Culture and Identity

Abstract

This chapter examines how culture and identity affect economic behaviors and outcomes. Cultural differences in economic behavior have been found in survey data and experiment data. Differences in norms and worldviews have been used to empirically and theoretically study these cultural differences.

Appendices

Appendix 1: Institution and Culture as Equilibria

In this chapter, we discussed an approach where institutions and norms are taken to be exogenous. There is also another approach where how norms and institutions are endogenously determined in economic systems. In this approach, norms and institutions are determined by repeated game, evolutionary game, or one of multiple equilibria as a general equilibrium model of market transactions. In these models, culture is considered to be a part of an institution and treated as an endogenous factor. Examples are Aoki’s (2001) Comparative Institutional Analysis; Greif’s (2006) Historical and Comparative Institutional Analysis; Cole et al.’s (1992) model of norms; and Alesina and Angeletos’ (2005) and Bénabou and Tirole’s (2006) models where preferences for income redistribution are endogenously determined. In many of these models, the assumption of selfish economic man is maintained, but an economic man behaves altruistically because of sanctions against behaviors that violate norms that are endogenously determined. Such models are categorized as those in traditional economics. When a model assumes social preferences, or norms to influence endogenous preferences for altruism, it is categorized as one in behavioral economics. Making a distinction between behavioral economics and traditional economics, however, is not important. How to analyze norms, culture, and altruism for what purpose is important. In this chapter, we discussed models in which norms are given and exogenous, but an interpretation may be how an individual might act with given norms when the norms are endogenously determined.

Appendix 2: Theoretical Prediction of Krupka and Weber’s (2013) Experiments on the Dictator Game

In the text of this chapter, we introduced a theoretical prediction by Krupka and Weber (2013) that, if we restrict our attention to those dictators who take the action that results in higher monetary payoff for them than recipients, then more participants in the bully version will take the action that results in the (10 dollars, 0 dollar) outcome than those in the standard version will take the action which results in the same outcome. In this Appendix, we will explain the reason for this theoretical prediction.

The reason for this prediction can be explained using Table 9.1. In the table, we can see that the cases when the distributor’s payoff will be larger are not only ($10, $0), but also ($9s, $1), ($8, $2), ($7, 3), and ($6, $4). If we compare N(a_i) of the action which leads to the last four outcomes and N(a_i) of the action which leads to the first outcome, the absolute value of each of the difference will be smaller under the bully version. In other words, in the bully version, the evaluation for an action which brings an outcome ($10, $0) is relatively higher than that in the standard version (i.e., it is easier to take such action). For example, if we compare the difference in N(a_i) between ($10, $0) and ($6, $4), under the bully version, it is −0.9 − (−0.09) = 0.81 whereas in the standard version it is −0.8 − 0.14 = 0.94.

Appendix 3: The Background of the Tough Love Model

Because this chapter and Chap. 11 use the tough love model of Bhatt and Ogaki (2012) as an important example, in this Appendix we will explain its background for the deeper understanding of the model. The first author of this book came up with the idea of the model around 2005 and started building a model with Vipul Bhatt, who was a graduate student then. The author spent more than 20 years in the USA and often felt that children in Japan are less disciplined than the ones in the USA, especially when a child is in the pre-school age. For example, in Japan, even when a child is running around in a store and being a nuisance, his or her parent does not say anything, or just say “You will hurt yourself if you are running around” or “You will be scolded by that old man.” In comparison, in the USA, parents typically reprimand their child clearly saying, “That is bad” even in a public place with other people around. These observations prompted the author to think that in Japan, people may be thinking that love means accepting everything in a gentle manner; else, parents lack confidence in ethical judgement when they reprimand their children.

According to Nobuta (2009), the term “tough love” originates back in the 1950s, as the wisdom of a self-help group called Al-Anon for wives with alcoholic spouses based on members’ tough experiences dealing with their partners’ alcoholism. Various efforts of wives to stop their spouse’s binge drinking failed. From this experience, wives admit that what they can do is limited. What they did was detachment with love: they cuorageouly let their spouses make decisions to hurt themselves while still kept on watching over them. Thus the concept of tough love came into existence. This is different from the common perception of loving family, i.e., stay close and devote themselves to each other. Many people may think alcoholism is an extreme example and not relevant to them. However, sometimes an extreme example may reveal the universal truth without being bounded by common sense. We believe that the concept of tough love will provide a hint when thinking about the family relationship, especially whether or how to discipline a child.