The Market for Social Norms

Abstract

This article presents a semirigorous model in which a new norm arises out of the workings of a market for norms. Change is triggered by a shift in either cost-benefit conditions or group composition. Because individuals are heterogeneous in important respects, they respond differently to these triggering events. The first persons to supply new norms generally are individuals who have either superior technical knowledge of cost-benefit conditions, superior social knowledge of group dynamics, or special endowments that provide them with unusually high tangible benefits from norm reform. Members of the social audience observe the competing efforts of these norm suppliers and reward the most meritorious ones by conferring on them either esteem or, according to an alternative conception, new exchange opportunities. Under optimal conditions, members of the audience—key participants in the demand side of the market for norms—do not free-ride because they incur no net costs when conferring their rewards.