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Social Norms, Culture and Development
Economic development is not only dependent on fiscal policy, monetary policy and taxation, but is also rooted in human psychology, sociology, culture and norms. In economics, there has been a bit of resistance in emphasising other aspects of development, because it is thought of giving ground to the neighbouring disciplines.22 The recent World Development Report (WDR) of 2015 focuses on the behavioural and social foundations of development, and has been very well received.
Government documents (generally, hard-nosed), usually, make no mention
of the role of social norms and culture in promoting
development and economic efficiency. However, there is now a growing body of literature that demonstrates how certain social norms and cultural practices are vital ingredients for economic efficiency and growth. Groups and societies that are known to be honest and trustworthy tend to do better than societies that do not have this reputation. There have been broad cross- country studies and also laboratory experiments that illustrate this. More generally, what is being argued is that a nation’s success depends of course on its resources, human capital and economic policies, for instance fiscal and monetary policies, but also on the cultural and social norms that permeate the society. Societies that are endowed with personal integrity and trustworthiness have the natural advantage, in that no third party is required to enforce contracts. For outsiders the mere knowledge that a particular society is trustworthy is reason to do more business and trade with it. One reason why these ‘social’ causes of development do not get enough recognition in the literature on economic policy is that the science of how these economics-friendly social qualities are acquired is not yet fully understood. Fortunately, the new discipline of behavioural economics is beginning to give us some insights into the formation of customs and behaviour:23
• It is, for instance, known that buildings and office spaces which are cleaner and aesthetically better maintained result in individuals being more honest and desisting corrupt activity. It is almost as if we have a mental inclination not to defile a good ambience through acts of corruption.
• New York city’s notorious high crime was controlled, among other things, by cleaning up the city and removing graffiti from the walls. New York’s police department took a decision to deter vandalism and graffiti that scar public spaces. This act of making the cityscape more aesthetic somehow made potential criminals less prone to crime.
• One sees casual evidence of this in the behaviour of Delhites using the metro. It has been widely noted that people behave better when they travel on Delhi’s well-maintained metro (postponing their bad behaviour to when they come up to the surface again, some would add).
All this is in keeping with the influential broken windows theory in sociology, which maintains that, if we control low level, anti-social behaviour and take small steps to improve the environment, this will have a natural deterrent effect on larger criminal behaviour and acts of corruption. Also, the sheer recognition and awareness that some collective qualities of citizens, such as honesty and trustworthiness, enable the entire society to do well, prompts individuals to adopt those qualities and overcome the ubiquitous free-rider problem.
There is a growing literature24 in economics arguing that pro-social behaviour, which includes altruism and trustworthiness, is innate to human beings and, moreover, forms an essential ingredient for the efficient functioning of economies. In other words, human beings have a natural ability to forego personal gains for the sake of other people or because that is what is required because of a promise the person had made. This trait may well have evolutionary roots, but its existence is now well demonstrated in laboratory tests by recent studies.
There is research25 in psychology and evolutionary biology which shows that morality, altruism, and other-regarding values are an innate part of the human mind, even though the social setting in which a person lives can nurture or stunt these traits. However, the recognition that these human and moral qualities can have a large impact on economic development came relatively late to economics. Hence, the literature on this is relatively recent and brief. In fact, recent research shows that having a few ‘good’ human beings in society can give rise to dynamics through which we end up with an overall better society. There is also evidence that social norms and habits that at first sight seem ingrained in a society can change over short periods of time. By this argument it is possible for a country to nurture and develop the kinds of social norms that enable a more vibrant economy.
In talking about a nation’s economic progress, all attention, including both praise and criticism, is usually focused on the government. It is, however, important to recognise that much also depends on civil society, the firms, the farmers and ordinary citizens. The social norms and collective beliefs that
shape the behaviour of these agents play an important role in how a nation performs.
Honesty, punctuality, the propensity to keep promises, the attitude towards corruption are matters shaped in great part by norms, and social beliefs and the behaviour patterns can become habitual. Moreover, in a democracy like India, what can be done by government depends in great measure on how ordinary people think and what people believe in. That is what electoral politics is all about. An important reason why this got so little attention in the past is because so much of traditional economics was written as if these non- economic facets of life did not matter. But we now know that a market economy cannot function if people are totally self serving. While self-interest is a major driver of economic growth, it is important to recognise that honesty, integrity and trustworthiness constitute the cement that binds society. At times economists treated these social norms, preferences and customs as unalterable. If that were so, there would not be much point in analysing their effect. But we do know that these qualities in a people can change. Honesty and integrity can be nurtured and aversion to corruption can be shored up.
If these traits are absent or inadequate in a nation, it is likely that that nation will stagnate and remain in a chaotic poverty trap. Take for instance, contracts which enable markets to develop and form the basis of economic life. If the contractual system in a nation is so weak that when a bank gives a 20-year mortgage to a person for buying a house, there is high risk of default, the implication of this is not that banks in that country will make large losses. The implication is that banks will not give loans; and the housing market will remain severely underdeveloped and the total number of houses will be few and far between.
Enforcing complicated or large contracts, especially ones protracted over a long period of time, is the responsibility of the state. The state provides the laws and enforcement to enable people to sign contracts. However, economic life is full of everyday ‘contracts’ (for example, you let me ride in your taxi, and I will pay you at the end of it; I pay you money now and you paint my house over the next two days; or you paint my house over the next two days and I will pay you after that). In these everyday situations it is too cumbersome to bring in the state or the law courts. Here the main guarantor
has to be the people’s personal integrity and trustworthiness. Societies that have successfully nurtured these qualities have done well; societies that have done poorly on these fronts, tend to do poorly in terms of economic progress.
It is not known precisely how these values can be inculcated in society. But, hopefully, writing about their importance will catalyse change, as ordinary people realise that for economic advancement these social qualities are as important as policies that concern directly with the economy—like operating the stock market or setting the rules of market competition.
Further, basic literacy and better education are helpful since people can then, on their own, reason and reach these conclusions. Literacy has the added value that it implies ordinary people will demand policies which are truly better, rather than those that merely look good on the surface. In a democratic setting like India, this will incentivise politicians to adopt better policies. Finally, if political leaders and policymakers act as role models in terms of these qualities of honesty, integrity and trustworthiness, that can set the ball rolling. Inclusion of the behavioural dimension of human existence in policymaking has potential to play a huge role in promoting well-being.
1. Based on the analyses in Michael P. Todaro and Stephen C. Smith, Economic Development, Pearson Education, 8th Ed., New Delhi, 2004, pp. 9–11.
2. As the IMF and the WB considered this yardstick of development as quoted in Gerald M. Meier and James E. Rauch, Leading Issues in Economic Development, Oxford University Press, New Delhi, 2006, pp. 12–14.
3. World Bank, World Development Report 1991, Oxford University Press, New York, 1991, p. 4.
4. UNDP, Human Development Report, 2013 and Human Development Report, 2010, United Nations Development Programme, New York, USA, 2013 and 2010.
5. Todaro and Smith, Economic Development, p. 58.
6 There were diverse opinions about the real meaning of ‘development’—by mid- 1940s upto almost the whole 1950s it meant 5–7 per cent growth rate in an economy—even by the IMF and WB. By the late 1960s new views of development started emerging. Arthur Lewis had seen development in the sense of human freedom in 1963 itself when he concluded that “the advantage of economic growth is not that wealth increases happiness, but that it increases the
range of human choice.” For him development means a freedom from ‘servitude’—mankind could be free to have choices to lead a life full of material goods or in spiritual contemplation (W. Arthur Lewis, The Theory of Economic Growth, Allen & Unwin, London, 1963, p. 420).
For Dudley Seers development meant more employment and equality besides a falling poverty (‘The Meaning of Development’, a paper presented at the 11th World Conference of the Society for International Development, New Delhi, 1969, p. 3). Dudley Seers was later supported by many other economists such as Denis Goulet (The Cruel Choice: A New Concept in the Theory of Development, Atheneum, New York, 1971, p. 23), Richard Brinkman (1995), P. Jegadish Gandhi (1996) and many others.
The International Labour Organization (ILO) had also articulated by the mid- 1970s that economic development must be able to deliver the economic ability that people can meet their basic needs (the concept of ‘sustenance’) besides the elimination of absolute poverty, creating more employment and lessening income inequalities (Employment, Growth and Basic Needs, ILO, Geneva, 1976). Amartya Sen articulated a similar view via his ideas of ‘capabilities’ and ‘entitlements’ (“Development: Which Way Now?”, Economic Journal 93, December 1983, pp. 754–57).
By 1994, the United Nations looked to including the element of ‘capabilities’ in its idea of development when it concludes that ‘human beings are born with certain potential capabilities and the purpose of development is to create an environment in which all people can expand their capabilities in present times and in future. Wealth is important for human life. But to concentrate exclusively on it is wrong for two reasons. First, accumulating wealth is not necessary for the fulfillment of some important human choices.... Second, human choices extend far beyond economic well-being’ (UNDP, Human Development Report 1994, Oxford University Press, New York, 1994, pp. 13–15).
The World Bank by 1991 had also changed its views about development and had concluded that for improving the quality of life we should include education, health, nutrition, less proverty, cleaner environment, equality, greater freedom and richer cultural life as the goals of development.
Amartya Sen, a leading thinker on the meaning of development attracted attention for articulating human goals of development. He opined that enhancing the lives and the freedoms we enjoy, should be the concerns of development known as the ‘capabilities’ approach to development (see his Commodities and Capabilities, North Holland, Amsterdam, 1985 and Development as Freedom, Alfred Knopf, New York, 1999).
7 . Stefan Priesner, a senior economist with the UNDP conducted the study for the
John Hopkins University, USA, in 2005.
8. The WHRs have three editors: 1. John F. Helliwell, Vancouver School of Economics, University of British Columbia, and the Canadian Institute for Advanced Research (CIFAR); 2. Richard Layard, Director, Well-Being Programme, Centre for Economic Performance, London School of Economics; 3. Jeffrey D. Sachs, Director, The Earth Institute, Columbia University. [The reports were written by a group of independent experts acting in their personal capacities—any views expressed in these reports do not necessarily reflect the views of any organisation, agency or programme of the United Nations
9. Guidelines on Measuring Subjective Well-being, OECD, Paris, 2013.
10. Used in the World Values Survey, the European Social Survey and many other national and international surveys. It is the core ‘life evaluation’ question recommended by the OECD (2013), and used since the first World Happiness Report.
11. The Gallup World Poll (GWP) – the GWP includes the ‘life satisfaction’ question on a 0 to 10 scale on an experimental basis, giving a sample sufficiently large to show that when used with consistent samples the two questions provide mutually supportive information on the size and relative importance of the correlates.
12. The European Social Survey contains questions about ‘happiness with life as a whole’, and about life satisfaction, both on the same 0 to 10 numerical scale. The responses provide the scientific base to support the WHR findings that answers to the two questions give consistent (and mutually supportive) information about the correlates of a good life.
13. UN General Assembly, Happiness: Towards a Holistic Approach to Development,
United Nations 19 July 2011.
14. J. F. Helliwell, R. Layard & J. Sachs (eds.), World Happiness Report 2012, Earth Institute, New York, USA, 2012.
15. OECD; Guidelines on Measuring Subjective Well-being, Organisation for Economic Co-operation and Development, Paris, 2013.
16. J. F. Helliwell, R. Layard and J. Sachs (eds.), World Happiness Report 2012, Earth Institute, New York, USA, 2012.
17. The Anthropocene is a newly invented term that combines two Greek words: ‘anthropo’ for human; and ‘cene’ for new, as in a new geological epoch. The Anthropocene is the new epoch in which humanity, through its technological prowess and population of 7 billion, has become the major driver of changes of Earth’s physical systems, including the climate, carbon cycle, water cycle, nitrogen cycle and biodiversity.
18. Among the foremost contributors to the Happiness Economics, Easterlin is particularly known for his 1974 article ‘Does Economic Growth Improve the Human Lot? Some Empirical Evidence’ (his ideas are today known as the Easterlin Paradox, was proposed by him in this article). Here he concluded that contrary to expectation, happiness at a national level does not increase with wealth once basic needs are fulfilled.
19. Suppose that a poor household at Rs. 1,000 income requires an extra Rs. 100 to raise its life satisfaction level (or happiness) by one notch. A rich household at Rs. 1,000,000 income (one thousand times as much as the poor household) would need one thousand times more money, or Rs. 100,000, to raise its well-being by the same one notch. Gains in income have to be of equal proportions to household income to have the same benefit in units of life satisfaction.
20. On an average across, the OECD countries, cash transfers and income taxes reduce inequality by one third. Poverty is around 60 per cent lower than it would be without taxes and benefits. Even among the working-age population, government redistribution reduces poverty by about 50 per cent (OECD, 2008).
21. Pasi Sahlberg, ‘Education Policies for Raising Student Learning: The Finnish Approach; Journal of Education Policy, 22(2), March 2007, World Bank, Washington DC, pp. 147–171.
22. Kaushik Basu, Chief Economist, World Bank, Livemint, N. Delhi, 3 February, 2015.
23. Ministry of Finance, Economic Survey 2009–10, Government of India, N Delhi, pp. 34–35.
24. Over half a dozen contemporary works have been cited as references by the Ministry of Finance, Economic Survey 2010–11, Government of India,
N Delhi, p. 40.
25. Several recent literature have been quoted by the Economic Survey 2011-12, Ministry of Finance, GoI, N Delhi, p. 44:
(i) F. Fukuyama, Trust: The Social Virtues and the Creation of Prosperity, Free Press, New York, 1996.
(ii) A. S. Guha, and B. Guha, ‘The Persistence of Goodness’, Journal of Institutional and Theoretical Economics, 2012.
(iii) M. D. Hauser, Moral Minds, Harper Collins, New York, 2012.
(iv) T. Hashimoto, ‘Japanese Clocks and the History of Punctuality in Modern Japan’, East Asian Science, Technology, and Society 2, 2008.