Cultural Institutions Flashcards
1
Q
6.1 Why do we need to think about culture and social economics?
A
- Economists are concerned with economic growth and development (Solow Model)
- Economic Growth = Natural Capital + Physical Capital + Human Capital + ε
- Model overlooks the interaction of economic actors
- ‘Classical and neoclassical economics operates…with an atomised and undersocialised conception of human action…The theoretical arguments disallow by hypothesis any impact of social structure and social relations.’ (Granovetter, 1973)
- Decomposing the Solow residual ε
- EG = Natural Capital + Physical Capital + Human Capital + Social Capital + ε
- Social capital - the missing link?
– ‘Social’ as it involves social interactions
– ‘Capital’ because its effects might have persistence just like physical or human capital
2
Q
6.2 Love and GDP (2)
A
- Stevenson and Wolfers (2008): Cross country measures of Recalled Feelings and GDP, based on Gallup World Poll data
- Find statistically insignificant relationship between Love and GDP
3
Q
6.3 Social capital and its trends, does it have an impact on growth? - What is social capital? (6)
A
- Social capital considers the manner in which economic actors interact
- Considerable debate about what it is actually
- Institutions, relationships, attitudes and values governing interactions among peoples
- Putnam (1993): Horizontal associations which can be either positive or negative
- “Social capital” refers to features of social organization such as networks, norms, and social trust that facilitate coordination and cooperation for mutual benefit (Putnam 2000).
- Better social connections can help solve the free-rider problem in providing public goods, or they can create trust between individuals in the absence of explicit contracts
4
Q
6.3 Social capital and its trends, does it have an impact on growth? - What are the different kinds of social capital? (3)
A
- Formal (PTA, labour union) and informal (friends) social capital develop reciprocity
- ‘Bonding’ social capital or ‘strong ties’
– ‘Bonding’ social capital links sameness and enables cooperation between groups
–For example, horizontal associations such as networks and clubs
–The bigger the group that sustains it, the more powerful is bonding social capital - ‘Bridging’ social capital or ‘weak ties’ - links between disparate social sub-groups
- Returns to social capital rise in the level of community investment in social capital
5
Q
6.3 Social capital and its trends, does it have an impact on growth? - How to measure social capital? (2)
A
- Participation data
–Membership of organisations is possibly the best single measure of social capital
–Putnam suggests that membership in the USA has gone down in the 20th century
–Americans are increasingly ‘bowling alone’ (Putnam, 2000) - Attitudinal data
–Questions on ‘trust’ are used in social capital surveys
–For example, ‘Do you think that most people can be trusted?’
–Problems with interpreting questions on trust
6
Q
6.3 Social capital and its trends, does it have an impact on growth? - Trends in social capital - Membership trends (Putnam, 2000) (16)
A
- Putnam (2000)- America is ‘bowling alone’ in increasing numbers
- In summary, memberships rise for first 2/3 of the 20th century, with a sharp dip during the Great Depression, then a long period of growth until 1965, but thereafter, organisations see absolute declines in numbers in recent decades
- Researchers in fields such as education, urban poverty, unemployment, the control of crime and drug abuse, and even health have discovered that successful outcomes are more likely in civically engaged communities. Similarly, research on the varying economic attainments of different ethnic groups in the US has demonstrated the importance of social bonds within each group.
- Researchers have also discovered highly flexible “industrial districts” based on networks of collaboration among workers and small entrepreneurs e.g. Silicon Valley. Hallmarks of successful performance of representative government in regions were voter turnout, newspaper readership, membership in choral societies and football clubs.
- WHAT HE DOES- studies average membership rates for 32 national voluntary organizations in the USA, including religious affiliation (the most common associational membership among Americans; churchgoing fell from 48% in the late 50s to around 41% in the early 70s), Parent Teacher Association, trade union membership, membership of the General Federation of Women’s Clubs (down 59% from 1964-2000), volunteers for the Boy Scouts (down 26% 1970-2000), as well as membership of fraternal organization.
- Civic engagement fosters the emergence of social trust.
- Provides familiar evidence of falling turnout in national elections over the 3 decades to 2000. By almost every measure, Americans’ direct engagement in politics and in government has fallen steadily and sharply over that generation.
- Less trust in government in US also, with those that only trust it sometimes or almost never rising from 30% in 1966 to 75% in 1992.
- Putnam discovers that more Americans are bowling today than ever before, but bowling in organized leagues has plummeted. Between 1980 and 1993, the total number of bowlers in America increased 10% but league bowling decreased by 40%.
- From the General Social Study, within all educational categories, total associational membership declined significantly between 1967 and 1993. At all educational levels the average number of associational memberships has fallen by about ¼ over the last quarter century. Point is clear: more Americans than ever before are in social circumstances that foster associational involvement (higher education, middle age, and so on), but never the less, aggregate associational membership appears to be stagnant or declining.
- The downward trend is most marked for church-related groups, for labour unions, for fraternal and veterans’ organizations and for school-service groups. Membership in professional associations on the other hand has risen over these years, although less than might have been predicted, given sharply rising educational and occupational levels.
- The most fundamental form of social capital is the family, and the massive evidence of the loosening of bonds within the family (both immediate and extended) is well known within the literature.
- Americans are also less trusting. The proportion of Americans saying most people can be trusted fell by more than 1/3 between 1960 (58%) and 1993 (37%).
- Close correlation between social trust and civic engagement is apparent in the evidence.
- Forms of social capital are correlated across individuals; members of associations are much more likely than non-members to participate in politics, to spend time with their neighbours, to express social trust etc.
7
Q
6.3 Social capital and its trends, does it have an impact on growth? - Trends in social capital - Membership trends (Putnam, 2000) - COUNTER ARGUMENT
A
- Traditional counter argument: that the traditional forms of civic organization whose decay have been traced here have been replaced by vibrant new organizations.
- American Association of Retired Persons (AARP), grew exponentially from 400,000 card playing members in 1960 to 33 million in 1993, becoming the largest private organization in the world.
- But these mass membership organizations don’t actually see members attending meetings and most are unlikely to ever encounter knowingly any other member. Ties are in short to common symbols, leaders and ideals, but not to each other.
- Some researchers have also argued that in the few decades up to 2000 witnessed a rapid expansion in “support groups” of various sorts. Wuthnow reports that 40% of all Americans claim to be “currently involved in a small group that meets regularly and provides support or caring for those who participate in it”. Nearly 5% of Wuthnow’s national sample claim to participate regularly in a “self-help” group such as Alcoholics Anonymous, and nearly as many say they belong to book-discussion groups and hobby clubs.
8
Q
6.3 Social capital and its trends, does it have an impact on growth? - Why is social capital eroding? (5)
A
- Could be due to the movement of women into the labour force- seems plausible that this social revolution should have reduced the time and energy available for building social capital. But given that the survey data implies that aggregate declines for men are virtually as great and time-budget studies suggest that most husbands of working wives have assumed only a minor part of the housework means something besides this must be responsible for the erosion of social capital
- Could also be due to the increased mobility of the population- frequent studies have shown that mobility tends to disrupt root systems, with it taking time for the individual to put down new roots. Mobility has been increased by the automobile, suburbanization, the movement to the Sun Belt etc. But best evidence shows that residential stability and homeownership in America have risen modestly since 1965, and are surely higher now than during the 1950s, when civic engagement and social connectedness by our measure was definitely higher.
- Other demographic transformations may also be responsible; there have been fewer marriages, more divorces, fewer children, lower real wages and so on. The replacement of community-based enterprises by outposts of multinational firms may have also undermined the basis for civic engagement.
- The technological transformation of leisure- suggestions that these are individualizing our use of leisure time and thus disrupting many opportunities for social-capital formation. E.g. television.
- In concluding, Putnam suggests that the government has a role to play in ensuring public policy does not impinge on social capital formation e.g. the consolidation of country post offices and small school districts, which have admin and financial efficiencies but have a negative effect on social capital. Tax deductions for charitable contributions illustrate that government can encourage social-capital formation. A proposal in San Luis Obispo, California, to require that all new houses have front porches illustrates the power of government to influence where and how networks are formed.
9
Q
6.3 Social capital and its trends, does it have an impact on growth? - Social Capital - Consequences (7)
A
- Notes that social capital is not homogenous, can be formal (Parent Teacher Associations) or informal (a nod to a passer by).
- Social trust is not part of the definition of social capital but it is certainly a close consequence – therefore easily thought of as a proxy
- Low social capital is clearly associated with the depth of slavery in the 19th century – because slavery as a system and the post-slavery reconstruction period were institutionally designed to destroy social capital
- Another variable that strongly predicts social capital is the pattern of immigration - The best single migration-based positive determinant of social capital is the fraction of the population that is of Scandinavian descent
- The relationship between social capital and educational performance is much stronger – two magnitudes stronger than spending on schools or teacher/pupil ratios or any of the obvious things that are more usually thought to increase educational performance.
- Crime is strongly negatively predicted by social capital – the strongest predictor of the murder rate is low level of social capital
- Despite this very wide range of promising results suggesting that social capital has a multitude of measurable consequences – not yet in a position to rule out all other explanations for these patterns – statistically these results are robust but we need to explore a variety of other datasets and into micro level data across different countries (this paper just focusses on American states)
10
Q
6.3 Social capital and its trends, does it have an impact on growth? - Social Capital - Impact of social capital on growth (3)
A
- Guiso, Sapienza and Zingales criticize Putnam; Putnam (1993) documents a large number of positive institutional outcomes associated with higher social capital, like more efficient health care systems.
- Both these papers, however, do not show that the effects of culture on institutions have an economic payoff. Evidence in this direction is provided by Tabellini (2005). He measures culture as the “principal component” of four values: trust, beliefs in the importance of individual effort, generalized morality, and obedience (which he considers a negative value), inferred from questions on the World Values Survey. He then uses a measure of education and of historical political institutions across 69 European regions as instruments - finds that the quality of the historical institutions (such as constraints on the executive) has a positive and statistically significant effect on today’s social values.
- Putnam documents that both GDP per capita and growth are higher in those regions that exhibit higher levels of the “good” cultural values like trust, beliefs in individual effort, generalized morality and low obedience. More importantly, the effect is bigger when he uses an instrumental variable approach and first predicts the four values with their historical determinants, before carrying out the principal component methodology and creating a culture variable. This evidence strongly suggests that “better” cultural values do have a large economic payoff.
11
Q
6.3 Social capital and its trends, does it have an impact on growth? - Italy (3)
A
- Northern Italy’s economic success relative to southern Italy as a consequence of higher density of voluntary associations among northern people (Putnam, 1993)
- Putnam (1993) - Finds that newly established regional governments in fifteen regions in 1970 Italy have differing degrees of success according to the social capital traits instilled in regions dating back to whether they had experienced the institution of “free cities” in the middle ages, because “free cities” developed a form of early participatory democracy that generated a notion of belonging to a polity
- Guiso, Sapienza, and Zingales (2013) formally test this hypothesis with a regression, finding significant correlation between historical experience as “free city” in middle ages and the success or failure of its institutions.
12
Q
6.3 Social capital and its trends, does it have an impact on growth? - Trust and economic growth (6)
A
- Studies using World Value Survey data show that trust is important (Knack & Keefer, 1997)
- Knack & Keefer: A one standard deviation increase in country-level trust increases economic growth by more than one-half of a standard deviation
- Transition economies in Eastern Europe and the former USSR: ‘A hundred friends are worth more than a hundred roubles.’
- Guiso et al. (2003): religion on trust
o Being raised religiously raises the level of trust by 2%. If a person regularly attends religious services, the level of trust increases by another 20%. This effect differs across denominations; while Catholic and Protestant have roughly a similar positive effect, Muslim, Hindu and Buddhist do not. - Guiso et al. (2004): trust and trade
o A country that trusts another more tends to exchange more goods and financial assets with it, and to engage more in direct investment.
o These results hold after controlling for the typical variables the trade literature has focused on (distance, common borders, commonality of language) as well as for variables that have been ignored until recently in the trade literature, such as differences in the origin of the legal system among country pairs. - Trust and entrepreneurship:
o Positive and significant impact on probability of becoming an entrepreneur in an ordinary least squares regression
o Trusting others increases the probability of being self-employed by 1.3 percentage points (14 percent of the sample mean).
13
Q
6.3 Social capital and its trends, does it have an impact on growth? - Ethnic diversity (1)
A
Affects public goods choice (Poterba 1996) and leads to weaker social participation (Alesina and LeFerrara 2000; Iyer, Kitson and Toh, 2005)
14
Q
6.3 Social capital and its trends, does it have an impact on growth? - How does social capital relate to human capital? (3)
A
- Association between social capital acquisition and human capital acquisition is very robust
- Strong association between education and trust; education and voluntary activity
- Due to book-learning and social skills, and human capital acquisition creates a strong positive externality for social capital acquisition
15
Q
6.4 Religion as a form of social capital - Barro & McCleary (2003) (5)
A
- Barro and McCleary (2003) examine the effects of religious participation and beliefs on a country’s rate of economic growth. Six international surveys conducted between 1981 and 1999 to measure religiosity- church attendance and religious beliefs for 59 countries
- They conclude that believing matters more than belonging, and that for a given level of church attendance, increases in some religious beliefs (notably in heaven, hell and the afterlife) tends to increase economic growth.
- Economic growth is also negatively affected by church attendance. They show this using instrumental variable analysis where the instruments include the presence of a state religion, religious adherence, and an indicator for religious pluralism. The underlying model behind their work is that religious beliefs affect individual traits which support economic progress.
- In general, the cross-country regression-based studies are interesting, but not without their limitations. Some of them have statistical difficulties such as outlined by Voas. Durlauf et al. (2011) demonstrate the sensitivity of the results to instrument choices in such analysis. They also show that when model-averaging methods are used, there is very little evidence that religion-related variables do in fact predict cross-country differences in income. Durlauf et al. find that the work of Barro and McCleary demonstrating an effect of religion on growth is statistically replicable, but NOT STATISTICALLY ROBUST, hence they find no evidence for the effect of religious beliefs on growth once they control for model uncertainty.
- A problem with cross-country regressions in investigating this key link (the main staple of the macroeconomics of religion) is that it is often difficult to evaluate the effects of religion on growth separately to the effect of other factors notably geography, other institutions and ethnic fractionalization, which are also important growth determinants.
