Cultural economics

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For an alternate standard usage of 'cultural economics', see Economics of the arts and literature.
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Cultural economics is the branch of economics that studies the relation of culture to economic outcomes. Here, 'culture' is defined by shared beliefs and preferences of respective groups. Programmatic issues include whether and how much culture matters as to economic outcomes and what its relation is to institutions.[1] As a growing field in behavioral economics, the role of culture in economic behavior is increasingly being demonstrated to cause significant differentials in decision-making and the management and valuation of assets.

Overview

Applications include the study of

value systems approach to the cultural emergence aspect of macroeconomics.[22]

Development

Cultural economics develops from how wants and tastes are formed in society. This is partly due to nurture aspects, or what type of environment one is raised in, as it is the internalization of one's upbringing that shapes their future wants and tastes.[23] Acquired tastes can be thought of as an example of this, as they demonstrate how preferences can be shaped socially.[24]

A key thought area that separates the development of cultural economics from traditional economics is a difference in how individuals arrive at their decisions. While a traditional economist will view decision making as having both implicit and explicit consequences, a cultural economist would argue that an individual will not only arrive at their decision based on these implicit and explicit decisions but based on trajectories. These trajectories consist of regularities, which have been built up throughout the years and guide individuals in their decision-making process.[25]

Combining value systems and systems thinking

Economists have also started to look at cultural economics with a systems thinking approach. In this approach, the economy and culture are each viewed as a single system where "interaction and feedback effects were acknowledged, and where in particular the dynamic were made explicit".[26] In this sense, the interdependencies of culture and the economy can be combined and better understood by following this approach.

Said E. Dawlabani's book MEMEnomics: The Next-Generation Economic System

value (ethics)) and systems thinking to provide one of the first frameworks that explores the effect of economic policies on culture. The book explores the intersections of multiple disciplines such as cultural development, organizational behavior, and memetics all in an attempt to explore the roots of cultural economics.[27]

Growth

The advancing pace of new technology is transforming how the public consumes and shares culture. The cultural economic field has seen great growth with the advent of online social networking which has created productivity improvements in how culture is consumed. New technologies have also led to cultural convergence where all kinds of culture can be accessed on a single device. Throughout their upbringing, younger persons of the current generation are consuming culture faster than their parents ever did, and through new mediums. The smartphone is a blossoming example of this where books, music, talk, artwork and more can all be accessed on a single device in a matter of seconds.[28] This medium and the culture surrounding it is beginning to have an effect on the economy, whether it be increasing communication while lowering costs, lowering the barriers of entry to the technology economy, or making use of excess capacity.[29]

An example of culture being consumed via smartphone.

This field has also seen growth through the advent of new economic studies that have put on a cultural lens.

For example, Kafka and Kostis (2021) at a recent study published in the Journal of Comparative Economics, use an unbalanced panel dataset comprised from 34 OECD countries from 1981 to 2019, conclude that the cultural background during the overall period under consideration is characterized as post-materialistic and harms economic growth. Moreover, they highlight both theoretically and empirically the cultural backlash hypothesis since the cultural background of the countries under analysis presents a shift from traditional/materialistic (from 1981 up to 1998) to post-materialist values (from 1999 up to 2019). Doing so, they conclude on a positive effect of cultural background on economic growth when traditional / materialistic values prevail, and a negative effect when post-materialistic values prevail. These results highlight culture as a crucial factor for economic growth and indicate that economic policy makers should take it seriously into account before designing economic policy and in order to explain the effectiveness of economic policies implemented.

Another study on Europeans living with their families into adulthood was conducted by Paola Giuliano, a professor at UCLA. The study found that those of Southern European descent tend to live at home with their families longer than those of Northern European descent. Giuliano added cultural critique to her analysis of the research, revealing that it is Southern European culture to stay at home longer and then related this to how those who live at home longer have fewer children and start families later, thus contributing to Europe's falling birthrates.[30] Giuliano's work is an example of how the growth of cultural economics is beginning to spread across the field.[31]

Sustainable development

Main article: Sustainable development

An area that cultural economics has a strong presence in is sustainable development. Sustainable development has been defined as "...development that meets the needs of the present without compromising the ability of future generations to meet their own needs...".[32] Culture plays an important role in this as it can determine how people view preparing for these future generations. Delayed gratification is a cultural economic issue that developed countries are currently dealing with. Economists argue that to ensure that the future is better than today, certain measures must be taken such as collecting taxes or "going green" to protect the environment. Policies such as these are hard for today's politicians to promote who want to win the vote of today's voters who are concerned with the present and not the future. People want to see the benefits now, not in the future.[33]

Economist David Throsby has proposed the idea of culturally sustainable development which compasses both the cultural industries (such as the arts) and culture (in the societal sense). He has created a set of criteria in regards to for which policy prescriptions can be compared to in order to ensure growth for future generations. The criteria are as follows:[34]

  1. Advancement of material and non-material well-being: implies balance amongst economic, social, and cultural forces
  2. Intergenerational equity and the maintenance of cultural capital: current generation must recognize their responsibility to future generations
  3. Equity within the present generation: distribution of cultural resources must be fair
  4. Recognition of interdependence: policy must understand the connections between economic, cultural and other variables within an overall system.

With these guidelines, Throsby hopes to spur the recognition between culture and economics, which is something he believes has been lacking from popular economic discussions.

Cultural finance

Cultural finance a growing field in behavioral economics that studies the impact of cultural differences on individual financial decisions and on financial markets. Probably the first paper in this area was "The Role of Social Capital in Financial Development" by Luigi Guiso, Paola Sapienza, and Luigi Zingales.[35] The paper studied how well-known differences in social capital affected the use and availability of financial contracts across different parts of Italy. In areas of the country with high levels of social capital, households invest less in cash and more in stock, use more checks, have higher access to institutional credit, and make less use of informal credit. Few years later, the same authors published another paper "Trusting the Stock Market" where they show that a general lack of trust can limit stock market participation. Since trust has a strong cultural component, these two papers represent important contribution in cultural economics.

In 2007,

Shalom Schwartz, it has been proved that corporate dividend payments are determined largely by the dimensions of Mastery and Conservatism.[37] Specifically, higher degrees of conservatism are associated with greater volumes and values of dividend payments, and higher degrees of mastery are associated with the total opposite. The effect of culture on dividend payouts has been further shown to be closely related to cultural differences in risk and time preferences.[38]

A different study assessed the role of culture on earnings management using

Robert House, identifying strong and specific influences in risk aversion behavior resulting from the overlapping cultural dimensions between them that remained constant over a 20-year period.[40]

In regards to

foreign relations, confirming an earlier study concluding that nations closer to each other tend to be more integrated.[46] Since increased cultural distance reduces the amount of foreign direct investment, this results in an accelerating curvilinear correlation between financial behavior and cultural distance.[47][48][49]

Culture also influences which factors are useful when predicting stock valuations. In

interest rates, inflation, and industrial production, but found that exchange rate, currency exchange volume, and trade were all unique to Romania.[53]

Geographical origins of cultural traits

Geographical characteristics were linked recently to the emergence of cultural traits and differences in the intensity of these cultural traits across regions, countries and ethnic group. Geographical characteristics that were favorable for the usage of the plow in agriculture contributed to a gender gap in productivity, and to the emergence of gender roles in society.[54][55][56] Agricultural characteristics that led to a higher return to agricultural investment generated a process of selection, adaptation, and learning, that increase the level of long-term orientation in society.[13]

See also

Notes

  1. doi:10.1162/JEEA.2008.6.2-3.255   • Raquel Fernández, 2016. "Culture and Economics." The New Palgrave Dictionary of Economics
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  2. Laurence R. Iannaccone, 1998. "Introduction to the Economics of Religion," Journal of Economic Literature, 36(3), pp. 1465–95.
    • Luigi Guiso, Paola Sapienza, Luigi Zingales, 2003, "People's Opium? Religion and Economic Attitudes", Journal of Monetary Economics, January 2003.https://doi.org/10.1016/S0304-3932(02)00202-7    • Laurence R. Iannaccone and Eli Berman, 2008. "religion, economics of," The New Palgrave Dictionary of Economics, 2nd Edition. Abstract.
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  4. Richard A. Posner
    , 1997. "Social Norms and the Law: An Economic Approach," American Economic Review, 87(2), p. 365–69.
    Gary S. Becker and Kevin M. Murphy, 2001, Social Economics: Market Behavior in a Social Environment, ch. 10, "The Formation of Norms and Values." Description Archived 2009-07-03 at the Wayback Machine and table of contents. Harvard University Press.
       • Jess Benhabib, Alberto Bisin, and Matthew Jackson, ed., 2011. Handbook of Social Economics, Elsevier. Vol. 1A: Part 1. Social Preferences, ch. 1-11; Part 2. Social Actions, ch. 12-17. Description & Contents links Archived 2012-01-05 at the Wayback Machine and chapter-preview links.
       • Arthur J. Robson, 2008. "group selection," The New Palgrave Dictionary of Economics, 2nd Edition. Abstract.
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       • _____, 2005. "Identity and the Economics of Organizations," Journal of Economic Perspectives, 19(1), pp. 9–32.
    doi:10.1257/0895330053147930
       • _____, 2010. Identity Economics: How Our Identities Shape Our Work, Wages, and Well-Being, Princeton University Press. Description & TOC, "Introduction," pp. 3–8, and preview.
  6. JSTOR 40005121
  7. doi:10.1162/qjec.2006.121.2.699
  8. doi:10.1111/j.1465-7295.2006.00042.x
       • Timur Kuran, 1995. Private Truths, Public Lies: The Social Consequences of Preference Falsification. Harvard University Press. Description and scroll to chapter-preview links.
  9. doi:10.1162/0033553053327434
  10. Alan B. Krueger, 2008. What Makes a Terrorist: Economics and the Roots of Terrorism, Princeton. Description Archived 2011-10-09 at the Wayback Machine, Introduction, and ch. 1 preview
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       • Paul J. Zak and Stephen Knack, 2001. "Trust and Growth," Economic Journal, 111(470), p     p. 295–321.
       • Patrick Francois and Jan Zabojnik, 2005. "Trust, Social Capital, and Economic Development," Journal of the European Economic Association, 3(1), p p. 51–94.
       • Sjoerd Beugelsdijk, 2006. "A Note on the Theory and Measurement of Trust in Explaining Differences in Economic Growth," Cambridge Journal of Economics, 30(3), pp. 371–87.
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  15. ^ • Melvin W. Reder, 1999. Economics: The Culture of a Controversial Science, Description[permanent dead link] and chapter links.
       • Joseph J. Spengler,1970. "Notes on the International Transmission of Economic Ideas," History of Political Economy, 2(1), p p. 133–51.
       • Yuval Yonay and Daniel Breslau, 2006. "Marketing Models: The Culture of Mathematical Economics," Sociological Forum, 21(3), p p. 345–86. HTMl[permanent dead link]
  16. ^ As at Journal of Economic Literature category JEL: Z1 Cultural Economics,....
  17. ^ • Partha Dasgupta, 2008. "social capital," The New Palgrave Dictionary of Economics, 2nd Edition. Abstract.
       • Joel Sobel, 2002. "Can We Trust Social Capital?" Journal of Economic Literature, 40(1), pp. 139–54 (close Bookmarks tab).
  18. ^ James Moody and Martina Morris. "social networks, economic relevance of," The New Palgrave Dictionary of Economics, 2nd Edition Abstract.
  19. ^ • Paul Seabright, 2008. "hunters, gatherers, cities and evolution," The New Palgrave Dictionary of Economics, 2nd Edition. Abstract.  • Alberto Bisin and Thierry Verdier, 2008. "cultural transmission," The New Palgrave Dictionary of Economics, 2nd Edition. Abstract.
       • Joel M. Guttman, 2003. "Repeated Interaction and the Evolution of Preferences for Reciprocity," Economic Journal, 113(489), p p. 631–56.
       • Alberto Bisin et al., 2004. "Cooperation as a Transmitted Cultural Trait," Rationality and Society, 16(4), 477–507. Abstract.
       • Oded Galor and Omer Moav, 2002. "Natural Selection and the Origin of Economic Growth," The Quarterly Journal of Economics, 117(4), 1133–1191.
      
  20. ^ • Sushil Bikhchandani, David Hirshleifer, and Ivo Welch, 1992. "A Theory of Fads, Fashion, Custom, and Cultural Change as Informational Cascades." Journal of Political Economy, 100(5), pp. 992–1026. Archived 2011-07-13 at the Wayback Machine
       • Sushil Bikhchandani, David Hirshleifer, and Ivo Welch, 1998. "Learning from the Behavior of Others: Conformity, Fads, and Informational Cascades," Journal of Economic Perspectives, 12(3), pp. 151–70. Archived 2011-08-15 at the Wayback Machine
       • Sushil Bikhchandani, David Hirshleifer, and Ivo Welch, 2008. "information cascades," The New Palgrave Dictionary of Economics, 2nd Edition. Abstract. Archived 2013-01-21 at archive.today
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       • Oded Galor and Omer Moav, 2002. "Natural Selection and the Origin of Economic Growth," The Quarterly Journal of Economics, 117(4), pp. 1133–1191.
       • Enrico Spolaore and Romain Wacziarg, 2013. "How deep are the roots of economic development?," Journal of Economic Literature, 51(2), pp. 325–369.
       • Oded Galor and Ömer Özak, 2016. "The Agricultural Origins of Time Preference," American Economic Review, 106(10), pp. 3064–3103.
      
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Journals
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