A theory of “valuable rituals”

May 7, 2002

Free Market Foundation

Economist Michael Suk-Young Chwe has a theory regarding the value of communal activities such as weddings, the Super Bowl, presidential inaugurations, graduation ceremonies and political rallies.

In his book, “Rational Ritual” (Princeton University Press, 2001), he argues that a presidential inauguration, for example, is important because everyone seeing it knows who the president is and knows that everyone else also knows, and this common knowledge is essential to the legitimacy of the office.

Similarly, a marriage ceremony allows everyone to recognise the couple as a couple by generating the necessary common knowledge.

When a blitz of six ads during the 1986 Super Bowl introduced the Discover credit card to Americans, the common knowledge generated persuaded retailers to accept it and consumers to use it.

Conversely, advertising to large markets where audience members aren’t aware of each other isn’t as valuable which is why a high-traffic Web site like Yahoo still has trouble getting the sort of ad dollars a TV show with the same audience would draw.

Professor Chwe believes that neither a world of “atomistic individuals” nor a world of purely social groupings exists. Effective social institutions, including cultural rituals and economic practices, allow individuals to cooperate for mutual benefit.

Source: Virginia Postrel (Reason magazine), Economic Scene: Communal Activities, from Weddings to Football, Add Value to Shared Knowledge, New York Times, April 25, 2002.

For text http://www.nytimes.com/2002/04/25/business/25SCEN.html
For more on Consumers & Advertising http://www.ncpa.org/iss/eco/

FMF Policy Bulletins 30 April 2002