What role has culture played in determining the long-run economic trajectories of various societies? How have cultural attributes such as racial norms, ethnic norms, gender norms, the importance placed on education, religious values, trust of outsiders, family structures, and incest taboos affected economic outcomes? Why do these cultural attributes vary across societies in the first place? This chapter summarizes and classifies a rapidly growing literature on the various ways in which culture has shaped the modern economy.

What is culture? The literature largely follows definitions employed in cultural anthropology, which views culture as a set of learned rules of behavior. These rules are the short-cuts we apply to make sense of a complex world. Our brain power is limited. It is impossible to think through the implications of every action we take. How do we interact with strangers? When do we move forward at a stop sign? What type of food is healthy to eat? The answers to these questions are embedded in a society’s culture, and different cultures have come to different conclusions regarding the best ways to answer them.

Why might culture help explain how the world became rich? The answer to this question is often addressed by considering its converse: what aspects of culture have inhibited economic development? Because the learned norms and beliefs we acquire through cultural evolution develop slowly – often more slowly than economic and technological change – cultural beliefs can become maladapted to their economic environment. In other words, cultural beliefs that benefited economic growth under one set of circumstances may hamper it in another. And because cultural norms are slow to change, societies may not be in a position to take advantage of the new opportunities afforded to them.

For instance, one type of cultural value that affects economic development is the way people think and talk about work and profit. For the ancient Greeks and Romans, work of any type was among the lowest-valued pursuits. Wealth was valued because it brought freedom and permitted leisure. The middling classes had little prestige in ancient society. If you were at all successful, you were supposed to strive to own a landed estate and live off of its returns. Indolence was what a Roman social climber strove towards. A society with such cultural values is unlikely to have sustained economic growth.

What about religion? Perhaps the most famous argument that "culture matters" was made by Max Weber in The Protestant Ethic and the "Spirit" of Capitalism. According to Weber’s hypothesis, the Calvinist doctrine of predestination encouraged people to work harder and save more. This is how they would show that they were one of the "elect" who would enter heaven. This ideal became secularized in places with Calvinist influence (the US, Netherlands) and was the root of a "capitalist spirit" that permeated these societies.

Weber was correct about the correlation between the spread of Protestantism and the spread of economic growth. Protestantism is strongly and positively correlated with modern per capita GDP, while the correlation is weaker for Catholicism and negative for Islam (see the figure below). But is Weber’s causal argument correct? Did Protestantism (and specifically Calvinism) cause economic growth via some capitalist work ethic, or is this just a case of "correlation does not equal causation"?

There have been several critiques of Weber's thesis in the century since it was first published. These critiques are discussed in this chapter. But if it was not a work ethic, the question remains: why did Protestant countries grow faster? A large literature has emerged on this topic, highlighting features such as literacy (for both males and females), compulsory schooling, political economy, and bureaucratization, among others. We examine this literature in this chapter.

What about other religions? An old canard of early-20th century scholars was that there was "something about Islam" that retarded economic development. Such theses are hard to swallow. While the negative correlation between the presence of Islam and economic development may be true of the last few centuries (see the above figure), this has not always been the case. During the "Golden Age of Islam" – roughly the 7th through 10th centuries – the Islamic Middle East was far ahead of Western Europe in terms of wealth, technology, science and architecture. It is therefore tough to accept theories of economic growth that blame some attribute of Islam but do not also explain the Muslim advantage that existed for centuries following the spread of Islam.

This does not mean that we should automatically discard theories that attribute economic growth, or lack thereof, to Islam. A recent literature looks at the role that Islamic institutions played in the economic development of the Middle East. These include the role of Islamic law and the role of religious authorities in legitimating political rule. These theories tend to not focus on the tenets of Islam (or any other religion), but on how religion was institutionalized in the Islamic world.

Perhaps the most important reason that culture can affect economic growth is that it persists. A large literature has emerged in the past two decades documenting the various ways in which culture persists and what this means for economic outcomes. These studies focus on family structures, civic participation, individualism, gender norms, trust norms (see the figure at the top of the page), among many other types of cultural values. These are all cultural features that arose in the distant past, often for reasons completely unrelated to current circumstances. However, they persisted in spite of a changing world and still affect economic growth today.

Even after the reasons certain cultural traits emerged are long a thing of the past, they tend to shape the outlook of the descendants of those past societies. For this reason, culture tends to interact with some of the other determinants of long-run economic development, such as institutions and demography. As we shall see later in the book, these interactions are at the heart of most societies’ long-run economic trajectories, for both good and bad.