In my last post I discussed the role that culture plays in historical political economy. We can view culture as the lens through which one (or a society) views the world. This means that cultural forces can be a particularly potent means of locking a society into a “bad equilibrium.”
It is not just that societies have “bad” institutions that fail to foster incentives for economic or political change. It is that institutions tend to evolve hand-in-hand with culture. One supports the other. Institutional change is difficult to implement without a corresponding cultural change, and vice versa. This is one of the leading reasons that institutions can be so difficult to change, even when they inhibit economic activity.
That was the primary idea of the last post. But how has this played out in the historical record? Are there instances of societies falling behind because of bad institutions, which themselves persisted due to that society’s culture?
Trust and the Long Shadow of the Slave Trade
There is a large literature on how trust helps foster ‘good’ economic and political outcomes. This makes sense. If I only trust my family, I am unlikely to engage in exchange with you. This is even true in countries with strong rule of law. I don’t want to have to take you to small claims court because I paid you $5 for a plate, just to come home and find that it has a huge hidden crack in it. If this type of behavior is widespread, I probably won’t do much shopping at all. It helps if I trust that you won’t cheat me. Likewise, it helps the merchant if she knows I will actually pay her.
So, trust is important to encourage economic activity. But where does it come from? Why are some societies much more trusting than others? Nathan Nunn and Leonard Wantchekon’s study of trust in sub-Saharan Africa provides amazing insight. It shows just how important history is for understanding modern phenomena. They find that differences in trust within Africa date to the slave trade. But why?
It comes as no surprise that the slave trade was brutal. Millions of Africans were ripped from their homes and placed on cramped, unsanitary ships. Those that survived lost everything. But why should this have affected trust in modern-day Africa? Nunn and Wantchekon focus on the manner in which slaves were captured. In the early days of the trans-Atlantic slave trade, the state or tribe most often organized slave raids. Over time, however, the slave trade progressed and (p. 3221) “the environment of ubiquitous insecurity caused individuals to turn on others—including friends and family members—and to kidnap, trick, and sell each other into slavery.” It is small wonder that this created an environment of mistrust.
But why did that mistrust persist? The slave trade ended well over a century ago. Nunn and Wantchekon appeal to what I defined as culture in my last post — those heuristics or short-cuts that shape how we see the world. They argue that mistrusting ones neighbors, friends, and family became part of the lens through which Africans saw the world. This was particularly true in those places most affected by the slave trade. In their words (p. 3222): “in areas heavily exposed to the slave trade, norms of mistrust towards others were likely more beneficial than norms of trust, and therefore they would have become more prevalent over time.”
This is one of many examples of how culture and the historical past intertwine. These two forces cast a huge shadow over economic and political development. Culture can be such a powerful determinant of economic and political outcomes because it persists. Once a society views the world through a certain lens, it takes a lot to change that lens. This is all the more true because institutions tend to form in the context of that lens.
All about the Family
Another cultural feature that has had a huge effect on economic and political history is the family. Family types differ across societies. In some societies, such as many in the West, nuclear families are the primary kin unit. This includes parents and children. Only infrequently does it include a third generation or adult siblings.
By contrast, in many parts of the world, larger families are considered the “kin unit”. The literature calls these units “clans”. Clans include grandparents, uncles, aunts, cousins, etc. The family unit is a prototypical cultural feature. Who you view as being part of your inner circle reflects how you see the world. But why are there differences in family units across cultures? And what does this matter for economic and political development?
The nuclear family is the historical aberration. Clan family organization likely goes back to before the Neolithic period. What made nuclear families the norm in parts of world, particularly Europe? The anthropologist Jack Goody claimed that it came about from norms promoted the medieval Church. This included, importantly, a ban on cousin marriage.
The argument goes as follows. In the medieval period, one often left bequests to the Church if there were no family. One way people kept wealth in the family was to marry cousins. By ending this practice — the Church banned cousin marriages, at one point up to the sixth cousin! — the Church destroyed this practice and enriched itself in the process. One unintended consequence was that this destroyed European kin networks in the process.
Goody’s hypothesis has fascinated social scientists for decades. Much compelling research suggests that differences in family units have far-reaching economic and political consequences. Avner Greif highlighted one important consequence. He argued that small families made Europeans more individualistic. On the other hand, North African and the Middle Eastern cultures were more communal. Communal cultures have many ties with people they trust. Their kin unit is big enough that they can exchange within the group and still benefit from gains from trade.
Europeans could not do this. They had to go outside the group to engage in exchange. But how could they do this, if they could not trust non-kin? Greif argued that Europeans set up institutions to overcome this problem. These institutions aligned the incentives of all parties to act truthfully. Institutions like these have huge set up costs. They will not be established where there is not an overwhelming need. An unintended consequence of these institutions is that once they are established, they open up a much larger world for economic exchange. This world is much larger than even the largest kin unit. What had at one point been an impediment ended up being a blessing in disguise.
Jonathan Schulz recently put this theory to the test. He reasoned that if the Church’s prohibition on kin marriages actually affected European institutional development, it should have been associated with the growth of communes. Communes (think, city-states) were the prototypical medieval institution aimed at bringing non-kin together. Schulz finds that places that had been under the influence of the Church for longer were in fact more likely to be organized as communes in the medieval period.
The cultural legacy of the medieval Catholic Church had enduring effects. More work by Joseph Henrich and Schulz (along with Duman Bahrami-Rad and Jonathan Beauchamp) recently put the Goody theory to a fascinating set of empirical tests. If Christianity was indeed the reason that Europeans were more individualistic, then the early spread of Christianity should be associated with higher degrees of individualism, lower levels of conformity, and more prosociality to non-kin. This is precisely what they find. These are somewhat uniquely Western traits. They are not found in most of the world. Henrich calls this part of the broader set of unique WEIRD characteristics (Western, Educated, Industrialized, Rich, and Democratic) that helped set the West off.
Avner Greif and Guido Tabellini take this logic and compare social organization forms in Europe and China. In China, the basic form of social organization was the clan, steeped in Confucian norms. Meanwhile, in Europe it was the corporation, a “voluntary association between unrelated individuals established to pursue common interests.”
There were many consequences of this arrangement. First, the type of morality that emerged in the West was “generalized”. That is, Westerners had more pro-social attitudes towards people outside their kin group. More importantly, generalized morality is scalable. Corporate institutions can become large because they do not rely on kin ties. In the end, this gave Europe a huge institutional advantage over China.
A related argument was recently (as in last week!) put forth by Zhiwu Chen, Chicheng Ma, and Andrew Sinclair. The clan was the key unit in China for risk-sharing and resource pooling. Clan members supported each other in time of need and brought resources together for bigger projects. This was rooted in a Confucian ideology that was centered around clan-based obligations.
Chen, Ma, and Sinclair argue this meant that there was little demand for larger financial markets that could distribute capital more broadly. Why borrow from (or lend to) someone you cannot trust when there are a bunch of your kin to borrow from? This was not the case in Europe, where there were no larger family units to provide access to capital. Eventually, financial markets emerged in Europe to fill this void.
The research I have highlighted here is just the tip of the iceberg. With each passing week there is seemingly some new, fascinating work at the intersection of culture, institutions, and history. It is hard to keep up. There is good reason for this explosion in interest in culture and HPE. Now that we have the tools to convincingly draw empirical associations, we are able to say so much more than we were even a couple decades ago. Our understanding of the historical past is much better for it.