Yes, culture should matter to economists

Although sociologists and anthropologists "have accumulated a wealth of field evidence on the impact of culture on economic behavior", in the last fifty years "most economists have been reluctant to rely on culture as a possible explanatory variable". So write Luigi Guiso, Paola Sapienza and Luigi Zingales in a review article prepared for The Journal of Economic Perspectives, Does Culture Affect Economic Outcomes? (PDF). The authors are "trying to convince the reader that cultural hypotheses can be rigorously tested and are economically important".

For example, we show that cultural differences in the extent thriftiness is taught to children can explain as much of the cross-country variation in savings as the best economic models on this topic. Time has come, thus, to fully integrate a cultural dimension in our economic analysis.

Doing so will open a new exciting set of questions. First of all, how does culture emerge and how does it persist? Marx was definitely right that production technology plays a role, but culture is not only the byproduct of a class attempt to seize political power. Cultural norms arise also for efficiency and hygienic considerations. One big outstanding question, then, is how do these two forces – power and efficiency-- balance out? Another one is what determines the persistence of the cultural traits. Finally, what is the interaction between culture and formal institutions? Does culture determine formal institutions or is it the other way around?

These answers await future research. In the meantime, we hope to have persuaded the readers that importing cultural elements in the economic discourse will not impoverish and hallow out our discipline, but it will make it richer, better able to capture the nuances of the real world, and ultimately more useful.

Recommended holiday reading. I particularly liked the charts on trust and religion at the back (figure 3 is simple, but very telling). You may also find the latest (May 2005) version of last year's NBER working paper 11005 by the same authors on Cultural Biases in Economic Exchange (PDF) of interest, and my previous post: Chen on the political economy of beliefs.

Comments

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I agree. Culture is also an implicit factor in each country's economic figures. Economists have been also pointing to culture oriented outsourcing.

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Culture is very much coupled in economies. Even to the fact that culture is identified with economy.