Market norms and Social norms

by TruetoThis1 min read6th Aug 2020No comments

3

Social & Cultural Dynamics
Personal Blog

Predictably Irrational

When I joined LW,  I browsed through an article that recommended Predictably Irrational as a read for starters. After reading it, I decided to share my greatest use of the content.

 

MARKET NORMS VS SOCIAL NORMS

The idea is that there are different forms of currency when dealing with an exchange. Market norms (financial currency) and social norms (favor/casual currency). Each of these are individually effective, but you must beware not to mix improperly or the relationship could be hard to reestablish.

Example: I need a cook to make dinner for myself and some guests. I have a friend who's a chef, yet his rate is double what I can pay. By offering what I can pay (market norm), compared to what he usually charges, it discounts him and can be insulting . However, if I approach him and ask for a favor (social norm) and he agrees to do it for free or a lesser rate, I can gift him with the money and the reward is amplified.  

 

APPLICATION

I recently started a business and needed to hire a skincare chemist, but I had no financial backing to support. I put an ad out and instead of offering a salary, I offered an unpaid internship with sporadic rewards like gas cards and Amazon gift cards. As of today, I have two chemists on this internship and one who is paid. Sure and true to the theory, the interns work just as hard as the paid chemist. 

 

I guess to truly get the full effect of Ariely's experiment, there would have to be someone who is paid a rate lower than the paid employee and more than the interns. But overall, you get the point. It's an effective system. What are some ways you can substitute market norms for social norms in your world?