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. What we say, for instance, can be curtailed by having laws that restrict freedom of speech. But not having such a restrictive law, or having a law or a constitutional requirement—such as the First Amendment in the US—which gives individuals the right to say what they wish or believe in, does not automatically guarantee freedom of speech. Social restrictions can also curtail our freedom. If there is a social norm against a certain opinion or viewpoint or against the explicit mention of certain facts of life, then through the threat of ostracism and other ‘social’ punishments the individual freedom to express a viewpoint or fact can be limited.

The goods that we buy, the food that we consume, the services that we render are all influenced both by the law and the norms of society. But in traditional economics there was little recognition of this fact, especially the influence of norms. 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 (see, for instance, Ullmann-Margalit 1977; Elster 1989).