Culture; it’s not what you think
Noah Smith has a new post that quotes me saying things that I don’t believe, and that he knows (or should know) I don’t believe. I admitted in the comment section to his critical post that I shouldn’t have called the Chinese “pragmatic.” It’s clear from this follow-up post, and the comment section where he responds, that Noah and I actually have pretty similar views on culture.)
Take two very poor countries, North Korea and Pakistan. Then ask which one is likelier to be rich in 50 years time? I’d say North Korea, and if you hooked Smith up to a lie detector, I imagine he’d do the same. But why?
For me the answer would be culture, culture, culture. But not culture in the sense that ignorant people use the term “culture.” Rather culture as a sort of residual. We can observe cultural differences, but don’t really know what part of the cultural differences matter for development. The easiest way to explain all this is with a bunch of examples.
Why do I think North Korea will do much better than Pakistan? Is it because I’ve met Koreans, and Pakistanis, and noticed some mysterious superiority in the Koreans that I have met? Not really. Both the Korean and South Asian people I’ve met seem highly productive. Nothing about them would provide me with any useful information to predict North Korea will grow faster than Pakistan.
Alternatively, suppose it were the case that both Koreas were currently desperately poor, and India and Bangladesh were rich, while Pakistan was poor. In that case I’d predict Pakistan would do much better over time, even though nothing changed in the personal characteristics of the people I happen to have met who were Korean or South Asian. One notices cultural patterns in development, but that doesn’t mean one knows which particular cultural characteristics explain those patterns.
Here’s another example. Back in the early 1980s I saw China moving toward a market economy. At the same time I knew that all of the very fast-growing economies in the world, whose growth wasn’t based in resource extraction (i.e. South Korea, Taiwan, Hong Kong, Singapore, Japan, etc.), were located in East Asia. I noticed that China was right in the middle of this group, and also shared cultural similarities. Thus I predicted China would grow really fast, and because I was correct I’ll be able to retire early. Yes, I know, that violates the EMH 🙂
So why fixate on “culture”? Why not “geography?” Because it seems like culture is the key factor. Australia is a neighbor of New Guinea, yet has cultural similarities to Europe. Singapore is next to Indonesia, but has cultural similarities to Taiwan and Hong Kong. Israel is next to Egypt, but has cultural similarities to Europe. When culture and geography diverge, go with culture.
So far this seems very deterministic, but when you look closer you realize that it really isn’t. That’s because economic development reflects many factors, and culture impacts those factors in diverse and often unpredictable ways. A (by no means exhaustive) list includes skill at governance, skill at entrepreneurship, propensity to save, work hard, etc. Many people assume that cultures that work hard are richer. And yet the data shows that Germans work less hard than Greeks, for instance. The data doesn’t match the stereotypes.
In the eastern Mediterranean there are lots of cultures that have a reputation for entrepreneurship (Greeks, Armenians, Lebanese, Jews, etc.) When these people move to a country like the US, they often do just as well as immigrants from a country like Germany, perhaps even better. So the stereotypes often do more to mislead than illuminate.
So maybe the Germans don’t work harder than the Greeks, but their culture led to more effective governance. That’s certainly plausible, but the result also seems quite “fragile.” After all, Greece is the birthplace of democracy, and Germany . . . well let’s not talk about that period. And although a high saving propensity probably helps, the (low-saving) US is the richest big country in the world.
I think that conservatives often err in assuming culture is constant over time, and more importantly that the advantages of certain cultural attributes is stable over time. A culture that is able to mobilize horseman to sweep across the grasslands and conquer huge regions, may not be well-suited to organizing large assembly lines that run with mindless precision. And that latter group may not be good at service/tech industries that require lots of creativity and individual initiative. And of course there are the contingencies of history—the Cold War separated the two Koreas, the two Germanys, the three Chinas.
So with all these caveats why do I cling to culture as an important factor? Because it obviously is. For some reason it has become politically incorrect to talk about culture. (Oddly, a few years back the non-culture explanations (genetics) were taboo.) Others seem bothered by the non-scientific aspect of culture. But I still see strong cultural correlations in economic performance. That information seems useful, even predictive where the contingencies of history have created artificial outcomes, and so I see no reason to throw out useful information.
Interestingly, Noah Smith uses exactly the same analysis I would use to predict China might do better than his opponent assumes. He notes that Japan, Taiwan and Korea have moved up to European levels of income.
PS. Just be be clear, I think all cultures are capable of achieving a great deal of economic progress, and indeed going forward I expect the less developed parts of the world to grow much faster than the developed regions. In the long run all countries will be rich, but I believe that culture plays a role in how fast they’ll get there.
The recent “global recession” might well have seen the fastest progress in all of human history. Here are a few snippets from The Economist:
National campaigning will start after various state-assembly elections in November. Observers expect a more presidential style of contest than usual. So television will especially matter: at the last election in 2009, 460m people [in India] had a box at home. Next year nearer 800m will.
And from the same issue:
Mr Webb estimates that since 1994 rural income per person has risen at an annual average rate of 7.2% in real terms (compared with 2.8% for urban incomes). Between them, the rise in income and better connections add up to a radical transformation in rural Peru. The study suggests the two are closely related. It points to the wisdom of boosting investment in infrastructure in the poorer rural parts of Latin America: Andean roads are vulnerable to rains and mudslides and need active maintenance, and there is scope to slash journey times further. Clearly, peasant farmers respond as creatively as anyone else to the opportunities that come from being connected to the market economy.
For most of my life I’ve thought of the world as being overwhelmingly poor and rural. But just in the past few years things are changing fast. We’ve suddenly gone from most people not having telephones and TVs to most people having them. From most people living in rural areas to most living in urban areas. The impact on governance, and indeed culture, will be huge. Look for India’s caste system to gradually break down.
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30. April 2013 at 17:15
First I think that N. Korea has an unfair advantage in that a government collapse there would most likely lead to reunification and so they have quite a lead.
I am skeptical about the ability of china to deal with the demographic time bomb caused by the one child policy and improved healthcare. There are still a good 200m people to move from the agricultural sector to a more productive one so I want to see what happens then.
Of course in 50 years India will probably have the worlds largest economy.
30. April 2013 at 17:23
I can’t speak for Noah, but I thought his point comparing ‘culture’ to ‘phlogiston’ was fair and well made. The fact is economies are wildly complex and there’s simply a lot we don’t understand (or, at least, there is a lack of consensus on what we do and don’t understand). If you’re accustomed to precision, as in the physical sciences for example, perhaps that’s just maddening. I don’t think sociologists or anthropologists have any such problems speaking of the relevance of ‘culture’.
30. April 2013 at 17:54
Have you read Acemoglu and Robinson’s “Why Nations Fail” yet? (Yes I plan to keep pimping this until you do 🙂 )They make a pretty strong case that institutions tend to shape culture.
One of the main reasons China is doing better than Pakistan is that they have a strong centralized state — Xiaoping’s market-friendly counter-coup inherited an undisputed central authority from the horrors of the Mao and the Gang of Four. Pakistan’s central government is basically absent from large portions of the hinterlands, which creates obvious problems.
And that’s not only why we would expect North Korea to have a better chance of success than Pakistan, it’s why South Korea succeeds today. Same culture, same genetics, geographically contiguous, and yet they have a PPP GDP per capita ten times apart.
30. April 2013 at 18:08
Morgan, you just made milk come out my nose!
30. April 2013 at 18:12
Professor Sumner,
How did you make money by correctly predicting China’s economic success?
30. April 2013 at 18:19
errorr, Interesting that I also predicted India will have the world’s largest economy in 50 years. Very few people agree with us.
Jim, Yes, but it’s often easy to see that culture is important, even if you don’t fully understand why.
Morgan, I think I’ll cut that.
TallDave, The causation goes both ways (culture and institutions.)
J, My 401k plan.
30. April 2013 at 20:01
The play between culture and government and prosperity is fascinating.
But…
If you had asked me in 1992 what would be the future of Japan, I would have said, “Very bright. Good culture, work ethic, reasonable governance.”
In some regards, I would have been right. They still live well, still have low crime, have reasonable governance, etc. But, less well than in 1992.
Monetary policy is so important…..
Retiring on China investments? I did so on Los Angeles land…but it was luck. I didn’t even to buy. But when you buy 10 percent down and the price triples…and you can rent out parts…and live on parts….
30. April 2013 at 22:26
I understood this post on culture much better than I did your previous posts on the subject. Thank you for the clarification!
Also, I second the recommendation for Acemoglu and Robinson — a lot of their papers, as well as their book, have interesting things to say on this topic.
1. May 2013 at 00:02
Put me into the “India will have the biggest economy in 50 years” club too.
Culture is the last refuge of the analytically bereft. That said, culture obviously does matter. The Aborigines of Australia and the Maoris of New Zealand both had to deal with invading British settlers. Fairly obviously, culture does a huge amount to explain their very different outcomes. Add in institutions, and the differences are explained.
Deepak Lal has some intriguing things to say about culture.
1. May 2013 at 00:06
Sorry, screwed up the Deepak Lal link, it should have been to here (pdf)
1. May 2013 at 00:28
Scott, maybe you need to do another post on NGDPLT as “doing less”: http://econlog.econlib.org/archives/2013/04/the_hulks_hands.html
Also, Garett Jones has a suggestion https://twitter.com/GarettJones/status/329227620707356672
(He’s also leaving EconLog.)
1. May 2013 at 00:37
Gavyn Davies is no longer talking about NGDPLT: http://blogs.ft.com/gavyndavies/2013/05/01/what-the-ecb-can-and-cannot-do-to-heal-the-eurozone/?
1. May 2013 at 04:13
Scott
Noah’s a shader.
It obvs to anyone reading it the comparison was US vs. Japan, and it is US vs China.
It’s the FIRST THING Altman says, and Noah has to update:
“Update: Altman responds, noting that Japan’s GDP is markedly less than that of the U.S., Canada, and Austrialia. Of course, I could have pointed out that Singapore, with a GDP (PPP) per capital of $60,410, is considerably richer than any of the countries named. But I thought it more appropriate to compare countries of similar population sizes and resource endowments…”
What huh? You skipped the US, bc you skipped Singapore?
The question is WHY does Noah shade? Why doesn’t he make the most charitable, forget charitable, why doesn’t he make anything but the most dickish assumptions?
It’s because Noah’s not actually that sure of himself. His brain can’t wander off to far from camp on it own, it might not make it back in one piece.
AND THAT’S OK, but the reality is all the good discoveries go to the guys who can let their brain wander off by itself…
No discoveries for Noah. “noah, come out to plllaayyy”
“”-
The real meta conversation being had here is can authoritarian China beat the US at being capitalistic?
And the answer is still out.
But it’s not bc authority isn’t bad. It is, but that’s just a drag of X.
The question is whether the US turns into Europe – and let’s states get fat a lazy like Greece, instead of being forced to compete on labor deregulation and bowing down to entrepreneurs like South Carolina.
And since Noah wants the greeks to stays fat and lazy, since if they bend and thing improved, LIKE SOUTH CAROLINA, Noah’s team loses a pawn, he’s not going to spend time letting his brain wander off and DISCOVER:
Noah THINKS he’s saying Japan beats Europe, but he’s REALLY saying is:
U.S.A. DO NOT BECOME LIKE EUROPE, then you will be no better than Japan, and even China might beat you!
Singapore. derp.
1. May 2013 at 05:11
Ben, Good point.
Daniel, Thanks, but it always helps to list a couple of their “very good points” in the comment section here. That will encourage me to read the book.
Lorenzo, Good point.
Saturos, Thanks for the link. Did you see the Clive Crook piece on Krugman?
Morgan, I guess there’s no stopping Morgan from being Morgan.
Again, the Greeks work longer hours than the Germans, or at least did when they had jobs. There are hungry children in Greece, I doubt that’s because their parents are “lazy.”
1. May 2013 at 06:33
Scott,
Do you include demographics as a component of your broad definition of “culture”? I’d argue that age distribution plays a significant role in determining gdp per capita, but you may include that in your definition of culture.
Share the optimism about India, but I believe the decades of malnutrition and extraordinary oppression in N. Korea make their 50 year future significantly less bright (absent reunification).
1. May 2013 at 07:33
East Germany is still much poorer than West Germany, decades after unification and with massive subsidies. Russia isn’t doing so well either, relying heavily on resource extraction.
There are economics who’ve done a good job arguing for the importance of institutions by using some “natural experiments”. Acemoglu & Robinson often fall short in my opinion, seeming more often to make the assumption that the cause MUST be institutions rather than providing good evidence for it. Their paper on malaria as a “proxy” for the effect of colonization is a horribly egregious example, including non-colonized countries as colonies and failing to consider whether malaria BY ITSELF (or even as something correlated with pre-colonization factors) might cause discrepancies.
1. May 2013 at 08:06
TallDave, The causation goes both ways (culture and institutions.)
Of course. But institutions are usually stronger, as Korea and Nogales (Arizon/Sonora) demonstrate.
1. May 2013 at 09:03
Prof, I don’t think culture can so singularly be attributed to economics. Take a look at this list: http://en.wikipedia.org/wiki/List_of_ethnic_groups_in_the_United_States_by_household_income
India is #1 (~ $90,000), Pakistan healthily but not substantially above the American average at #48 (~ $60,000) and Bangladesh on par with Americans #118 (~ $45,000).
India is democratic and many grads are highly technically skilled. So there’s a difference. But it’s much harder to get out of Pakistan, so there’s more of a self-selection. And Russians are smart and highly trained but lag a full $20,000 behind Americans.
I talk a lot about this – and I think we’d agree, if not for my quasi-reservations* on China – here: http://ashokarao.com/2013/05/01/china-got-99-problems/
It’s worthwhile to note Korea has significant historical roots in Confucianism, but is as rich as Europe. And the North is poor because of really, really, crappy institutions: nothing cultural.
I also think urbanization is important. Living in an Indian city, it’s possible to compare first-generation migrants from rural areas who are decidedly more “castist” than their long-time urban-dwelling friends. As China urbanizes same economic forces will come to play.
Also, Altman notes that Confucianism took particular hold of Beijing after 1990. If anything, this falsifies his theory because China (and its cities) has grown remarkably in the past two decades. But he predicted that it would slow growth down.
*I think China will become as rich as Europe, but never America. We have too many supply-side edges like a huge potential immigrant base, best university system, relative deregulation, the reserve currency (I don’t believe any non-democracy can have one, as I argue in my post), deeply liquid equity and labor markets, etc.
1. May 2013 at 09:07
Notice I didn’t develop my point well on the Indian/Pakistani/Bangladesh post – they come from very similar cultures (in the broad scheme, Indians will burn me for saying this) but have hugely different outcomes in America.
I think success of emigrants is usually a fair gauge. But again, institutions are important. China is growing so much faster and richer than India, but Indians in America do far better than Chinese (90k vs 65k).
1. May 2013 at 09:35
Scott, I just noticed you said: errorr, Interesting that I also predicted India will have the world’s largest economy in 50 years. Very few people agree with us.
I expect to have a blog post on this soon, will forward it to you, would love your thoughts.
In short, I am one of the few that agree (see the American income link above for a big argument), but with qualification. I see a very possible future in which India remains uncertain about its tryst with capitalism outside of the main cities. The biggest welfare redistribution program in the world, NREGA, encourages farmers against mechanization, is hugely expensive, and disincentivizes migration to cities. There are severe regulations preventing scalable industry. Primary and secondary education are a serious bottle-neck to India’s best institutes of higher education.
The parliamentary system is also highly problematic for a country as big as India. As free marketer Shashi Tharoor puts it, “It is a perversity only the British could have devised: to vote for a legislature not to legislate but in order to form the executive.”
It’s well-nigh ungovernable, and that poses large structural uncertainties and inability to control inflation and deficits (central bank in cahoots with this strategy by holding high reserve requirements on banks forcing a captive demand of Indian debt).
But again, in think in 50 years the Rupee will be a safer currency than the RMB because it is never a subgame perfect strategy for a democracy to default. Can’t say the same of China. You might also be interested in: http://ashokarao.com/2013/04/15/is-south-india-really-richer/
1. May 2013 at 09:43
Scott: Don’t apologise. There is nothing wrong with saying the Chinese are pragmatic. In general, they seem to be–it is a fair cultural generalization. That doesn’t mean their leadership will always act as such or that all individual Chinese are pragmatic.
Don’t surrender to the empty-headed political correctness of the left which lives in the fantasy that all peoples and cultures are malleable soft putty, completely interchangeable, each existentially unbound. They use this nonsense as a sort of tyranny to censor speech, as Noah has just done with you. I am Chinese and I tend to think of the Chinese leadership as pragmatic, not that other leadership groups are not or cannot be. This is what I grew up with, what I observed about the way my elders tended to think. So what! It is my working hypothesis. But no, such a Sin for today’s liberals!
Yet, even if people like Noah succeed in tyrannizing others into not openly voicing their opinions (culled from lived experience and observations) the opinions do not go away; they merely go underground. I would rather people be able to voice cultural, social, racial observations honestly and openly– many such observations are simply plain to many. Political correctness is the most insidious, subversive threat to Western Civilization in a long time–well that’s my generalization that Western Civilization is on balance admirable, oh such a cultural stereotype about the Caucasian peoples. Tsk, tsk.
Jeff
1. May 2013 at 10:06
Ashok, my first-hand experiences and the statistics I’ve perused have both indicated that the difference between the average immigrant-to-the-US and the average resident-of-the-home-country is far starker for India than it is for China.
However, I don’t think the above point is actually necessary to make the argument for India’s potential.
1. May 2013 at 10:14
Jeff,
Be aware of the hypocrisy of pigeon-holing, mis-representing, and/or silencing other people’s views merely because you feel they’re pigeon-holing, mis-representing, and/or silencing yours.
1. May 2013 at 10:24
Right, myb6, agreed. But it should foil any “cultural” reasons.
Note that for a long time the “Hindu growth rate” was a term of contempt for bad growth before the ’80s. Of course, a better word for “Hindu growth rate” is “Fabian socialism”.
1. May 2013 at 13:55
It’s not culture. It’s IQ.
1. May 2013 at 14:07
[…] was framed in terms of economic interdependence and not of morality aka, helping the lazy Greek (some economists disagree with that stereotype) it is likely that bond spreads within the EU would not be as high as they are now and more power […]
1. May 2013 at 17:18
Scott… Normally I am with Noah about 90% of the time. I tend the opposite with you.
On this… Wow. Well said.
I do agree with Noah on how “derpy” Altman was.
It is like you said… “We can observe cultural differences, but don’t really know what part of the cultural differences matter for development. ”
And those guys who were Claiming “The Hive-mindedness of Asians was a good reason to expect China to do well was at least as derpy.
2. May 2013 at 00:12
[…] Scott Sumner has some thoughts too. I’ll add that I don’t think culture is nearly as important as other factors in the […]
2. May 2013 at 05:04
MCK comments on international worker’s day (is he working for two news outlets now?): http://www.bloomberg.com/news/2013-05-01/happy-may-day-capitalist-workers.html
And yes, Scott, I quite liked the Crook piece, I made sure to tweet it.
2. May 2013 at 05:18
Culture as a sort of residual? Oh yes, you mean race and genetics.
2. May 2013 at 06:38
Neil, I agree that lots of things like demographics matter. But don’t overemphasize the long term effects of horrific policies. China under Mao was just as bad off as North Korea in recent decades. Yes, lots of damage was done to health, but China still managed fast growth after Mao died.
Wonks, True, but East Germany is a developed country now. Obviously I think institutions and culture are both important, as I suggested in this post.
Talldave, You said;
“But institutions are usually stronger, as Korea and Nogales (Arizon/Sonora) demonstrate.”
Or perhaps culture is usually stronger, as Malaysia and South Africa and Peru demonstrate.
Ashok, You said;
“It’s worthwhile to note Korea has significant historical roots in Confucianism, but is as rich as Europe. And the North is poor because of really, really, crappy institutions: nothing cultural.”
I think you need to read my post more carefully, I do not disagree with this. Indeed many of your points echo what I said.
Jeff, I don’t think there is any danger of me giving in to political correctness. I think there is a term similar to “pragmatic” that does describe Chinese culture, but it isn’t precisely pragmatism. That’s why I changed my mind.
I’ve read that the Chinese are enthusiastic about research aimed at boosting intelligence through genetic manipulation. The West is squeamish. That’s more along the lines of what I was thinking of, but I’m not sure what term is appropriate.
Yaron, OK, but is IQ cultural?
Thanks Bill.
2. May 2013 at 06:46
Saturos,
I’ve not seen anything by MCK at Free Exchange in a while (too different from RA?) After a little digging, I found a post of links by MCK from two months ago.
2. May 2013 at 07:15
Or perhaps culture is usually stronger, as Malaysia and South Africa and Peru demonstrate.
I think it’s fair to say culture can be stronger than institutions, if those institutions are relatively weak or limited. Malaysia’s federal institutions would be a good example of this — the country is still more of a federation than a centralized state, with different regions living under markedly different regional institutions. In the case of SA, blacks only very recently gained access to state institutions, and Peru I’m not familiar with.
But I think it’s also fair to say strong institutions will generally trump culture. North and South Korea have a very clear delineation: identical cultures + different institutions imposed in the 1950s = largest bordered PPP GDP per capita differential in the world, as well as radically different political freedom. Nogales has a similar situation, straddling the US/Mexico border.
2. May 2013 at 07:54
Scott, never said you disagreed, just was in there as part of my larger point. Very much in tune with your and Noah’s points on Taiwan etc. But I think the biggest knock on Altman’s point – one he believes is validating – is the idea that the further institution of Confucian principles post-1990 in some way hurt growth.
If anything China has burst remarkably since then, and making hand-wavy predictions about what happens in 2040 is useless. For one, as I note, Confucianism is generally a counterveiling force against the state (it historically almost always has been – all of the big Chinese statists Qin, Ming and Mao tried killing it). Perhaps, no less with liberal trust in anecdotal opinion, you can account parts of state rigidity to Confucianism, but this is decidedly the exception.
2. May 2013 at 09:43
“For me the answer would be culture, culture, culture. But not culture in the sense that ignorant people use the term “culture.””
Let me introduce you to Jayman. He doesn’t use the word “culture” in the ignorant sense as a sort of code word for biology. Instead, he just says biology. Maybe he’s ignorant. Maybe the fact that he’s a partially black jamaican will allow you to consider his arguments before judging him.
http://jaymans.wordpress.com/2012/07/12/how-much-hard-evidence-do-you-need/
2. May 2013 at 11:01
I’d like to see more people from the various ideologies and disciplines acknowledge that there’s environment, genetics, culture, and institutions, and that they interact in ways that are difficult (maybe impossible) to suss out given our very limited data sets and experimental options. Some people will react with “DUH!” but how often does this sentiment actually show up in the writing?
Ashok, we can’t rule out culture from that datapoint: selection may bias cultural characterstics too, and/or cultural characterstics that lead to a model minority might not work as well on a nation-state level (I honestly don’t know). To me, India’s potential is more about the tailwinds of demographics, skills, and catch-up. I apologize for my nitpickiness, I enjoy your comments and I agree on your conclusion anyways.
Yaron: clearly IQ isn’t the only relevant variable. Also, I don’t think it’s conclusive which way the causation runs.
3. May 2013 at 00:50
Of course “culture” matters as it shapes the informal institutions, social mores are of course often as important as written laws. There is a huge difference between a low trust and a high trust equilibrium country. Something else I have seen is many cultures are very accepting of corruption in officials, there is a presumption of corruption which alters the constraints of government greatly. I am not sure I share your North Korea optimism, I don’t think there is a country in the history of the world that is quite analogous to the current situation there, though if South Korea takes over I’m sure they could grow quite rapidly.
3. May 2013 at 06:20
Talldave, I agree about Korea and the TexMex border, but I don’t think you addressed my examples. The federal structure of Malaysia doesn’t explain the ethnic differences in incomes, as these groups mix in the same states. This is true in many countries, even the US. Do American groups with high incomes (Asians, Jews, etc) have better institutions?
Brendan, I didn’t mean “genetic” when I said ignorant, I meant simplistic (i.e the view that the Greeks or Mexicans are “lazy” when they clearly are not.)
myb6, Yes, lots of factors are at work, and it’s really difficult to tease out individual strands. I also tend to think that advantages to one culture or another are not stable over time, as I indicated.
Rob, You said;
Of course “culture” matters as it shapes the informal institutions, social mores are of course often as important as written laws. There is a huge difference between a low trust and a high trust equilibrium country.”
A very important point that most people overlook. Culture is something that is more that the sum of individual attributes. That’s why individuals from dysfunctional cultures often do quite well in America. Hence it’s wrong to talk as if a bad culture reflects poorly on the individual people within that culture.
German culture in 1940 was really bad, and yet individual Germans were presumably not that different from the Germans of 1900 or 1980.