The origin, development, and regulation of norms.

• Author: McAdams, Richard H.

For decades, sociologists have employed the concept of social norms to explain how society shapes individual behavior.(1) In recent years, economists and rational choice theorists in philosophy and political science have started to use individual behavior to explain the origin and function of norms.(2) For many in this group, the focus of study is the interaction of law and norms, of formal and informal rules. Exemplified by Robert Ellickson's Order Without Law,(3) this literature uses norms to develop more robust explanations of behavior and to predict more accurately the effect of legal rules. Norms turn out to matter in legal analysis for many reasons. Sometimes norms govern behavior irrespective of the legal rule, making the choice of a formal rule surprisingly unimportant.(4) Sometimes legal rules facilitate or impede the enforcement of a norm, and the selection of the formal rule matters in entirely new ways, the exact consequence depending on whether the formal rule strengthens or weakens a desirable or undesirable norm.(5) Indeed, in some cases, new norms arise in the presence of different legal rules, making the relevant policy choice one between two or more law-norm combinations.(6)

Roughly speaking, by norms this literature refers to informal social regularities that individuals feel obligated to follow because of an internalized sense of duty, because of a fear of external nonlegal sanctions, or both.(7) Law-and-norms scholars view these informal rules as ubiquitous. Though relatively recent, the economics literature uses norms to explain an incredible variety of positive and normative issues: the informal resolution of property disputes among rancher neighbors in Shasta County, California,(8) the preference of the diamond industry for nonlegal means of contract enforcement,(9) the stability of racial discrimination in competitive markets,(10) the effectiveness of various anti-dueling statutes from the previous century and safe-sex education efforts from this one," the reason people vote,(12) the transitional difficulties in moving from a Marxist to a market economy,(13) the general efficiency of the common law,(14) and the operation of the elder share regime governing sumo wrestling in Japan.(15)

One reasonably might wonder from even this incomplete list if a single social science construct is actually capable of illuminating so many different behaviors and legal rules. Because law-and-economics theorists use norms to address such different problems -- diamond selling and dueling, sexual customs and voting -- perhaps they are using the term norms to mean different things.(16) And because these theorists offer norms to explain otherwise puzzling phenomena, there is the related risk, as Cass Sunstein warns, "that a reference to social norms will become a conclusory response to any apparently anomalous results."(17) If norms explain too much, in other words, there is a danger they really explain nothing.

I do not believe this risk has been realized, but there is a danger that it will be. In this article, I advocate the use of norms in economic analysis of law. Norms are a vitally useful tool for explaining; behavior and predicting the effect of legal rules. Ellickson was right to have criticized law and economics in 1991 for having largely ignored informal means of social control,(18) and much stiff remains to be done in applying economics to understanding the complex mix of legal and norm-based rules. But because norms are a relatively new subject for law and economics, there is as yet no consensus about certain basic theoretical propositions, including, most importantly, the meaning of norm. My goal is to remedy some fundamental ambiguities in the term norm -- ambiguities that give this literature an unnecessarily ad hoc appearance and limit our understanding of the connections between law and norms. Toward this end, I offer a particular theory of the origin and., growth of norms, and I derive some implications the theory has for how law can govern norms.

Part I introduces this new law-and-norms literature, by which I mean the economic study of the interaction of formal (legal) and informal (norm-based) rules. I provide a provisional definition of norm and identify the puzzle of its origin. Part Il offers a simple model. In the theory I propose, the initial force behind norm creation is the desire individuals have for respect or prestige, that is, for the relative esteem of others. Withholding esteem is, under certain conditions, a costless means of inflicting costs on others. These costs are often extremely small; their insignificance compared to material incentives is probably what explains the tendency of economic theories to ignore them altogether. But Part 11 demonstrates that dynamic forces can cause the weak desire for esteem to produce powerful norms, sometimes because individuals struggle to avoid deviance, sometimes because they compete to be heroic. Identifying the stages in this process permits some analytical clarity that is currently lacking, or so I argue in Part III, where I use these stages of norm development to resolve some troubling ambiguities in the literature over the meaning of norms. The esteem model offers a way to unite what may appear to be unrelated strands of the literature concerning internalized and noninternalized norms, broadly and narrowly defined norms, and group and societal norms. Finally, in Part IV, I point out some of the model's immediate implications for the legal regulation of norms. Though norms can be either socially productive or unproductive, the esteem theory identifies new situations in which norms reduce social welfare. The model also reveals how law can regulate norms: strengthening norms through the expressive function of law and impeding norms with legal protections of privacy.

1. The Economics of Norms and Norm Origin

   1. The New Economic Literature on Law & Norms

      In the 1980s, rational choice theorists in various disciplines began to study norms.(19) Within law and economics,(20) Janet Landa and Robert Cooter sought to explain why, in parts of Asia, ethnic minorities tended to dominate the middleman position in many industries.(21) They concluded that these "ethnically homogenous middlemen groups" succeed in nations without reliable legal enforcement of contracts because the groups' social connectedness give their members a unique means of (informally) sanctioning contract breaches by other group members.(22) About the same time, Robert Ellickson began investigating how ranchers in Shasta County, California, settle property disputes. Ultimately, Ellickson concluded that these ranchers enforce informal norm-based rules for disputes involving cattle trespass and boundary fences and thus resolve certain conflicts without the legal regime.(23) In several articles(24) and in his book, Order Without Law, Ellickson generalizes these results, explaining how law and norms are alternative means of social control, each providing a mechanism for overcoming pervasive problems of collective action.(25)

      Order Without Law created, or at least anticipated, a burgeoning new subfield of legal studies.(26) Much of the economic work continues in contract law, which sometimes explicitly references business norms. Lisa Bernstein, for example, studies how American merchants -- from diamond sellers to grain distributors -- deter contract breaches and resolve disputes without resort to the legal system.(27) Robert Cooter proposes that courts enforce the otherwise underenforced norms of an industry by directly incorporating them into the legal rules governing contracts in that industry, at least where the structural circumstances make it likely the norm is efficient.(28)

      Outside the law of contracts, the literature continues to grow.(29) Theorists have explored the relevance of norms to various public law issues: whether weakened voting norms justify mandatory voting laws,(30) whether norms of reciprocity explain why government must compensate for its takings,(31) and whether the criminal prohibition of blackmail is efficient.(32) More generally, Lawrence Les-sig(33) and Cass Sunstein(34) have discussed government efforts to "manage" social norms. Sunstein uses norms to explain the "expressive" function of law: by "making a statement," law can strengthen the norms it embodies and weaken those it condemns. One might therefore justify government coercion as a means of impeding unwanted norms or facilitating desirable norms.(35) Lessig emphasizes the need for the state to consider the "social meaning" of behavior it seeks to regulate. Law can influence behavior by changing the norms that determine the meaning ascribed to behavior; often one cannot predict the effect of law, he claims, without considering this interpretive dimension.(36)

      The value of this scholarship must be measured within each area of law it addresses, but the literature does point strongly toward a particular research agenda: those who study law should study norms. Where norms govern individual behavior, one cannot correctly assess the effect of formal, state-enforced rules without understanding the informal rules also at work. In many ways, this point is very old: legal scholars have always paid some attention, sometimes enormous attention, to social or business customs, conventions, mores, and the like.(37) But the new law and norms literature re-states and sharpens the point. Norms matter to legal analysis because (1) sometimes norms control individual behavior to the exclusion of law, (2) sometimes norms and law together influence behavior, and (3) sometimes norms and law influence each other.(38)

      Consider each possibility. First, a norm may govern behavior so tightly that the choice between (plausible) legal rules is irrelevant. Ellickson, for example, discovered that different property regimes in Shasta County had no effect on the way neighbors resolved certain disputes because the...