Can welfare policy make use of social norms?

Recent literature in social policy proposes that problems like poverty can be reduced by strengthening community norms and other forms of social capital. This paper presents a simple model of social norms, and explores the effects and counter-effects of anti-poverty policies on poverty-related norms. The basic result is to show that the norm system may react in unintended ways: a policy of cutting welfare grants in order to reduce the welfare caseload, for example, can lessen the stigma shown against the poor, in certain cases enough to cause caseloads to rise instead of fall. As a result, strengthening community norms may in some cases do more to frustrate the intentions of policy-makers than to satisfy them.