Abstract
How does culture influence the economy? In the Protestant Ethic, Max Weber began to answer this question by investigating the relationship between worldviews derived from religious teachings and the emergence of capitalism in Europe. Despite decades of globalization, almost one hundred years after the publication of the Protestant Ethic, differences among cultures remain no less real than in Weber’s time. In fact, increasing trade and communication appear to have made some cultural differences more salient than ever, making the question about how culture influences the economy no less relevant than it was in Weber’s time.
In Culture and Economics, Eelke De Jong and his collaborators, Robbert Maseland and Sjoerd Beugelsdijk, who coauthored chapters 2 and 8, respectively, explore this question from the perspective of economists who take culture seriously. The book, intended as a broad overview of the field, presents research in economics that seeks to identify the effect of cultural values on a variety of macro-economic outcomes, such as economic institutions, growth rates, and international trade. De Jong’s conception of cultural values draws heavily on the work of Geert Hofstede, who used data collected on IBM employees in 40 countries to identify four dimensions on which cultures differ: power distance, uncertainty avoidance, individualism vs. collectivism, and masculinity vs. femininity. These four dimensions, along with other dimensions-based approaches to cultural values, are discussed in the book’s Appendix.
The first few chapters of the book provide a general introduction to the topic. chapter 1 introduces the book and defines culture as “collectively held values.” In chapter 2, Maseland summarizes the history of thought about culture and the economy, beginning with Weber’s work. Chapter 3 provides an overview of the post-World-War-II developments that led to the increasing interest in cultural values among mainstream economists. Chapter 4 provides a brief outline of methods used in the study of culture.
In the following chapters, De Jong discusses research streams in which he is an active participant. Chapter 5 provides an overview of studies that examine the relationship between cultural values and institutions. In it he concludes that while differences in values appear to be associated with differences in institutions in developed economies, in developing economies the relationships are difficult to interpret. In the next chapter, De Jong evaluates existing evidence for the relationship between cultural values and growth. He concludes that the relationship is weak or non-existent. Furthermore, some compelling evidence suggests that the causality might not only run from values to growth but also in the reverse direction. Chapter 7 focuses on religion as a source of values. De Jong concludes that despite a few famous examples, such as Confucian values in the case of Asian Tigers, a systematic relationship does not appear to exist. In this chapter, De Jong goes the furthest toward discussing the limitations of the approach to culture that relies on cross-country or cross-regional measures of values.
The last three chapters examine other areas in which economists have examined the influence of culture on the economy. In chapter 8, Beugelsdijk reviews literature on social capital and summarizes some critiques of Putnam’s work. In chapter 9, De Jong examines work on culture and cross-border transactions, including international trade, foreign direct investment, and portfolio investment. De Jong concludes that the evidence appears to suggest that greater cultural differences have a negative effect on cross-border transactions. In the last chapter, De Jong summarizes the lessons and identifies directions for future research.
An empirical approach to the study of culture that aims to elicit values through a series of survey questions, such as the one followed by Hofstede and De Jong, has a number of advantages, but also some drawbacks. Despite the fact that Hofstede’s cultural dimensions are widely used in international management research and appear to lead to useful results across a variety of settings, the convenience of this approach comes at a cost that De Jong readily acknowledges. Most importantly, this approach fails to explore how social institutions create and reproduce cultural differences. Many cultural values are learned through family interactions, schooling, and exposure to the media. By ignoring the ways in which institutions shape culture, we risk missing how cultures change, why different groups in a society might have different cultures, and which groups have most influence on cultural processes. While De Jong acknowledges these shortcomings of his approach, he leaves largely unanswered the question of where research on culture in economics should go from here.
Massachusetts Institute of Technology
Sloan School of Management
Cambridge, MA 02142-1347