Importance of culture for development

A fab econ history paper by Nathan Nunn of Harvard.

He explores the role of culture in eco development. He says cultural beliefs help develop  institutions which in turn lays the foundations  for eco growth and development:

This article discusses the importance of accounting for cultural values and beliefs when studying the process of historical economic development. A notion of culture as heuristics or rules of thumb that aid in decision making is described. Because cultural traits evolve based upon relative fitness, historical shocks can have persistent effects if they alter the costs and benefits of different traits. 

A number of empirical studies confirm that culture is an important mechanism that helps explain why historical shocks can have persistent impacts; these are reviewed here. As an example, I discuss the colonial origins hypothesis (Acemoglu, Johnson, and Robinson 2001), and show that our understanding of the transplantation of European legal and political institutions during the colonial period remains incomplete unless the values and beliefs brought by European settlers are taken into account. It is these cultural beliefs that formed the foundation of the initial institutions that in turn were key for long-term economic  development. 

The paper points to some interesting studies to show the role of culture:

Evidence that historical shocks can shape cultural evolution come from a variety of settings and disciplines. A number of studies examine historical migration episodes within the US and show that the identity of the early migrants was important for the subsequent development of a particular location. The most well known evidence for this comes from lab-based experiments from the field of psychology. Cohen et al. (1996) attempt to explain why today in the US South (but not the US North) there is a ‘‘culture of honour,’’ where particular importance is placed in defending one’s reputation and honour, even if this requires  aggression and violence.

Their explanation for why this culture exists in the South but not the North is rooted in the different histories of settlement in  the two areas. The North was primarily settled by groups with a farming background, while the South was settled primarily by the Celts who had been herders since prehistoric times and had never engaged in large-scale agriculture. They argue that historically in herding cultures, characterised by low population densities and weak states, protection of one’s property was left to the individual. Therefore, a culture of aggressive behavior arose and continues to persist even today. 

Someone even tested for this cultural difference:

To test the culture of honour hypothesis, Cohen et al. (1996) conducted a series of experiments involving white males from the US North and US South. In  the experiments, each individual was bumped by an accomplice and called an ‘‘asshole.’’ (The participants did not know this was part of the experiment.) Using a number of methods, including direct observation,  psychological tests, and saliva samples, Cohen et al. compare the effects of this incident on Southerners relative to Northerners. They find the Southerners became more upset, were more likely to feel that their masculinity was threatened, became more physiologically and cognitively primed for aggression (measured by a rise in testosterone and cortisol levels), and were more likely to engage in aggressive behavior subsequently.

Another study looks at US migration. There have been four phases of US migration:

The details of this process are described in detail in David Hackett Fischer’s (1989) book Albion’s Seed. Fisher documents four waves of early migration to North America.

The first migrants were the Puritans (16291641) who settled in Massachusetts. These migrants, who were primarily middle class from East Anglia, migrated for religious reasons and because of intolerable  conditions at home.

The second wave of migrants (16421675) were the Cavaliers and with them indentured servants, who migrated from the South and Southwest of England to  the Chesapeake Bay. The primary motivation for this group was what Fischer calls the younger son syndrome. Men who were not the oldest son, and therefore did not inherit the family estate, set sail to the New World to create estates of their own.

The third wave (16751725) were the Quakers, who migrated to escape  persecution in England. The Quakers, who tended to be lower middle class from England’s North Midlands, settled in the Delaware Valley.

The final wave  (17171775) were the Scotch-Irish who migrated primarily for material reasons. They were from the borderlands of Northern England, Scotland and Ireland and settled in the backcountry of the US South. Although they were a mixed group, the majority were lower class.

Each of these four migrants set different instis based on their own values/cultures:

The Puritans, in addition to their well-known belief in the importance of universal education, were obsessed with maintaining proper order. The institutions they established  laws requiring universal education, high tax rates, sizable government intervention, and swift and brutal justice  clearly reflected this. In addition, a number of institutional structures, like the town meeting and town covenants, were transplanted directly from East Anglia. 

In contrast to the Puritans, the Virginia Cavaliers believed that inequality was natural. For them the ideal society was less about equality, but about maintaining order and the existing hierarchy. These values resulted in limited education, lower taxes, less government spending, and an informal system of justice based on hierarchical violence.

The Quakers, although a religious group like the Puritans, had a very different notion of freedom. They believe in personal freedom, including freedom of choice and even freedom to make the wrong choice. This is very different from the Puritans who were obsessed with limiting individual freedom to maintain social order. The Quakers’ emphasis on personal freedoms strongly  influenced the institutions that were established in the Delaware Valley. ..As well, taxation was much more limited than in New England.  Tax laws required the consent of the people and expired every 12 months. 

The fourth group, the Scotch-Irish, believed in natural liberty: freedom from the constraints of the law, order and justice, and in minimal government, light taxes, and the right to armed resistance of authority. The institutions that arose in the Southern Backcountry were an outgrowth of these values. The emphasis on minimal government and freedom from the law resulted in a very limited justice system. Societies relied primarily on self-policing by ad-hoc vigilante groups (i.e., the 18th-century ‘regulators’); sheriffs were used only to patrol the public roads. 

An amazing reading..

Nunn says the famous collonial hypothesis sugggested by Acemoglu et al reflects the role of culture:

The importance of culture in shaping colonial institutions provides an interesting insight into a recent debate within economics related to Acemoglu et al.’s (2001) colonial origins hypothesis. The empirical results provided in Acemoglu et al. (2001) derive from IV estimates of the impact of institutions on long-term economic development, using historical European settler mortality rates in overseas colonies as an instrument for current institutions. They argue that in areas where Europeans could settle, growth-promoting institutions that provided a rule of law and protection of private property rights were established.

However, Glaeser et al. (2004) make the point that European settlers not only brought European institutions to the newly settled lands, but also brought ‘‘themselves, and therefore their know-how and human capital’’ (Glaeser et al. 2004, 289). They argue that this violates the exclusion restriction from the IV estimates from Acemoglu et al. (2001). The crucial point is that European settlers not only established growth-promoting institutions, but they also brought their know-how with them, which also matters for long-term development.

Read the whole thing. Plenty of examples and papers covered.

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