Lawrence Harrison makes the case for the economic importance of culture in the latest issue of Cato Unbound:
How then would Easterly explain why, in multicultural countries where the economic opportunities and incentives are available to all, some ethnic or religious minorities do much better than majority populations, as in the case of the Chinese minorities in Indonesia, the Philippines, and Thailand-and any other place to which the Chinese have migrated, including the United States? Why has the Washington Consensus worked well in India and poorly in Latin America (with the exception of Chile), where socialism, and even authoritarian socialism in the cases of Cuba and Venezuela, appear to be alive and well?
My main complaint about Harrison is that he focuses too much on personal culture (work ethic, emphasis on education, family values) rather than political culture (support for the free market, openness to the world economy, etc.) When you look at the success of Jews or Japanese in the U.S., it’s hard not to give Jewish and Japanese culture a fair share of the credit. But by international standards, these cultural premia are small: Jews make about 70% more than the average American, and Japanese make about 30% more. This is nothing compared to the 7000% (!) premium Americans in America make compared to Somalians in Somalia.
How much of these is personal culture, and how much is political? Simple test: Move a random Somalian to the U.S. He won’t earn the American average, but he can expect his income to rise twenty times. On the other hand, imagine instilling an American ethos in a random Somalian in Somalia. He’d be relatively successful, but it would be surprising if this did more than triple his income.
Nothing to sneeze at? True. But the bottom line is that bearers of dysfunctional cultures who live under functional economic policies are a lot better off than bearers of functional cultures who live under dysfunctional economic policies.
READER COMMENTS
Tim Lundeen
Dec 4 2006 at 3:04pm
Ummm… what about genetic contributions here? There is good reason to think that a lot of the traits Harrison cites as cultural have a significant genetic basis.
RogerM
Dec 4 2006 at 3:34pm
My main complaint about Harrison is that he focuses too much on personal culture
Personal culture determines political culture. For example, you can’t get to the political institutions that protect private property if individuals don’t value private property rights and insted value equitable distributions of property/income as tradition cultures do.
I can’t speak for Harrison, but Douglass North shifted his view of the causes of institutions over the years. Originally, he placed a great deal of emphasis on the idea that institutions evolved in response to pressures to lower transaction costs. But in his later books, he places more emphasis on religion/philosophy and personal culture as determinants of political/economic institutions.
Justin
Dec 4 2006 at 3:45pm
My main complaint about Harrison is that he focuses too much on personal culture (work ethic, emphasis on education, family values) rather than political culture (support for the free market, openness to the world economy, etc.)
Hmmm, as someone who is socially conservative first and economically conservative second, I feel the opposite – libertarians always give short shift to culture, work ethic, and esteem for education. The historian Will Durant had a great quote: “In my youth I stressed freedom, and in my old age I stress order. I have made the great discovery that liberty is a product of order.”
I would add: freedom arises from order and a respect for the intrinsic dignity in other human beings.
The Soviet Union is sliding back to totalitarianism because they did not have the infrastructure of stable families, work ethic, and esteem for education. Those are fundamental. I feel perenially frustrated because libertarians do not emphasize the different performance of different cultural units, even though they all exist under the same ecnomic incentives. It takes 200 years of stability and order to create that society that is 20,000 times more wealthy. I suspect that libertarians do this for two reasons: first they are socially liberal and do not like to concede the importance of socially conservative institutions like stable marriages, and secondly because when all you have is a hammer, everything looks like a nail.
Bruce G Charlton
Dec 5 2006 at 1:16am
Excellent point by BC.
But, a further point. In terms of personal satisfaction, status should be taken into consideration. Probably, humans (especially men) are highly driven to seek status: relative prestige position.
In terms of staus, an American in Somalia will probably be high status – which is nice, while the Somalian in the US will be low status – which is not so nice.
Dain
Dec 5 2006 at 4:59am
Brian,
But is not the political culture the aggregate of many personal cutlures? A Somali in America earns twenty times more than he would in Somalia because the population at large values complex, long term market transactions. He benefits from this culture of investment and productivity.
Peer pressure I suppose would play a positive role, as many a Somali that would prefer the values of a bourgeious culture over machismo and superstition can thrive here. (Even given America’s relative embrace of machismo and superstition compared to, say, Europe. In their case labor markets – as you point out in the podcast – have a larger negative role.)
TGGP
Dec 5 2006 at 11:48am
How does this gel with your support for open borders? It’s not like we’re screening people to make sure they won’t vote for the same crappy policies they fled, and polls suggest that they do still support those here.
Ann
Dec 5 2006 at 3:31pm
Regarding why Chinese did well in Indonesia, the Philippines and Thailand, there’s a selection bias there. The Chinese that went to those places weren’t necessarily identical to the Chinese that chose to stay at home.
The Chinese are an interesting example, since they’re extremely good at working a system but have a cultural aversion to trying to change the system itself. They claim that they value stability, which means never changing the system no matter how bad it is, until eventually the system utterly collapses or explodes, thus reinforcing their aversion to change.
But I agree that culture matters, and thus that treating all cultures as equal is not just silly but harmful. The way to help poor countries is to find ways to change the dysfunctional aspects of their cultures.
Mr. Econotarian
Dec 5 2006 at 4:27pm
How does this gel with your support for open borders? It’s not like we’re screening people to make sure they won’t vote for the same crappy policies they fled, and polls suggest that they do still support those here.
The fact they were smart enough to come to the US implies an entrepreneurial spirit?
Same thing that brought my great-grandmother, only she just didn’t have to deal with economically ignorant immigration quotas because she arrived before 1920.
We should be embracing more immigrants today and saying “Amen brother, you came here for economic freedom, let’s all get to work an enjoy the benefits of the free market!” rather than “The free market doesn’t work, go home!”
Dain
Dec 5 2006 at 11:34pm
Thank you Mr. Econ.
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