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. I assume preferences are private information, and that interactions between individuals do not involve communication, nor bargaining. I 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.). I consider them as an idealization of an imperative and a more liberal approach to social norms. I find that aggregate welfare depends on the distribution of preferences in the society._x000d_ _x000d_ A third, more realistic behavioural rule is then introduced, a retaliation strategy that prescribes “do to your neighbours what they have done to you”. I 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 recover the same social welfare that are obtained when everybody played that moral norm._x000d_ _x000d_ Keywords: Liberalism, Tit-for-tat, non-market interaction, golden rule_x000d_ _x000d_ JEL Classification: D63, D64, P50_x000d_ _x000d_ Acknowledgements: A Lagrange fellowship by ISI Foundation is gratefully acknowledged. The author is grateful to Florentin Paladi, who provided a number of computations and helped in getting some of the results of section 3. Matteo Richiardi wishes also to thank Michele Sonnessa, author of JAS - the agent-based simulation platform used in the paper - for his software and programming assistance.