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Tag Archives: social norms

Thank you grunge stamp isolated on white

I never realized the cost of saying, “Thank you.”

Assume for a moment that you receive a text that you appreciate. Should you reply with a thank you? One NY Times reporter suggests that your decision relates to texting etiquette. However, I suspect it really is about cost benefit analysis.

Defined economically as sacrifice, the cost of unnecessary texts and emails is huge time that might be spent elsewhere. But, the catch is that the cost is higher on the recipient’s end. If so, doesn’t the sender have the incentive to send unnecessary communication?

Maybe not. Gradually, the social norms for communication are changing.

With the first telephone, no one knew to say hello when you began speaking. Then, someone figured it out and it stuck. Now, with new communications media, again social conventions are evolving. For many people, a lone “thank you” is digitally inconsiderate.

I wonder though, if saying thank you brings the benefit of graciousness to our society. And, does the benefit to all of us outweigh the individual cost?

Your opinion?

Sources and Resources: My pondering the new media “rules” began with a NY Times ”Bits” article on texting, email and voicemail etiquette. Conveying more detail, this Washington Post article provides more cost benefit analysis of texting. Surprisingly, one college professor says his students are writing better because of texting.

Please note that the title of this entry was slightly edited after it was posted.

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Decisions Have An Opportunity Cost That Require Tradeoffs

A gift can be worth much more or less than its price tag. It just depends on whether you are the giver or the receiver.

One of the best gifts I have ever gotten was a book of car wash coupons. Happily, I used every one, each time feeling that I had gotten something for free. The value of the gift to me was equal to the value that the giver had paid to say thanks for driving her daughter to school every morning.

According to economist Joel Waldfogel, my experience was unusual. What we give rarely is worth as much to the recipient. As a result, he says that there is an “orgy of value destruction” during the holidays. If you are willing to pay only $25 for that $50 sweater your Aunt Minnie gave you, then $25 of value is destroyed. Called deadweight loss, Waldfogel estimates that 18 percent of the value of all gifts given during the December holidays disappears.

Is the answer cash? Not necessarily. Explained by behavioral economist Dan Ariely, the reason might be that we have market norms and social norms. A stranger asked to help someone move a sofa says no when offered a small amount of cash. However, when asked as a favor, more people willingly assisted. The former was a transaction. The second was an act of good will.

The good will takes us to gift giving. Even when value is lost on the recipient’s side, it might be gained with the giver. After all, if the pleasure of giving a $50 sweater could “add” $25 to its value and make it worth $75 to your Aunt Minnie, then that 18 percent deadweight loss is eliminated.

Maybe you think this behavioral analysis is ridiculous. But, the combination of gifts’ deadweight loss and the need to judge gifts with social norms might be why gift cards are so popular. It also explains why my car wash coupons were worth more to me than their price tag.

Sources and Resources: Joel Waldfogel conveys the academics behind his ideas in his paper, more informally explains his book, Scroogenomics, in this video, and summarizes his conclusions in this NPR segment. My top recommendation, though, is Dan Ariely’s book, Predictably Irrational in which I read about social and market norms (Chapter 4).

Past Monday Behavioral Economics Posts

Managing Risk: 11/12

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Sometimes, deterrents won’t work.

Our story begins at several Israeli day-care centers. Because some parents were picking up their children after dismissal time, two economists suggested a fine. To their surprise, the number of latecomers more than doubled after it was announced. And even when the fine was eliminated, more parents were late.

Discussing the results, one of the economists shared a personal experience. Feeling uneasy about a late pick-up for his young child, he “drove like crazy” to the day-care center whenever he ran late. However, after they imposed a $3 charge for any delay, he said to himself, “It’s not worth risking your life for $3.”

You can see what happened. The cost changed. Initially, the dollar cost was zero but the moral or social cost was high. The $3 charge, though, “crowded out” the intangible cost and made a late pick-up “cheaper.”

Our Bottom Line: Newly articulated penalties can have unintended consequences. I wonder whether Dodd-Frank will surprise us.

To read more about the day-care experiment, you might enjoy this paper by economists Uri Gneezy and Aldo Rustichini, this article, and sections of Predictably Irrational and Freakonomics. A recent econlife post also looked at when dollars crowd out community values.

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