1. Summarize the main ideas / contents of Paragraph 1 to 4.
2. Why in the middle of the 20th century, cultural explanations began to fall out of favour?
3. What is “social capital” mentioned in Paragraph 6 and 7?
4. Summarize the main ideas / contents of Paragraph 5 to 8.
5. What is contestability (可竞争性) in Paragraph 8?                                     Hard work and black swans

The Economists - SEPTEMBER 5TH–11TH 2020

To explain wealth and poverty, the ideas of the earliest economists are being revisited and improved

1. The emergence of the discipline of economics in the 18th century was the result of people trying to explain something that had never happened before. At the time a handful of countries were becoming fabulously rich, while others remained dirt-poor. In 1500 the world’s richest country was twice as well-off as the poorest one; by 1750 the ratio was five to one. It is no coincidence that the most famous book in economics, published in 1776, inquired into “the Nature and Causes of the Wealth of Nations”.

2. In order to explain such a divergence between rich and poor countries, the early economists were obsessed with culture, a catch-all term encompassing a society’s beliefs, preferences and values. Adam Smith, the author of “The Wealth of Nations”, explored the ways in which culture helped or hindered capitalism. He argued that certain norms were required in order for market economies to thrive —most importantly that people would be self-interested, but that they would satisfy their selfinterest by adapting to the needs of others. Karl Marx, a few decades later, worried that a culture of “oriental despotism (专制)” prevented the emergence of capitalism in Asia. 

3. The speculations of Smith, Marx and others were often vague. Max Weber’s “The Protestant Ethic and the Spirit of Capitalism”, published in 1905, made them concrete. Weber argued that Protestants, in particular Calvinists, drove the emergence of capitalism due to a strong work ethic. 

4. In the middle of the 20th century such cultural explanations began to fall out of favour. The rapid rise of Japan’s economy in the 1950s, and later of the Asian “tigers”, quashed (击碎) the Marxist-Weberian notion that Western culture alone was conducive to industrialisation. At the same time the increasing availability of data with which to do statistical analysis meant that economists’ attention went elsewhere. Why bother with hard-to-measure matters such as morals, when it is possible to plug hard data such as capital accumulation, wages or employment into a regression model? In 1970 Robert Solow, a Nobel prizewinner, quipped (讥讽) that attempts to explain economic growth with reference to culture ended up “in a blaze (大火) of amateur sociology”. 

5. But an interest in culture remained— and indeed is now making a comeback. Since the 1980s datasets such as the World Values Survey and the General Social Survey have made it easier to quantitatively measure cultural preferences and relate them to economic outcomes. Top economic journals now regularly include papers on the importance of culture. Even many hardline wonks (书呆子) have come to realise the limits to pure economic reasoning. 

6. Perhaps the most influential text in the revival of cultural economics was “Making Democracy Work”, a book from 1993 by Robert Putnam. Mr Putnam tried to understand why for many decades northern Italy had been richer than the south, folding the explanation under the catch-all term “social capital”. People in the south were fiercely loyal to their family, but more distrustful of outsiders—whereas in the north people were happier to form connections with strangers, Mr Putnam argued. In the north people read more newspapers, were more likely to participate in sports and cultural associations, and voted more frequently in referendums (公众决议). This, the theory went, contributed to better local government and more efficient economic transactions, which in turn produced greater wealth—though Mr Putnam was not clear about the precise mechanism by which one thing led to the other.               7. A group of researchers, largely dominated by Italians who were inspired by Mr Putnam’s work, has since extended his ideas, seeking cultural explanations of why some areas are rich and others poor. A paper from 2004 by Luigi Guiso, Paola Sapienza and Luigi Zingales, also looking at Italy, finds that in high-social-capital areas, households invest less in cash and more in stocks, and make less use of informal credit. In areas where people do not really trust those outside their family, it may be hard to form large business organisations which can benefit from economies of scale and which can drive the adoption of new technologies. This suggests that it is no coincidence that the average business in Lombardy, a rich northern region in Italy, has 13 employees, compared with five in Calabria, a poor southern one. 

8. Others look beyond Italy. In “A Culture of Growth”, published in 2016, Joel Mokyr of Northwestern University puts the “principle of contestability (可竞争性)” as the reason why some countries industrialised but others did not. Organisations such as the Royal Society, founded in London in 1660, were forums for the exchange of ideas, where people put forward their discoveries and fiercely interrogated the theories of others. Crucially, too, over time the goal of western European science shifted from one concerned with the “mindless piling up of empirical facts (实证事实，实证证据)”, as Mr Mokyr puts it, towards discoveries which could be put to use in the real world. Scientific inquiry laid the groundwork for European economic exceptionalism (独特性，独一无二的特性). Nothing quite comparable happened in other parts of the world.