IDEAS home Printed from https://ideas.repec.org/a/eee/jeborg/v126y2016ipbp5-24.html
   My bibliography  Save this article

The cultural foundations of economic failure: A conceptual toolkit

Author

Listed:
  • Collier, Paul

Abstract

This paper proposes a framework for integrating mental constructs into economic analysis. It considers three types of belief: identities, narratives and norms. Identities influence preferences; narratives influence how causal relationships are (mis)understood; norms determine self-imposed constraints. The beliefs are acquired pre-rationally, through participation in social networks which are initial endowments; subsequent choice of network participation is path dependent. Actors rationally maximize their utility subject to these beliefs, but the beliefs themselves are contaminated by these endowments of irrationality. In equilibrium, beliefs and networks are locally stable and constitute a ‘culture’: the culture can be that of an organization, an entire society, or a family. Local stability is achieved partly through interactions between the three types of belief, and partly through the interaction of beliefs and networks. A dysfunctional culture generates behaviour that yields bad outcomes. If these forces are strong, Bayesian updating from mistakes can be frustrated: dysfunctional cultures can be traps. Principals can use various control variables to improve (or preserve) outcomes by targeting beliefs. The framework enables a systematic approach to dysfunctional cultures.

Suggested Citation

  • Collier, Paul, 2016. "The cultural foundations of economic failure: A conceptual toolkit," Journal of Economic Behavior & Organization, Elsevier, vol. 126(PB), pages 5-24.
  • Handle: RePEc:eee:jeborg:v:126:y:2016:i:pb:p:5-24
    DOI: 10.1016/j.jebo.2015.10.017
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S016726811500284X
    Download Restriction: Full text for ScienceDirect subscribers only

    File URL: https://libkey.io/10.1016/j.jebo.2015.10.017?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Enrico Spolaore & Romain Wacziarg, 2013. "How Deep Are the Roots of Economic Development?," Journal of Economic Literature, American Economic Association, vol. 51(2), pages 325-369, June.
    2. Hamlin, Alan & Jennings, Colin, 2011. "Expressive Political Behaviour: Foundations, Scope and Implications," British Journal of Political Science, Cambridge University Press, vol. 41(3), pages 645-670, July.
    3. George A. Akerlof, 2009. "How Human Psychology Drives the Economy and Why It Matters," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(5), pages 1175-1175.
    4. Sendhil Mullainathan & Joshua Schwartzstein & Andrei Shleifer, 2008. "Coarse Thinking and Persuasion," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 123(2), pages 577-619.
    5. David Rueda, 2014. "Food Comes First, Then Morals: Redistribution Preferences, Altruism and Group Heterogeneity in Western Europe," CAGE Online Working Paper Series 200, Competitive Advantage in the Global Economy (CAGE).
    6. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2006. "Does Culture Affect Economic Outcomes?," Journal of Economic Perspectives, American Economic Association, vol. 20(2), pages 23-48, Spring.
    7. Roland Bénabou & Jean Tirole, 2011. "Identity, Morals, and Taboos: Beliefs as Assets," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 126(2), pages 805-855.
    8. David Yanagizawa-Drott, 2014. "Propaganda and Conflict: Evidence from the Rwandan Genocide," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 129(4), pages 1947-1994.
    9. Simon Gaechter & Benedikt Herrmann & Christian Thoeni, 2010. "Culture and Cooperation," Discussion Papers 2010-09, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
    10. Barr, Abigail & Lindelow, Magnus & Serneels, Pieter, 2009. "Corruption in public service delivery: An experimental analysis," Journal of Economic Behavior & Organization, Elsevier, vol. 72(1), pages 225-239, October.
    11. Alain Cohn & Ernst Fehr & Michel André Maréchal, 2014. "Business culture and dishonesty in the banking industry," Nature, Nature, vol. 516(7529), pages 86-89, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Bellanca, Nicolò, 2023. "Place identities and narratives in local development," OSF Preprints jpce6, Center for Open Science.
    2. Antoci, A. & Bellanca, N. & Galdi, G., 2018. "At the relational crossroads: Narrative Selection, Contamination, Biodiversity in Trans-Local Contexts," Journal of Economic Behavior & Organization, Elsevier, vol. 150(C), pages 98-113.
    3. Menta, Giorgia & Lepinteur, Anthony, 2021. "Boys don’t cry (or do the dishes): Family size and the housework gender gap," Journal of Economic Behavior & Organization, Elsevier, vol. 186(C), pages 164-188.
    4. Sharun Mukand & Dani Rodrik, 2018. "The Political Economy of Ideas: On Ideas Versus Interests in Policymaking," NBER Working Papers 24467, National Bureau of Economic Research, Inc.
    5. Azmat, Saad & Kabir Hassan, M. & Ali, Haiqa & Sohel Azad, A.S.M., 2021. "Religiosity, neglected risk and asset returns: Theory and evidence from Islamic finance industry," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 74(C).
    6. Leonie Hodel & Yann Polain de Waroux & Rachael D. Garrett, 2024. "Characterizing culture’s influence in land systems," Nature Sustainability, Nature, vol. 7(8), pages 973-982, August.
    7. Christian Cordes, 2019. "The promises of a naturalistic approach: how cultural evolution theory can inform (evolutionary) economics," Journal of Evolutionary Economics, Springer, vol. 29(4), pages 1241-1262, September.
    8. Vyacheslav V. VOLCHIK & Maxim A. KORYTSEV & Elena V. MASLYUKOVA, 2018. "Institutional traps and New Public Management in education and science," Upravlenets, Ural State University of Economics, vol. 9(6), pages 17-29, December.
    9. Mikołaj Biesaga & Anna Domaradzka & Magdalena Roszczyńska-Kurasińska & Szymon Talaga & Andrzej Nowak, 2023. "The effect of the pandemic on European narratives on smart cities and surveillance," Urban Studies, Urban Studies Journal Limited, vol. 60(10), pages 1894-1914, August.
    10. Mukand, Sharun W. & Rodrik, Dani, 2018. "The Political Economy of Ideas," CAGE Online Working Paper Series 370, Competitive Advantage in the Global Economy (CAGE).
    11. Vyacheslav V. Volchik & Elena V. Maslyukova & Sophia A. Panteeva, 2022. "Innovation indicators in the context of narrative economics," Journal of New Economy, Ural State University of Economics, vol. 22(4), pages 24-44, January.
    12. Elliott Ash & Sharun Mukand & Dani Rodrik, 2021. "Economic Interests, Worldviews and Identities: Theory and Evidence on Ideational Politics," CESifo Working Paper Series 9501, CESifo.
    13. Tobias Steindl, 2021. "Cultural rule orientation, legal institutions, and the credibility of corporate social responsibility reports," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 28(1), pages 310-332, January.
    14. Mukand, Sharun W. & Rodrik, Dani, 2018. "The Political Economy of Ideas," The Warwick Economics Research Paper Series (TWERPS) 1163, University of Warwick, Department of Economics.
    15. Jonathan F. Schulz, 2016. "The Churches’ Bans on Consanguineous Marriages, Kin-networks and Democracy," Discussion Papers 2016-16, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
    16. Paul Collier & Anthony J. Venables, 2017. "Urbanization in developing economies: the assessment," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 33(3), pages 355-372.
    17. Angelo Antoci & Guido Ferilli & Paolo Russu & Pier Luigi Sacco, 2020. "Rational populists: the social consequences of shared narratives," Journal of Evolutionary Economics, Springer, vol. 30(2), pages 479-506, April.
    18. Akerlof, Robert, 2017. "Value Formation: The Role of Esteem," Games and Economic Behavior, Elsevier, vol. 102(C), pages 1-19.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Butler, Jeffrey V. & Fehr, Dietmar, 2024. "The causal effect of cultural identity on cooperation," Journal of Economic Behavior & Organization, Elsevier, vol. 221(C), pages 134-147.
    2. Hicks, Daniel L. & Santacreu-Vasut, Estefania & Shoham, Amir, 2015. "Does mother tongue make for women's work? Linguistics, household labor, and gender identity," Journal of Economic Behavior & Organization, Elsevier, vol. 110(C), pages 19-44.
    3. Heineck, Guido & Süssmuth, Bernd, 2013. "A different look at Lenin’s legacy: Social capital and risk taking in the Two Germanies," Journal of Comparative Economics, Elsevier, vol. 41(3), pages 789-803.
    4. Sun-Ki Chai & Dolgorsuren Dorj & Katerina Sherstyuk, 2018. "Cultural Values and Behavior in Dictator, Ultimatum, and Trust Games: An Experimental Study," Research in Experimental Economics, in: Experimental Economics and Culture, volume 20, pages 89-166, Emerald Group Publishing Limited.
    5. Vesa Pursiainen, 2022. "Cultural Biases in Equity Analysis," Journal of Finance, American Finance Association, vol. 77(1), pages 163-211, February.
    6. An, Jiafu & Jiang, Mengfei & Xu, Jiaman, 2021. "Professional norms and risk-taking of bank employees: Do expectations of peers’ risk preferences matter?," Journal of Financial Stability, Elsevier, vol. 56(C).
    7. Kostis, Pantelis C. & Kafka, Kyriaki I. & Petrakis, Panagiotis E., 2018. "Cultural change and innovation performance," Journal of Business Research, Elsevier, vol. 88(C), pages 306-313.
    8. Mario Coccia, 2017. "General purpose technologies in dynamic systems: visual representation and analyses of complex drivers," IRCrES Working Paper 201705, CNR-IRCrES Research Institute on Sustainable Economic Growth - Moncalieri (TO) ITALY - former Institute for Economic Research on Firms and Growth - Torino (TO) ITALY.
    9. Ahrens, Steffen & Bosch-Rosa, Ciril, 2023. "Motivated beliefs, social preferences, and limited liability in financial decision-Making," Journal of Banking & Finance, Elsevier, vol. 154(C).
    10. Yasar Ersan & Ilhan Can Ozen, 2022. "Once Upon a Time in Anatolia: The Long Run Development Effects of American Missions in Anatolia," ERC Working Papers 2201, ERC - Economic Research Center, Middle East Technical University, revised Jan 2022.
    11. Ani Harutyunyan & Omer Ozak, 2016. "Culture, diffusion, and economic development," Working Papers of LICOS - Centre for Institutions and Economic Performance 551450, KU Leuven, Faculty of Economics and Business (FEB), LICOS - Centre for Institutions and Economic Performance.
    12. Chen, Na & Yang, Huan, 2024. "From rural to urban: Clan, urbanization and trust," China Economic Review, Elsevier, vol. 85(C).
    13. Leonardo M. Klüppel & Lamar Pierce & Jason A. Snyder, 2018. "Perspective—The Deep Historical Roots of Organization and Strategy: Traumatic Shocks, Culture, and Institutions," Organization Science, INFORMS, vol. 29(4), pages 702-721, August.
    14. Scott L. Fulford & Ivan Petkov & Fabio Schiantarelli, 2020. "Does it matter where you came from? Ancestry composition and economic performance of US counties, 1850–2010," Journal of Economic Growth, Springer, vol. 25(3), pages 341-380, September.
    15. Matuszak Piotr, 2020. "What determines the scale of state ownership in enterprises? Some evidence from post-socialist countries," Economics and Business Review, Sciendo, vol. 6(4), pages 95-117, December.
    16. Lata Gangadharan & Tarun Jain & Pushkar Maitra & Joe Vecci, 2022. "Lab-in-the-field experiments: perspectives from research on gender," The Japanese Economic Review, Springer, vol. 73(1), pages 31-59, January.
    17. Yann Algan & Pierre Cahuc, 2014. "Trust, Well-Being and Growth: New Evidence and Policy Implications," Post-Print hal-01169659, HAL.
    18. Abramson, Boaz & Shayo, Moses, 2017. "Grexit vs. Brexit: International Integration under Endogenous Social Identities," CAGE Online Working Paper Series 334, Competitive Advantage in the Global Economy (CAGE).
    19. Casey, Gregory & Klemp, Marc, 2016. "Instrumental Variables in the Long Run," MPRA Paper 68696, University Library of Munich, Germany.
    20. Francesco Flaviano Russo, 2024. "Cultural assimilation and segregation in heterogeneous societies," Journal of Population Economics, Springer;European Society for Population Economics, vol. 37(3), pages 1-36, September.

    More about this item

    Keywords

    Culture; Beliefs; Social networks; Cultural change;
    All these keywords.

    JEL classification:

    • B41 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Economic Methodology
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D87 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Neuroeconomics
    • O35 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Social Innovation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jeborg:v:126:y:2016:i:pb:p:5-24. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/jebo .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.