Jesus vs. Hillel. From moral to social norms and back

This paper studies how different behavioural norms affect individual and social welfare in a population with heterogeneous preferences. We assume preferences are private information, and that interactions between individuals do not involve communication, nor bargaining. We first compare two stylized behavioural rules: one states "do to your neighbours what you would like them do to you", also known as Jesus' golden rule, while the other prescribes "don't do to your neighbours what you would not like them do to you", and is attributed to the Jewish rabbi Hillel (I century B.C.). We consider them as an idealization of an imperative and a more liberal approach to social behaviour. We find that aggregate welfare depends on the distribution of preferences in the society. We then contribute to the theory of social norms by introducing a third, more realistic behavioural rule: a retaliation strategy that prescribes "do to your neighbours what they have done to you". It is a sort of "blind" tit-for-tat strategy where no memory is conserved about the identity of the offender and retaliation is adopted in the next interaction, independently of whom the individual is interacting with. We show that, if followed by everybody, this strategy leads to the selection of a single behaviour, which becomes established as a social norm. This behaviour leads in general to more inequality, with respect to the Jesus or Hillel rules. However, it is sufficient that a small group (about 1%) of the population keeps on playing one of the two moral norms to prevent the establishment of a social norm and recover the same social welfare that is obtained when everybody played the moral norm.