The Economics of National Cultures--Posner

In our last week's postings on the French riots precipitated by the new employment law, now in force, that allows employers to fire, without cause, during the first two years of employment employees under the age of 26, Gary Becker and I offered some possible explanations for the riots that did not depend on any notion of a distinctive French political or social culture. But it is difficult to resist attributing some causal efficacy to cultural factors. The new law permits, though within a very limited scope, employment at will, the dominant employment contract in the private sector in the United States--and public opinion polls indicate that the French are more hostile toward capitalism than virtually any other nation; a recent poll finds that only 36 percent of the French have a favorable opinion of capitalism, compared to 71 percent of Americans. The French are at once highly statist, which is related to the rejection of capitalism, and highly prone to riots and work stoppages, which may also be, as I will suggest. They are unusually xenophobic, as indicated by their efforts to prevent the incorporation of English words into the French language, their resistance to foreign acquisition of French companies, and their emphatically independent line (going back to De Gaulle) in foreign relations and military matters. The French are, in short, culturally distinct. Can an economic account of cultural difference be given? If so, the starting points would be habit, on which Becker has written, and the economics of organizations, networks, and language, on all of which I have done some work. Much behavior is habitual, and this can be given an economic meaning. Behavior is habitual when it is done without conscious thought, or more precisely with limited thought. (More technically, behavior is habitual when cost and benefit are time-dependent and cost is negatively related to time and benefit positively related to it. See Gary S. Becker, "Habits, Addictions, and Traditions," 45 Kyklos 327, 336 (1992), and notice that the obverse case—cost positively, benefit negatively, related to time—is that of boredom.) One is conscious that one is brushing one'’s teeth, but the amount of thinking that is involved is very slight; one does't think about which tooth to brush next, how long to brush, how much toothpaste to put on the brush, and so forth. So transforming behavior from deliberated to habitual, usually by repetition, economizes on cognitive effort, and is thus cost-effective. The cost of making it habitual is a sunk cost, moreover, which means that once behavior is habitual it is cheap to continue with it. This discourages change, since new costs would have to be incurred. Culture is similar. The way in which people speak (including pronunciation, grammar, syntax, and vocabulary), gesture, hold their bodies, grimace, use knife and fork, greet one another, behave toward members of the opposite sex, and otherwise conduct themselves in their basic social interactions is to a high degree habitual, most of that behavioral repetoire having been learned and mastered in early childhood--when learning costs (notably of language) are low. To change one's cultural identity as an adult requires incurring heavy time costs, often with limited results--a foreigner is unlikely ever to lose all traces of foreignness. This is one reason why there are many different languages, even though it would be more efficient (costs of change aside) if everybody in the world spoke the same language. Beliefs also have an important habitual element. If one is brought up to believe that being American or French is very special and that foreign attitudes and behaviors should be held at bay, the adherence to those beliefs is cheap. Once you believe something, you will be reluctant to incur the cost of changing the belief unless assailed by some doubt that you cannot easily resist; and people do not like being in a state of doubt. Most people cannot give a good account or defense of their beliefs; they believe something because they have always believed it, not because they have a good, conscious reason to believe it. Once a belief system is entrenched, it is likely to persist indefinitely until a very rude reality check causes the costs of continued adherence to the system to exceed the costs of change. That has not yet happened in France, a rich country--surprisingly so, given its high unemployment rate and overregulation. GDP per capita is the 21st highest in the world, and though significantly lower than that of the United States is comparable to that of Germany and the United Kingdom, and higher than Sweden's. In addition, France has the world third-highest life expectancy and its workers have a great deal of leisure. The country can afford high unemployment and a short work week for those who are employed because it has the most productive workforce in the world, though in part this is an artifact of high unemployment--the unproductive workers aren't employed. The high standard of living of the French, which actually understates the quality of French life because of their leisure and life expectancy, discourages the French from reexamining their political beliefs, since such reexamination would be costly, whereas continued adherence to their beliefs is costless in the sense of requiring no mental energy and not preventing the enjoyment of a good life by most people. A weak work ethic weakens resistance to the inconvenience caused by riots and work stoppages. There is an interesting literature on organizational culture--the beliefs, norms, customary practices, methods, etc. that are found in, and vary among, particular organizations--that bears on our subject. The literature emphasizes the difficulty of changing an organization's culture. A famous study of our failure in Vietnam, by Robert Komer (Bureaucracy Does Its Thing: Institutional Constraints on U.S.-GVN Performance in Vietnam (R–967–ARPA, Aug. 1972), and a similar recent study by John Nagl (Learning to Eat Soup with a Knife: Counterinsurgency Lessons from Malaya and Vietnam (paperback ed. 2005)), document the inability of our government to change the organizational culture of our armed forces, even though it was plain to many people in government that that culture was poorly suited to the conditions of the Vietnam war. Business failures frequently stem from the same cultural inertia, even though business receives from the market strong signals that its culture is maladapted. The explanation is in part the sunk-costs problem that I have emphasized, but also the "network" character of an organization's culture, which makes it necessary, in order to change the culture in a constructive way, to change a great many things at once, and some of the things may be very difficult to change. For example, when the Detroit auto companies began losing market share to Japanese manufacturers, they studied Japanese methods and decided to adopt one of them, the "quality circle" approach whereby workers were encouraged to take an active role in suggesting productivity enhancements. Transposed to the United States, the approach failed because workers realized that improvements in productivity might endanger their job. This wasn't a problem in Japan because workers in the Japanese automobile industry had de facto lifetime tenure, which our workers did not. In Vietnam the obstacles to our armed forces' changing their organizational culture was that the culture was optimized to a continuing threat, namely that of a conventional war in Europe. Secretary of Defense Rumsfeld has had a somewhat easier job of altering the armed forces' culture to make it more responsive to what is being called "postmodern warfare," illustrated by the struggle against global terrorism and the insurgency in Iraq, because the threat of a conventional war has receded. In addition, in seeking to transform the armed forces, Rumsfeld is aided by the fact that technological innovation, the key to his concept of transformation, is an element of the traditional U.S. military culture. So culture is habit writ large and is difficult to change because habits are difficult to change. And changing national cultures, like changing social norms and customs (themselves a part of culture), is particularly difficult, because of the lack of centralized direction. In principle, the culture of a nation's military can be changed by an order of the commander in chief, though in practice such an order is likely to be foiled by passive resistance within the organization. But a national culture has no hierarchy, unless the nation is totalitarian. To change a nation's language or any other deep-seated feature of its culture requires coordinated action without a coordinator. Imagine a country whose leaders thought it would be more efficient for drivers to drive on the right-hand side of the road rather than the left but decided to leave the change to the spontaneous decision of the drivers. The dramatic though not complete changes in the German and Japanese national cultures that occurred in the wake of World War II were facilitated by the fact that in each case the war had smashed much of the existing national culture as well as demonstrated its dysfunctional character. That has yet to happen in France.

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