Johan Fourie's blog

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Culture

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In a recent NBER Working Paper, Nathan Nunn explains why economists need to (re)consider culture as causal explanation for a country’s economic performance. Historical shocks, such as the adoption of plough agriculture, the slave trade, or missionary activities, he argues, affects culture, and culture affects economic activity. In the spirit of Acemoglu, Johnson and Robinson, Nunn suggests that culture (instead of institutions, as AJR argues) is one mechanism through which historical events influence economic development today.

But what is culture? Nunn builds on a large literature to define culture as ‘fast-and-frugal’ decision-making heuristics or ‘short-cuts’. When faced with a decision, individuals rely on their past experiences to reduce the high ‘cognitive cost’ of making the decisions. But their past experiences are not only shaped by their own past decisions, but also by the decisions of those individuals around them, the members of their society, i.e. culture is a collective for a society’s gut-feel of what is the right thing to do. With this in mind, Nunn argues that this collective gut-feel is influenced by historical events. The slave trade, for example, “altered the cultural norms of the descendants of those exposed to the trade, making them inherently less trusting”. The possibility of being captured by your neighbour reduced your willingness to trust them, an important precondition for a functioning market society. Or, to use another example, Avner Greif (1994) shows how differences between the Genoa and Maghribi traders have their origins in the “different strategies undertaken by medieval merchants to prevent overseas agents from behaving opportunistically during long-distance trade”. Whereas the Maghribi merchants relied on collective enforcement to punish any agent who had cheated, the Genoese merchants followed an individual punishment strategy. The two systems resulted in two distinct cultural trajectories. Nunn argues that such cultural trajectories still matter today. In earlier research, for example, he shows that lower trust in African communities that were worse affected by the slave trade are still poorer today. He’s results show that both institutions and culture explain this, but that the cultural component (i.e. lack of trust) explains most of the variation.

These ideas have interesting relevance for the South African situation, with its plethora of cultures. Of course, culture has often been used to support racial prejudice, most regrettably as a justification for Apartheid and the homelands policy. Investigating culture, and especially its positive and negative impact on economic performance, remains a sensitive issue, but should not stand in the way of interesting research. One question would be to ask how exactly these policies of segregation shaped cultural traits – the collective gut-feel of individuals in the different cultural groups. For example, is there more mistrust of whites in areas where violent contact during Apartheid was more intense? Or more trust in areas that have a longer history of heterogenous groups living side-by-side?

Another question would be how these cultural traits have influenced post-Apartheid integration and economic performance. Is the trust in political leaders associated with the anti-Apartheid struggle not a collective gut-feel shaped by Apartheid policies? Or disrespect in schools not a consequence of a “liberation before education” struggle? Answering these questions will no doubt be tough, requiring interdisciplinary work with sociologists, historians, psychologists and economists. Moreover, understanding that culture matter is only the beginning; we need to know what incentives drive (positive) cultural change. How do we improve, for example, the “culture” of education in poor-performing schools? History might cause cultural shorthand, but understanding the past allows us to interpret why we make the decisions we do and, hopefully, prescribe policies that are cognizant of the ways peoples of diverse cultures react to incentives.

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Written by Johan Fourie

March 1, 2012 at 12:27

2 Responses

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    September 10, 2013 at 19:15

  2. Hi there,
    I thoroughly respect your thoughts on Culture Johan Fourie’s blog and of course will be back again. Thank you..

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    October 12, 2012 at 09:27


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