Sep 15, 2011

What is cultural economics and how can it help us understand economic growth?

From a paper by Alberto Alesina: (HT @cblatts)
We as economists always start with the assumption that preferences are primitive, exogenously given and we have nothing to say about where they come from. Cultural economics will lead in the direction of being more ambitious. Perhaps we can make some progress in the explanation of where certain attitudes are born, how they persist and what leads to a change. As economists, not only do we think of preferences as primitive but also as constant over time. This cultural analysis will also help us understand the evolution of preferences and will link up with other fascinating areas of research like that of “persuasion,” that is, how certain messages may change not only information and beliefs but also the utility function of individuals. Another connection here is with the literature on identity, pushed, amongst others, by George Akarloff.
But a cautionary note:
One has to admit that to study culture is not easy. It is a concept that is hard to measure and it is easy to fall into a trap of “anything goes”. We should maintain the rigor that economists have, even in the study of culture. Identification problems are huge. Reverse causality always looms in the background of these studies on culture. But we should not shy away from tackling big issues in economics. In my opinion, our profession is slipping too much into perfectly tight methodologies applied to smaller and smaller problems. We may perfectly identify certain things based upon “natural experiments”. But what we uncover may be quite small and none very general. Keep reading . . .

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