Book Description

This dissertation consists of three chapters exploring the role of social norms and social image in economic decision-making. A combination of theory and experiments is used to understand how certain social preferences might form, how they influence our individual choices through both internal and external motivation, and how they might aggregate into societal norms when individuals are externally pressured to appear to be doing the right thing. The first chapter examines how individual beliefs, or personal norms, interact with the desire to maintain a positive social image when individuals disagree about what should be done in that situation. This commonly occurs in settings such as partisan politics or when moral norms are in flux. Traditional notions of social norms cannot describe these situations, and there is correspondingly no unambiguously ``good'' action that social pressure can promote. I develop two alternative, psychological game theoretic models that explain how social pressure affects behavior even if individuals do not agree on the norm. One channel is ``approval seeking'', in which individuals want their peers to approve of their actions. Another channel is ``respect seeking'', in which individuals want to be known for strict adherence to their personal norms. Approval seekers pool on one option as social pressure increases, thus creating the illusion of societal consensus. This can potentially leading to destructive posturing, in which damaging norms are perpetuated. Respect seekers, on the other hand, are less hypocritical the more social pressure increases, and are accordingly less willing to compromise. Respect is thus a less likely force to produce a societal consensus norm. These results demonstrate that using social pressure to promote a certain behavior may backfire if it targets the wrong kind of social image. In the second chapter, Ulrike Malmendier, Roberto Weber and I explore the case of the norm of reciprocity, both positive and negative. Reciprocal behavioral has been found to play a significant role in explaining outcomes in many important economic domains. However, despite mounting empirical evidence, economists still struggle to converge on the correct model of the underlying motives. Existing theories posit internal preferences for the welfare of others, inequality aversion, or utility from repaying others' kindness. Recent evidence reveals that `one-sided' acts of kindness, not involving reciprocity, exhibit a large degree of reluctance, with people trying to avoid opportunities to act generously, suggesting that external factors such as social image, self image, or social pressure are important determinants of unilateral sharing. However, this revision of conventional theoretical motives for sharing has had little spillover to `two-sided' reciprocity environments, where one individual responds to the actions of another. We review the literature on reciprocity and point to the relative lack of attention paid to external factors. We then present a novel experiment that explores the importance of internal versus external factors in driving reciprocal behavior. We find that, in a laboratory reciprocity setting (the double-dictator game), failure to account for external motives leads to a significant overestimation of internal motives such as fairness and altruism. We use the experimental data to illustrate the importance of combining reduced-form and structural analyses in disentangling internal and external determinants of pro-social behavior. In the third chapter, Pamela Jakiela, Edward Miguel and I look deeper into the origins of norms. We combine data from a field experiment and a laboratory experiment to measure the causal impact of human capital on respect for earned property rights, a component of social preferences with important implications for economic growth and development. We find that higher academic achievement reduces the willingness of young Kenyan women to appropriate others' labor income, and shifts players toward a 50-50 split norm in the dictator game. This study demonstrates that education may have long-run impacts on social preferences, norms and institutions beyond the human capital directly produced. It also shows that randomized field experiments can be successfully combined with laboratory experiment data to measure causal impacts on individual values, norms, and preferences which cannot be readily captured in survey data.