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Laws and Norms

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  • Bénabou, Roland
  • Tirole, Jean

Abstract

This paper analyzes how private decisions and public policies are shaped by personal and societal preferences (values), material or other explicit incentives (laws) and social sanctions or rewards (norms). It first examines how honor, stigma and social norms arise from individuals’ behaviors and inferences, and how they interact with material incentives. It then characterizes optimal incentive-setting in the presence of norms, deriving in particular appropriately modified versions of Pigou and Ramsey taxation. Incorporating agents’ imperfect knowledge of the distribution of preferences opens up to analysis several new questions. The first is social psychologists’ practice of norms-based interventions, namely campaigns and messages that seek to alter people’s perceptions of what constitutes normal behavior or values among their peers. The model makes clear how such interventions operate, but also how their effectiveness is limited by a credibility problem, particularly when the descriptive and prescriptive norms conflict. The next main question is the expressive role of law. The choices of legislators and other principals naturally reflect their knowledge of societal preferences, and these same community standards are also what shapes social judgements and moral sentiments. Setting law thus means both imposing material incentives and sending a message about society’s values, and hence about the norms that different behaviors are likely to encounter. The analysis, combining an informed principal with individually signaling agents, makes precise the notion of expressive law, determining in particular when a weakening or a strengthening of incentives is called for. Pushing further this logic, the paper also sheds light on why societies are often resistant to the message of economists, as well as on why they renounce certain policies, such as "cruel and unusual punishments", irrespective of effectiveness considerations, in order to express their being "civilized".

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 8663.

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Date of creation: Nov 2011
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Handle: RePEc:cpr:ceprdp:8663

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Related research

Keywords: culture; esteem; expressive content; honor; incentives; law; motivation; norms-based interventions; punishments; reputation; social norms; stigma; taxation;

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References

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  1. Iris Bohnet & Bruno S. Frey & Steffen Huck, . "More Order with Less Law: On Contract Enforcement, Trust, and Crowding," IEW - Working Papers 052, Institute for Empirical Research in Economics - University of Zurich.
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Cited by:
  1. Riedel, Nadine & Schildberg-Hörisch, Hannah, 2011. "Asymmetric obligations," FZID Discussion Papers 28-2011, University of Hohenheim, Center for Research on Innovation and Services (FZID).
  2. Galbiati, Roberto & Schlag, Karl H. & van der Weele, Joël J., 2013. "Sanctions that signal: An experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 94(C), pages 34-51.
  3. Edlund, Lena & Ku, Hyejin, 2011. "The African Slave Trade and the Curious Case of General Polygyny," MPRA Paper 52735, University Library of Munich, Germany, revised 16 Dec 2013.
  4. Juan Dubra & Rafael Di Tella, 2011. "Free to Punish? The American Dream and the harsh Treatment of Criminals," Documentos de Trabajo/Working Papers 1105, Facultad de Ciencias Empresariales y Economia. Universidad de Montevideo..
  5. Timothy Besley & Torsten Persson, 2013. "Taxation and Development," STICERD - Economic Organisation and Public Policy Discussion Papers Series 41, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.

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