The Costs of Social Norms Dan Ariely

Dan Ariely, in Chapter 4 “The Cost of Social norms” from his book “Predictably Irrational” (2010) talks about the difference between social and market norms. He refers to social norms as the friendly request people make to one another without expecting money to be involved as these are part of our social nature and a way to help our community. In this approach gifts and other social rewards are the perfect payment. On the other hand Ariely refers to market norms as those that imply payments, money is involved. It’s the exchange of a product or service for money. Throughout the entire chapter Ariely gives a profound explanation why these two approaches shouldn’t be mixed and the consequences when this occurs “When a social norm collides with a market norm, the social norm goes away for a long time. Social relationships are not easy to reestablish. Once a social norm is trumped by a market norm it will rarely return.” (Ariely, 2010)

It is interesting how business can be categorized in one of these approaches. One could think that all businesses are market oriented, but there are some businesses, specifically family businesses that have decided to be social oriented. Some of the family businesses that have implemented the social norms without knowing the possible consequences if these are not handled appropriately have suffered by going through several conflicts. In order to provide a more in depth discussion two examples of problems faced by family businesses who apply social norms are shown below.

A few years ago, in 2008, one of my cousins started his own business, in Ecuador, with the help of his wife. Since then, both have been working together to make the business successful and make a living from it. The business main activity is to provide high quality service in the maintenance of electronic equipment such as laptops, computers, cellphones, and as well they import this products and sell them to the public at a cheaper price than competition. The company...