Understanding Society Starts with Economics

Things like language and norms and values differ from culture to culture. What role do these factors play in economic growth? And how can society benefit from a better understanding of these factors? Kool continues: “There is a lot of research on the question of why some countries develop prosperously and others not so much, or why trade relations differ. Some countries trade easily, others not so much. Here cultural and institutional factors come into play. Simple things like property rights and a credible legal system that guarantees the rule of law have an important positive effect on economic development. Similarly, trust is an important factor in the way we deal with others. Trust benefits a lot from understanding each other: language, culture, norms and values all play a role here. A simple example is the difference in the way we treat refugees from Ukraine versus refugees from Syria. In high-trust societies, the transaction costs of trade, economic agreements etc. are much lower than in low-trust societies where very precise contracts need to be written before one makes an economic transaction. While there is a lot of knowledge on the value of such institutional factors, changing and improving them is tough. Culture is embedded in society on a deep level and changing that takes huge investments in time and energy.”