CULTURE AND HISTORY

1
CULTURE AND HISTORY
2
Challenges

• Alan Greenspan
• Mancur Olson
• Lawrence Harrison
• David Landes
• Douglass North

3
Alan Greenspan, 1997 (!)

• Much of what we took for granted in our free
  market system and assumed to be nature, was not
  nature at all but culture.
• Capitalist culture and infrastructure
• Evolved over generations
• ? Institutional imitation, transplantation?

4
Mancur Olson, 1996

• Big bills left on the sidewalk
• Efficient markets hypothesis
• Coaseian bargains
• Laissez faire
• Why are only some nations rich?
• Why do poor nations fail to imitate?

5
Wealth and Poverty

• Borders between nations
• Different access to resources
• Different public policies, incentives
• Strucure of incentives
• Legal systems
• Political structures
• Special interests, lobbies

6
Factors that are not ...

• Access to productive knowledge
• Poor countries excluded?
• Overpopulation
• Move to rich countries, equalize?
• Migrations
• Poor countries get richer (Ireland exodus?)
• Density of population
• Hong Kong, Singapore, Netherlands
• Returns to capital
• Struggle to get into the Third World

7
Quality of Institutions

• All countries below production possibilities
• Catching up
• Fastest economic growth
• Some of the low incomes countries
• Recommendation
• The best thing a society can do to increase its
  prosperity is to wise up.
• Provocative?
• Sums lost, trillions of dollars

8
Lawrence Harrison

• Underdevelopment is a state of mind
• Decolonization
• Poor track record
• Explaining failure
• Colonialism, dependency, racism
• Cultural values and progress
• Economics, anthropology
• Culture as an explanation
• Emotionally, blame victims
• Intellectually, causality

9
David Landes Rich and Poor

• Types of explanations
• We are good and they are bad
• Us hardworking, knowledgable, educated, well
  governed, efficacious, productive
• Them the reverse
• We are bad and they are good
• Us greedy, ruthless, exploitative, aggressive
• Them weak, innocent, virtuous, abused,
  vulnerable
• ?Very different policy recommendations

10
Growth is Natural

• Adam Smith
• Invisible hand, laissez faire
• Thomas Malthus
• Population trap, Malthusian check
• David Ricardo
• Limits to cultivation, poorer soils, falling
  yields
• Technology overcomes
• Growth optimism
• Failure to grow, imitate
• State gets in the way

11
Third World

• Why underdevelopment?
• Theoretical challenge
• Incentive is there
• Gap between what is and what can be
• Opportunity is there
• Decolonization, development plans, assistance
• Why such selective growth?
• Tigers
• Poverty
• Large regions zero growth

12
Late Comers are Favored?

• Size of the gap
• Limits to staples growth
• Lateness breeds bad politics
• Misdiagnosis, blame outsiders
• Cultural factors
• ? Economics vs. sociology and history

13
Landes - Culture

• Max Weber was right
• Dependency theory
• Japan
• Meiji restoration
• Weber
• Calvinism, konfucianism
• Or simply irrelevant?
• ? Pessimism can only offer the empty consolation
  of being right.

14
North, Path Dependence

• Divergent patterns of evolution
• Why fail to copy success?
• Technology
• Large investments
• Learning effects
• Coordination effects
• Adaptive expectations
• Institutional change
• Success story (Rise of the West)
• Persistent poor performance
• Increasing returns vs. social norms
• History matters
• Determinism vs. Institutional lock-in