[Excerpt] Why and how do groups create norms? Kenneth Arrow proposed that “norms of social behavior, including ethical and moral codes, ….are reactions of society to compensate for market failure”. This internalize the real externalities explanation for norms is also standard among rational choice theorists in sociology. The situation becomes more complex when we recognize some actions create positive externalities for some individuals and negative externalities for others. Often this results in no norm being established. However, sometimes one segment of a social system has normative hegemony and enforces norms that enhance their power and prestige at the expense of other groups. Norms regarding caste in India, for example, were functional for Brahmins but humiliating for Harijans. Caste and status norms of this type will also be referred to as “Honor us; Not them” norms. Such norms arise when one group is much more powerful (has greater ability to enforce their preferred social norm) than other groups and it imposes its will on others. An additional requirement is that the people who oppose the norm established by the dominant group must be unable or unwilling to leave the social system in which the norm operates.
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