tag:blogger.com,1999:blog-4039434.post567371149194083427..comments2024-02-26T06:46:53.171-05:00Comments on Rajiv Sethi: Norms as a Substitute for LawsRajivhttp://www.blogger.com/profile/13667685126282705505noreply@blogger.comBlogger13125tag:blogger.com,1999:blog-4039434.post-55335658277041915822010-04-05T12:06:30.503-04:002010-04-05T12:06:30.503-04:00Stergios, I think there's a lot of interesting...Stergios, I think there's a lot of interesting theory and empirical work to be done in this area (Jean-Marie Baland and various co-authors have some very good recent papers.) But you're right, the picture is still quite confusing, it's not clear why some communities are able to manage CPRs effectively based on norms and rules while other fall victim to free riders. So a lot of open questions remain.Rajivhttps://www.blogger.com/profile/13667685126282705505noreply@blogger.comtag:blogger.com,1999:blog-4039434.post-78670490334226342362010-04-05T10:20:12.012-04:002010-04-05T10:20:12.012-04:00Rajiv,
I just recently finished Governing the Com...Rajiv,<br /><br />I just recently finished Governing the Commons (i.e. yesterday) so this post is pretty serendipitous!<br /><br />I was extremely impressed with Ostrom's work, and wish I'd read her book sooner. As someone who primarily works (or, rather, attempts to work) in theory, some of which I try to apply in environmental policy issues, her detailed description of real-world case studies was a revelation --and a huge lesson in humility about the reach of our rigorous game-theoretic models.<br /><br />But one set of questions haunted me throughout: Will it be possible to ever develop the mathematical machinery to quantitatively study the complex processes Ostrom so effectively describes in her prose? If not, is the above endeavor even necessary and/or the point? Are Ostrom's qualitative rules and frameworks all that we really need to craft policy in a complex and uncertain world?<br /><br />To be sure, I won't be giving up on my research agenda. But I will certainly not be fetishizing elegant math as much as I did before.<br /><br />p.s. I will read your earlier posts on Ostrom. Sorry if they already cover this ground.Unknownhttps://www.blogger.com/profile/00263026838165166976noreply@blogger.comtag:blogger.com,1999:blog-4039434.post-65982765397584024212010-04-02T14:27:21.571-04:002010-04-02T14:27:21.571-04:00MR, thanks... the article you linked to is interes...MR, thanks... the article you linked to is interesting. I share your concerns about major breakdowns in norms of ethical conduct and the ecosystem analogy is apt. In a review of Ostrom's work a few years ago I made a similar point: <br /><br />"institutions of self-governance are fragile: large-scale interventions, even when well-intentioned, can disrupt and damage local governance structures, often resulting in unanticipated welfare losses. When a history of successful community resource management is in evidence, significant interventions should be made with caution. Once destroyed, evolved institutions are every bit as difficult to reconstruct as natural ecosystems, and a strong case can be made for conserving those that achieve acceptable levels of efficiency and equity."<br /><br />Also, I liked your last post on Modigliani-Miller and agree completely with it. But I disagree with Mankiw's suggestion that under the MM assumptions, maturity transformation has no real effects. MT affects the pattern of investment by affecting the shape of the yield curve, even under the MM assumptions. I hope to put up a post on this at some point.Rajivhttps://www.blogger.com/profile/13667685126282705505noreply@blogger.comtag:blogger.com,1999:blog-4039434.post-42126489768995687972010-04-02T13:07:47.594-04:002010-04-02T13:07:47.594-04:00Rajiv - great post as always. I also enjoyed readi...Rajiv - great post as always. I also enjoyed reading the paper on the evolution of social norms you wrote with E. Somanathan which you linked to. The conclusion that the erosion of norms can be extremely hard to reverse is especially pertinent. <br /><br />Norms tend to change in an abrupt manner. This tends to make us complacent about maintaining the conditions that make the norms effective. Moreover, once we move out of the cooperative equilibrium into the defector equilibrium, merely turning back the clock is not enough to get back to the cooperative equilibrium. This kind of phenomena is pervasive in ecosystems - See for example this <a href="http://www.narf.ssji.net/%7Eshtrom/chalmers/cb/scheffer2001.pdf" rel="nofollow">paper</a> by Scheffer and especially Figure 2 on page 2.<br /><br />One of the things that concerns me about the current crisis is the possibility of a breakdown in the norms of fairness and ethical conduct due to the rightly perceived unfair nature of our crony capitalist system. If strategic default becomes the norm rather than the exception, the costs of such a breakdown in a basic moral norm can be very significant. It may also take us a very long time to reverse such a breakdown.Ashwinhttps://www.blogger.com/profile/12538605904825633269noreply@blogger.comtag:blogger.com,1999:blog-4039434.post-63193103734000793312010-04-02T10:15:11.574-04:002010-04-02T10:15:11.574-04:00Eric: overlap, yes, but not much familiarity as it...Eric: overlap, yes, but not much familiarity as it should.Rajivhttps://www.blogger.com/profile/13667685126282705505noreply@blogger.comtag:blogger.com,1999:blog-4039434.post-70146802691627328732010-04-01T13:01:06.478-04:002010-04-01T13:01:06.478-04:00The discussion of rules/norms reminds me a lot of ...The discussion of rules/norms reminds me a lot of the original institutionalist and economic anthropology discussions of the role of social beliefs in organizing economic activity (Bohannon, Polanyi, Dalton, etc). I wonder if the new literature has much overlap (familiarity) with the older stuff?Dodgy Bagehothttps://www.blogger.com/profile/04905330717836358627noreply@blogger.comtag:blogger.com,1999:blog-4039434.post-44116572423011140852010-04-01T12:56:11.969-04:002010-04-01T12:56:11.969-04:00BruceT, you're right, norms and sanctions work...BruceT, you're right, norms and sanctions work best in groups with well defined boundaries. This is why the distinction between common property and open-access is so critical in resource economics. Open access forests would be degraded in no time. <br /><br />MG, yes, if violating norms is consistently profitable (even taking account of sanctions) then such norms will not survive in the long-run, but I think the same goes for laws. <br /><br />Thirtyseven, thanks for the information. I don't know much about the comedy circuit but among some groups the sanctions can be pretty severe: norms against plagiarism in academic research are quite successful deterrence mechanisms for instance.Rajivhttps://www.blogger.com/profile/13667685126282705505noreply@blogger.comtag:blogger.com,1999:blog-4039434.post-12353288682780562372010-04-01T12:11:57.976-04:002010-04-01T12:11:57.976-04:00This was fascinating and I love where you took it....This was fascinating and I love where you took it.<br /><br />However, I feel compelled to add that aside from Rogan, there's very few concrete examples of comedians doing the vigilante social norm routine. In recent years we've seen a LOT of comedians build huge, undeniably successful careers off stolen material (Dane Cook being one outstanding example) despite the bitter venom from a small crowd of purists and talented creators. <br /><br />Norms are all too easily subverted or trumped outright by money. The massive network TV paychecks and mid-size arena tour income that Mencina continues to earn speaks volumes about how much impact Rogan's actions really had. Carlos Mencina didn't get kicked out of any clubs that mattered enough for him to change his ways -- so he won't.Justin Bolandhttps://www.blogger.com/profile/06617774048323657315noreply@blogger.comtag:blogger.com,1999:blog-4039434.post-36855436753351680562010-04-01T10:03:08.947-04:002010-04-01T10:03:08.947-04:00Few months ago I wrote a post about "Social n...Few months ago I wrote a post about "Social norms versus market norms: how to screw the economy up".<br />http://mgiannini.blogspot.com/2009/03/social-norms-versus-market-norms-how-to.html<br />In the world of economics, particularly in finance, the problem is when social and market norms collide, thus troubles set in.<br />If you want to earn extra profit (excess returns) automatically you have to disregard social norms. The copyright law is something to let the owner earn more money than actually would be the case should only social norms be enforceable. Formal law and market norms are there to justify profits in excess of "socially" acceptable or simply to maximize those.<br /><br />At http://www.predictablyirrational.com/?page_id=129 we can read "When social and market norms collide, trouble sets in. Take sex again. A guy takes a girl out for dinner and a movie, and he pays the bills. They go out again, and<br />he pays the bills once more. They go out a third time, and he’s still springing for the meal and the entertainment. At this point, he’s hoping for at least a passionate kiss at the front door. His wallet is getting perilously thin, but<br />worse is what’s going on in his head: he’s having trouble reconciling the social norm (courtship) with the market norm (money for sex). On the fourth date he casually mentions how much this romance is costing him. Now he’s crossed the line. Violation! She calls him a beast and storms off. He should have known that one can’t mix social and market norms-especially in this case-without implying that the lady is a tramp. He should also have remembered the immortal words of Woody Allen: “The most expensive sex is free sex.”M.G. https://www.blogger.com/profile/14140876295753661499noreply@blogger.comtag:blogger.com,1999:blog-4039434.post-56055629506375601642010-04-01T08:39:57.570-04:002010-04-01T08:39:57.570-04:00I wonder whether the success of such norms is reli...I wonder whether the success of such norms is reliant on a lack of mobility between groups. Many of these norms likely developed over generations of people who had to live with the consequences of their actions. In a modern era, how resilient would such norms be if, say, someone cut down large swathes of forest and moved to the city with the proceeds? <br /><br />However I agree that norm-based interactions can be much more efficient than relying on legal agreements. Francis Fukuyama wrote a very interesting book called "Trust" which covered this on a macro level. It described how societies which had greater levels of social trust were much more successful. Societies with lower levels of trust had much higher transaction costs, which substantially held back commercial trade.BruceThttps://www.blogger.com/profile/10113854187807865736noreply@blogger.comtag:blogger.com,1999:blog-4039434.post-39079254858524360302010-04-01T07:01:01.037-04:002010-04-01T07:01:01.037-04:00Don, thanks for the quote. I've been thinking ...Don, thanks for the quote. I've been thinking a lot about online manners recently, wondering whether the tone of the comments on a blog reflect an audience effect (some blogs attract well-mannered readers) or whether readers take their cues from posts and other comments. <br /><br />Bruce, your point is well taken. In hierarchical contexts there can be oppressive norms that serve to reinforce and entrench status. Axelrod has a 1996 paper with some examples from the Jim Crow period, and many vivid cases can be found in rural parts of South Asia even today, related both to gender and caste. So I should have been more careful with the comment about efficiency, thanks for pointing this out.Rajivhttps://www.blogger.com/profile/13667685126282705505noreply@blogger.comtag:blogger.com,1999:blog-4039434.post-66523017400050488122010-04-01T02:48:47.889-04:002010-04-01T02:48:47.889-04:00It is very common in business, to try to establish...It is very common in business, to try to establish a norm that employees should signal their cooperativeness, by a willingness to work late, and to forego claims for overtime rates of pay. Employees, who leave on time, are "clock-watchers" and employees, who complain or defend their rights, are likely to be fired.<br /><br />Are such norms more "efficient" than the law? For whom?<br /><br />Laws regarding overtime pay have been increasingly limited in their scope, in order to align with such "norms". One dodge is assert that an employee is a manager and therefore a "salaried" "professional" and, therefore, overtime laws should not apply.Bruce Wilderhttps://www.blogger.com/profile/09631065564839959376noreply@blogger.comtag:blogger.com,1999:blog-4039434.post-87606869685271352512010-04-01T02:29:27.859-04:002010-04-01T02:29:27.859-04:00"Manners are of more importance than laws. Th..."Manners are of more importance than laws. The law can touch us here and there, now and then. Manners are what vex or soothe, corrupt or purify, exalt or debase, barbarize or refine us, by a constant, steady, uniform, insensible operation like that of the air we breathe in.<br /><br /> * No. 1, p. 172 in The Works of the Right Honourable Edmund Burke: A New Edition, v. VIII. London: F. C. and J. Rivington, 1815."<br /><br />Don the libertarian DemocratDonald Pretarihttps://www.blogger.com/profile/14493535232127084725noreply@blogger.com