Social vs. Market Norms

Have you ever wondered why it was acceptable to offer pizza and beer to a friend for helping you move, but weird to offer them money? What about when a buddy helps you study for your super tough econ exam? Why is pulling out your wallet the last thing you consider doing? I only ask because a few months back, I helped an elderly Asian couple move into my building (and by move, I mean I helped them carry a couch up a couple flights of stairs, nothing special). After we gently placed the couch by the window, the man pulled out his wallet and offered me a ten dollar bill. Of course, I refused the gift, thinking it was the polite thing to do. As I walked out of their semi-empty apartment, I started to wonder; why exactly was it so impolite to accept the money?


According to Dan Ariely, its because we simultaneously live in two different worlds, one where social norms reign and another where market norms dominate. Based on his book Predictably Irrational, social norms include helping friends move, giving your roommate a ride to work and holding the door open for a stranger. Here, the return is the warm and fuzzy feeling you get from being a good person, along with the eventual repayment of kindness you expect (you may help move your friends couch, but this doesn't mean he has to come right over and move yours). Social norms are wrapped up in our social nature and our need for community.


On the other hand, market norms are based on rigid rules where feelings aren't involved. "The exchanges are sharp edged" Ariely explains, "wages, prices, rents, interest, and cost-and-benefits." Here, when a benefit is given, immediate (or close to immediate) reciprocity of comparable benefits is expected.

You've probably guessed by now that helping a friend falls under social norms. You help because you want to be a good friend, not because you want to get paid. But I haven't answered why it would be weird to actually get paid (ie when social and market worlds become intertwined).

If you've ever read Freakonomics by Steven Levitt and Stephen Dubner, you'll recognize the following story about the Israeli daycare study. This is what happens when a social problem is "solved" with a financial solution:

When market norms are introduced, the social pressures melt away and are replaced. Worse still, they learned that once market norms are introduced, it becomes extremely difficult to bring back the feeling of social responsibility, even when the market norms are taken away.

Now to answer the questions from above. If you were to pull out a crisp twenty for your friend's moving services, market norms collide with social ones. Three possibilities come to mind. Most likely, you insult them by assuming they're only doing it for the money. The implied lack of morality will come off as awkward, cold, and impolite.

Assuming they do accept the money, you are bound to get the number wrong, as everyone believes their time is the most precious thing in the world. When you hand them the twenty dollar bill, they'll think that their services are worth much more than $20. They'll walk away feeling used, hurting your social relationship because you used a financial solution (or you give them more money to try to smooth things over and begin to realize you might as well have hired a professional mover).

The third possibility assumes you got the number right. Congratulations! Now whenever you ask this friend for help, they'll expect some sort of financial reimbursement (since you already paid them once). It moves from being a friendship to an on-call rent-a-pro service. Either way, you've pushed your relationship into the realm of market exchange, which almost never works out.