.