A Service of Leibniz-Informationszentrum econstor Wirtschaft Leibniz Information Centre Make Your Publications Visible. zbw for Economics Goldschmidt, Nils Article — Published Version A cultural approach to economics Intereconomics Suggested Citation: Goldschmidt, Nils (2006) : A cultural approach to economics, Intereconomics, ISSN 0020-5346, Springer, Heidelberg, Vol. 41, Iss. 4, pp. 176-182, http://dx.doi.org/10.1007/s10272-006-0188-1 This Version is available at: http://hdl.handle.net/10419/41914 Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes. 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Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, If the documents have been made available under an Open gelten abweichend von diesen Nutzungsbedingungen die in der dort Content Licence (especially Creative Commons Licences), you genannten Lizenz gewährten Nutzungsrechte. may exercise further usage rights as specified in the indicated licence. www.econstor.eu DOI: 10.1007/s10272-006-0188-1 FORUM Culture and Economics The question of how far it is necessary to include cultural factors in the analysis of economic processes has become topical again in recent years. The fi rst contribution to this Forum introduces a cultural approach to economics. This is followed by an article that examines the transition processes in central and eastern Europe from an econocultural perspective. The next article deals with the concept of a country-specifi c national tax culture and its implications for tax policy, especially in the context of transformation processes. The fi nal paper discusses Turkey’s economic culture and its possible impact on the country’s integration into the European Union. Nils Goldschmidt* A Cultural Approach to Economics cultural approach to economics deals with the in- That such an understanding will have consequences A terplay between informal and formal institutions for the theory and practice of economic policy will be and its cultural as well as cognitive perception. Thus, a mentioned here only briefl y. cultural approach to economics can be connected to Institutions and Social Interaction three different, recent developments in economics: It is one of the numerous merits of Douglass C. • institutional economics as a theory of institutional North to have clarifi ed the notion of institutions and change as established by Douglass C. North how to operationalise institutions as a tool for eco- • the evolutionary approach to economics and social nomic analysis. Following North, “institutions are the philosophy in the tradition of Friedrich A. von Hayek rules of the game in a society or, more formally, are the humanly devised constraints that shape human inter- • the behavioural economic theory related to socio- actions”.1 The idea that “rules of the game” are “guid- biology, evolutionary anthropology and evolutionary ing” human, i.e. social, interaction has a long tradition psychology as discussed in the literature, for exam- in the history of economic thought. As Hayek pointed ple, in the “continuity hypothesis”, in the ideas of a out,2 it was Adam Smith who introduced the notion “universal Darwinism” and in the concept of “pro- of “rules of the game” to economics, relating it to the gram-based behaviour”. Stoic philosophy: In what follows, I will present the central insights that “Human life the Stoics appear to have considered a cultural approach to economics can add to modern as a game of great skill; in which, however, there was economic theory as related to the above-mentioned a mixture of chance, or of what is vulgarly understood developments. Insisting on the very “cultural dimen- to be chance. In such games the stake is commonly a sion” of economic phenomena will surely neither shake trifl e, and the whole pleasure of the game arises from the fundaments of traditional economics nor will it es- playing well, from playing fairly, and playing skillfully tablish another distinctive approach in the heterodox … From ignorance of the rules of the game, fear and fi eld of economics, but it might re-direct our attention doubt and hesitation are the disagreeable sentiments again to some insights and crucial points that were still that precede almost every stroke which he plays; … in the focus of a “verstehende Nationalökonomie” (un- derstanding economics) as developed by Max Weber. * Research Associate, Walter Eucken Institut, Freiburg, Germany; Re- 1 Douglass C. North: Institutions, Institutional Change and Economic search Associate, Research Programme “Integration Area Europe”, Performance, Cambridge et al. 1990, Cambridge University Press, Hamburg Institute of International Economics (HWWA), Germany. This p. 3. outline is in its main parts the result of cooperation with Bernd Rem- mele and Joachim Zweynert. The author wishes to express his indebt- 2 Cf. Friedrich A. Hayek: Law, Legislation and Liberty. A New State- ness to Inga Fuchs for central insights on this subject, and to Michael ment of the Liberal Principles of Justice and Political Economy, Lon- Wohlgemuth, who helped to fi nish this paper in a short period of time. don 1982, Routledge, p. 71. 176 Intereconomics, July/August 2006 FORUM Our only anxious concern ought to be, not about the evolve out of informal ones and vice versa? Do for- stake, but about the proper method of playing.”3 mal institutions support (complement) or do they un- dermine (substitute for) the contributions of informal The central point of such an understanding is, how- institutions?5 And, how could formal institutions be ever, that a framework of institutions structures the enforced in different (informal) environments? Even human “playing fi eld” and results in a “proper method though North addresses these questions – “formal of playing.” Accordingly, institutions are the “key” to rules can complement and increase the effectiveness altering human behaviour. In addition, a “fair” structure of informal constraints. They may lower information, of the rules of the game also provides a just outcome. monitoring, and enforcement costs and hence make Thus, institutions and therefore incentives should be in informal constraints possible solutions to more com- the focus of an economist for two reasons. plex exchange”6 – the statements are mostly general • At least in modern, i.e. anonymously structured soci- ones and the actual processes and dynamics remain eties it will be not very promising to hope to alter eco- unclear. nomic policy by altering human behaviour. Instead, • The same is true of the very notion of informal rules. “rules make better politics”4 – a line of thought that North defi nes them as “a part of the heritage that we can be found in several different approaches such call culture”7 and thus they are the main reasons for as new institutional economics, German “Ordnung- “path dependency.” In a similar manner, Avnar Greif sökonomik” and constitutional political economy. for example states, “past behavior, cultural beliefs, • Especially in times of rapid economic change, as social structures, and organizations impact the de- we can observe in the transformation processes in velopment of values and social enforcement mech- eastern Europe, institutions are crucial to structur- anisms that inhibit fl exibility in departing from past ing successful economic processes. Or to put it the patterns of behavior.”8 Recently, North clarifi ed his other way round: contrary to production processes approach to culture and informal rules / constraints to which the specifi c “set of data” (law, natural and / norms (terms all of which can be found in North’s cultural circumstances etc.) can be assumed to be writings) affi rming that prominent approaches like exogenous, economic policy and its institutions will Dawkins’ idea of “memes” (a sort of genes that trans- be successful only if one takes into account specifi c port culture)9 are odd – a statement one cannot but historical and cultural development paths as endog- agree with: “Culture traits do not possess attributes enous elements. Without going into details here: the parallel to those of genes and indeed the growing transition processes in central and eastern Europe literature of the new institutional economics makes have shown the necessity of such an understanding abundantly clear that institutions must be explained painfully enough – something the World Bank and in terms of the intentionality of humans.”10 Never- the IMF had to learn in the last decade. theless, the understanding of “intentionality” again However, it was Douglass C. North who also estab- remains vague. Are intentionality and culture bound 11 lished the difference between formal and informal rules together by something like a “Lamarckian” process as a central differentiation to characterise institutions. – an idea that was already favoured by Popper and 12 Even though this differentiation can also be found in Hayek? Or are informal norms a mixture of genetic 13 other approaches