Lecture 12 - Culture

Question 1

What is culture?

Answer 1

The economics definition of culture: Culture is customary beliefs and values that ethnic, religious and social groups transmit fairly unchanged generation to generation

Question 2

Why does culture matter?

Answer 2

• Shared values and beliefs help us coordinate with others
• These shared values give us rules of thumb to think about
• These values will then be transmitted within the family (vertical transmission), across peers (horizontal transmission) and can lead to persistence

Question 3

What is religion?

Answer 3

Religion is often cited as a possible cultural explanatory factor of economic differences

Question 4

Why does religion matter to economists?

Answer 4

• Religion shapes our beliefs
• Religion shapes our values
• Religion is transmitted from one generation to the other
• Religious beliefs are sticky, they don’t change fast over time

Question 5

What did Max Weber primarily research?

Answer 5

Max Weber attempted to answer the question as to why all the richest nations at the turn of the 20th century were predominantly Protestant

Question 6

What is the Protestant’s ethic and how does it back up the fact that the richest nations at the turn of the 20th century were predominantly protestant

Answer 6

The Protestant ethic: Protestantism’s values makes people’s decisions align with profit maximisation objectives

Question 7

Give a brief summary on the Protestant ethic

Answer 7

Observation: In the 1900s the richest countries tended to be majority protestant
Theory: Protestantism incentivized people to find their calling in worldly affairs

Question 8

Why does trust matter to economists?

Answer 8

• Trust shapes our beliefs
• Trust shapes our values/preferences
• Trust is transmitted from one generation to the other

Question 9

Does trust vary across countries?

Answer 9

Yes, trust varies a lot across countries

Question 10

Is there a correlation between trust and GDP per capita?

Answer 10

Yes, there is correlation between trust and GDP per capita

Question 11

Briefly explain Algan and Cahuc (2010) “Inherited trust and growth” to suggest the relationship between trust and GDP is causal

Answer 11

Algan and Cahuc wrote the papre ‘inherited trust and growth’ to show that there is a causal component to the relation between trust and GDP:
-Each country has institutional or human capital characteristics that determine both growth and trust
- Whether to trust people is something parents will teach their children including migrant families
- Among migrants there is a component of trust levels that does not result from the environment where they grow up in, instead it is transmitted from the origin country through the family

Question 12

What is mistrust?

Answer 12

• Trust may be conducive to economic growth when it facilitates profitable risk taking
• Mistrust however may be the best belief to adhere to in societies affected by conflict