The Causes of Economic Growth: Cultural and Social Determinants

It is noteworthy at the outset that the theories of institutional change referred to in chapter 7 almost all had some role for culture. This insight accords with casual empiricism: we all know, for example, that laws against littering or even certain illegal drugs are almost impossible to enforce if many members of society view them as illegitimate. Yet while economists and economic historians admit the importance of culture in this way, they tend to stop short of explicit cultural analysis. Greif (2006, 8, 19-20), for example, not only recognizes that we must understand why rules are enforced and obeyed, and cannot thus simply study the development of formal rules in isolation, but goes so far as to define ‘institution’ as a complementary complex of formal rules (what we and most others would call institutions) and cultural elements. The main reason why institutional change is slow and path dependent is that institutions depend on ‘poorly understood and often unintentional processes of socialization, internalization, learning and experimentation;’ these processes include beliefs and ethical attitudes (190). When agents are forced to engage in institutional change, cultural norms guide them as to which of many possible new equilibria they should move toward (129-33). Yet he worries that cultural elements are largely unobservable, and despairs of cultural explanations for this reason: since ad hoc appeals to unobservable cultural elements can explain everything they explain nothing (2006, xv). He thus focuses his analysis almost entirely on the observable formal rules: when these seem to work supporting cultural values and beliefs must be in place. When he makes specific reference to particular beliefs these tend to be beliefs derivative of the institution itself such as a belief that kings will respect the institution of private property.