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Sunday, June 14, 2009

Norms Matter

In his first Reith Lecture this year, Markets and Morals, Professor Michael Sandel discussed a couple of related examples in which economic incentives do not produce the intended system effect.

Firstly, an Israeli nursery. Parents would arrive late to pick up their children, causing cost and inconvenience to the staff. So the nursery introduced a system of fines, hoping to penalize these parents and encourage prompt pickup. As it turned out, the frequency of late pickup actually increased. It turned out that parents regarded this merely as a charge for extra time, and no longer felt guilty about the burden on the staff.

Secondly blood donation. In the UK, blood donation is voluntary; in the US, blood donors are paid, in order to encourage more regular donation. As it turns out, the US system produces more uncertainty and greater quality problems. Apparently blood donors no longer feel a sense of obligation in a market economy - blood is regarded as a commodity rather than as a gift.

As Professor Sandel puts it: Norms matter. This principle is not surprising to those familiar with Donella Meadows' idea of leverage points (PDF). Her paper identifies different degrees of effectiveness in intervening in complex systems. Economic incentives and punishments (rules of the system) rank 5th in her scheme, but the underlying value system (mindset or paradigm) ranks 2nd.


  1. Hi Richard,

    This reminds me of a friend who rewards his little kids jelly beans for not disturbing others and behaving themselves. The result: the kids knows when to disturb others to get their reward!
    That's true learning and intelligence to me.

  2. Thanks Catus. However, I don't read your jelly bean example in terms of norms, but simply as a badly designed and counterproductive incentive scheme - like so many other incentive schemes in our "target culture".

    Of course, the longer-term goal of the parent is to get the child to internalize the norms - to behave well without the jelly bean bribe - but often the short-term goal (getting the children to shut up now) takes precedence.

    I don't know if you can listen to the Reith Lecture or read the transcript outside the UK, but if you can I encourage you to do so, because he had some more good examples.