Why do some societies fail to adopt more efficient institutions? And why do such failures often coincide with cultural movements that glorify the past? Murat Iyigun and his coauthors propose a model highlighting the interplay—or lack thereof—between institutional change and cultural beliefs. The main insight is that institutional change by itself will not lead to a more efficient economy unless culture evolves in tandem. This is because institutional change can be countered by changes in cultural values complementary to a more "traditional" economy. In their model, forward-looking elites, who benefit from a traditional, inefficient economy, may over-provide public goods that are complementary to the production of traditional goods. This encourages individuals to transmit cultural beliefs complementary to the provision of traditional goods. A horse race results between institutions, which evolve towards a more efficient (less traditional) economy, and cultural norms, which are pulled towards "tradition" by the elites. When culture wins the horse race, institutions respond by giving more political power to traditional elites—even if in doing so more efficient institutions are left behind. In this Quantitative History Webinar, Murat will explain in detail how such cultural and institutional dynamics have historically generated cultural revivals that further empowered the entrenched political and economic elites.
Live on Zoom on October 8, 2020
09:00 Hong Kong/Beijing/Singapore | 10:00 Tokyo | 12:00 Sydney
[19:00 Previous day Colorado Time | 21:00 Previous day New York Time]
Professor of Economics
University of Colorado Boulder