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Social Norms And The Law

The New Palgrave Dictionary of Economics and the Law, (Peter Newman, ed.), May 1998

16 Pages Posted: 1 Dec 1997  

Kaushik Basu

Cornell University - Department of Economics; Harvard University - Harvard Institute of Economic Research; IZA Institute of Labor Economics; World Bank


After one eats in a restaurant, that one has to leave a tip is a social norm, and that one has to pay for the food is law. As
is evident from this both norms and the law influence our behaviour. The goods that we buy, the food that we consume,
the services that we render and the opinions that we express are all influenced both by the law and the norms of society.
But in traditional economics there was little recognition of this fact. In recent years this has been changing and there have
been several initiatives to integrate the analysis of norms and institutions with markets and the provision of public
goods. This essay begins by discussing what social norms are and how they influence economic functioning and it tries
to classify different kinds of social norms. It comments on the relation between norms and evolutionary processes, and
the interconnections between social norms, the law and the state. It also addresses the much-discussed question: to what
extent can social norms or voluntary community-based effort be a substitute for law?

Suggested Citation

Basu, Kaushik, Social Norms And The Law. The New Palgrave Dictionary of Economics and the Law, (Peter Newman, ed.), May 1998. Available at SSRN: or

Kaushik Basu (Contact Author)

Cornell University - Department of Economics ( email )

414 Uris Hall
Ithaca, NY 14853-7601
United States
607-255-2525 (Phone)
607-255-2818 (Fax)

Harvard University - Harvard Institute of Economic Research ( email )

Department of Economics
200 Littauer Center
Cambridge, MA 02138
United States
617-495-8161 (Phone)
617-495-8570 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072

World Bank

1818 H Street NW
Washington, DC 20433
United States

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