Social Norms versus Market Norms in Daycare

“Any questions?” asked the daycare-center director. She was a pleasant mix of smart and caring. She no doubt wished her center could accept all the applicants. But this being one of the few daycare centers near downtown San Francisco, the wait list dwarfed the enrollment.

“Wait list” was a misnomer. The center chose children based on unspecified factors, only one of which was place in line. So, all parents on this tour for applicants were listening attentively, mustering questions that demonstrated thoughtful consideration for their childrens’ welfare, and otherwise exhibiting best behavior.

Until the following exchange:

Parent: What is the policy if I’m late to pick up my child?

Director: We understand that once in a while you get stuck in traffic or can’t get here for extraordinary reasons. Just give us a call at the time, and we’ll make sure someone stays with your child until you get here.

Parent: Is there a fine or penalty?

Director: We’re not going to fine you for a rare event that’s totally out of your control.

Parent: But what if it happens repeatedly? How many times do I have to be late before you start fining me, and what’s the fine?

Director: Uh, we haven’t had to deal with that before.

Parent: Well how do I get that question answered?

Director: Let me get back to you on that.

As this exchange progressed, the questioning parent’s demeanor went from neutral to baffled, like a boss mystified by a subordinate’s inability to answer a simple question. Meanwhile, everybody else in the room was looking at each other like, “There’s one person we don’t have to worry about getting in before us.”

At the time, I didn’t ask myself why everyone except Baffled Parent knew something had gone awry. However, the incident came back to me when I read Dan Ariely’s Predictably Irrational. The book is about how people’s decisions—not just individually but in aggregate—can be skewed by factors beyond traditional economics’ view of rationality.

Ariely would explain that Baffled Parent tried to apply traditional economics’ “market norms” in a situation where “social norms” prevail. In fact, Ariely has an example of what happened when a day care center tried doing things Baffled Parent’s way:

A few years ago, [Uri Gneezy of UC San Diego and Aldo Rustichini of the University of Minnesota] studied a day care center in Israel to determine whether imposing a fine on parents who arrived late to pick up their children was a useful deterrent. Uri and Aldo concluded that the fine didn’t work well, and in fact it had long-term negative effects. Why? Before the fine was introduced, the teachers and parents had a social contract, with social norms about being late. Thus, if parents were late—as they occasionally were—they felt guilty about it—and their guilt compelled them to be more prompt in picking up their kids in the future. (In Israel, guilt seems to be an effective way to get compliance.) But once the fine was imposed, the day care center had inadvertently replaced the social norms with market norms. Now that the parents were paying for their tardiness, they interpreted the situation in terms of market norms. In other words, since they were being fined, they could decide for themselves whether to be late or not, and they frequently chose to be late. Needless to say, this is not what the day care center intended.

I’ll have more to say on Ariely’s book—of which social versus market norms is a small section—in a subsequent post.