American Economic Association

Endogenous Preferences: The Cultural Consequences of Markets and Other Economic Institutions Author(s): Samuel Bowles Reviewed work(s): Source: Journal of Economic Literature, Vol. 36, No. 1 (Mar., 1998), pp. 75-111 Published by: American Economic Association Stable URL: http://www.jstor.org/stable/2564952 . Accessed: 01/06/2012 18:23

Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at . http://www.jstor.org/page/info/about/policies/terms.jsp

JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact [email protected].

American Economic Association is collaborating with JSTOR to digitize, preserve and extend access to Journal of Economic Literature.

http://www.jstor.org Journal of Economic Literature Vol. XXXVI (March 1998), pp. 75-111

Endogenous Preferences: The Cultural Consequences of Markets and other Economic Institutions

SAMUELBOWLES University of Massachusettsat Amherst

Than,ks to Eric Verhloogent, Jamiies Heinitz, Stephaniie Eckmiiani,Nicole Hubei-, an*d Melissa Os- bornte for research assistance, to the University of Sienia for pr-ovidinlg anii,un,paralleled en vi- ronm0ntentfor r-esea-rch ani-d writing, to Robert Boyd1, Coiin. Canerer, Rober-t Cialditti, Lilia Costabile, Joshu-a. Cohen, Gernald Cohen, Martin Daly, Peter- Dormii-ant,Catherine Eckel, Mar- cus Feldlm7an.,Ernst Fehr, Nanicy Folbre, Christina Fong, Bruino Fr-ey, Her-bert Ginitis, Karla Hoff, Daniel Kahneanwn, Melvin1 Kohn, David Kr-eps, Tiniiur-Kuran., George Loewen stein, Eli- n)or Ostromn, Benttley MacLeod, Paul MAaillerbe, Karl Ove Moene, Casey Mulligan, Richard Ni.sbett, Ugo Pagano, Jeani-Philippe Plattealu, John Roemn,er, Susan, Rose-Acker-miiani,Pauil Romiter,Pau-il Ro:zin, Andrewv Schotter, Paul Seabright, Gil Skilltiman, Peter Skott, Rolhini Soal.- nathan, Hillel Steiner, Philippe -van.iParijis, Burtont Weisbrod, Elisabeth Wood, Erik Olini Wr-ight, Viviana Zelizer, and6 twvo anonym-noutsreferee.5 for gutidanice in the literatuires covered here anid commttitenitsoni. ani, earlier draft, andctto the MacArtlhur Foundation for financial slp- port. Correspon.dentce to [email protected],ass.edu.

1. Hobbes' Fiction from the ways that society shapes the de- velopment of its members in favor of [Let us] . . . return again to the state of na- "taking individuals as they are." Reflect- ture, and consider men as if but even now sprung out of the earth, and suddenly (like ing this canon, most economists have not mushrooms), come to full maturity, without asked how we come to want and value any kind of engagement with each other. the things we do. Hobbes' fiction neatly elides the in- Thomas Hobbes ([1651]1949, p. 100) fluence of social arrangements on the If friends make gifts, gifts make friends.... process of human development and thus Thus do primitive people transcend the Hob- greatly simplifies the task of economic besian chaos. theory. But the scope of economic in- Marshall Sahlins (1972, p. 186) quiry is thereby truncated in ways M /[ARKETS AND OTHER economic in- which restrict its explanatory power, stitutions do more than allocate policy relevance, and ethical coherence. goods and services: they also influence If preferences are affected by the poli- the evolution of values, tastes, and per- cies or institutional arrangements we sonalities. Economists have long as- study, we can neither accurately predict sumed otherwise; the axiom of exoge- nor coherently evaluate the likely con- nous preferences is as old as liberal sequences of new policies or institu- political philosophy itself. Thomas tions without taking account of prefer- Hobbes' mushroom metaphor abstracts ence endogeneitv. In the Dages which 75 76 Journal of Economic Literature, Vol. XXXVI (March 1998) follow I review models and evidence kets and other economic institutions on concerning the impact of economic in- human development.2 But consensus stitutions on preferences, broadly con- eludes any of the grand claims made strued, and comment on some implica- concerning the nature of the effects or tions for economic theory and policy how they might be generated. The rea- analysis.1 son-is that most writers have implicitly The production and distribution of invoked a kind of functionalist corre- goods and services in any society is or- spondence between economic struc- ganized by a set of rules, among which tures on the one hand and values, cus- are allocation by fiat in states, firms, toms, and tastes on the other, without and other organizations, patriarchal and explaining the mechanisms by which the other customary allocations based on former might affect the latter. Thought- gender, age, and kinship (as for example ful works on the subject-Joseph takes place within families), gift, theft, Schumpeter (1950) on "the civilization bargaining, and of course markets. Par- of capitalism," Daniel Bell (1976) on ticular combinations of these rules give "the cultural contradictions of capital- entire societies modifiers such as "capi- ism," David Potter (1954) on the "peo- talist," "traditional," "communist," "pa- ple of plenty," Karl Polanyi (1957) on triarchal," and "corporatist." These dis- "the great transformation," or Peter tinct allocation rules along with other Laslett (1965) on "the world we have institutions dictate what one must do or lost"-are surprisingly bereft of causal be to acquire one's livelihood. In so arguments. doing they impose characteristic pat- Nonetheless, the argument that eco- terns of interaction on the people who nomic institutions influence motivations make up a society, affecting who meets and values is plausible, and the amount whom, on what terms, to perform which of evidence consistent with the hy- tasks, and with what expectation of re- pothesis is impressive. Many ethno- wards. graphic and historical studies, for exam- One risks banality, not controversy, in ple, recount the impact of modern suggesting that these allocation rules economic institutions on traditional or therefore influence the process of hu- indigenous cultures.3 The rapid rise of man development, affecting personality, feminist values, the reduction in family habits, tastes, identities, and values. size, and the transformation of sexual One cannot be too far out on a limb practices coincident with the extension when in the company of Adam Smith as of women's labor force participation well as Edmund Burke, Alexis de Toc- likewise suggest that changes in eco- queville and Karl Marx, John Stuart nomic organization may foster dramatic Mill and Frederick Hayek: all cele- changes in value orientations. brated or lamented the effects of mar- Drawing on literatures from the other

1 I abstract from other forms of preference en- dogeneity such as the many variants of Harvey 2 In these pages and elsewhere, Albert Leibenstein's (1950) "bandwagon" and "snob" ef- Hirschman (1977, 1982) has catalogued early fects or James Duesenberry's (1949) analysis of statements of the cultural effects of markets, obvi- keeping up with the Jones' or Thorstein Veblen's ating the need for more than passing mention (1934) emulation effects, or the interdependent here. preferences studied by Robert Pollak (1976). 3 Among the more instructive not mentioned Rather, I here develop the research agenda sug- elsewhere in this essay are Kenelm Burridge gested by Herbert Gintis' early (1971, 1972) inves- (1969), Daniel Lerner (1958), Margaret J. Field tigations of the impact of economic institutions on (1960), T. Scarlett Epstein (1962), Michael Taus- preferences. sig (1980), and Jean Ensminger (1992). Bowles: Endogenous Preferences 77 social sciences, history, and experimen- and desires, including child rearing tal economics, I have identified five ef- and schooling, as well as informal learn- fects of markets and other economic in- ing rules such as conformism (Section stitutions on preferences. Few are 8). supported by empirical evidence that Until recently, economic theory gave will convince a confirmed skeptic, but little guidance in understanding these most are plausible and consistent with effects, for it purposefully abstracted substantial evidence. from wlhat were considered to be the ir- Framing and situation construal: eco- relevant sociological details of the ex- nomic institutions are situations in the change process. In the complete con- social psychological sense and thus have tracting world of Walrasian economics, framing and other situation construal for example, there is little reason for an effects; people make different choices economic actor to be concerned about depending on whether the identical fea- his exchange partner's psychological sible set they face is generated by a makeup or moral commitments; more- market-like process or not (I address over there is no way that these personal these issues in Section 4). traits could be affected, if one were so Intrinsic and extrinsic motivations: concerned. Markets of this type, wrote the ample scope of market choices and Albert Hirschman in these pages (1982, often extrinsic nature of market rewards p. 1473), are peopled by "large numbers may induce preference changes driven of price taking anonymous buyers and by individual desires for feelings of sellers supplied with perfect informa- competence and self-determination; tion" . . . and "function without any pro- other institutions may have related ef- longed human or social contact among fects (Section 5). or between the parties." Grocery mar- Effects on the evolution of norms: kets approximate this ideal (a fact which economic institutions influence the may explain why fruit stands and fish structure of social interactions and thus markets figure so prominently in eco- affect the evolution of norms by alter- nomics textbooks). ing the returns to relationship-specific By contrast, now-standard micro- investments such as reputation-build- economic theories of labor, credit, and ing, affecting the kinds of sanctions that other markets as well as the contempo- may be applied in interactions, and rary theory of the firm treat economic changing the likelihood of interaction interactions as personal, strategic, and for different types of people (Section durable connections among people 6). whose identities matter for the out- Task performaance effects: economic comes. Aspects of social life once institutions structure the tasks people thought to be the province of psychol- face and hence influence not only ogy or sociology are thus seen to be es- their capacities but their values and sential to the explanation of the bread psychological functioning as well (Sec- and butter of economics: prices and tion 7). quantities. The theory of asymmetric in- Effects on the process of cultural formation and incomplete contracting transmtission: in part for the above shows that markets may not clear in reasons, and in part independently, competitive equilibrium, leading to markets and other institutions affect asymmetries between those on the short the cultural learning process itself, side of the market (able to secure all altering the ways we acquire our values the transactions they desire) and those 78 Journal of Economic Literature, Vol. XXXVI (March 1998)

on the long side of the market, some of Or, to take another example, there are which may be unable to secure any significant differences in the personal- transaction at all. An important conse- ity effects on participants in markets quence is the reappearance of complex, which clear in equilibrium and those asymmetrically placed, opportunistic, which do not, and in those markets and (especially) malleable economic ac- which do not clear, for people on the tors more reminiscent of the flesh and short side of the market (whose advan- blood dramatis personae of classical tageous positions may allow them to economics than the anemic and one-di- make take it or leave it offers) and mensional homo economicus of the those on the long side of the market, standard textbooks. some of whom are simply excluded Two aspects of exchanges with incom- from the exchange process, while others plete contracts account for this. First, fear losing the transaction they have se- where contracts are incompletely speci- cured. Thus the details of market struc- fied or costly to enforce, the ex post tures-and in particular the ways in terms of an exchange may depend on which social interactions are pat- the normative commitments and psy- terned-may be important. chological makeup of the parties to the I turn first to methodological issues. exchange; where the amount of work In the next section I ask what we mean done on the job cannot be secured by a by preferences and how they might be contract it will be influenced by the em- influenced by economic institutions; ployee's work ethic or sense of aliena- and in Section 3 I present a model illu- tion, for example. minating the influence of economic in- Second, because of the durability of stitutions on the process of cultural evo- the exchange, one or both parties may lution. have the capacity to structure the rela- tionship so as to affect the preferences 2. Social Interactions and the Evolution of their exchange partner (Bowles and of Preferences Gintis 1993; Mulligan 1997). Paternalis- tic policies in lifetime employment I do not know the fruit salesmanpersonally; and I have no particularinterest in his well- firms are an example. Incomplete con- being. He reciprocatesthis attitude.I do not tracts thus provide both the motivation know, and I have no need to know whether and the means for deliberate (as well as he is in direst poverty,extremely wealthy, or unwitting) preference modification in somewherein between . . Yet the two of us the exchange process. are able to . . . transactexchanges efficiently because both parties agree on the property Models of incomplete contracts not rightsrelevant to them. only dramatize the shortcomings of the JamesBuchanan (1975, p. 17) exogenous preferences assumption, they also provide a basis for a more nuanced Preferences are reasons for behavior, treatment of the effects of markets and that is, attributes of individuals that other economic institutions on prefer- (along with their beliefs and capacities) ences. Walrasian grocery markets sup- account for the actions they take in a port personal interactions quite distinct given situation. To explain why a person from the long term relationship charac- chose a point in a budget set, for exam- teristic of a lifelong employment firm; ple, one might make reference to her and the differences in the structure of craving for the chosen goods, or to a re- these exchanges appear to have effects ligious prohibition against the excluded on preferences, as we will see presently. goods. Conceived this way, preferences Bowles: Endogenous Preferences 79 go considerably beyond tastes, as an power they must be sufficiently per- adequate account of individual actions sistent to explain behaviors over time would have to include values or what and across situations.5 If preferences Amartya Sen (1977) terms commit- are endogenous with respect to eco- ments and John Harsanyi (1982) calls nomic institutions it will be important moral preferences (as distinct from per- to distinguish between the effects of sonal preferences). Also included are the incentives and constraints of an the manner in which the individual con- institutional setup (along with given strues the situation in which the choice preferences) on behaviors, and the is to be made (Lee Ross and Nisbett effect of the institution on prefer- 1991), the way that the decision situ- ences per se. The key distinction is that ation is framed (Amos Tversky and where preferences (and not just be- Kahneman 1986), compulsions, addic- haviors) are endogenous they will tions, habits, and more broadly, psycho- have explanatory power in situations logical dispositions. Preferences may be distinct from the institutional environ- strongly cognitively mediated-my en- ments which account for their adoption. joying ice cream may depend critically Thus, however acquired, preferences on my belief that ice cream does not must be internalized, taking on the make me fat-or they may be visceral status of general motives or constraints reactions-like disgust or fear-evoking on behavior. Values which become du- strong emotions but having only the rable attributes of individuals-for ex- most minimal cognitive aspects (Robert ample, the sense of one's own efficacy B. Zajonc 1980; David Laibson 1996; introduced below-may explain behav- Loewenstein 1997; Rozin and Carol Ne- iors in novel situations, and hence are meroff 1990). The term "preferences" included in this broad concept of pref- for these heterogeneous reasons for erences. behavior is perhaps too narrow, and We acquire preferences through ge- runs the risk of falsely suggesting that netic inheritance and learning. Very a single model of action is sufficient; long lasting economic institutions, such Patrick H. Nowell-Smith's (1984) "pro as the social structures of the simple so- and con attitudes" or "reasons for cieties which predominated in the first choosing" are more descriptive, but un- 100,000 years (90 percent) of biologi- wieldy.4 cally modern human existence, could For preferences to have explanatory substantially affect gene distributions in a population and hence could pro- 4 In order to account for an individual's actions vide part of a genetic explanation of preferences need not coincide with the reasons preferences (Christopher Boehm 1993; given by the particular individual, of course. Nor do preferences alone generally give a sufficient ac- Linnda Caporael et al. 1989; Feldman count of behaviors: my consumption of aspirin is and Kevin Laland 1996; William Dur- accounted for by my aversion to pain plus my be- ham 1991). Nonetheless it seems likely lief that aspirin will relieve the pain and that this little white object is indeed an aspirin, and so on. that the more important effects of eco- 5 Benjamin Bloom (1964) documents stability nomic organization on preferences op- over time of a range of measured personality erate through cultural transmission, traits. For particular psychological dimensions in- troduced below see Herman Witkin and John that is, learning. Drawing on the exten- Berry (1975 p. 41; field independence), Paul An- sive literature on food tastes, Clark drisani and Gilbert Nestel (1976 p. 161; internal- external locus of control), and Kohn and Carmi Schooler (1983 p. 147; self-directedness). Ross evidence for intertemporal and cross situational and Nisbett (1991) provide a critical review of the consistency of behavior. 80 Journal of Economic Literature, Vol. XXXVI (March 1998)

McCauley, Rozin, and Barry Schwartz culture in search of work), and confor- (1994, p. 27) write: mism (Solomon Asch 1952; Muzafer Sherif 1937; Theodore Newcomb et al The human being comes into the world with 1967). While the individual benefits ac- certain likes and dislikes, such as innate dis- cruing to those exhibiting particular like of pain, bitter tastes, and many types of strong stimulation, and an innate liking for cultural traits may affect these learning certain types of touch or sweet tastes . . . Al- processes and hence the rate at which most the entire adult ensemble of likes and the traits are replicated, most prefer- dislikes is acquired, presumably in the pro- ences are not chosen in the usual sense cess of enculturation. of intentional action toward given ends. Rather, preferences are learned as an For this reason I will treat preferences accent or a taste for a national cuisine is as cultural traits, or learned influences acquired, that is, by processes which on behavior: liking ice cream, or never may but need not be intentional. lying, or reciprocating dinner invitations However acquired, preferences are are cultural traits.6 internalized: there is considerable evi- We know surprisingly little about how dence that preferences learned under we come to have the preferences we do; one set of circumstances becomne gener- the theory of cultural evolution is thus alized reasons for behavior. Thus eco- similar to the theory of natural selection nomic institutions may induce specific prior to its integration with Mendelian behaviors-self-regarding, opportunis- genetics. While it is comforting to recall tic, or cooperative, say-which then be- that Darwin's contribution was possible come part of the behavioral repertoire even though he did not know how traits of the individual. The effects of mere are passed on, this lacuna is nonetheless exposure just mentioned provide a par- a major impediment to endogenizing ticularly transparent example: "likes" or preferences. We know that intentional habits initially induced by exposure or motivations are sometimes involved; repetition become permanent reasons one learns to appreciate classical music for behavior. because one notices that aficionados ap- Learning by doing is another mecha- pear to enjoy it (Gintis 1972; Bowles nism for the generalization of prefer- and Gintis 1986; Gary Becker 1996). ences: behaviors found successful in But instrumental motivations may be of coping with the tasks defined by one limited importance compared to other sphere of life are generalized to other influences such as mere exposure realms of life. Paul Breer and Edwin (Zajonc 1968), the unintended conse- Locke (1965, p. 253) present substan- quences of activities motivated by other tial experimental evidence to this ef- ends (such as migration to a different fect. They asked subjects to perform 6 The pioneering works in the formal theory of different sets of tasks and investi- cultural evolution are Luigi Cavalli-Sforza and gated changes in apparently unrelated Feldman (1981) and Boyd and Peter Richerson (1985). Robert LeVine (1973) earlier developed values: what he termed a Darwinian "variation-selection model to culture-personality relations." Sarah In a period of less than four hours and with- Otto, Freddy Christiansen, and Feldman (1995), out a single verbal reference to family, frater- Robert Plomin and his collaborators (see Plomin nity, way of life, or any of the other areas and Denise Daniels 1987) as well as Rozin (1991). Rozin and T. A. Vollmecke (1986) provide evi- measured, we succeeded in changing a wide dence that food tastes, psychological functioning, variety of attitudes ranging from specific be- and other traits are far from exhaustively deter- liefs about the most effective way to organize mined by genetic inheritance. a work group, to abstract values concerning Bowles: Endogenous Preferences 81

the individual and society. This evidence was tant, but where empirical studies are taken to mean that task experience is capable available, other influences appear as of exerting a very powerful influence on all sorts of beliefs, values, and preferences powerful if not more.7 If I am right that which, to the casual observer, appear to be acquiring preferences is akin to acquir- only remotely related to the task itself. ing an accent, studies of language change may be illuminating. On the ba- Finally, preferences may become gener- sis of intensive empirical study of lin- alized through a process which Leon guistic change in Philadelphia, for ex- Festinger (1957, p. 260) termed disso- ample, William Labov concluded that nance reduction: linguistic traits are not transmitted across the human organism tries to establish inter- group boundaries simply by exposure in the nal harmony, consistency or congruity among mass media or in schools. . . . Our basic lan- his opinions, attitudes, knowledge, and val- guage system is not acquired from school ues. . . . there is a drive toward consonance teachers or from radio announcers, but from among cognitions. friends and competitors: those who we ad- mire, and those who we have to be good The cognitive elements in dissonance enough to beat. (Labov 1983, p. 23) could be one's values and a behavior, as when one is doing something which is in- The inference is not that institutions consistent with one's values. Festinger such as schools and churches are unim- (1957, pp. 271-73) frequently used this portant, but that understanding their reasoning to explain "specific ideological role in the acquisition of cultural traits changes or opinion changes subsequent may be enhanced by seeing them-along to the change in a person's way of life" with markets, firms, families, and gov- such as a: ernments-as distinct patterns of social interaction affecting the diffusion of cul- sudden change in the job which a person tural traits in a population in ways often does. A worker in a factory, for example may be promoted to the job of foreman. Suddenly unrecognized by any of the participants. he finds himself giving orders instead of re- ceiving them . . . these new actions will be 3. Economic Institutions dissonant in many instances with opinions and Cultural Evolution and values which he acquired as a worker and still holds. In pursuit of dissonance reduc- [The 17th century Salem "witches" and their tion, one would expect this person to quite defenders were] a group of people who were rapidly accept the opinions and values of on the advancing edge of profound historical other foreman, that is, opinions and values change. If from one angle they were diverg- which are consonant with the things he now ing from an accepted norm of behavior, from does. 7 Studies of preferences for brands of food, Dissonance reduction thus provides an- soap, movies, and other consumption items for other explanation for how economic which one would expect an important advertising effect indicate that personal contact is consider- circumstances may induce new prefer- ably more important than advertising in motivating ences, and why the new preferences brand changes (Elihu Katz and Paul Lazarsfeld might become general reasons for behav- 1955.) Everett Rogers' (1962) classic study of dif- fusion of innovations found personal communica- ior. tion to be of substantial importance in the diffu- In contrast to the social interactions sion of both ideas and practices such as cooking based taken would methods. Some behavioral changes may be in- approach here, many duced simply by providing information; in these emphasize the role of religious or politi- cases media exposure appears to be effective. But cal indoctrination or advertising in pref- where information alone is insufficient (changes in erence change. These intentional forms smoking behavior, e.g.) face to face contact ap- pears to be more effective (June Flora, Nathan of inculcation are undoubtedly impor- Maccoby, and John Farquhar 1989). 82 Journal of Economic Literature. Vol. XXXVI (March 1998)

another angle their values represented the which were not explicable by religious "norm" of the future. In an age about to pass, or educational influences. However, the the assertion of private will posed the direst possible threat to the stability of the commu- pattern of personality differences were nity; in the age about to arrive it would form consistent with the hypothesis that a central pillar on which that stability rested. distinct motivations had evolved as adaptations to longstanding geographi- Paul Boyer and Stephen Nissenbaum (1974, p. 109) cally determined differences in struc- tures of competitive economic opportu- How might allocation rules affect the nity among the various cultural groups. differential replication of cultural Moreover as market-based and other traits? The gist of an answer is given competitive systems of advancement be- best by a concrete example. Erich came more generalized during the Fromm and Michael Maccoby's (1970, course of the twentieth century, those p. 232) study of social character in a exhibiting high levels of achievement Mexican village led them to this conclu- orientation-some of them presumably sion: "deviants" in the premodern compli- ance-based rather than achievement- In a relatively stable society (or class) with its typical social character there will always be oriented subcultures-gained positions deviant characters who are unsuccessful or of educational leadership, thus assum- even misfits under the traditional conditions. ing roles as privileged cultural models. However in the process of socioeconomic These studies of Mexico and Nigeria change, new economic trends develop for suggest that new economic arrange- which the traditional character is not well adapted, while a certain heretofore deviant ments might affect cultural evolution in character type can make optimal use of the two ways: either by influencing the eco- new conditions. As a result the "ex deviants" nomic well-being of those exhibiting become the most successful individuals or distinct traits or by altering the learning leaders of their society or class. They acquire rules which make up the process of cul- the power to change laws, educational sys- tems, and institutions in a way that . . . influ- tural transmission itself. The cultural ences the character development of succeed- transmission process translates eco- ing generations. . . . deviant and secondary nomic well-being, exposure to role trait personalities never fully disappear and models, and other influences into repli- hence . . . social changes always find the indi- cation of traits, and thus intervenes be- viduals and groups that can serve as the core for the new social order. tween payoffs and replication. Evolutionary game theoretic models The traits of the "ex deviants" in this ex- typically abstract entirely from the pro- ample enjoy heightened replication pro- cess of cultural transmission, repre- pensities both directly (others may want senting payoffs associated with particu- to emulate the successful) and indirectly, lar traits as if they were the only because bearers of the traits become influences on the replication of traits.8 privileged cultural models, such as By contrast, models of cultural evolu- teachers. tion typically address what is known The Fromm-Maccoby view is sup- about the particulars of the process by ported by the field research of LeVine in Nigeria. Using David McClelland's 8 One could interpret the payoffs in evolutionary (1961) measures of achievement moti- game theoretic models as the replication propensi- vation and other value orientations, ties themselves, but while thus formally accommo- dating analysis of the process of cultural transmis- LeVine (1966) found significant differ- sion, this would add no insight to the distinct ences among distinct cultural groups influences of the transmission process per se. Bowles: Endogenous Preferences 83 which traits are acquired, distinguishing cultural inheritance. Frequency depen- between vertical transmission from par- dent replication may also arise where ents, oblique transmission from non-pa- groups that are nunerically preponder- rental members of the previous genera- ant are disproportionately likely to oc- tion (for example, teachers), and cupy privileged roles as teachers or horizontal transmission from one's own other cultural models. Persistent ethnic cohort (as in the case of language differences in food tastes, coupled with change or fashion; Penelope Eckert very low vertical (parental) transmission 1988, 1982; Labov 1972, p. 304).9 These of these tastes (Rozin 1991) is a piece models, as well as the studies of Mexico of evidence suggesting the importance and Nigeria above, make it clear that a of conformist transmission. Another, trait which is advantaged in the trans- from empirical cross cultural psycho- mission process may diffuse in a popula- logical studies, is the importance of tion even if the economic benefits asso- membership in particular tribes as a ciated with the trait are inferior to the predictor of values orientations, inde- population average. Thus the effects of pendently of sources of livelihood, ecol- economic institutions on both payoffs to ogy, and other possible influences distinct traits and the cultural transmis- (Robert Edgerton 1971). sion process must be studied. The relationship between payoff- A particularly important example of based and conformism or other fre- how a trait may be advantaged in the quency dependent influences on the transmission process is termed con- replication of cultural traits and the formist transmission: the prevalence of ways that these may be influenced by a trait in a population may enhance the economic institutions may be illustrated replication propensity of each repre- by means of a simple model based on sentative of that trait, independently of Bowles (1996). The basic intuition is the payoff to those exhibiting the trait. that the distribution of cultural traits in Under quite general conditions where a population is determined as the equi- learning is costly, conformist transmis- librium of a system whose exogenous sion may be efficient in the sense that elements are subject to long-term influ- an individual who sometimes adopts ence of markets and other economic in- traits by simply copying what others are stitutions. Economic institutions affect doing rather than on the basis of the the evolution of preferences by chang- payoffs associated with various actions ing these exogenous determinants of will do better than those who always en- the cultural equilibrium. gage in costly investigation of the rele- Suppose x and y are mutually exclu- vant payoffs (Boyd and Richerson 1985; sive cultural traits. Each member of a Feldman, Kenichi Aoki, and Jochen large population is a "cultural model" Kumm 1996). Conformist transmission with replication propensities, rx or ry, of preferences thus might have evolved defined as the number of copies of each under the influence of either genetic or model made at end of each period, pos- sibly a generation. Agents implement 9Empirical studies in this tradition include the strategy dictated by their trait in a Kuang-Ho Chen, Cavalli-Sforza, and Feldman (1982) and Cavalli-Sforza et al. (1982); Boyd and game which assigns benefits to each, Richerson (1985) survey many empirical studies of following which the traits are replicated these three transmission processes. Alberto Bisin through an updating process described and Thierry Verdier (1996) present a model of preference evolution integrating the cultural evo- below, generating a new population fre- lution and evolutionary game theory approaches. quency (one may think of the popula- 84 Journal of Economic Literature, Vol. XXXVI (March 1998) tion as composed of single parents each by the population frequency. The ex- with a single child, who in the process pected payoffs are thus of growing up may or may not adopt the = + tt(X (1) traits of the parent). Cultural equilib- bx(p;6) tx,t(x,x) ,y) rium is defined as a frequency of traits by(p;6) = j1yxJt(y,X)+ Lyyt(y,y). which is stationary. To take account of frequency depen- Members of the population are dent biases in cultural transmission paired to play a two-person game, the suppose that conformist transmission is payoffs of which are denoted nt(i,j), the described by the conformist bias func- payoff to playing trait i against aj-play- tion 3(p), which we write as Q,(p - k) ing partner. The "game" may be one of and ,y(k - p) where for simplicity the familiar interactions of the hawk- a=6 ->0= and k E [0,1] is the value dove, prisoners' dilemma, or coordin- of p for which no bias operates. Further ation game type. It might refer to an we define a e [0,1], the degree of con- interaction as everyday as eating a meal formism, as the weight placed on a (p) together, or meeting in public, where as opposed to b(p; 6) in the transmis- the two traits might dictate matters of sion process. Thus we have the replica- style ("wearing a tie") or taste ("wanting tion propensities: a drink"). Or- it could refer to an ex- change of goods or some more conven- r, = ca(p - k) tionally economic interaction. The pay- + (1 - o)(bx(p;6) - by(p;6)) + 1 (2) off structure could be degenerate in the sense that my enjoyment of a beer may ry = OCG(k- p) not depend at all on what you are eating + (1 - c)(by(p;6) - bx(p;6)) + 1. or drinking; but the model is designed Where p = k, or if cx = 0 conformist to address more interesting cases of transmission does not so emulation, social dilemmas and the like. operate replica- tion depends solely on payoffs, as in con- For any population frequency of the x ventional evolutionary game theoretic trait, p e [0,1] let ,uij = be the giy(p;6) models. Equilibrium is probability of being paired with aj type defined by dp/dt = 0, which for p e that conditional on being an i type, where (0,1) requires the effects of conformist transmission 6 e [0,1] is a measure of the exog- offset the effects of unequal out- enously determined extent to which game comes so that r. = ry, or pairing is nonrandom.10 If pairing is random 6 = 0 and the probability of 6a(p - kY(l - c) = by(p;6)- bx(p;6) (3) meeting an x type is simply p, irrespec- from which it can be seen that cultural tive of one's own type: ju. = ,uyx = p. equilibrium does not require equal pay- But where residence is correlated with offs. Figure 1 illustrates this equilibrium type, or where sorting by type takes condition for the case of an interior sta- place by means of social networks or ble equilibrium. This equilibrium can be other groups, the probability of meeting seen to be stable because for p > p" the one's own tVDe may exceed that given payoff advantage of the y trait (the right- hand side of (3)) more than offsets its 10The explicit relationship between the g's and p is this: define 6 as the degree of segmentation disadvantage due to conformist transmis- of the population, then for p E (0,1), gxx = 6 + sion (the lefthand side), as a result of (l-6)p and p,u = (1-6)(l-p), from which it is clear which > r,. giving dp/dt < 0. So dis- that 6 is a non-genetic analogue to the "degree of ry relatedness" in biological models (W. D.Hamilton turbances of p will be self correcting. 1975; Alan Grafen 1979). Markets and other economic institu- Bowles: Endogenous Preferences 85

payoff b (pJ;6)- bx(p;6) units (payoff effect)

1-ct (coinforiiiisiimeffect)

k / , 1.0 p

Figure 1. Cultural Equilibrium tions will affect the distribution of cul- To say that economic institutions tural traits in the population because have these effects is, of course, to com- they influence the determination of the pare markets, say, with some other allo- exogenous variables in the above model: cation rule or to compare various types i) the rules governing who interacts of markets. Allocation rules are differ- with whom (as indicated by the func- ing mechanisms for coordinating the tions git(p,6) measuring the degree of transfer of goods and services. Econo- segmentation into distinct social net- mists tend to focus on the relationships works and other sources of nonran- thereby established among the objects dom pairing); of exchange, relative prices, for exam- ple. But allocation rules also establish ii) the payoffs t(i,j) to any given inter- relationships among people, based on action (determined by the frequency assignment to distinct positions with of interaction, ease of recognition of corresponding rights, status and obliga- types, for example); tions and patterns of interaction. Thus iii) the structure of the transmission markets support interpersonal experi- process itself (in this case the nature ences distinct from other allocation and strength of conformism, cx, k, rules. Robert Lane (1991), whose The and x, including the assignment of Market Experience must be the starting some types as compulsory or other- point for any consideration of the psy- wise advantaged models, such as chology of markets, writes: teachers). In more complex models, allowing for In spite of the variety of markets over time movement among population groups, and across cultures, I believe that it is possi- cultural equilibria are influenced by mi- ble to conceive of a mfarket experience that is typical, frequent, and paradigmatic for those gratory flows, which in turn are subject who do market work for pay, use money and to the influence of economic institutions buy-rather than make, inherit or receive (Bowles and Gintis 1998). from government-the commodities with 86 Journal of Economic Literature, Vol. XXXVI (March 1998)

which they adorn their lives. (p. 4). . . Inevi- tably the market shapes how humans flourish, Anonym-ous Personal the development of their existences, their minds, and their dignity. (p. 17) Eplhemneral Ideal Markets Asciiptive Markets What is psychologically distinctive Durable Bureaucracies Commniiiuinities about markets as opposed to other allocation mechanisms? Max Weber Figure 2. Allocation Rules as Learning Environmiients ([192211978, p. 636) wrote "A market may be said to exist wherever there what Parsons (1967, p. 507) calls the is competition for opportunities of "two principal competitors" of the mar- exchange among a plurality of poten- ket: "requisitioning through the direct tial parties.""l Markets structure social application of political power" and interactions "each of which is specifi- "non-political solidarities and communi- cally ephemeral insofar as it ceases ties." These allocation rules contrast to exist with the act of exchanging with markets in at least one of the char- the goods." As a result, according to acteristics-impersonality and epheme- Weber, rality-stressed by Weber. Centralized bureaucratic allocations are in some re- The market community as such is the most impersonal relationship of practical life into spects as impersonal as markets-at which humans can enter with one another. least ideally-but membership in the This is not due to the potentiality of struggle group defining the allocation is gener- among the interested parties which is inher- ally given, entry and exit costs are high ent in the market relationship. . . The rea- (often involving a change in citizenship son for the impersonality of the market is its matter-of-factness, its orientation to the com- or at least residence), and contacts are modity and only to that. far from ephemeral. In contrast to both bureaucratic and market allocation, In Weber's view, then, markets-at least kin-like directly interacting communi- ideally-are characterized by imperson- ties with stable membership exhibit ality, ephemerality of contact, and ease neither ephemerality nor impersonality of entry and exit. 12 This might be in their characteristic rules governing termed the economics textbook concep- allocation. 13 Figure 2 presents these tion of competitive markets. three ideal types along with a fourth- Contrast these arrangements with ephemeral and personal social interac- tion-which I have termed ascriptively 11 Georg Simmel (1900, p. 297) writes in similar vein that "'money . . . is conducive to the removal ordered markets. Racially segmented of the personal element from human relationships spot labor markets are an example, as through its indifferent and objective nature." Tal- they are personal (the racial identities cott Parsons (1949, p. 688) describes markets simi- larly: "When a man walks into a store in a strange of the participants matter) but the city to make a purchase, his only relevant relation contact among participants is not on- to the clerk behind the counter concerns matters going. of kind of good, price, etc. All other facts about both persons may be disregarded. Above all it is The contrast between personalized not necessary even to know whether the two have non-market transactions and the puta- any further interests in common beyond the im- tive impersonality of market exchange mediate transaction." 12 On the psychological dimensions of distinct economic arrangements, see Alan Page Fiske 13 I have in mind allocation systems of the type (1991, 1992). Among economists, Yoram Ben-Po- described by Emile Durkheim's "organic solidar- rath (1980, p. 4) provides the fullest description of ity" ([1933]1964), or Sahlins' (1972) "generalized the idealized interactions among market agents as reciprocity," or Ferdinand Tonnies' ([1887]1963) "iimpersonal." See also Zelizer (1996). Gemeinschaft, or William Ouchi's "clans" (1980). Bowles: Endoerenous Preferences 87 is, of course, a matter of degree, par- feel entitled to the service (irrespective ticularly in markets characterized by of the taxes paid) and may be unlikely the asymmetric information, incomplete to compare the value of the service to contracts and hence importance of that of other goods and services trust, ongoing interaction, and shared whether traded or not; in the second understandings of the type analyzed by case one may feel that the good is ac- the theory of social exchange.'4 Imper- quired by dint of one's talents as an in- sonality of contact and permeability of come earner, and may readily compare boundaries, while characteristic of all its price with other traded goods and markets by comparison to other alloca- services, the value of one's own labor tion rules, describe some markets more time, and the like. This framing effect aptly than others. Thus in assessing the may thus be part of an account of why a cultural effects of markets it will be particular action was taken; if different necessary to distinguish not only be- institutions induce different choices tween markets and other allocation from an identical choice set institutions rules such as bureaucracy and commu- may affect preferences. This is because nity, but among differing types of mar- choices made under the influence of in- kets as well. stitutionally determined framing may I turn now to evidence and reasoning later be repeated even in the absence of concerning the five effects of economic the framing effect if the effects of expo- institutions on preferences previewed sure to the object of choice, or disso- in the introduction. nance reduction effects are strong; how- ever, I am aware of no evidence to this effect. 4. Markets, Situations, and Framing Markets thus affect behavior in ways Money is one of the shatteringly simplifying not fully captured by the fact that mar- ideas of all time, and like any other new and ket-determined prices and endowments compelling idea, it creates its own revolution. define the budget set: markets provide ... [The] Tiv [of Nigeria] have tried to cate- presumptive reasons why people pos- gorize money with other imported goods . . . sess the goods they do, and they prompt to be ranked morally below subsistence. They have, of course, not been successful in so do- some comparisons while inhibiting oth- ing. ers. I call these the construal effects of Paul Bohannan (1959, pp. 500, 503) markets, borrowing the term from so- cial psychology in preference to the fa- Markets frame choices; we will see miliar but narrower concept of framing that a choice problem presented in a effects. The construal effects of markets market environment may induce behav- arise in large part because people ap- iors different from the identical prob- pear to have what might be termed rela- lem in framed in a non-market way. tional preferences: the terms on which Consider an example of market framing: they are willing to transact depends paying a tax and receiving a governmen- both on the perceived relationships tal service differs relevantly from buy- among the exchanging parties, and on ing the identical service on a market. In related concepts of fairness. Markets af- the first case one may-as a citizen- fect both. 14 Kenneth Arrow (1971), George Akerlof There is considerable experimental (1984), Heinz Hollander (1990), Rachel Kranton evidence consistent with the impor- (1996), Kreps (1990), have recently formalized some of Peter Blau's (1964) and George Homans' tance of the construal effects of mar- (1958) early reasoning concerning social exchange. kets. Experimental markets and bar- 88 Journal of Economic Literature, Vol. XXXVI (March 1998)

gaining environments consistently yield ments, particularly those by Elizabeth discrepant results, with markets quickly Hoffman et al. (1994), have yielded converging to the competitive equilibria considerable insight on the construal ef- implied by self-regarding preferences, fects of markets. Hoffman and her col- and bargaining games often yielding laborators varied two aspects of the ex- evidence consistent with other-regard- perimental environment for ultimatum ing or relational preferences.15 An ex- and dictator games: proposers either ample of the later is the comparative won their position by doing well on a study of bargaining and market behav- trivia quiz or were randomly assigned, ior in four cultures by Alvin Roth et al. and their relationship to their game (1991). In their study both market partner was described either as an "ex- and bargaining experiments were de- change" (with prices elicited by the ex- signed to have distributionally extreme perimenter) or simply as "divide $10." equilibria, one player receiving all of The combined "earned status" plus "ex- the benefits. The market experiments change" experimental condition ap- quickly converged to this equilibrium in proximates a market arrangement in all four cultures. By contrast, proposers that competitive success is not simply a in the ultimatum game (the bargaining matter of chance but is based on appar- situation) made much higher than equi- ent accomplishment; and the exchange librium offers; and substantial positive framing of the game structure is tran- offers were frequently rejected.16 Posi- sparently more market-like than the "di- tive offers are also common in dictator viding the pie" framework.17 Despite games. These results are consistent with the fact that the experimental situation a large body of experimental evidence was otherwise identical, the two market by others, beginning with Werner Gtith, like protocols yielded significantly Rolf Schmittenberger, and Bernd smaller offers in both the ultimatum Schwarze (1982). game and the dictator game. A considerable body of research has In other experiments, market-like sought to explain this now well estab- anonymity generates behaviors differing lished aspect of ultimatum and dictator from those induced by more personal game play, with interest centering on settings. Communication or other con- the question (unrelated to my concern ditions contributing to group identity or here) of whether the unexpected results a reduction in social distance among ex- were motivated by intrinsically gener- perimental subjects increases contribu- ous preferences on the part of the pro- tions in public goods games (John posers. But the subsequent experi- Ledyard 1995; Robyn Dawes, Alphons

15Camerer and Richard Thaler (1995) is a re- 17 If, as I have suggested, markets enhance the cent survey of results for ultimatum and dictator perception that one's possessions are acquired by experiments. Alternating offer bargaining experi- merit rather than by chance, the extent of endow- ments yield similar results (Jack Ochs and Roth ment effects-the unwillingness to part with goods 1989). in one's possession for prices considerably higher 16A high offer in an ultimatum game may not than the maximum price one would have paid to indicate generosity toward the other player, but acquire them-may be subject to market effects. rather the anticipation that low offers will be re- Experimental subjects reported by Loewenstein jected. But the rejection of a positive offer is other and Samuel Issacharoff (1994) were particularly regarding (perhaps motivated by spite or a com- unwilling to part with objects in their possession if mitment to reciprocal fairness) so I represent high they came to possess them as a result of winning offers by the proposer as evidence of other regard- an inconsequential contest. Thus market-acquired ing behavior (either that of the proposer or the goods may Se more subject to endowment effects proposer's anticipation of the responder). than goods acquired as gifts or public transfers. Bowles: Endoeenous Preferences 89 van de Kragt, and John Orbell 1988) above market and non-market experi- and induces cooperative play in prison- ments were conducted with the same ers' dilemma interactions (Peter Kol- subject pools, these results are consis- lock 1997). Simon Gaechter and Fehr tent with the view that market-like situ- (1997) find that in a public goods inter- ations induce self-regarding behavior, action, even quite minimal (experimen- not by making people intrinsically self- tally induced) social familiarity among ish, but by evoking the self-regarding subjects enhances the impact of social behaviors in their preference reper- approval incentives (implemented by ex toires. Thus, the hypothesis that market post revelation of subjects' identities situations induce self-regarding behav- and contributions); when familiarity and ior does not imply that those living in the public revelation of one's contribu- non-market societies would be intrinsi- tions is combined, a significant increase cally less self-regarding.'9 in participation results. Where competitive markets approxi- On the basis of experimental evi- mate the law of the single price and dence from dictator and ultimatum where the extent of markets is such that games, Schotter, Avi Weiss, and Inigo few things do not have a price, markets Zapater (1996, p. 38) offer this conclu- have further construal effects: they fa- sion: cilitate comparison among disparate ob- jects. The appropriate comparison is to The morality of economic agents embedded in a market context may . . . be quite differ- settings (in families or in so-called ent from their morality in isolation. While we "primitive exchange") in which goods are not claiming that people change their na- may be transacted at vastly different ex- ture when they function in markets, it may be change ratios depending on the social that the competition inherent in markets and relationships among the parties to the the need to survive offers justifications for ac- tions that in isolation would be unjustifiable. exchange.20 Reporting on a pre-market society in southeastern New Guinea, A striking example illustrating this Raymond Firth (1958, p. 69) writes: suggestion is found in Catherine Andre "There is . . . no final measure of the and Platteau's (1997, p. 32) study of value of individual things, and no com- the impact of the land market in mon medium whereby every type of Rwanda: good and service can be translated into customary obligations attached to lineage terms of every other." Well working lands, in particular obligations to redistribute markets, by contrast, favor thinking of land in favor of landscarce kith and kin, cease goods both abstractly (bananas in gen- to apply when the lands are acquired through eral, not this particular banana) and a purchase instead of being handed down within the lineage. 19 In fact high ("other regarding") offers in the The experimental results might be ultimatum games of Roth et al. were made in what summarized by saying that the more the would appear to be the most and least market-like situation a societies in the sample-U.S. and the former Yu- experimental approximates goslavia (by contrast to Israel and Japan). In the competitive (and complete contracts) public goods experiments by Steven Kachelmeier market with many anonymous buyers and Mohamed Shehata (1997) subjects in Beijing and sellers, the less be- acted no different than the Canadian subjects un- other-regarding der conditions of anonymity but proved signifi- havior will be observed.18 Because the cantly less self regarding when the identity of the players was public knowledge. 18 On the differing outcomes of anonymous and 20 Sahlins' (1972) theory of primitive exchange is face to face bargaining see Roth (1995) and Roy distinct from market exchange precisely in this de- Radner and Schotter (1989). viation from the law of the single price. 90 Tournalof Economic Literature, Vol. XXXVI (March 1998)

comparatively (objects seen as repre- 5. Markets and Motivation senting more or less market value, di- vorced from their particular uses or In the realm of ends everything has either a are thus powerful price or dignity. Whatever has a price can be properties). Markets replaced by something else which is equiva- cognitive simplifiers, allowing radical lent; whatever is above all price, and there- reductions in the complexity with which fore has no equivalent, has dignity. one typically views an assortment of dis- Immanuel Kant ([1785]1949, p. 182) parate goods. A dramatic example is provided Bo- The reward structures of markets hannan's study (1959) of the extension may affect motivation independently of of markets in an African subsistence framing effects. The impersonality and economy, that of the Tiv in Nigeria. ephemerality of contact which charac- terizes markets (by contrast to other al- The most distinctive feature about the ecoln- location rules) imply that a market is a share omy of the. Tiv-and it feature they "transaction entails a full quid pro quo with many, perhaps most, of the pre-mone- tary peoples-is what can be called a multi- (with) no left-over business or outstand- centric economy . . . in which a society's ex- ing balance" (Ben-Porath 1980, p. 4) By changeable, goods fall into two or more default, then, the incentives relevant to mutually exclusive spheres, each marked by activities governed by markets fre- different institutionalization and different quently center on the quid pro quo and moral values. (p. 492) take the form of what social psycholo- Among the Tiv, domestic goods, women, gists term extrinsic rather than intrinsic and prestige goods were all exchanged, rewards or sanctions, namely rewards and in the latter there was a monetary unrelated to the activities being moti- equivalent (brass rods) but "no one, save vated. On the basis of dozens of experi- in the depths of extremity, ever paid ments by social psychologists over the brass rods for domestic goods" (p. 493), past 30 years one may conclude that the while "rights in women had no equiva- salience of extrinsic reward in market lent or 'price' in brass rods or in any activities will have effects on prefer- other item save, of course, identical ences. rights in another woman. . . . Exchanges A series of well-designed experiments within a category . . . excite no moral show that the degree to which an activ- judgements. Exchanges between catego- ity is liked may be reduced by inducing ries, however, do excite a moral reac- subjects to engage in the activity as a tion" (p. 496). The extension of general- means toward an extrinsic goal, such as ized markets, and with them money, being paid. The nature of the extrinsic eroded these arrangements: reward is unimportant as long as it is clearly a quid pro quo. Mark Lepper, General purpose money provides a common David Greene, and Nisbett (1973, p. denominator among all the spheres, thus 130) write "Contracting explicitly to en- making the commodities within each express- ible in terms of a single standard and hence gage in an activity for a reward (will) immediately exchangeable. (p. 500) undermine interest in the activity, even when the reward is insubstantial or Among the Tiv, the set of permissible ex- merely symbolic." Correspondingly changes has expanded with the advent of when people are induced to engage in markets and basic notions of what it an activity with little or no extrinsic re- means to have a well-ordered life have ward, they come to value the activity changed. more highly, that is, they come to be- Bowles: Endogenous Preferences 91

lieve that their actions were intrinsically Camerer and Howard Kunreuther motivated (Lepper and Greene 1978; 1989.) and Edward Deci and Richard Ryan While the evidence for extrinsic re- 1985; Deci 1975). ward and other self-determination ef- Similar changes in evaluations in- fects on preferences appears quite duced by extrinsic rewards have been strong, the relevant data provide little shown to affect subsequent behavior in support for the anti-market normative non-experimental situations. Frey and inferences sometimes thought to follow. Felix Oberholzer-Gee (1997) found First, the evidence does not implicate that proposing financial compensa- monetary rewards per se, but rather any tion reduced Swiss citizens' willingness extrinsic reward (including negative re- to host a nuclear waste facility. Richard wards such as punishments or admoni- Titmuss' (1971) claim that eliciting tions). Moreover, distinctly non-market blood donations by monetary incentives aspects of governance-close supervi- had perverse effects on preferences sion, externally imposed time limits for lacked compelling evidence, as was work tasks for example-appear to have pointed out by Arrow (1972) and Chris- similar effects (Lepper and Greene topher Bliss (1972). However a field 1978, p. 121). Paying someone to per- experiment by William Upton (1974) form a task which they might willingly partially supports Titmuss' sugges- have done without pay seems likely to tion. Among 1,261 prospective blood undermine motivation; but this says lit- donors in Kansas City and Denver, tle about the relative effectiveness of some were offered financial induce- the various ways-pay, supervision, ments, others not. Among those in- threat of job loss, etc.-to induce peo- itially exhibiting strong motivations to ple to undertake tasks which they would contribute blood (as indicated by past rather not do. Second, while the extrin- donations), those offered financial sic nature of market rewards may un- inducements were substantially less dermine motivations, the wide range of likely to actually donate blood than choices often afforded in market situ- those offered no financial reward. ations may support the sense of self- Among those expressing low intrinsic determination and thus induce positive motivation, however, the prospect of motivational effects. financial reward had a (not statistically significant) positive effect on eventual 6. Markets, Reputations, and Norms donation. The underlying psychological mecha- The real reason why all these economic obli- nism appears to be a fundamental de- gations [among the Trobriand Islanders] are sire for "feelings of competence and normally kept, and kept very scrupulously, is that failure to comply places a man in an in- self determination" which are associ- tolerable position ... The honourable citizen ated with intrinsically motivated behav- is bound to carry out his duties, though his iors (Deci 1975). Relatedly, a person's submission is not due to any instinct or intui- perceived degree of self-determination tive impulse or mysterious "group senti- in making a choice influences the evalu- ment," but to the detailed and elaborate working of a system, in which every act has ation of the things over which the its own place and must be performed without choice is being made. For example, risk fail .... every one is well aware of its exist- imposed by others is weighed more ence and in each concrete case he can fore- negatively than risk chosen by the sub- see the consequences. ject. (See Chauncy Starr 1969; see also Bronislaw Malinowski (1926, p. 40) 92 Journal of Economic Literature, Vol. XXXVI (March 1998)

"Market-like arrangements" wrote complete-contracting assumptions of Charles Schultze (1977, p. 18) "reduce the standard model, the adverse conse- the need for compassion, patriotism, quences of lack of trustworthiness or brotherly love, and cultural solidarity." generosity may be attenuated; but at Minimizing the demand on what might the same time markets may militate now be termed social capital, plus the against the evolution of these traits. conviction that the market system is, as Thus markets may undermine the re- Hayek (1948, p. 11) wrote "a system un- production of traits necessary for effi- der which bad men can do least harm," cient market transactions in the absence are among the attractive features of of complete contracting. markets. This is not to say, however, To see how this might be the case, I that markets make norms redundant; will consider a subset of norms which I where contracts are incomplete or un- call nice traits; these are behaviors enforceable, trustworthiness and other which in social interactions confer norms facilitate exchange. Arrow (1971, benefits on others. Others would like to p. 22) writes: be paired with those exhibiting nice In the absence of trust ... opportunitiesfor traits in an interaction. Included are mutuallybeneficial cooperationwould have such strategies as conditional or uncon- to be foregone ... normsof social behavior, ditional cooperation in a prisoners' di- including ethical and moral codes [may be] lemma game, contributing rather than . . .reactions of society to compensatefor withholding in a public goods game, or marketfailures. playing dove in a hawk-dove game.21 As But if, as Schultze and Hayek say, mar- my subsequent examples will confirm, it kets make fewer demands on people's is not possible to generalize about the elevated motivations, the impersonal and effect of markets on socially valued ephemeral nature of market interactions norms: "nice traits" may sustain collu- also affect the benefits and costs of ac- sion where competition would be more quiring cultural traits affecting socially socially beneficial, for example (Rose- valued behaviors. Markets thus affect not Ackerman 1997). Using a model similar only the demand for, but also the supply to that presented above, I (1996) show of cultural traits. Among these are repu- that allocation rules which closely con- tations for trustworthiness, generosity, form to idealized markets may support and vengefulness. lower equilibrium population frequen- Where markets govern the exchange cies of nice traits, by comparison with of well defined (meaning third party en- alternative allocation rules which devi- forceable) property rights, reputations ate from the market ideal. The intuition of any kind will tend to be both costly behind this result is that behaviors de- for people to acquire and of little bene- termined by nice traits affect others in fit to those who do, and for these rea- non-contractible ways, and the regula- sons unlikely to be favored by differen- tion of non-contractible behaviors tial replication. A consequence is that through market-like interactions gener- markets lack the personal element of non-market connections, and as Ben- 21 Bowles (1996) gives the following definition: in a population with traits x and x' the latter indi- Porath (1980, p. 18) writes, with "[t]he cating all other traits, x is a nice trait if lt(x,x) > development of markets . . . the bene- lt(x,x ), lt(x',x) > lt(x'x'), and it(x,x) > it(x',x'). fits from a connection decline as iden- Other nice traits are "learn" rather than "imitate" in games of conformism and learning of the type tity becomes less important." Thus studied by John Conlisk (1980) and Boyd and where markets approximate the ideal Richerson (1993). Bowles: Endogenous Preferences 93 ates analogues to familiar market failures tions are segmented so that individuals which in many cases may be attenuated of a given "type" tend to interact dis- by deviations from the market ideal. proportionately with one another, nice To see why this might be true con- types will be favored. For example, if sider the various ways-identified by bi- because of geographical or cultural seg- ologists, students of cultural evolution, mentation, the probability of interact- and evolutionary game theorists-that ing with one's own type is greater than nice traits might flourish in a large the population frequency of the trait, population. All, I will suggest, may be the equilibrium level of the nice trait weakened by the impersonality and will exceed the equilibrium distribution ephemerality of contact that charac- of traits in a population under random terize markets. First, frequently re- pairing. The reason is that segmentation peated interaction of a given pair of in- partially internalizes the externality as- dividuals provides opportunities to sociated with the nice trait: the non- sanction violations of norms and to re- random pairing means that the benefits ward nice traits. By contrast to other al- of niceness are disproportionately likely location rules, the ephemerality and to be conferred on others bearing nice anonymity of market interactions traits, thereby favoring the replication clearly militate against repeated pair- of nice traits. To the extent that the im- ings and hence against this mechanism personality (and hence anonymity) of for supporting nice traits. Second, fre- markets erodes the bases of segmenta- quent interaction of a limited number tion, markets inhibit this mechanism of people likewise lowers the cost of ac- that fosters the proliferation of nice quiring information about the recent traits. behaviors of others, thus increasing the Finally, socially beneficial culturally value of acquiring a reputation for be- transmitted traits may evolve if the ing "nice."22 The impersonality and pressure of cultural group selection is ephemerality of contact in markets sufficiently strong. This occurs when clearly militate against these mecha- the prevalence of nice traits in a sub- nisms favoring nice traits. group enhances the average perfor- The third mechanism-segmenta- mance of the group sufficiently to allow tion-is less familiar to economists, the trait to proliferate even if it is dis- having been introduced by biologists as advantaged in replication within each "games among relatives."23Where, as in group. Group selection pressures vary the model introduced above, popula- with the extent of group differences in the distribution of traits among the sub- 22 Bowles and Gintis (1997a) define a level of groups in a large population, which in "optimal parochialism" based on the latter mecha- nism in a model of endogenous group formation in turn depends on the level of migration a large population. In a population paired to play among groups and the extent to which one shot prisoners' dilemma games with the strat- the formation of new groups contrib- egy set augmented by an opportunity to pay a cost to determine the type of the other agent and to utes to between group differences, for cooperate if the other is either a cooperator or an example by favoring the formation of "inspector," the fraction of defectors in a (stable, groups which are more homogeneous interior) equilibriumn population distribution varies linearly wit! the cost of inspection. than the population as a whole (Boyd 2:3Grafen (1979) and Robert Axelrod and Wil- and Richerson 1990). High entry and liam Hamilton (1981). Bowles (1996) and Bowles exit costs and other supports for popula- and Gintis (1998) study the effect of segmentation on the evolution of nice traits in a large popula- tion segmentation sustain the group dif- tion. ferences which render the pressure of 94 Journal of Economic Literature, Vol. XXXVI (March 1998)

Model Effect favoring the Necessary structural Relationshipto replication of nice traits chiaracteristic idealized mwarkets

Retaliation Punishmiientof Frequent or long Unlikely given Taylor(1976), Drew antisocialbehaviors lasting interactions ephemerality Fudenberg-Eric Maskin (1986)

Reputation Kreps (1990), Enhanced value Low cost of Unlikely given Carl Shapiro (1983), of reputations information impersonality, Bowles and Gintis (1997a) for niceness about others ephemerality

Segmentation Advantageous Non random Unilikelygiven Grafen (1979), Hamilton pairing for those pairing of agents impersonality,low (1975), Axelrod-Hainilton witlhnice traits entry and exit (1981) costs

Group selection Enhanced group Limnitedintergroup Unlikely given low David Wilson and Elliot selection pressures migration,non-random entry and exit costs Sober (1994), Boyd and favor nice traits group forination and iinpersonality Richerson (1990)

Figure 3. How Markets May Discourage the Evolution of Nice Traits group selection effective. The low entry from idealized markets may induce and exit costs typical of markets-by "nice behaviors." comparison to other allocation rules- We have seen already that even in weaken the pressures of group selec- experimental markets characterized tion. by complete contracting and distri- Figure 3 summarizes these four butionally extreme (unfair) equilibrium mechanisms supporting the replication outcomes, the competitive equilibrium of nice traits, and the manner in which implied by self-regarding preferences market allocation rules may undermine is rapidly obtained in a wide variety them.24 Because these conjectures pre- of subject pools. This does not occur dict differences between the distri- in experimental markets with incom- bution of cultural traits in whole popu- plete contracts. In a series of experi- lations, adequate testing would require ments, Fehr and his co-authors have comparative data in which entire popu- found that contractual incompleteness lations governed by more or less market induces a pattern of reciprocity among like arrangements are the units of subjects which has durable effects on analysis. As the following studies sug- competitive equilibrium (Fehr and gest, however, less demanding tests us- Jean-Robert Tyran 1996; Fehr et al. ing experimental data on a common 1997; and Fehr, Gaechter, and Georg pool of subjects under varying institu- Kirchsteiger 1997). For example in an tional conditions suggest that deviations experimental labor market in which ef- fort is selected by the "worker" after a 24The bibliographic references merely give ex- wage offer is made by the "firm," the amples of the relevant models; inferences con- cerning the relationship between economic insti- subgame perfect equilibrium based on tutions and the evolution of norms are my own. self-regarding preferences in a one time Bowles: Endogenous Preferences 95 interaction (offer the lowest wage, pro- course, the degree of contractual in- vide the lowest effort level) does not oc- completeness is not exogenous, and it cur. Rather, "firms" offer wages higher may respond to the levels of trust and than necessary and "workers" recipro- reciprocity exhibited by the relevant cate by working harder than the mini- population of traders. For example, mum. lower levels of trust and reciprocity Relatedly, Kollock (1994, p. 341) in- would plausibly lead those designing vestigated "the structural origins of contracts and the relevant enforcement trust in a system of exchange, rather environments to be willing to pay more than treating trust as an individual per- for more complete contracts. Greifs sonality variable" with similar results. (1994) analysis of the divergent cultural Using an experimental design based on and institutional trajectories of the the exchange of goods of variable qual- Genovese and Maghribi traders in the ity, Kollock found that trust in and com- late medieval Mediterranean provides a mitment to trading partners as well as a well documented historical example. concern for one's own and others' The individualism of the Genovese trad- reputations emerges when product ers precluded the communitarian en- quality is variable and non-contractible forcement techniques of the Maghribi but not when it is contractible. These traders; but it also provided an impe- experimental results appear to capture tus for the development and perfection some of the structure of actual ex- of ultimately more successful third changes. Ammar Siamwalla's (1978) party enforcement of claims by the study of marketing structures in Thai- Genovese. land contrasts the impersonal structure If levels of trust and reciprocity on of the wholesale rice market-where the one hand and contractual incom- the quality of the product is readily as- pleteness on the other are mutually de- sayed by the buyer-with the personal- termining one may define an equilib- ized exchange based on trust in the raw rium set of norms and contracts. If the rubber market-where quality is impos- nature of the mutual influences are as I sible to determine at the point of pur- have suggested, there may be any num- chase. ber of these equilibria, some with high These experimental results suggest levels of trust and relatively incomplete that trust or reciprocity may depend on contracts (like the Maghribi traders) the form of the contract, contractual in- and others with the converse (like the completeness leading to trusting and re- Genovese). If this vastly oversimplified ciprocal behaviors, and conversely. view captures something about the dy- Fehr, Gaechter and Kirchsteiger (1997) namics of cultural change, we might ex- present a surprising case of this in their pect rapid shifts in both norms and con- experiments with "firms"and "workers." tracts where exogenous events "tip" the When they provided more complete society from the basin of attraction of contracting of labor effort through one norm-contract equilibrium to an- monitoring and the imposition of fines other. Thus, it seems reasonable that on workers in cases of verified shirking, some of the apparently profound cul- worker effort significantly declined. tural changes associated with the exten- Their interpretation is that explicit in- sion of markets in previously non-mar- centives may destroy trust- and reci- ket systems might be explained by the procity-based incentives. structural characteristics in Figure 3 Outside the experimenter's lab, of along with the increasingly contractual 96 Journal of Economic Literature, Vol. XXXVI (March 1998) nature of transactions between people which had directed community mem- and the related incentives to reallocate bers' efforts and imagination toward time and effort away from human in- common projects, and the dense net- vestments which are specific to a par- work of social relationships sustaining ticular relationship (trust, ethnic or this gave way to investments-schooling communal capital) and toward general and transportation-whose returns were investments (schooling). relatively independent of the commu- Florencia Mallon's (1983) study of nity social fabric, and contributed little the growth of markets-particularly la- to it.25 bor markets-and the erosion of com- The ethnographic literature on the munity institutions in the central high- environmental degradation of local lands of Peru during the early twentieth commons provides numerous examples century suggests that some of the above of similar processes (Jean-Marie Baland mechanisms may have been at work. and Platteau 1995). Central to the institutions of local soli- darity among residents was the practice 7. Markets, Firms, and Tasks of contributing labor to road building, irrigation, and other communal proj- It is only our Western societies that quite re- ects: "Community membership itself, cently turned man into an economic animal. and access to village resources was But we are not yet all animals of the same species. defined in terms of of a quota labor Marcel Mauss ([1925]1967, p. 74) time that households owed to the com- munity as a whole." With the extension Learning by doing is a ubiquitous of labor markets, many found employ- form of personal development; it ap- ment in distant mines for extended pe- plies to preferences no less than to riods of time, eventually converting the skills. The activities we engage in and labor dues they owed to the community the tasks they present to us are not fully to cash payments collected and sent determined by technology; they depend home by migrants associations in the as well on economic institutions. Thus mining towns. But "migration, by com- economic institutions may shape prefer- modifying relationships and separating ences by influencing the tasks we per- them out from the intricately woven form. fabric of local life, was changing the We know from the experiments of very context within which community Sherif (1937), Breer and Locke (1965), could be defined"(Mallon 1983, pp. and others that task performance affects 264-65). values. Relatedly, a substantial ethno- Traditional institutions were further graphic literature suggests that differ- undermined by the sale of common ing modes of livelihood are associated lands (or charging fees for the use of with differing general attitudes and val- the common lands) and the use of the ues. Edgerton's (1971) cross-cultural proceeds to build schools and roads. In- comparisons, for example, revealed a creased access of the richer peasants to large and statistically significant rela- distant markets for their produce freed tionship between the predominance of them of dependence on the locality. pastoral as opposed to farming liveli- The obligation to provide communal la- hoods and the general cultural valuation bor-or even money payments in their 25 An analogous process, occurring in Botswana, stead-thus became unenforceable, and is described by T. S. Zufferey (1986). See also the practice declined. The institutions Raul and Luis Garcia-Barrios (1990). Bowles: EndoQenous Preferences 97 of independence.26 A plausible mecha- vide at least as fertile a ground for the nism for both the Edgerton and the development of a sense of personal effi- Breer and Locke findings is that strate- cacy as do perfectly competitive mar- gies found successful in coping with the kets: the latter will - exhibit a larger tasks defined by one sphere of life are number of potential suppliers, while the generalized to other realms of life. Be- former will exhibit the stronger version cause markets and other economic insti- of consumer sovereignty (because the tutions affect the kinds of tasks we con- consumer confers a rent on the seller front and structure rewards and whenever p > mc) albeit vis 'a vis a penalties to various behaviors, we may more limited array of suppliers. presume that they affect learning. If Lane is right that markets teach What, then do market tasks teach? self-attribution or personal efficacy, the Lane (1991, p. 11) reasons that the be- extent to which this is true appears to lief that one is effective in influencing depend on one's success in market ac- his or her fate (called self-attribution): tivities: income predicts self-attribution better than other demographic variables is learned from experiences of acting and see- including level of schooling; whites are ing the world respond, contingent responses. [Because] a transaction . . . requires mutually more self-attributing than African contingent responses . . . an economy based Americans; men are more self-attribut- on transactions teaches self-attribution. ing than women; and self-attribution rises with age until leveling off in mid- I know of no evidence for or against dle age.27 this plausible conjecture; but if true, the What the market teaches depends not effects on self-attribution may well de- merely on the degree of success as pend on the structure of the relevant measured by income, but also on the markets. structural location in a market situation. Consider, first, the following counter That the inability to find suitable em- intuitive example. Market interactions ployment may undermine ones's sense are particularly likely to contribute to of efficacy is unsurprising, but having a the sense of personal efficacy under job can do the same. The relevant fea- conditions which allow what I term con- ture of the labor market is that it re- sumer sovereignty with teeth-that quires employees to relinquish (sub- which occurs when the consumer's pur- stantial, but not unlimited) authority chase confers a rent on the seller be- cause price exceeds marginal cost. In 27 Gerald Gurin and Patricia Gurin (1976); this situation the consumer who James Birren, Walter Cunningham, and Koichi switches to another supplier imposes a Yamamoto (1983). In the former study the normal- cost (the loss of the rent) on the seller ized regression coefficient of income in a multiple regression predicting a measure of personal effi- (Gintis 1989). In this sense monopo- cacy is twice as large as that for education and listically competitive markets may pro- three times as large as that for race (p. 137). Lon- gitudinal evidence suggests that internality (or 26Independent minded people may become self-attribution) and success are mutually deter- herders rather than farmers, of course, but Edger- mining; while an internal locus of control contrib- ton's results are robust even when the pastoral- utes to success, the reverse is also true (Andrisani ism/farming measure is not the actual means of and Nestel 1976). The strong relationship between livelihood (e.g., livestock ownership) but rather income and self-attribution may thus arise because the geographical suitability of the relevant locale the more self-attributing people are also more suc- for each of these two pursuits. The relevant corre- cessful (rather than the other way around); but lations are only slightly diminished when the un- this reasoning obviously does not apply to the sub- derlyng) and presumably exogenous, measure is stantial correlations with exogenous determinants used. of economic success such as race, gender, and age. Innrnai of Economic Literature Vol. YYYVI (March 1998) over their actions to the employer (Her- sonality causal effects are robust.28 bert Simon 1951). The employer's Compared to direct measures of occu- authority can be effectively wielded pational self-direction, covarying influ- because the labor market does not ences such as income, race, ethnicity, clear, and the employee is thus not in- family structure, religion, and education different to having the job or losing it were considerably less robust and con- (Bowles and Gintis 1992, 1993). Of sistent predictors of personality and course employees differ greatly in the tastes. degree to which they are subjected to Kohn and his co-authors reason that hierarchical authority; and these differ- "social structure affects individual psy- ences appear to have psychological con- chological functioning mainly by affect- sequences. ing the conditions of people's own Over a period of three decades Kohn lives." Summarizing his earlier work on and his collaborators have studied the child rearing, Kohn (1969, p. 189) relationship between one's position in wrote: the indi- an occupational hierarchy and Self direction, in short, requires opportuni- vidual's valuation of self-direction and ties and experiences that are much more independence in their children, intel- available to people who are more favorably lectual flexibility, and personal self-di- situated in the hierarchical order of society; rectedness, concluding that "the experi- conformity is the natural consequence of in- adequate opportunity to be self-directed. ence of occupational self direction has a profound effect on people's values, ori- But why should work experiences affect entation, and cognitive functioning" child-rearing values and leisure time (Kohn et al. (1990), p. 967; see also preferences? Kohn concludes that: Kohn 1969, 1990). His collaborative The simple explanation that accounts for vir- study of Japan, the U.S. and Poland tually all that is known about the effects of (1990) based on sample surveys of male job on personality . . . is that the processes employees (from the 1960s and 1970s) are direct: learning from the job and extend- yielded cross culturally consistent find- ing those lessons to off-the job realities.29 ings: people who exercise self-direction Thus, just as the wide range of choices on the job, also value self-direction and contingent reinforcement charac- more in other realms of their life (in- teristic of consumer g;oods markets may cluding child-rearing and leisure activi- ties) and are less likely to exhibit the 28 See Kohn and Carrie Schoenbach (1983). Jey- lan Mortimer, Jon Lorence, and Donald Kumka nexus of traits termed the authoritarian (1986, p. 113) use similar methods to address the personality. (See Kohn and Schooler problem of endogeneity of occupational selection, 1983, p. 142.) and report a substantial causal effect of occupa- tionally determined work autonomy on the sense These results do not arise because of self-confidence. self-directed people select (or are se- 29 Kohn (1990, p. 59). Gabriel Almond and Sid- lected into) jobs where occupational ney Verba (1963, pp. 180ff, 364ff) provide further evidence that work experiences are associated with self-direction is substantial. In a series generalized subjective orientations. Across all oc- of related studies using longitudinal cupational types in five different countries, those data, Kohn and his colleagues use two who were consulted on the job scored significantly higher on a measure of subjective civic compe- stage least squares estimation to ad- tence measuring the sense of personal efficacy in dress the question of reciprocal dealing with local and national government bodies. causation (personality dimensions as Differences (between those consulted and those not) in subjective competence scores within broad causes of job position); effects in both job types were larger than the differences between directions are found, but the job to per- job types. Bowles: EndoQenous Preferences 99 promote personal efficacy, the surrender mal to contribute the maximal amount of authority to employers which charac- to the public good. Half of the subjects terizes the labor market appears to sup- (in each treatment) were allowed to en- port far-reaching psychological effects, gage in discussion prior to each play (of some of which undermine the sense of course the discussion should have had being in control of one's life. no effect on the outcome of the stan- Unlike Kohn's studies, most research dard game, as the dominant strategy is on the relationship between job struc- to contribute nothing). After eight tures and personality do not adequately rounds of play another seven rounds address the problem of mutual causa- were conducted, this time with the tion mentioned above. Robert Karasek same groups but with all playing the (1978) however, was able to study standard game. Among those who had the behavioral effects of exogenous been permitted discussion, those who changes in job structure (including had experienced the incentive compat- both expert and self-reports of job char- ible modified game contributed signifi- acteristics) using panel data on the cantly less in the final seven rounds Swedish labor force over the years than those whose only experience was 1968-1974, a period of considerable ex- the standard game, and (in subsequent perimentation with job redesign. He questionnaires) revealed that their be- found that; havior was less guided by considerations of fairness. workers whose jobs had become more passive also became passive in their leisure and po- The authors' explanation of this strik- litical participation and workers with more ing finding is that the incentive compat- active jobs became more active. These find- ible mechanism rewarded those con- ings were significant in eight out of nine sub- tributing to the public good, thus mak- populations controlled for education and fam- ing self interest a good guide to action, ily class background. Karasek (1990, pp. the 53-54) while those experiencing standard game succeeded only to the extent The effect of economic institutions that they evoked considerations of fair- on task performance and hence on per- ness as a distinct motive. They con- sonality may go beyond those stressed clude by Kohn and Lane. The seemingly de- The failure of the . . . (incentive compatible) sirable attribute of markets stressed by mechanism to confront subjects with an ethi- Schultze above-that they make few de- cal dilemma appears to lead to little or no mands on our ethical reasoning-may learning in ethical behavior in the subsequent have a negative counterpart in a re- period. . . . It is an institution, like other in- duced salience of moral concerns or ca- centive compatible devices, which can gener- ate near optimal outcomes. . . . However pacity for moral reasoning. A recent from an ethical point of view it is not only public goods experiment suggests that unsuccessful as pertains to subsequent behav- these market effects may be important ior; it appears to be actually pernicious. It un- (Norman Frohlich and Joe Oppenheimer dermines ethical reasoning and ethically mo- 1995). Subjects played five-person pub- tivated behavior. (Frohlich and Oppenheimer 1995, p. 44) lic goods games under two conditions: one group played the standard contribu- Thus far I have considered the direct tion game and the other played a modi- effects of markets and other economic fied game in which a randomized as- institutions on the evolution of prefer- signment of payoffs similar to the ences. But there are indirect effects as Rawlsian veil of ignorance made it opti- well. 100 Journal of Economic Literature, Vol. XXXVI (March 1998)

8. Markets and the Process of Cultural whether a society's socialization pres- Transmission sures were primarily toward compliance or assertion."30 Other studies have ... the mnodernand the traditionalconscious- confirmed consistent relationships be- ness of the [early19th century]French peas- ant contended for mastery[in]. . .the form tween these group differences in child- of an incessantstruggle between the school- rearing practices and group differences mastersand the priests. in various measures of psychological KarlMarx ([1852]1963, p. 125) functioning (Witkin and Berry, 1975). For example, hunter gatherer societies Here I consider the influence of eco- stress in their child rearing (and achieve nomic institutions on the structure of in their adults) greater independence, social interactions which make up the while more stratified agricultural socie- process of cultural transmission, that is ties stress (and achieve) greater obedi- on child-rearing practices, childhood ence. and adolescent socialization, and the These results suggest economic struc- availability of and sometimes comnpul- tural effects on child rearing and sory exposure to entirely new cultural thereby on personality, but do not shed models such as teachers and media fig- light on the effects of modern economic ures. Some of these effects are the in- institutions; indeed markets played a tentional result of people's attempt to limited role in most of the societies acquire and to teach their children studied by Barry, Bacon, and Child and those traits required for adequate func- Witkin and Berry. The expansion of tioning in the social system; other ef- markets may have had its largest impact fects are entirely unintended. in rendering inadequate the previously One avenue for the effects of eco- dominant family-based and heterogene- nomic organization on cultural trans- ous forms of socialization studied by mission, the existence of a connection these authors. Ernest Gellner's (1983) between forms of livelihood and pat- account of the rise of nationalism is terns of child rearing, has been widely based on the transformation of sociali- documented. Herbert Barry, Irvin zation required by the spatial extension Child, and Margaret Bacon (1959) cate- of the division of labor made possible gorized 79 mostly non-literate societies by markets: according to the prevalent form of live- In the closed local communities of the agrar- lihood (animal husbandry, agricultural, ian or tribal worlds, when it came to commu- hunting, and fishing) and the related nication, context, tone, gesture, personality ease of food storage or other forms of and situation were everything . . . Among in- wealth accumulation, the latter being a timates of a close community, explicitness well documented correlate of dimen- would have been pedantic and offensive [p. 33] . . . [but] the requirements of a modern sions of social structure such as stratifi- cation. They combined these with evi- 30 The statistical relationships observed were dence on the dominant forms of child not explainable by the covariation of child-rearing rearing including obedience training, practices and type of livelihood with other mea- sures of social structure such as unililnearity of de- self-reliance, independence, and re- scent, extent of polygyny, levels of participation of sponsibility. They found large differ- women in the predominant subsistence activity, ences in the recorded child-rearing size of population units, and the like. A society- level rather than individual approach has been practices, concluding: "knowledge of adopted in mnuchof the cross cultural literature on the economy alone would enable one to child rearing. See the work of Beatrice and John predict with considerable accuracy Whiting (Whiting 1963; J. and B. Whiting 1975). Bowles: EndoQenous Preferences 101

economy obliges [us] to be able to communi- zle, for available data suggests that a cate contextlessly and with precision with all large part of the schooling-earnings re- comers in face to face ephemeral contacts. (p. 140) lationship is not mediated by the effect of schooling on the level of cognitive This requires functioning. Schools make people sustained frequent and precise communica- smarter, and richer, but the latter ef- tion between strangers involving a sharing of fect-at least in the U.S-.is surpris- explicit meaning, transmitted in a standard ingly independent of the former. The idiom and in writing when required. For a relevant evidence is this: the estimated number of converging reasons this society effect of schooling on earnings is only must be exo-educational: each individual is trained by specialists, not just by his own lo- modestly reduced if the individual level cal group, if indeed he has one. (p. 34) of cognitive skill is econometrically "held constant" by inclusion in an earn- As a result there emerged "a school ings function.32 transmitted culture not a folk transmit- Gintis and I (1997b) suggest that ted one" (p. 36) in which children were schooling may raise earnings through its "handed over by their kin groups to an contribution to the acquisition of such educational machine" (p. 37). Universal personality traits as a lower rate of time schooling may be represented as a par- preference, a lower disutility of effort, ticular assignment of cultural models to or a cooperative relationship to author- children, one unprecedented in its di- ity figures, which are relevant to the vorce from family and degree of centrali- work situation but which are not meas- zation.31 As a result the cultural trans- ured on the existing cognitive measures. mission processes became markedly We motivate this hypothesis using a more conformist as cultural models were standard principal agent model of the selected from (or by) dominant groups problem of labor discipline in an em- and a society-wide socialization system ployment relationship characterized by intruded into what was once an entirely incomplete contracts. If we are right, local learning process. the structure of schooling would con- We know strikingly little about the tribute to preparation for adult roles in cultural impact of these historically a manner not dissimilar to that sug- novel forms of socialization; most stud- gested by the Bacon, Child, and Barry ies of the impact of schooling and its study. But do schools produce these relationship to the economy have non-cognitive employment related stressed the contribution of schooling traits? to cognitive functioning, not to values To the best of my knowledge only or personality. But the evidence that one study has attempted to provide an personality effects of schooling are im- answer; it does not provide a satisfac- portant is substantial, if indirect. The tory basis for generalization, but it is substantial and apparently causal rela- nonetheless worth reviewing. The strat- tionship between years of schooling at- egy of the study was to see if schools tained by an individual and subsequent rewarded (and thus inferentially fos- labor market earnings presents a puz- tered the development of) people with 31 Robert Dreeben's (1968) book on the social- the same personality traits that are val- ization tasks of schooling develops a similar argu- ued by employers. In parallel investiga- ment based on "the liberating effect" of "the sepa- ration of the workplace from the household" (p. 32 Gintis (1971) first demonstrated this. Bowles 129). See also Gintis (1971) and Bowles and Gintis and Gintis (1997b) reviews the large number of (1997b). relevant estimates over a 40 year period. 102 Journal of Economic Literature, Vol. XXXVI (March 1998)

tions in distinct populations conducted Economists have followed Hume, during the early 1970s, Richard Ed- rather than Aristotle, in positing a given wards (1977) used peer-rated personal- and self-regarding individual as the ap- ity measures of employees in both propriate behavioral foundation for con- private and public employment to siderations of governance and policy. predict supervisor ratings of these The implicit premise that policies and workers. Peter Meyer (1972) used the constitutions do not affect preferences same peer rated personality variables to has much to recommend it: the premise predict grade point averages of students provides a common if minimal analyti- in a high school, controlling for cal framework applicable to a wide SAT(verbal and math) and IQ. Edwards range of issues of public concern, it found that employees judged by their expresses a prudent antipathy toward workplace peers to be "perseverant," paternalistic attempts at social engi- "dependable," "consistent," "punctual," neering of the psyche, it modestly "tactful," "identifies with work," and acknowledges how little we know about "empathizes" had significantly higher the effects of economic structure and supervisor ratings, while those judged policy on preferences, and it erects a by their peers to be "creative" and "in- barrier both to ad hoc explanation and dependent" were ranked poorly by su- to the utopian thinking of those who in- pervisors. Meyer found virtually identi- voke the mutability of human disposi- cal results for the high school students tions in order to sidestep difficult ques- in his grading study: the exact traits tions of scarcity and social choice. predicting favorable supervisor ratings Realism, however, cannot be among the in the Edwards study, predicted good virtues invoked on behalf of the exoge- grades (holding constant cognitive nous preferences premise.34 Economic scores). Teachers and employers in these institutions, we have seen, may affect samples reward the same personality preferences through their direct influ- traits .33 ences on situational construal, forms of reward, the evolution of norms, and 9. Conclusion task related learning as well as their in- direct effects on the process of cultural Political writers have established it as a transmission itself. maxim, that, in contriving any system of gov- One hopes that the active research ernment . . . every man ought to be supposed agenda now being pursued by econo- to be a knave and to have no other end, in all mists, other social scientists and biolo- his actions, than his private interest. gists in this area may soon allow more David Hume ([1754]1898 p. 117)

34 Lawgivers make the citizen good by inculcat- Indeed Hume, immediately following the pas- sage just quoted, muses that it is "strange that a ing habits in them, and this is the aim of maxim should be true in politics which is false in if he does not succeed in do- every lawgiver; fact." While in academic settings most economists ing that, his legislation is a failure. It is in this still adhere to the exogenous preferences canon that a good constitution differs from a bad and its "de gustibus non est disputandum" one. (George Stigler and Becker 1977) implication, Aristotle (1962, p. 1103) many appear aware of its limitations when it comes to evaluating institutions and policies. Thus 33We would like to know (but do not) if schools Becker (1995, p. 26) refers to "the effects of a produce the traits they reward, and if traits valued free-market system on self-reliance, initiative, and by supervisors are rewarded by enhanced pay. The other virtues" and referring to government trans- underlying studies are reported and compared in fers to the poor, claims that "the present system Bowles and Gintis (1976). corrupts the values transmitted to children." Bowles: EndoL,enous Preferences 103

confidence in assessing the empirical tural group this may miss important ef- magnitude and generality of these ef- fects of economic institutions operating fects.35 The following research priori- on group differences. Comparative ties seem particularly important. analysis of economic experiments im- First, we know very little about the plemented in the differing economic process of cultural transmission-who environments of distinct societies, in- acquires what trait from whom, under cluding those with premodern economic what conditions, and why. Yet this in- institutions, would be illuminating. formation is critical to understanding I emphasize empirical studies be- how economic institutions may impact cause the proliferation of relevant theo- on preferences. Empirical studies of the retical models in economics has not been relative importance of parents, other matched by empirical investigation. But family members, friends, teachers, and important contributions could be made others in cultural learning, and the in- by two types of conceptual work. terplay of cultural and genetic transmis- Fourth, experiments in economics, sion would be very valuable. sociology, and psychology have raised Second, while we have evidence that serious doubts about the behavioral ac- traits acquired in one environment are curacy of the minimalist conception of then generalized to others (recall homo economicus: the individual actor Kohn's studies of child rearing) we do with self-regarding and outcome-based not know how this takes place or how preferences. Much of the impact of eco- persistent the traits may be once the in- nomic institutions on behavior may oc- itiating environment is withdrawn. cur through the ways that particular in- Third, because imitation of prevalent stitutional settings prompt individuals traits, or enforced conformism may play to draw one or another response- an important role in the transmission of whether self-regarding, spiteful, gener- cultural traits, comparative studies of ous, or other-from their varied behav- whole societies may provide insights not ioral repertoires. A concept of available in individual-based studies. An preferences more adequately grounded example may make this clear. Recall in the empirical study of behavior that Edgerton (1971, p. 195) found that would assist in analyzing these pro- pastoralists valued independent action cesses. more than farmers. But farmers in a Finally, an integration of the insights predominantly pastoral tribe valued in- of the theory of cultural evolution with dependence more (almost twice as those of evolutionary game theory much by his measure) than farmers in seems likely to be insightful, especially predominantly farming tribes, while in view of the apparent importance of pastoralists in predominantly farming conformism in cultural transmission tribes valued independence consider- (and hence the needed modification of ably less than did pastoralists in the pas- the concept of cultural equilibrium as toral tribe. Thus it appears that the pre- suggested in Section 3). dominant livelihood in a tribe may have Shortcomings of the existing empiri- cultural effects beyond the effects of cal studies and the unsatisfactory "black the livelihood of the individual. Analysis box" nature of extant knowledge of of individual data within a single cul- social learning notwithstanding, the weight of both reason and evidence 35Avner Ben-Ner and Louis Putterman (1997) is a valuable collection of relevant work by econo- point strongly to the endogeneity of mists. preferences. If preferences are indeed 104 Journal of Economic Literature. Vol. XXXVI (March 1998) endogenous in the senses suggested out that economists typically assume here, four implications follow. otherwise and for this reason propose First, economics pays a heavy price from the to deal with unethical or antisocial behavior for its self-imposed isolation by raising the cost of that behavior rather other behavioral sciences. At its sim- than proclaiming standards and imposing pro- plest, the conception underlying con- hibitions and sanctions. The reason is prob- temporary disciplinary boundaries is ably that they think of citizens as consumers one of society marked by an implausible with unchanging or arbitrarily changing tastes in matters civic as well as commodity-related degree of specialization among institu- behavior. . . . A principal purpose of publicly tions: families and religious institutions proclaimed laws and regulations is to stigma- shape culture, governments govern, and tize antisocial behavior and thereby to influ- economic institutions allocate re- ence citizens' values and behavioral codes. sources. These disciplinary boundaries have favored the development of paro- Frohlich and Oppenheimer's and Fehr chial, incompatible, and inadequate and Gaechter's experiments above sug- models of human behavior in the vari- gest that raising the cost of an antisocial ous disciplines, ranging from the over- behavior and other incentive compatible socialized homo sociologicus to the un- devices may actually do harm. Moreover, dersocialized homo economicus (Mark the analysis in Section 6 of the evolution Granovetter 1985). Recognition of the of nice traits suggests that approximating cultural effects of markets (and other the market ideal by perfecting property economic institutions) may foster a rights may weaken non-market solutions more unified approach to the behavioral to problems of social coordination. sciences, a benefit of which might be There is thus a norm-related analogue to the more successful resolution of out- the second best theorem of welfare eco- standing puzzles in economics.36 nomics: where contracts are incomplete Second, the effectiveness of policies (and hence norms may be important in and their political viability may depend attenuating market failures), more on the preferences they induce or closely approximating idealized complete evoke.37 Hirschman (1985, p. 10) points contracting markets may exacerbate the underlying market failure (by undermin- 36 For example, given the poor empirical show- the ing of most theories of wages (Truman Bewley ing reproduction of socially valuable 1995) an adequate understanding of wage setting norms such as trust or reciprocity) and institutions-including why employers do not gen- result in a less efficient equilibrium allo- erally charge job fees (H. Lorne Carmichael cation. An caution 1985)-would seem to require an account embrac- analogous applies to ing effects of wages on such preferences as the governmental, family based, or other so- disutility of labor and perceptions of just treat- lutions: for example, numerous experi- ment, along lines suggested by Akerlof's (1984) ments we have that analysis of gift exchange and Robert Solow's (as seen) suggest (1990) treatment of "labor markets as social insti- "earning" a claim on a resource differs in tutions," as well as the work of Fehr and his co- psychologically important ways from sim- author mentioned above. ply receiving one, and an adequate un- 37 Romer's (1996) account of the origins and evolution of the social security system addresses derstanding of public transfers would the ways that income transfer programs shape seem to require attention to these ef- preferences; and Frey's (1997) econometric study fects. of tax compliance in Switzerland explores the way that different constitutional arrangements affect a Third, preference endogeneity gives predisposition to tax avoidance. On the impor- rise to a kind of market failure and sug- tance of considering the impact of environmental a reconsideration of some policy on environmental preferences see Cass gests aspects Sunstein (1993). of normative economics. The influence Bowles: Endogenous Preferences 105 of our preferences on others is not even are shaped by markets and other eco- approximately captured by contracts: nomic institutions, both evaluative is- norms of generosity, non-aggression, or sues and a public interest may arise, for punishment of antisocial behaviors con- an individual's preferences induce ac- fer external benefits for example, while tions imposing non-contractible costs a taste (or addiction) for smoking con- and benefits on others. Thus part of the fers external costs. Because our prefer- reasoning which conventionally estab- ences have non-contractual effects on lishes a public interest in the nature others, how we acquire them is a matter and amount of schooling -the sociali- of public concern. zation of children is to some extent a Just as the process of natural selec- public good-would seemingly apply to tion does not generally maximize aver- the effects of economic institutions on age fitness, there is no reason to expect preferences as well. that the process of cultural transmission A broader concept of market failure determining the equilibrium distri- is thus required, one encompassing the bution of traits in the population will effects of economic policies and institu- support a socially optimal outcome. The tions on preferences and for this reason cultural equivalent of a market failure more adequate for the consideration of thus results; indeed the long-term per- an appropriate mix of markets, commu- sistence of socially and even individu- nities, families, and states in economic ally disadvantageous norms is hardly governance.38 Such a new welfare eco- open to question, extreme forms of nomics would of course have to con- blood revenge representing a particu- front the longstanding liberal philo- larly well documented example (Jon El- sophical reluctance to privilege some ster 1989; Edgerton 1992; Boehm ends over others; that is, it would have 1984). Because states, communities, to address the problem that Hobbes' and markets may influence the process mushroom fiction ellides. of cultural evolution, any normative 38 An example of the reasoning I am recom- evaluation of the role and scope of mending is Michael Taylor's (1987) suggestion these institutions must attempt to take that the kinds of opportunism which the Hobbe- their cultural effects into account. sian state is said to curb might be the consequence of living under a centralized authority, or more Fourth, there thus may be a novel succinctly that the Hobbesian state produces Hob- public interest in some types of eco- besian man (and then more or less successfully nomic arrangements which are com- curbs him). Analogous reasoning may apply to and monly considered private. Uncoerced markets homo economicus. exchange among informed adults is REFERENCES often considered a private realm in AKERLOF, GEORGE A. "A Theory of Social Cus- which there is no public interest the ab- tom, of Which Unemployment May Be One sence of non-contractual effects on Consequence," in An economic theorist's book third parties. The philosopher David of tales: Essays that entertain the consequences of new assumptions in economic theory. Gauthier (1986, pp. 95-96) writes "The GEORGE A. AKERLOF. Cambridge: Cambridge operation of the market cannot in itself U. Press, 1984, pp. 69-99. raise any evaluative issues . . . The pre- ALMOND, GABRIEL A. AND VERBA, SIDNEY. The civic culture: Political attitudes and democracy sumption of free activity ensures that in five nations. Princeton: Princeton U. Press, no one is subject to any form of com- 1963. pulsion or any type of limitation not al- ANDRE, CATHERINE AND PLATTEAU, JEAN- PHILIPPE. "Land Relations Under Unbearable ready affecting her own actions as a Stress: Rwanda Caught in the Malthusian Trap," solitary individual." But if preferences J. Econ. Behav, Organ., 1997, 34(1), pp. 1-55. 106 Journal of Economic Literature, Vol. XXXVI (March 1998)

ANDRISANI, PAUL J. AND NESTEL, GILBERT. "In- nance Hierarchy," Current Anthropology, June ternal-External Control as Contributor and 1993, 34(3), pp. 227-54. Outcome of Work Experience," J. Appl. Psych., BOHANNAN, PAUL. "The Impact of Money on an 1976, 61(2), pp. 156-65. African Subsistence Economy," J. Econ.Hist., ARISTOTLE. Nicomachean ethics. Indianapolis: Dec. 1959, 19(4), pp. 491-503. Bobbs-Merrill, 1962. BOWLES, SAMUEL. "Markets as Cultural Institu- ARROW, KENNETH J. "Political and Economic tions: Equilibrium Norms in Competitive Evaluation of Social Effects and Externalities," Economies." Working paper 1996-5. Dept. of in MICHAL D. INTRILIGATOR 1971, pp.3-24. Economics, U. of Massachusetts, June 25, 1996. -. "Gifts and Exchanges," Philosophy and BOWLES, SAMUEL AND GINTIS, HERBERT. Public Affairs, 1972, 1(4), pp.343-62. Schooling in capitalist America: Educational re- AsCH, SOLOMON E. Sociaf psychology. Engle- form and the contradictions of economic life. wood Cliffs, NJ: Prentice-Hall, Inc., 1952. New York: Basic Books, Inc., 1976. AXELROD, ROBERT AND HAMILTON, WILLIAM D. - . Democracy and capitalism: Property, "The Evolution of Cooperation," Science, Mar. community, and the contradictions of modern 1981, 211(27), pp. 1390-96. social thought. London: Routledge and Kegan BALAND, JEAN-MARIE AND PLATTEAU, JEAN- Paul, 1986. PHILIPPE. Halting degradation of natural re- "Power and Wealth in a Competitive sources-Is there a role for rural communities? Capitalist Economy," Philosophy & Public Af- Oxford: Clarendon Press, 1995. fairs, Fall 1992, 21(4), pp. 324-53. BARRY, HERBERT, III; CHILD, IRVIN L. AND BA- . "The Revenge of Homo Economicus: CON, MARGARET K. "Relation of Child Training Contested Exchange and the Revival of Political to Subsistence Economy," American Anthro- Economy," J. Econ. Perspectives, Winter 1993, pologist, Feb. 1959, 61(1), pp. 51-63. 7(1), pp. 83-102. BECKER, GARY S. "The Best Reason to Get People . "O timal Parochialism: The dynamics of off the Dole," Business Week, May 1, 1995, p. trust and exclusion in communities." Unpub- 26. lished paper, U. of Massachusetts, 1997a. ---. Accounting for tastes. Cambridge, MA: . "Labor Discipline and the Returns to Harvard U. Press, 1996. Schooling." Unpublished paper, Department of BELL, DANIEL. The cultural contradictions of Economics, U. of Massachusetts, July 1997b. capitalism. New York: Basic Books, 1976. ."The Moral Economy of Communities: BEN-NER, AVNER AND PUTTERMAN, LouIs, eds. Structured Populations and the Evolution of Economics, values, and organizations. Cam- Pro-Social Norms," Evolution and Human Be- bridge: Cambridge U. Press, 1997. havior, Jan. 1998, 19(1). BEN-PORATH, YORAM. "The F-Connection: Fami- BOYD, ROBERT AND RICHERSON, PETER J. Cul- lies, Friends, and Firms and the Organization of ture and the evolutionary process. Chicago and Exchange," Population Devel. Rev., Mar. 1980, London: U. of Chicago Press, 1985. 6(1), pp. 1-30. . "Group Selection among Alternative Evo- BEWLEY, TRUMAN F. "A Depressed Labor Market lutionarily Stable Strategies," Journal of Theore- as Explained by Participants," Amer. Econ. tical Biology, 1990, 145, pp. 331-42. Rev., 1995, 85(2), pp. 250-54. . "Rationality, Imitation, and Tradition," in BIRREN, JAMES E.; CUNNINGHAM, WALTER R. Nonlinear dynamics and evolutionary econom- AND YAMAMOTO, KOICHI. "Psychology of Adult ics. Eds.: RICHARD H. DAY AND PING CHEN. Development and Aging," Annual Review of New York: Oxford U. Press, 1993, pp. 131-51. Psychofogy, 1983, 34, pp. 543-75. BOYER, PAUL AND NISSENBAUM, STEPHEN. BISIN, ALBERTO AND VERDIER, THIERRY. "The Salem possessed: The social origins of witch- Economics of Cultural Transmission and the craft. Cambridge, MA: Harvard U. Press, 1974. Dynamics of Preferences." Unpublished paper, BREER, PAUL E. AND LOCKE, EDWIN A. Task Massachusetts Institute of Technology and experience as a source of attitudes. Homewood, CERAS, Mar. 1996. IL: The Dorsey Press, 1965. BLAU, PETER M. Exchantge and power in social BUCHANAN, JAMES M. The limits of liberty. Chi- life. New York: John Wiley and Sons, 1964. cago: U. of Chicago Press, 1975. BLISS, CHRISTOPHER J. "Review of R. M. Tit- BURRIDGE, KENELM. New heaven, new earth: A muss, The gift relationship: From human blood study of millenarian activities. New York: to social policy," J. Public Econ., 1972, 1, pp. Schocken Books, 1969. 162-65. CAMERER, COLIN F. AND KUNREUTHER, BLOOM, BENJAMIN S. Stability and change in hu- HOWARD. "Decision Processes for Low Prob- man characteristics. New York: John Wiley & ability Events: Policy Implications," J. Policy Sons, Inc., 1964. Anal. Manage., 1989, 8(4), pp. 565-92. BOEHM, CHRISTOPHER. Blood revenge: The CAMERER, COLIN AND THALER, RICHARD H. anthropology of feuding in Montenegro and "Anomalies: Ultimatums, Dictators and Man- other tribal societies. U. of Pennsylvania Press, ners," J. Econ. Perspectives, Spring 1995, 9(2), 1984. pp. 209-19. "Egalitarian Behavior and Reverse Domi- CAPORAEL,LINNDA R. ET AL. "Selfishness Exam- Bowles: Endogenous Preferences 107

ined: Cooperation in the Absence of Egoistic tional transformation of an African society. Incentives," Behavioral and Brain Sciences, Cambridge: Cambridge U. Press, 1992. 1989, 12, pp. 683-99. EPSTEIN, T. SCARLETT. Economic development CARMICHAEL, H. LORNE. "Can Unemployment and social change in south India. Manchester: Be Involuntary? Comment," Amer. Econ. Rev., U. Press, 1962. Dec. 1985, 75(5), pp. 1213-14. FEHR, ERNST; GAECHTER, SIMON AND KIRCH- CAVALLI-SFORZA, LuIGi L. AND FELDMAN, M. STEIGER, GEORG. "Reciprocity as a Contract W. Cultural transmission and evolution: A Enforcement Device. Experimental Evidence," quantitative approach. Princeton: Princeton U. Econometrica, July 1997, 65(4) pp. 833-60. Press, 1981. FEHR, ERNST ET AL. "When Social Norms Over- CAVALLI-SFORZA, L. L. ET. AL. "Theory and Ob- power Competition-Social Exchange in Ex- servation in Cultural Transmission," Science, erimental Labor Markets," J. Labor Econ, Oct. 1, 1982, 218, pp. 19-27. forthcoming. CHEN, KUANG-HO; CAVALLI-SFORZA, L. L. AND FEHR, ERNST AND TYRAN, JEAN-ROBERT. "Insti- FELDMAN, M. W. "A Study of Cultural Trans- tutions and Reciprocal Fairness," Nordic J. Pol. mission in Taiwan," Human Ecology, Sept. Economy, 1996, 23(2), pp. 133-44. 1982, 10(3), pp. 365-82. FELDMAN, MARCUS W.; AOKI, KENICHI AND CONLISK, JOHN. "Costly Optimizers versus Cheap KUMM, JOCHEN. "Individual Versus Social Imitators," J. Econ. Behav. Organ., Sept. 1980, Learning: Evolutionary Analysis in a Fluctuat- 1(3), pp. 275-93. ing Environment." Working Paper No. 96-05- DAWES, ROBYN M.; VAN DE KRAGT, ALPHONS J. 030, Santa Fe Institute, Mar. 14, 1996. C. AND ORBELL, JOHN M. "Not Me or Thee FELDMAN, MARCUS W. AND LALAND, KEVIN N. but We: The Importance of Group Identity in "Gene-Culture Coevolutionary Theory." Work- Eliciting Cooperation in Dilemma Situations: ing Paper No. 96-05-033, Santa Fe Institute, Experimental Manipulations," Acta Psycholo- Mar. 14, 1996. gica, 1988, 68, pp. 83-97. FIELD, MARGARET J. Search for security: An DECI, EDWARD L. Intrinsic motivation. New ethno-psychiatric study of rural Ghana. Evan- York: Plenum Press, 1975. ston, IL: Northwestern U. Press, 1960. DECI, EDWARD L. AND RYAN, RICHARD M. In- FIRTH, RAYMOND W. "Work and Wealth of Primi- trinsic motivation and self-determination in hu- tive Communities," in Human types: An intro- man behavior. New York and London: Plenum duction to social anthropology. BY RAYMOND Press, 1985. W' FIRTH. New York: Mentor Books, 1958, pp. DREEBEN, ROBERT. On what is learned in 62-81. school. Reading: Addison-Wesley, 1968. FISKE, ALAN PAGE. Structures of social life: The DUESENBERRY, JAMES STEMBLE. Income, saving four elementary forms of human relations. New and the theory of consumer behavior. Cam- York: Free Press, 1991. bridge, MA: Harvard U. Press, 1949. "The Four Elementary Forms of Sociality: DURHAM, WILLIAM H. Coevoluttion: genes, cul- Framework for a Unified Theory of Social Rela- ture, and human diversity. Stanford: Stanford tions," Psychological Review, Oct. 1992, 99(4), U. Press, 1991. pp.689-723. DURKHEIM, EMILE. The division of labor in soci- FLORA, JANE; MACCOBY, NATHAN AND FAR- ety. New York: Free Press, [1933] 1964. QUHAR, JOHN W. "Communication Campaigns ECKERT, PENELOPE. "Clothing and Geography in to Prevent Cardiovascular Disease: The Stan- a Suburban High School," in Researching ford Community Studies," in Public communi- American culture. Ed.: CONRAD PHILLIP KOT- cation campaigns. 21nd ed. Eds.: RONALD E. TAK. Ann Arbor: The U. of Michigan Press, RICE AND CHARLES K. ATKIN. Newbury Park: 1982, pp.139-44. Sage, 1989, pp. 233-52. _ "Adolescent Social Structure and the FREY, BRUNO S. "A *Constitution for Knaves Spread of Linguistic Change," Language in So- Crowds Out Civic Virtue," Econ. J., July 1997, ciety, June 1988, 17(2), pp. 183-207. 107(443), pp. 1043-53. EDGERTON, ROBERT B. The individual in cul- FREY, BRUNO S. AND OBERHOLZER-GEE, FELIX. tural adaptation. Berkeley: U. of California "The Cost of Price Incentives: An Empirical Press, 1971. Analysis of Motivation Crowding-out," Amer. -. Sick societies: Challenging the m?yth of Econ. Rev., 1997, 87(4), pp. 746-55. primitive harmony. New York: Free Press, FROLICH, NORMAN AND OPPENHEIMER, JOE A. 1992. "The IncomXatibility of Incentive Compatible EDWARDS, RICHARD C. "Personal Traits and 'Suc- Devices and Ethical Behavior: Some Experi- cess' in Schooling and Work," Educational and mental Results and Insights," Public Choice Psychological Measurement, 1977, 37, pp. 125- Studies, 1995, 25, pp. 24-51. 38. FRoMM, ERICH AND MACCOBY, MICHAEL. Social ELSTER, JON. "Social Norms and Economic The- character in a Mexican village: A sociopsycho- ory," J. Econ. Perspectives, Fall 1989, 3(4), pp. analytic study. Englewood Cliffs, NJ: Prentice- 99-117. Hall, 1970. ENSMINGER, JEAN. Making a market: The institu- FUNDENBERG, DREW AND MASKIN, ERIC. "The 108 Journal of Economic Literature, Vol. XXXVI (March 1998)

Folk Theorem in Repeated Games with Dis- fore its triumph. Princeton: Princeton U. Press, counting or with Incomplete Information," 1977. Econometrica, May 1986, 54(3), pp. 533-54. . "Rival Interpretations of Market Society: GAECHTER, SIMON AND FEHR, ERNST. "Collec- Civilizing, Destructive, or Feeble?" J. Econ. tive Action as a Partial Social Exchange." Un- Lit., Dec. 1982, 20(4), pp. 1463-84. published paper, Institute for Empirical Re- - . "Against Parsimony: Three Easy Ways of search in Economics, U. of Zurich, May 1997. Complicating Some Categories of Economic GARCIA-BARRIOS, RAUL AND GARCIA-BARRIOS, Discourse," Econ. Philos., Apr. 1985, 1(1), pp. LuIs. "Environmental and Technological Deg- 7-21. radation in Peasant Agriculture: A Consequence HOBBES, THOMAS. De cive or The citizen. New of Development in Mexico," World Devel., Nov. York: Appleton-Century-Crofts, Inc., 1949. 1990, 18(11), pp. 1569-85. HOFFMAN, ELIZABETH ET AL. "Preferences, GAUTHIER, DAVID P. Morals by agreement. Ox- Property Rights, and Anonymity in Bargaining ford: Clarendon Press, 1986. Games," Games Econ. Behav., Nov. 1994, 7(3), GELLNER, ERNEST. Nations and nationalism. Ith- pp. 346-80. aca: Cornell U. Press, 1983. HOLLANDER, HEINZ. "A Social Exchange Ap- GINTIS, HERBERT. "Education, Technology, and proach to Voluntary Cooperation," Amer. Econ. the Characteristics of Worker Productivity," Rev., Dec. 1990, 80(5), pp. 1157-67. Amer. Econ. Rev., May 1971, 61(2), pp. 266-79. HOMANS, GEORGE C. "Social Behavior as Ex- -. "A Radical Analysis of Welfare Economics change," Amer. J. Sociology, May 1958, 63(6), and Individual Development," Quart. J. Econ., pp.597-606. Nov 1972, 86(4), pp. 572-99. HUME, DAVID. Essays: Moral, political and liter- _. "The Power to Switch: On the Political ary. London: Longmans, Green and Co., [1754] Economy of Consumer Sovereignty," in Uncon- 1898. ventional wisdom: Essays on economics in INTRILIGATOR, MICHAEL D. Frontiers of quanti- honor of John Kenneth Galbraith. Eds.: SA- tative economics. Amsterdam: North-Holland MUEL BOWLES, RICHARD EDWARDS, AND Pub. Co., 1971. WILLIAM G. SHEPHERD. Boston: Houghton KACHELMEIER, STEVEN J. AND SHEHATA, Mo- Mifflin, 1989. HAMED. "Internal Auditing and Voluntary Co- GRAFEN, ALAN. "The Hawk-Dove Game Played operation in Firms: A Cross-cultural Experi- Between Relatives," Animal Behavior, 1979, ment," Accounting Review, 1997, 72(3), pp. 27(3), pp. 905-07. 407-31. GRANOVETTER, MARK. "Economic Action and So- KANT, IMMANUEL. The philosophy of Kant: Im- cial Structure: The Problem of Embeddedness," manuel Kant's moral and political writings. Ed.: Amer. J. Sociology, Nov. 1985, 91(3), pp. 481- CARL J. FRIEDRICH. New York: Modern Li- 510. brary, [1785] 1949. GREIF, AVNER. "Cultural Beliefs and the Organi- KARASEK, ROBERT. "Job Socialization: A Longitu- zation of Society: A Historical and Theoretical dinal Study of Work, Political and Leisure Ac- Reflection on Collectivist and Individualist So- tivity." Working Paper 59, Stockholm: Institute cieties," J. Polit. Econ., Oct. 1994, 102(5), pp. for Social Research, 1978. 912-50. KARASEK, ROBERT AND THEORELL, TORES. GURIN, GERALD AND GURIN, PATRICIA. "Per- Healthy work: Stress, productivity, and the re- sonal Efficacy and the Ideology of Individual construction of working life. New York: Basic Responsibility," in Economic means for human Books, 1990. needs. Ed.: BURKHARD STRUMPEL. Ann Arbor: KATZ, ELIHU AND LAZARSFELD, PAUL F. Per- Institute for Social Research, 1976. pp. 131-57. sonal influence: The part played by people in GUTH, WERNER; SCHMITTBERGER, ROLF AND the flow of mass communications. Glencoe, IL: SCHwNARZE, BERND. "An Experimental Analysis Free Press, 1955. of Ultimatum Bargaining," J. Econ. Behav. Or- KOHN, MELVIN L. Class and conformity: A study gan., Dec. 1982, 3(4), pp. 367-88. in values. Homewood, IL: Dorsey Press, 1969. HAMILTON, W. D. "Innate Social Aptitudes of - . "Unresolved Issues in the Relationship Man: an Approach from Evolutionary Genet- Between Work and Personality," in The nature ics," in Biosocial anthropology. Ed.: ROBIN of work: Sociological perspectives. Eds.: KAI Fox. New York: John Wiley, 1975, pp. 115-32. ERIKSON AND STEVEN PETER VALLAS. New HARSANYI,JOHN C. "Morality and the Theory of Haven, CT: Yale U. Press, 1990, pp. 36-68. Rational Behavior," in Utilitarianism and be- KOHN, MELVIN L. AND SCHOENBACH, CARRIE. yond. Eds.: AMARTYA SEN AND BERNARD WIL- "Class, Stratification, and Psychological Func- LIAMS. Cambridge: Cambridge U. Press, 1982, tioning," in MELVIN L. KOHN AND CARMI pp. 39-62. SCHOOLER 1983, pp. 154-89. HAYEK, FRIEDRICH A. VON. Individualism and KOHN, MELVIN L. AND SCHOOLER, CARMI. Work economic order. Chicago: U. of Chicago Press, and personality: An inquiry into the impact of 1948. social stratification. Norwood: Ablex Pub. HIRSCHMAN, ALBERT 0. The passions and the Corp., 1983. interests: Political arguments for capitalism be- KOHN, MELVIN ET AL. "Position in the Class Bowles: Endogenous Preferences 109

Structure and Psychological Functioning in the SAMUEL. "Source Dependence in the Valuation United States, Japan, and Poland," Amer. J. So- of Objects," J. Behavioral Decision Making, ciology, Jan. 1990, 95(4), pp. 964-1008. 1994, 7, pp 157-68 KOLLOCK,PETER. "The Emergence of Exchange MALINOWSKI, BRONISLAW. Crime in savage soci- Structures: An Experimental Study of Uncer- ety. London: Routledge & Kegan Paul, 1926. tainty, Commitment, and Trust," Amer. J. Soci- MALLON, FLORENCIA E. The defense of commtu- ology, Sept. 1994, 100(2), pp. 313-45. nity in Peru's central highlands: Peasant strug- -. "Transforming Social Dilemmas: Group gle and capitalist transition 1860-1940. Prince- Identity and Cooperation," in Modeling rational ton, NJ: Princeton U. Press, 1983. and mloral agents. Ed.: PETER DANIELSON. Ox- MARX, KARL. The eighteenth bruimaire of Louis ford: Oxford U. Press, 1997. Bonaparte. New York: International Publishers, KRANTON, RACHEL E. "Reciprocal Exchange: A [1852] 1963. Self-Sustaining System," Amer. Econ. Rev., MAUSS, MARCEL. The gift: forms and functions of Sept. 1996, 86(4), pp. 830-51. exchange in archaic societies. New York: W. W. KREPS, DAVII) M. "Corporate Culture and Eco- Norton, [1925] 1967. nomnic Theory," in Perspectives on positive po- MCCAULEY, CLARK; ROZIN, PAUL AND litical economy. Eds.: JAMES E. ALT ANI) KEN- SCHWARTZ, BARRY. "On the Origin and Nature NETH A. SHEPSLE. Cambridge: Cambridge U. of Preference and Values." Unpublished paper, Press, 1990, pp. 90-143. Oct. 1994. LABOV, WILLIAM. Sociolingtuistic patterns. Phila- MCCLELLAND, DAVID. The achieving society. delphia: U. of Pennsylvania Press, 1972. Princeton, NJ: Van Nostrand, 1961. _. "De Facto Segregation of Black and White MEYER, PETER J. "Schooling and the Reproduc- Vernaculars." Project on Linguistic Change and tion of the Social Division of Labor." Un- Variation, Lingiustics Laboratory, U. of Penn- published honors thesis, Harvard U., Mar. sylvania, 1983. 1972. LAIBSON, DAVI7D. "A Cue-Theory of Consump- MORTIMER, JEYLAN T.; LORENCE, JON AND tion." Unpublished Paper, Harvard U. Depart- KUMKA, DONALD S. Work, family, and person- ment of Economics, 1996. ality: Transition to adulthood. Norwood: Ablex LANE, ROBERT E. The market experience. Cam- Pub., 1986. bridge: Camnbridge U. Press, 1991. MULLIGAN, CASEY B. Parental priorities and eco- LASLETT, PETER. The world we have lost. Lon- nomic inequality. Chicago and London: U. of don: Methuen, 1965. Chicago Press, 1997. LEDYARD, JOHN 0. "Public Goods: A Survey of NEWCOMB, THEODORE M. ET AL. Persistence and Experimental Research," in The handbook of change: Bennington College and its students af- experimental economics. Eds.: JOHN H. KAGEL ter twenty-five years. New York: John Wiley & AN]) ALVIN E. ROTH. Princeton, NJ: Princeton Sons, Inc., 1967. U. Press, 1995, pp. 111-94. NOWELL-SMITH, PATRICK H. Ethics. London: LEIBENSTEIN, HARVEY. "Bandwagon, Snob, and Penguin, 1954. Veblen Effects in the Theory of Consumers' OCHS, JACK AND ROTH, ALVIN E. "An Experi- Demand," Quart. J. Econ., May 1950, 64, pp. mental Study of Sequential Bargaining," Amer. 183-207. Econ. Rev., June 1989, 79(3), pp. 355-84. LEPPER, MARK R. AND) GREENE, DAVID). The OTTO, SARAH P.; CHRISTIANSEN, FREDDY B. AND hidden costs of rewvard: New perspectives on the FELDMAN, MARCUS W. "Genetic and Cultural psychology of human motivation. Hillsdale: Inheritance of Continuous Traits." Working Pa- Lawrence Erlbaum Associates, 1978. per No. 0064. Morrison Institute for Population LEPPER, MARK R.; GREENE, DAVID) AND) NIS- and Resource Studies, Stanford U., 1995. BETT, RICHARD E. "Undermining Children's OUCHI, WILLIAM G. "Markets, Bureaucracies, Intrinsic Interest With Extrinsic Reward: A and Clans," Administrative Science Quarterly, Test of the 'Overjustification' H ypothesis," J. Mar. 1980, 25(1), pp. 129-41. Personality and Social Psychology, 1973, 28(1), PARSONS, TALCOTT. The structure of social action: pp. 129-37. A study in social theory with special reference LERNEri, DANIEL. The passing of traditional soci- to a group of recent European writers. 2nd ed. ety: ModerniZing the Middle East. New York: Glencoe, IL: Free Press, 1949. Free Press, 1958. - . "On the Concept of Political Power," LEVINE, ROBERT A. Dreanms and deeds: Achieve- 1967a in TALCOTT PARSONS, ed. 1967, pp. 297- ment motivation in Nigeria. Chicago: U. of Chi- 354. cago Press, 1966. ------ed. Sociological theory and modern soci- _ . Culture, behavior, and personalit?y. Lon- ety. New York: Free Press, 1967. don: Hutchinson & Co., 1973. POLANYI, KARL. The great transformation: The LOEW;\ENSTEIN, GEORGE. "Out of Control: Vis- political and economic origins of our time. Bea- ceral Influences on Behavior," Organizational con Hill: Beacon Press, 1957. Behavior and Huma7an Decision Processes, 1996, POLLAK, ROBERT A. "Interdependent Prefer- 65, pp. 272-92. ences," Amer. Econ. Rev., June 1976, 66(3), pp. LOC)EW;ENSTE1N, GEORGE ANI) ISSACHAROFF, 309-20. 110 Journal of Economic Literature, Vol. XXXVI (March 1998)

POTTER, DAVID MORRIS. People of plenty: Eco- Behavioral Foundations of Economic Theory," nomic abundance and the American character. Philosophy and Public Affairs, Summer 1977, Chicago: U. of Chicago Press, 1954. 6(4), pp. 317-44. PLOMIN, ROBERT AND DANIELS, DENISE. "Why SHAPIRO, CARL. "Premiums for High Quality Are Children in the Same Family So Different Products as Returns to Reputations," Quart. J. from One Another?" Behavioral and Brain Sci- Econ., Nov. 1983, 98(4), pp. 659-79. ences, 1987, 10, pp. 1-60. SHERIF, MUZAFER. "An Experimental Approach RADNER, ROY AND SCHOTTER, ANDREW. "The to the Study of Attitudes," Sociometry, July- Sealed Bid Mechanism: An Experimental Oct. 1937, 1, pp. 90-98. Study" J. Econ. Theory, June 1989, 48(1), pp. SIAMWALLA, AMMAR. "Farmers and Middlemen: 179-220. Aspects of Agricultural Marketing in Thailand," ROGERS, EVERETT M. Diffusion of innovations. Economic Bulletin for Asia and the Pacific, June New York: Free Press, 1962. 1978, 29(1), pp. 38-50. ROMER, PAUL. "Preferences, Promises and the SIMMEL, GEORG. The philosophy of money. Lon- Politics of Entitlement," in Individual and so- don and New York: Routledge, 1990. cial responsibility: Child care, education, medi- SIMON, HERBERT A. "A Formal Theory of the cal care and long-term care in America. Ed.: Employment Relationship," Econometrica, July VICTOR FUCHS. Chicago: U. of Chicago Press, 1951, 19, pp. 293-305.' 1996, pp. 195-228. SOLOW, ROBERT M. The labor market as a social ROSE-ACKERMAN, SUSAN. "Gifts and Bribes" in institution. Cambridge, MA: Basil Blackwell, Economics, values and organization. Eds.: 1990. AVNER BEN-NER AND LOUIS PUTTERMAN. STARR, CHAUNCEY. "Social Benefits versus. Tech- Cambridge: Cambridge U. Press, 1997. nological Risk," Science, Sept. 19, 1969, 165, Ross, LEE AND NISBETT, RICHARD E. The per- pp. 1232-38. son and the situation. Philadelphia, PA: Temple STIGLER, GEORGE J. AND BECKER, GARY S. "De U. Press, 1991. Gustibus Non Est Disputandum," Amer. Econ. ROTH, ALVIN E. "Bargaining Experiments," in Rev., Mar. 1977, 67(2), pp. 76-90. The handbook of experimental economics. SUNSTEIN, CASS R. "Endogenous Preferences, JOHN H. KAGEL AND ALVIN E. ROTH. Prince- Environmental Law," J. Legal Studies, June ton, NJ: Princeton U. Press, 1995, pp 253- 1993, 22(2), pp. 217-54. 346. TAUSSIG, MICHAEL T. The devil and commodity ROTH, ALVIN E. ET AL. "Bargaining and Mar- fetishism in South America. Chapel Hill: U. of ket Behavior in Jerusalem, Ljubljana, Pitts- North Carolina Press, 1980. burgh, and Tokyo: An Experimental Study," TAYLOR, MICHAEL. Anarchy and cooperation. Amer. Econ. Rev., Dec. 1991, 81(5), pp. 1068- Cambridge: Cambridge U. Press, 1976. 95. The possibility of cooperation. Cam- ROZIN, PAUL. "Family Resemblance in Food and bridge: Cambridge U. Press, 1987. Other Domains: The Family Paradox and the TITMUSS, RICHARD M. The gift relationship: Role of Parental Congruence," Appetite, Apr. From human blood to social policy. New York: 1991, 16(2), pp. 93-102. Pantheon Books, 1971. ROZIN, PAUL AND NEMEROFF, CAROL. "The TONNIES, FERDINAND. Community & society. Laws of Sympathetic Magic: a Psychological New York: Harper & Row, 1963. Analysis of Similarity and Contagion," in Cul- TVERSKY, AMOS AND KAHNEMAN, DANIEL. "Ra- tura psychology: Essays on comparative human tional Choice and the Framing of Decisions," J. development. Eds.: JAMES W. STIGLER, RICH- Bus., Oct. 1986, 59(4), pp. S251-78. ARD A. SHWEDER AND GILBERT HERDT. UPTON, WILLIAM EDWARD III. "Altruism, Attri- Cambridge: Cambridge U. Press, 1990, pp. bution, and Intrinsic Motivation in the Recruit- 205-32. ment of Blood Donors." Doctoral dissertation, ROZIN, PAUL AND VOLLMECKE, T. A. "Food Cornell U., 1973, pp. 1-89. Likes and Dislikes," Ann. Rev. Nutrition, 1986, VEBLEN, THORSTEIN. The theory of the leisure 6, pp. 433-56. class. New York: Modern Library, 1934. SAHLINS, MARSHALL P. Stone age economics. WEBER, MAX. Economy and society: An outline of Chicago: Aldine Pub. Co., 1972. interpretive sociology, Vols. I and II. Eds.: SCHOTTER, ANDREW; WEISS, AVI AND ZAPATER, GUENTHER ROTH AND CLAUS WITTICH. INIGO. "Fairness and Survival in Ultimatum and Berkeley: U. of California Press, [1922] Dictatorship Games," J. Econ. Behav. Organ., 1978. Oct. 1996, 31(1), pp. 37-56. WHITING, BEATRICE B., ed. Six cultures: Studies SCHULTZE, CHARLES L. The public use of private of child rearing. New York: John Wiley and interest. Washington, DC: Brookings Institu- Sons, 1963. tion, 1977. WHITING, BEATRICE B. AND WHITING, JOHN W. SCHUMPETER, JOSEPH A.. Capitalism, socialism M. Children of six cultures: A psycho-cultural and democracy. 3rd ed. New York: Harper & analysis. Cambridge, MA: Harvard U. Press, Row, 1950. 1975. SEN, AMARTYA. "Rational Fools: A Critique of the WILSON, DAVID SLOAN AND SOBER, ELLIOT. Bowles: Endogenous Preferences 111

"Reintroducing Group Selection to the Human "Feeling and Thinking: Preferences Need Behavioral Sciences," Behavioral and Brain Sci- No Inferences," American Psychologist, Feb. ences, 1994, 17, pp. 585-654. 1980, 35(2), pp. 151-75. WITKIN, HERMAN A. AND BERRY, JOHN W. "Psy- ZELIZER, VIVIANA A. "Payments and Social Ties," chological Differentiation in Cross-Cultural Sociological Forum, Sept. 1996, 11(3), pp. Perspective," J. Cross-Cultural Psychology, 481-95. Mar. 1975, 6(1), pp. 4-87. ZUFFERY, F. S. "A Study of Local Institutions and ZAJONC, ROBERT B. "Attitudinal Effects of Mere Resource Management Inquiry in Eastern Cen- Exposure," J. Personality and Social Psychol- tral District." Research paper no. 88, Land Ten- ogy . Monograph Supplement, June 1968, 9(2, ure Center, U. of Wisconsin-Madison, Mar. Part 2), pp. 1-27. 1986.