Social Norms , the Invisible Hand , and the Law

Social norms can be oppressive or empowering; and so can laws. Norms are sometimes described as emergent rules or behavioural regularities that arise as solutions to collective action problems of various kinds faced by individuals when they interact with each other. Examples include rules of combat, courtship rituals, and informal systems of property rights that determine what members of a group can do with the food they gather and the objects they create, or whom they can marry. The emergence and internalization of norms generally involves an invisible hand process similar to Darwin’s idea of natural selection in biology or Smith’s account of the operations of markets in economics. In some cases, these ‘invisible processes’ will be welfare-enhancing, and when they are, we will refer to them as invisible hands. In welfare-enhancing cases, a common thought is that the process in which a particular norm emerges as the prevailing one involves norms being tried out, with those that diminish welfare being filtered out over time, so that through a bottom-up, trial-anderror process, welfare-enhancing norms emerge victorious and are preserved and replicated. Of course, social evolution does not always work like this, and people can be trapped at equilibria that are mutually destructive or suboptimal (we call these invisible fists). The bottom-up emergence of norms is often contrasted with the top-down imposition of legislation by larger political units, which tends to displace or alter norms. But this contrast is too stark. For example, in representative governments laws emerge from the interactions of policymakers and citizens, without any one person wielding the power to impose top-down rules on passive subjects. Moreover, politicians and voters are themselves subject to prevailing norms, which influence the content of the laws that are enacted. And the institutions within which policy-makers and policy-takers interact are also governed by ‘process norms’ – concerning, say, who has voice and how collective decisions are appropriately made. In this paper we argue that social norms are emergent orders; that when they are welfare-enhancing they constitute invisible hand processes; and that whether we should rely more heavily on laws or norms to improve social welfare depends on the political institutions in place and the nature of the case under consideration. In other words, we argue that there is no general answer to the question of whether norms or laws should prevail, in part because both emerge from imperfect, path-dependent processes that have their own distinctive advantages and disadvantages. We do, however, suggest some general conditions under which it might be better to rely on laws or on norms to enhance social welfare.