The intersection of culture and wealth
An economist looks for the roots of prosperity in cultural norms and beliefs.
There is a large and growing body of pseudo-academic literature arguing that “if we truly believe that all humans are equal, then disparity in condition can only be the result of systemic discrimination.” Scholars working in economic growth, by contrast, find many causes for “disparity in condition,” including disparities in cultural norms. As economist Oded Galor argues in his recent book The Journey of Humanity: The Origins of Wealth and Inequality:
Cultural traits — the shared values, norms, beliefs and preferences that prevail in a society and are transmitted across the generations — have often made a significant impact on a society’s development process. In particular, aspects of culture that dispose populations towards or away from the maintenance of strong family ties, interpersonal trust, individualism, future orientation and investment in human capital have considerable long-term economic implications.
Some cultural norms, then, are more conducive to economic prosperity than others. But what happens when we mix cultures with different norms? That is the question Garett Jones, an economist at George Mason University, explores in his new book The Culture Transplant: How Migrants Make the Economies They Move To a Lot Like the Ones They Left.
Starting with that observation, based on a huge body of empirical research — that cultural factors are indispensable in explaining differing levels of economic well-being — Jones explains that immigrants take the norms of their home country with them and, crucially, largely retain them in their new country.
Jones includes an example with an interesting local tie. He cites a paper by economists Yann Algan and Pierre Cahuc, which asked, “Do you think most people can be trusted, or overall do you think you can’t be too careful in dealing with others?” Algan and Cahuc found that, internationally, Scandinavian countries are the most trusting, and it isn’t even close. However, they also compared the levels of trust in Sweden with those of Americans with Swedish heritage. Summarizing their findings, Jones writes:
Current trust attitudes back in the ancestral homeland did a very good job predicting trust attitudes of Americans whose ancestors came from those homelands. Forty-six percent of the home-country attitude toward trust survived, when compared against migrants whose ancestors came from other countries. People from high-trust societies pass on about half of their high-trust attitudes to their descendants, and people from low-trust societies pass on about half of their low-trust attitudes. On average, hyphenated-Americans appear to get about half of their attitudes towards trust from the land that comes before the hyphen.
But don’t their descendants assimilate so that this number falls and levels of trust converge? Apparently not, at least not in the very short term. “[L]ooking only at those fourth-generation immigrants, people whose great-great-grandparents were the most recent ancestors to live their full lives overseas,” Jones writes, Algan and Cahuc find “the same 46 percent persistence.” Overall, “average trust levels in ancestral homelands explain about half the differences in average trust levels across these different groups of hyphenated Americans.”
This is an important finding. “[T]here’s already a big scholarly literature across business, economics, and political science arguing that trust (when combined with trustworthiness) is really important for prosperity and productivity,” Jones notes. It is a key element of “social capital,” which, in American Experiment’s new report “The X-Factor? Social capital and economic well-being: A quantitative analysis,” we find is statistically significant and positively related with economic well-being, as measured by median household income. So, might one reason for Minnesota’s above-average median household income be our above-average share of residents with Scandinavian heritage, whose ancestors brought high levels of social capital — especially trust — with them, which persists to the present day?
The final link in Jones’ chain is to argue that if, say, a large number of people with Galor’s “high-growth” norms immigrate to a country with “lower-growth” norms, this will raise the average norms in that country, making it more like the country they left, and improving its economic prospects (the process can work in reverse, as in the example he gives of Argentina after World War I).
Here the evidence is less conclusive, the argument being based more on example and analogy than on the reams of research supporting the previous links. While it might be true that the Chinese diaspora across Southeast Asia generally has high-growth norms and makes its host nations better off, does it follow that poor countries would make themselves better off by importing, as Jones suggests, large numbers of Chinese citizens? The Chinese population of Singapore or Thailand might not be representative of the average Chinese: They are descended from the people who left, after all.
This is a brave book. It takes serious, research-driven looks at some of the dominant mantras of today. I recommend reading it.