On the Economics of National Culture-BECKER

Posner emphasizes two important reasons, habit and coordination costs, for why cultures, including those of nations and companies, often change very slowly. I agree with his arguments on why habitual behavior and coordination-network effects are important, and do not have much to add directly to his discussion. Instead, I will try to explain the seeming contradiction that many aspects of national cultures change drastically and often surprisingly quickly. In a nutshell what I claim is that major economic and technological changes frequently trump culture in the sense that they induce enormous changes not only in behavior but also in beliefs. A clear illustration of this is the huge effects of technological change and economic development on behavior and beliefs regarding many aspects of the family. Attitudes and behavior regarding family size, marriage and divorce, care of elderly parents, premarital sex, men and women living together and having children without being married, and gays and lesbians have all undergone profound changes during the past 50 years. Invariably, when countries with very different cultures experienced significant economic growth, women's education increased greatly, and the number of children in a typical family plummeted from three or more to often much less than two. Divorce rates often exploded, men and women married later, and living together without marriage became more common. Ireland is an excellent example since not long ago Irish family patterns were the object of study by demographers only because they were so different. These patterns involved late ages at marriage, high birth rates, no divorce, and married women who spent their time mainly caring for children and their husbands. Enshrined in the Irish Constitution of the 1930's is the hope that married women would not work but instead they would be home taking care of their families. All aspects of Irish family behavior changed radically during the past two decades: the typical family now has only about two children, divorce was legalized and is growing rapidly despite the Catholic Church's opposition, and the labor force participation of married women is becoming like that in other parts of Western Europe. The rapid economic growth Ireland experienced during the past couple of decades had a revolutionary impact on the incentives of parents to have many children, on attitudes about whether married women should work, and on whether married couples were obligated to remain together throughout their lives. What is fascinating about the Irish example is that these and other changes in family patterns of behavior occurred while Ireland remained a highly devout nation, with the highest rates of church attendance and other measures of religious belief in the Western world. Similar changes have also occurred in very different cultures. Japan, South Korea, Taiwan, Hong Kong, and other Asian countries had rapid declines in birth rates from very high to very low levels as they experienced extraordinary economic growth during the second half of the twentieth century. Married children are much less likely to live with parents than before their economic development, divorce rates are rising, and married women have become active in the labor force. Birth rates have declined and other aspects of family behavior have changed also in the primarily Muslim country of Malaysia, although these changes are generally smaller than in neighboring countries that experienced economic development. Even the "unique" culture of the French changed enormously as it experienced rapid development after World War II. French birth rates also fell below replacement levels, although they are higher than in other parts of Western Europe (partly due to generous child subsidies in France), married women work in large numbers, and divorce rates have risen a lot. Nor are the radical changes in France restricted to the family. A leading French businessman spoke in English before an international audience recently because he said English is the language of commerce. President Chirac walked out before he began to protest his speaking in English. The command of English has been growing rapidly among French youth, and many French companies conduct their board meetings and other internal discussions mainly, sometimes entirely, in English. French McDonald's restaurants have been attacked, but they are highly profitable because many French young people go there. English words are growing rapidly in spoken and even written French, despite continual protests. Yet, I am not suggesting full economic determinism, a la Marx. While economic progress and technological change do have enormous effects on "culture", some important national institutions, attitudes, and behavior change much more slowly. Among other examples, Posner mentions language, attitudes toward globalization, whether one drives on the left or right sides of a street, and units of measurement. Even various dimensions of family life change much slower in some cultures than in others. For example, while divorce rates have risen at rapid rates in Japan and South Korea, they are still much lower than those in the West, and the labor force participation of married women is also much lower. Change is easier in those parts of culture that are due mainly to habit. For habits respond as economic circumstances, technologies, and incentives change. At first, habitual behavior is usually slow to change since past behavior exercises enormous influences over current behavior that is "habitual". But the initially slow changes induce further and more rapid changes in later behavior, so that the cumulative change may eventually be quite big. Smoking is habitual, even addictive, but that did not prevent large declines in smoking rates in all developed countries since the early 1970"s after the evidence on its connection with cancer and heart disease became evident. In the past it was expected that women would stay home after marriage and have large families. These expectations changed greatly and rather rapidly as women"s education and their job opportunities improved, and as the economic advantages of investing more in the education of children became apparent. Change is harder in behavior that requires detailed coordination among different citizens. This is why measurement systems, basic street driving rules, the official language, and some other aspects of a country's institutions change very slowly, although languages get infiltrated by foreign and new words, and greater emphasis is placed on languages that are more important for communication with other countries. Despite French protests, English has become not only the international language of commerce, but also of advanced education instruction, and of communication through the Internet. To relate this to last week’s topic, how much of the opposition in France to the proposed youth labor law can be attributed to a special French culture? The propensity to riot is higher in France than say Germany, but strong and effective opposition to making discharge of employees easier is found also in German, Italy, and Portugal. Nor is the opposition restricted to Western Europe. So far the free market oriented Indian Prime Minister, Dr. Manmohan Singh, has not been able to make much of a dent in India's similar employment system, and the same difficulties in discharging employees are found in most of Latin America. No, the conflict over the proposed youth labor law is not particularly "French", but basically comes from the opposition of labor market insiders with good jobs who do not want to give up their privileges. This is the same source of opposition to labor market reforms in France, Germany, Italy, India, Argentina, and other countries with widely different cultures. It is more interesting to ask why Anglo-Saxon countries like Great Britain, Australia, and New Zealand have moved toward flexible labor markets in response to the effects of globalization, whereas these other nations have not? I do not have the answer, but before we attribute this to a unique Anglo-Saxon culture, let us recognize that China has also introduced flexible hiring and firing practices as it moved rapidly to a market economy. China obviously has a radically different history and "culture" than Anglo-Saxon nations.

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[Rahul]

excellent blog Dr Becker and Dr Posner. I am currently working on something similar, exploring link between economy and culture. The explanation on how certain cultures come about can ultimately be explained away simply through self interest & opportunistic tendencies.

i believe the arguments should hold both for organizational as well as the national culture