Norms, numbers and hierarchy: comment on E. Schlicht

American Journal of Economics and Sociology, The, April, 2002 by Barbara Krug

BARBARA KRUG *

I

The Number Game

CUSTOM IS A CUSTOM ONLY IF IT SHAPES BEHAVIOR. If only one individual adheres to a custom, then we would not regard it as a custom, but probably as personal eccentricity. If, on the other hand, everybody adheres to the same custom all the time, we would probably not notice that there is such a thing as a custom, but regard the behavior in question as "natural." Thus, if we observe different behaviors of groups in the same situation, we must assume that different customs can co-exist, or that there are different settings that shape behavior. The latter could be economic calculus, law, ideology or passion. That custom can become a custom depends then on a sufficiently large number of people allowing one custom to shape behavior.

II

The Problem of Consent

CUSTOM IS CUSTOM ONLY IF INDIVIDUAL ACTORS ADHERE TO IT. Settling for the same procedure creates the kind of network effect that the economic literature focuses on. Undoubtedly there is an economic value to the extent that custom serves as a transaction cost-saving device. Yet, to conclude from the transaction cost effect that customs are consciously and deliberately chosen is misleading. Schlicht persuasively argues that to choose a custom is not necessarily an act of rational choice, if it can be called a choice at all. What is needed for a custom to emerge or survive is consent, rather than choice. Aside from the specific content, consent to a custom seems to depend on two additional requirements (Tyler 1990; Akerlof 1980): procedural fairness and ethnic (or, to use a better term, community) reciprocity.

The latter implies that an economic agent is more willing to adhere to a custom--knowingly or unknowingly--the more the custom is embedded in the normal lifestyle of the community in which he or she lives. Procedural fairness, on the other hand, refers to the distribution of obligations and gains of custom compliance. In short, when all other people in a community follow a custom, and if the custom is regarded as fair, then individuals might comply with it even if they do not completely identify with the special content of that custom. One example that springs to mind is Christmas. The tradition of celebrating Christmas may not necessarily indicate religious belief, but rather the consent that December 25th should be a family event, or that to celebrate Christmas is what is done. To do something because this is "what is done" points to another aspect of custom: namely, whether a custom is only a custom so long as the content is not scrutinized.

III

Hierarchy in Custom

Unscrutinized Custom

One set of custom certainly implies routinization of behavior. Certain rules are blindly followed. An economic analysis would point to the transaction cost advantage that arises when not all decisions are submitted to the economic calculus. The economic approach would also predict that to leave custom unquestioned will depend on (1) whether the customary praxis in question is a low or high cost choice; (2) whether alternatives are known; and (3) whether the accompanying standards of fairness and reciprocity are maintained.

Certainly one strength of Schlicht's book is that it shows that the blind following of custom is not as blind as economic analysis usually assumes. In the sections on tacit knowledge, or emotional encoding (sections 1.5 and 1.6: pp. 15-18), for example, he shows how individual agents can creep into customs. It is a very subtle cognitive process--maybe for this reason escaping the attention of economics--indicating consent and identification rather than choice.

One can make the argument, and the book certainly suggests, that custom is custom only so long as it escapes the scrutiny of individual actors. Moreover, such an unquestioned form of custom can be maintained for a long time. Indeed, we observe that unscrutinized custom, such as keeping the knife in one's right or left hand while eating, plays a major role in daily life.

One way to explain this inertia is to assume that the actors do not know alternatives. If they did, individual actors would start thinking about the custom and might even calculate opportunity costs. In short, they would no longer act under the "veil of ignorance." Another interpretation, however, would point to the "cosiness" that an unscrutinized custom offers. We know that individual actors, or more precisely, groups, are inclined to create a "hospitable niche" in which they leave things as they are. They might even create special institutions that safeguard these niches. In these niches the idea that rules, money or exchange relations could make the overall outcome more efficient would be repulsive. One example of such a niche is the traditional community-based football club whose supporters get offended by the professionalism and money-based deals modern League Football aims at, which takes away the cosiness, or the emotional tie, that binds the group of people together.

On the other hand, the assumption that unscrutinized custom is stable is questioned both by the book, and also by the results in experimental economics. As the Yamagishi experiments showed, as long as custom remains unquestioned nobody will contribute to a sanctioning fund, to the effect that the custom will eventually break down. Schlicht offers an explanation for why individual actors will opt for sanctions: unscrutinized custom must be messy and create uncertainty, with the result that "our inclination to ask for clarity" will prompt us to search for supporting rules (pp. 28, 106-107).