SOCIAL NORMS AND ECONOMIC WELFARE

A norm is an established and self-reinforcing pattern of behaviour: ev eryone wants to play their part given the expectation that everyone el se will continue to play theirs. It is, in short, an equilibrium of a game. This paper surveys some of the ways in which norms structure eco nomic life: in the definition (and division) of property, in the terms of contracts, and in the assignment of social roles. We argue that no rms can evolve from the cumulative effect of many decentralized intera ctions by individuals who are trying to solve a coordination problem. The theory suggests circumstances under which evolutionary forces favo r norms that are efficient and more or less egalitarian in their distr ibutive implications. (C) 1998 Elsevier Science B.V. All rights reserv ed.