When the economist, Adam Smith, wrote in his 1776 book, Wealth of the Nations, that each of us contributes to a self-regulating system by pursuing our own personal interests, his idea of “personal interests” was not exclusively financial or material.
He understood that cultural values were involved in economics.
German social scientist, Max Weber, defined this more clearly during the early 20th century. He examined how certain cultural values influenced economic output.
One example he gave was the Protestant culture.
Reformation teachings in the religion called for congregants to gain wealth, and in doing so, the Protestant work ethic and teachings produced a stronger economy than did, for instance, the Catholic counterpart.
At that point in time, Ireland, Italy, Portugal, and Spain – all Catholic countries – had weaker economies than Great Britain and Germany – countries with a larger Protestant population.
Culture Impacts Economy
The plain fact is some economies fail while others succeed. And the success or failure of an economy is largely dependent on culture.
For any given culture to prosper, economists look at a checklist of necessities for economic development. These include:
- Good governance
- Stable political system
- Straightforward laws, enforced honorably
- Efficient and uncorrupt government officials
- Available land for businesses
- Less bureaucracy when it comes to applying for business permits
- Foreign investment
For an economy to develop fruitfully, these requirements must be fulfilled.
Values, Tastes & Desires
As Francis X. Hezel, SJ, writes in his article, “The Role of Culture in Economic Development”:
“Modern technology alone will never be able to turn around an economy and to boost the standard of living among a population. The development of a mindset, with accompanying values and habits, is a big part of the equation.”
The study of cultural economics examines all this.
Cultural economics differs from traditional economics in the examination of how and why individuals make decisions.
Traditional economics sees decision-making as producing explicit and implicit consequences.
Cultural economics sees decision-making as something arrived at through trajectories involving regularities accrued over the years that direct the individual in decision-making.
Our tastes, our desires are informed by our culture. This begins during primary socialization and continues to be enhanced by the environment we grow in. We internalize these tastes and desires and they inform our future wants.
Individuals and societies have culture-driven wants, needs, desires, and values, all of which drive the economy and the culture, thereby producing economic evolution – or stagnation.
Learn more about the 10 Cultural Universals.