Middle class values and the rise of capitalism

Values and culture are under-appreciated in the study of economic growth. New work by UCLA's Matthias Doepke and Zurich's Fabrizio Zilibotti may help to redress the balance, by providing a mechanism for explaining the emergence and transmission of heterogeneous preferences. Their paper, Occupational Choice and the Spirit of Capitalism (PDF), takes as its example the emergence of a hard-working, thrifty entrepreneurial middle class in Britain. Here is the abstract:

The British Industrial Revolution triggered a reversal in the social order of society whereby the landed elite was replaced by industrial capitalists rising from the middle classes as the economically dominant group. Many observers have linked this transformation to the contrast in values between a hard-working and frugal middle class and an upper class imbued with disdain for work.

We propose an economic theory of preference formation where both the divergence of attitudes across social classes and the ensuing reversal of economic fortunes are equilibrium outcomes. In our theory, parents shape their children’s preferences in response to economic incentives. This results in the stratification of society along occupational lines.

Middle class families in occupations that require effort, skill, and experience develop patience and work ethics, whereas upper-class families relying on rental income cultivate a refined taste for leisure. These class-specific attitudes, which are rooted in the nature of pre-industrial professions, become key determinants of success once industrialization transforms the economic landscape.

It's an interesting approach, demonstrating how economic conditions and culture are mutually interlinked. As they point out in the conclusions, the theory developed in this paper could be applied to other open questions in macroeconomics and economic growth.

Comments

[Travis Fast]

This is odd that you should celebrate this as a new approach. It is curious that every time mainstream economics makes a little headway in catching up with the rest of the social sciences it is celebrated as step forward in human understanding. Really, mainstream economics and economists should start benchmarking their innovative progress against actually existing knowledge in the social sciences.

[Marcin Tustin]

More interesting is whether this maps onto reality. How large were the middle class who depended on skill and hard work? A large part of the middle class in England at the time of the industrial revolution were gentlemen farmers - not wealthy enough to cultivate a refined taste in leisure, but instead being managers of their farms, with quite a lot of leisure time.

[Lafayette]

NE: "Values and culture are under-appreciated in the study of economic growth. "

Oh, I dunno.

Ever hear of Gert Hofstede? He and Hans Trompenaars (Book: Riding the Waves of Culture) - both Dutchmen - are the recognized "gurus" on corporate culture. True, a business context is not necessarily extrapolative of general cultural values ... but I feel they approximate them.

Hofstede, ex-Professor of sociology at the University of Maastricht, conducted his study of cultural values in a business context globally - and it is updated regularly.

Anyway, go here to see some interesting comparative data for yourself at Hofstede's web-site titled "Cultural Dimensions": http://www.geert-hofstede.com/

Surprisingly, in Hofstede's book, one sees (from the analyses) that it appears that the English-speaking work environment (meaning the UK, US, Canada, Australia, Ireland, New Zealand, etc.) display some of the the higher indices for risk taking. With one other non-English speaking country included ... Holland (of all countries!)

[Lafayette]

MT: "How large were the middle class who depended on skill and hard work?"

I suspect that with the advent of the Industrial Age, a great many. Of course, that depends upon what epoch we might be discussing.

I think also that the UK was similar to the US in the fact that the Industrial Age was a fast, upward escalator out of poverty. The immigrants to the US and into northern Europe attest to this fact, I suggest. (Let's remember that one of the first associations of Italian restaurant waiters, in London, was founded in the late 19th century.)

These immigrants, now assimilated as parents and grandparents of first, second and even third generations, are well integrated (for the most part) into the local cultures. I like to think of this as an example of the great success of democratic tolerance in both Europe and the US.

Less successful, perhaps, are the current day immigrants (mostly East Europeans) who seek to attain middle-class status. I am not sure the going is any better for them, really, than their forebears who arrived in the 19th and 20th centuries, even though the newly arrived tend to make headlines both in the UK, France and the US.

Inevitably they assimilate and are accepted - but not always by the "establishment" (meaning the people who run the country all the while promoting tolerance for the "immigrants so vital to our economic growth".

I can't speak of the English middle-class. But, in America, I venture that the overwhelming portion of very successful middle-class are those who were immigrants. Why?

A psychology professor once advanced this reasoning: To uproot yourself from your country is an act of courage that is not undertaken by all. Once arrived in the new country, it takes even further courage to battle conventions in order to assimilate and impose oneself. When that happens, finally, one deserves a great deal of respect from the locals ... which is rarely ever forthcoming.

[Tanya]

I'm with your earlier commenter: interesting research and great to see economists working in a similar area as other social scientists. The authors cite Weber (a very good thing) but don't cite the French sociologist, Pierre Bourdieu: what a shame, as Bourdieu built significantly on Weber's work in this area.

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