Norms, socially-determined notions about the right and wrong ways of doing things, have a great deal of influence on human behavior. Social norms give us the potential to rely less on relatively costly formal systems of enforcement and more on informal systems of enforcement. Once everyone gets that something like littering is wrong, formal punishments like fines, courts, and the police will matter less than the informal sanctions that come because people internalize the social norms and say “this is the wrong thing to do”. In this way, the dynamics of laws and norms have an important impact on growth and development in countries where more and more people are moving to be much closer to each other in cities.
In this FAQ video, Paul Romer describes the role of social norms in the process of development.