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Greif: Cultural beliefs and the organization of society

Disclaimer. Don't rely on these old notes in lieu of reading the literature, but they can jog your memory. As a grad student long ago, my peers and I collaborated to write and exchange summaries of political science research. I posted them to a wiki-style website. "Wikisum" is now dead but archived here. I cannot vouch for these notes' accuracy, nor can I say who wrote them.

Greif. 1994. Cultural beliefs and the organization of society. Journal of Political Economy 102 (5): 912-950.

The general game Greif sets up:

A key implication of this game: because collectivist values lower the optimal wage that must be paid to agents, cooperation can be maintained in situations that would not sustain individualist cooperation.

A refinement:

Integration vs segregation:

The major IMPLICATIONS of all this are apparent from the selections below:

"Among the Maghribis, collectivist cultural beliefs led to a collectivist society with an economic self-enforcing collective punishment, horizontal agency relations, segregation, and an in-group social communication network. In a collectivist society, individuals can be induced to forgo "improper" behavior through a credible threat of informal collective economic punishment.


"Among the Genoese, individualist cultural beliefs led to an individualist society with a vertical and integrated social structure, a relatively low level of communication, and no economic self-enforcing collective punishment. In such a society a relatively low level of informal economic enforcement can be achieved because of the absence of economic self-enforcing collective punishment and networks for information transmission. Furthermore, the integrated social structure and the low level of communication hinder social and moral enforcement mechanisms. To support collective actions and to facilitate exchange, an individualist society needs to develop formal legal and political enforcement organizations. Further, a formal legal code is likely to be required to facilitate exchange by coordinating expectations and enhancing the deterrence effect of formal organizations."

So individualist values require the creation of formal (legal) enforcement mechanisms, but collectivist values do not.

END RESULT of all this:

The organization innovations that are rational in individualist societies (e.g. the family firm to create an organization with a perpetual life span) leads to additional innovations, perhaps by chance (e.g. the family sells shares in its firm, giving rise to stock markets). Organizations that monitor contracts give rise to laws, accounting regulations, and so on.

And all this may explain why it was the West that developed first.

Research by the same authors

Research on similar subjects


Greif, Avner (author)EconomicsStatesTradeCultureMarket Failure

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