Arnold Kling  

Rules and Culture

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Tim Kane listens to a talk by Paul Romer, and muses,


Romer forces us to accept that rules are very difficult to change. Nations in particular, even when its leaders recognize the need for rules to change, have difficulty making them happen.

Here in America, there is tremendous acrimony about new legislation of almost any kind. Witness the current fight in the U.S. Congress over health care reform. So why do we imagine it would be trivial for another country to change its laws, let alone norms, customs, cultures? So the real challenge for development practitioners is how to make rule-changing easier.

If rules are hard to change, there may be a good reason for that. Rules may reflect the values that are embedded in a culture. People may resist the imposition of new rules that conflict with their values.

One of the unresolved issues in From Poverty to Prosperity concerns the relative importance of formal institutions and established culture. Can changes in formal institutions overcome established culture?

The case for established culture resisting changes to formal institutions can be made with respect to nation-building. If all we need to do to "fix" underdeveloped countries is revamp their formal institutions, then we should be able to go into a place like Iraq and turn it into a well-functioning country. However, it appears that established culture makes it difficult to turn Iraq into America simply by imposing American style rules.

On the other hand, the case for formal institutions overcoming culture can be made using side-by-side comparisons of Communist and non-Communist countries. Look at how much more economic growth took place in West Germany than in East Germany, or in South Korea relative to North Korea.

My view is that culture dominates. The case of Communism is exceptional. Communism shows that you can set up a system of rules that overcomes cultural tendencies. But the process of overcoming culture requires mass murder and a totalitarian system.

Fortunately, in America we live in a culture where many people still value individual responsibility. I have friends who are very left wing in terms of political opinions, but they consistently express personal values that reflect individual responsibility. They complain about people who make bad personal choices. All of the cultural signals that they send are conservative, even though they vote liberal. If the Democratic Party is having a hard time changing the rules to reflect collectivist ideology, in part that is because in our hearts very few of us are collectivists.



COMMENTS (12 to date)
Matt writes:

Good post.
I would like to say that I think the only reason communist countries had any growth at all was because of culture.

Truly excellent post.

On my view, formal institutions are always -- even in the case of communism -- a result of informal institutional dynamics. The power vaccum created by the end of the imperial era created had to be filled in Russia, China, and Southeast Asia. There were a plurality of informal norms, each associated with different groups of people, in these places. The inability to forge workable compromises among them is what permitted the most aggressive, sanguinary elements in these societies to rise to power through populist rhetoric, appealing to egalitarian ideals.

Germany is a special case, but the Great War and the Weimar period help explain the chaos that created similar initial conditions for Hitler's rise.

What are the lessons? Embrace heterogeneity and compromise? How American is that.

To embrace heterogeneity myself, I could have added "how Roman," "how Venetian," or "how Dutch."

MernaMoose writes:

I think you're right that culture dominates on average.

I'm afraid you're wrong when you say Americans aren't fully collectivists at heart. It may be against our cultural history, but collectivism has been the dominant philosophy taught in our school systems for way too many decades now.

Liberals are a bizarre collection of ideological contradictions.

dWj writes:

Culture has a lot of inertia, but the Communists pushed very hard on it for 50 years. I'm willing to believe that formal institutions could turn Iraq into America -- or at least, I don't know, Bulgaria -- in 50-100 years if someone were willing and able to apply them for that long. I don't think that's remotely likely.

Carl Shulman writes:

Singapore and Hong Kong ground out bureaucratic corruption using non-totalitarian methods.

liberty writes:

"Fortunately, in America we live in a culture where many people still value individual responsibility. I have friends who are very left wing in terms of political opinions, but they consistently express personal values that reflect individual responsibility. They complain about people who make bad personal choices."

But then they try to impose good choices through legislation, or at least "libertarian paternalism" - how is this not collectivist?

agnostic writes:

Maybe we should view established culture as a watchman or predator that locates its prey by motion-detection: if institutions undergo a big change in a small time, the jig is up, and established culture pounces right on it.

But if institutions inch imperceptibly in the right direction, established culture doesn't notice until it's too late -- the institutions were crawling not just to any old place, but to a place where there was a tranquilizer gun to subdue the established culture even if they were ultimately detected.

North, Wallis, & Weingast go on and on about how incremental the institutional changes were in English land law in the High and Late Middle Ages, or naval provisioning contracts in the early 18th C., etc. Imposing markets and elections in Iraq are too much, too fast.

If we were formally modeling this with ODEs, we'd have two state variables, one for institutions (I) and another for established culture (C). dC/dt would respond not just to what C or I currently are, but crucially to dI/dt. Like, the term representing C's curtailing of I's change would only flip on if dI/dt -- how fast institutions are changing -- exceeded some threshold. As a crude example:

dI/dt = [some growth term] - (dI/dt - l)*I*C

The product term I*C is borrowed willy-nilly from the Lotka-Volterra predator-prey model, so don't mind that so much. The key is that this predation of institutions by culture only flips on if the rate of institutional progress exceeds the culture's threshold of motion-detection, l.

(And l would obviously vary across cultures, depending on how costly it is to acquire and process the relevant info on what institutions are like and were like before.)

MernaMoose writes:

liberty,

Seriously, you don't see any difference between laws that keep the State out of places it doesn't belong, and things like the Health Deformation bill they're ramming down our throats right now?

MernaMoose writes:

agnostic,

Forgive me, for I am but a mere engineer and not an economist. But in your state models, how do you economists handle IC's (initial conditions)?

I understand the math. I've just never really understood how one would try and put a mathematical model to any kind of social system.

It seems like it'd be more of an inverse problem mathematically, as opposed to the direct attack methods we typically use for physics based problems. But an inverse problem on a nonlinear system?

All I can say is wow, that's Real Man's Math.

Fazal Majid writes:

Communism just illustrates that it is much easier to set up dysfunctional institutions than ones that work, just like disassembling a machine and reassembling the parts at random seldom yields a useful result.

fundamentalist writes:

De Soto addresses culture and institutions in his book. In an early chapter he shows how that Latin American countries after independence tried to create institutions that immitated US institutions but in a hostile culture. The results were disastrous.

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