Download model of man for market economy

Relationships of Culture and
Institutions
Vladimir Avtonomov
National Research University Higher School of
Economics, Moscow; Primakov National
Research Institute of World Economy and
International Relations
Studies of transition from planned to
market economies: the changing
phocus of attention :
• The Washington consensus: macroeconomic
stabilisation, price liberalization, privatisation.
PROBLEM: deep transformation crisis
• Legal and economic institutions/ government
policy
PROBLEM: imported institutions
• MENTALITY/CULTURE
Definitions of institutions
• Rules of the game plus enforcement
mechanisms (North)
• Self –supporting system of common beliefs
about how the game is played (Aoki)
• Habitual ways of doing things and thinking
(Veblen)
• System of rules, beliefs, norms and
organizations producing the regularity of
social behaviour (Avner Greif)
Definitions of culture
• For the majority - something like the sum of
traditions, values, norms and beliefs of the
society (Beugelsdijk, Maseland)
Culture and Institutions
• Culture and institutions are not mutually
exclusive categories
• Institutions unlike culture are not necessarily
specific for a given society and not accepted
by its members as something invariant.
(quantitative difference in stability)
Formal and Informal Institutions
• Informal institutions overlap or even roughly
coincide with culture.
• Then the problem “ culture vs. institutions” is
reduced to interrelations of formal and
informal institutions and becomes
“intrainstitutional”
• But when we deal with only formal
institutions, the problem looks more acute
(Alesina and Giuliano support this approach)
Economy and Culture: different
approaches
• Economic imperialism: economic rationality can explain
everything including institutions and cultural phenomena
• Neo-institutionalism: somewhat modified economic
rationality can explain a lot but not in all countries.
• Economic sociology (Parsons, Smelser) the cultural
subsystem exists besides the economic one and many
phenomena which are traditionally called economic exist
somewhere on the border between these subsystems .. .
• Some sociologists (Zukin, Dimagio) state that the culture
limits economic rationality
• It is virtually impossible to test all these hypotheses,
because of feed-backs.)
Formal institutions vs.
culture/mentality what is more
important?
• On the one hand we could find huge differences
in economic behaviour in countries with the
same national culture and different institutional
backgrounds (East and West Germany, North and
South Korea) .
• On the other hand former socialist countries
belonging to Eastern/ Western Christianity differ
a lot despite the likeness of formal institutions
D. Acemoglu and J.Robinson
Inclusive(good) and extractive (bad) institutionscan be plotted along one axis: the difference is
quantitative.
• Extractive institutions can generate growth (through
centralization) but not a sustainable one
• But Centralization promotes inclusive institutions?!
• Political institutions shape economic ones
• Institutions influence culture (trust, propesity to
cooperate) which can support institutions
• Other cultural aspects ( religion, ethics, values) are
irrelevant for explaining inequality of nations
North, Wallis, Weingast
• Open access orders and limited access orders (natural
states) as the means for keeping violence under control
• Limited access orders are sustainable and not
disfunctional ,difficult to transform but less efficient
regarding adaptation to change (creative destruction)
• A transition from limited access to open access
societies since the middle of XIX century requires
qualitative change (threshold conditions).
• Formal instituitions (elections, parliaments etc) work
differently under different orders! Can’t be imported.
Open access is a broader context for institutions!
[Could include cultural factors? - beliefs]
L. Harrison. Jews, Confucians, and
Protestants
• Cultural capital: orientation towards future,
value of education, of success, thrift, ethical
code
• D.Landes – “toxic cultures” – cultures are not
equally beneficial for economic growth
• Haiti and Barbados (the same ethnic origin –
different cultures and religions)
Harrison: universal culture of progress
• Religion: rationality, achivement, mysticism, this world,
pragmatism
• Fatalism/internal locus of control
• Future/present
• Thrift
• Value of education
• Work/achievement ethics
• Entrepreneurship
• Innovations
• Trust Distance
• Family
• Social capital
Formal institutions vs.
culture/mentality in relation to Russia
• Russian national character is not compatible
with market economy and its institutions
(D.L’vov)
• Russia is a “normal country” which could live
well under normal institutions (A.Shleifer and
D/Treisman).
Preliminary summary
• In our view, institutional (formal institutions)
and cultural approaches can supplement each
other (and neoclassical approach as well).
Culture does or doesn’t legitimize formal
institutions.
• Cultural and institutional approaches are
different abstractions representing different
layers of the common object - human
behaviour.
Different models of man used in
different approaches:
• homo oeconomicus in neoclassical approach
• modified homo oeconomicus (+ bounded
rationality and opportunistic behaviour) in
neoinstitutional approach
• model of man for market economy in cultural
approach.
Model of man for market economy
(close to the universal culture by
Harrison)
two main components:
• soft rationality – connection between the
activity and its result
• some ethics (provides forecastability, needed
for prolonged economic activity f.ex.
investments)
Ethics
Can be acertained either:
• by trust in friends and relatives
• or trust in external environment, market
institutions impartial and anonimous.
(Greif’s Mediterranian trade)
Which ethics and other human
characteristics are important for
market economy?
• ethics of rule-following
• trust /reputation (social capital),
• fairness, (Rawls: well-ordered is a sociey where the institutions are fair
and it is rpublicly recognised) – either impartiality or mutual advantage
• equality (some degree of). Unequality distorts the working of institutions
and leads to domination
• bourgeois virtues : work industrious, education, self-discipline,
responsibility, abstinence from immediate satisfation of wants, tidyness +
virtues of a ruler?
+ liberal traits:
• high value of liberty,
• Internal locus of control