Predictably Irrational— The Cost of Zero Cost, The Cost of Social Norms

the cost of zero cost

• zero price effect: Most transactions have an upside and a downside, but when something is Free! We forget the downside… humans are intrinsically afraid of loss. (54)

…we can use Free! To drive social policy. Want people to drive electric cars? Don’t just lower vehicle registration fees— eliminate them., so that you have created Free! (62)

the cost of social norms

…we live simultaneously in two different worlds— one where social norms prevail, and the other where market norms make the rules…. Social norms are wrapped up in our social nature and our need for community…. Instant paybacks are not required.

…the second world, the one governed by market norms, is very different…. The exchanges are sharp-edged: wages, prices, rents, interest, and costs-benefits. Such market relationships are not necessarily evil or mean— in fact, they also include self-reliance, inventiveness, individualism— but they do not imply comparable benefits and prompt payments… you get what you pay for. (68)

…people are willing to work for free (social norm) or for a reasonable wage; but offer them just a small payment and they will walk away. (73)

…for market norms to emerge, it is sufficient to mention money (even when no money changes hands). (74)

Thinking about money, then, made people more self-reliant and less willing to ask for help… and less willing to help others… they displayed many of the characteristics of the market: they were more selfish and self-reliant; they wanted to spend more time alone; they were more likely to select tasks that required individual input rather than teamwork— just thinking about money makes us behave as most economists believe we behave— and less like the social animals we are in our daily lives. (75)

…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. (77)