Three Essays on Culture and Economic Activity

Arielle John

Advisor: Peter J Boettke, PhD, Department of Economics

Committee Members: Christopher J. Coyne, Virgil H. Storr

April 23, 2013, 09:00 AM to 06:00 AM


This dissertation offers three essays on how culture affects economic activity. Culture is a context that enables a person to ascribe meaning to every aspect of her existence. To better understand why people perceive and respond to incentives the way they do, economists must attempt to discover the subjective meanings behind people’s choices. I offer an economic theory of culture, and I elaborate on how culture affects entrepreneurial activity in Trinidad and Tobago.

Austrian economists accept the duties of cultural economics and currently debate suitable ways to talk about culture. Proposed concepts include culture as capital, comparative cultural advantage, and culture as the rules of the game.  In the first essay, my foremost goal is to contribute to this debate.  Dissatisfied with the prevailing Austrian concepts of culture, Virgil Storr (2004: 32) proposes a novel one: “To my mind, culture is much more like a constitution” since a constitution “directs an individual away from certain types of activities and towards others, with constitutional rules serving as points of orientation.”  Accordingly, for any individual, “culture directs (but does not determine) his actions and acts as the prism through which he views his problem situation”(ibid.: 25).  A reasonable analogy, but Storr does not give us the details. My proximate goals are therefore twofold.  I first demonstrate that both culture and constitutions (1) emerge as spontaneous orders, (2) constrain and thus enable certain actions in order to generate predictable behavior and encourage cooperation within groups, and (3) bind decision-making in an “intermediate” way, making them rigid, but not static.  Secondly, I use the example of Trinidad and Tobago to show how a concrete and “thin” concept of culture as a constitution may adequately frame cultural and cross-cultural narratives that are “thick” in description.

In the second essay, I focus on the observation that Chinese, Syrians-Lebanese and whites have the highest levels of self-employment in Trinidad, while Indians have emerged as the new business class. However, relatively few black Trinidadians are self-employed. Using 2008 survey data, this study examines whether these apparent differences in self-employment rates can be explained by differences in attributes, or must be explained by other factors like ethnic inclination/disinclination due to historical/sociological factors.  I find substantial differences in the self-employment rates of the various ethnic groups, with black Trinidadians having the lowest rates, Indians and Mixed Trinidadians have the second highest, and the Chinese, Syrians-Lebanese and whites having the highest probability of being self-employed of all ethnic groups.  These differences in the probability that members of a given ethnic group will be self-employed persist even after controlling for individual characteristics that also affect self-employment choice.  I conclude with a discussion of the various historical/sociological factors that might explain differences in ethnic self-employment rates including the effects of colonization, the importance that each group places on family ties, and each groups’ appraisal of its status and opportunities relative to the other ethnic groups in the country.

Opportunity identification and opportunity exploitation appear to be the two essential moments of entrepreneurship captured in “stage models” of the entrepreneurial process (Moroz and Hindle 2011). Arguably, these two moments map quite nicely into the different approaches to studying entrepreneurship advanced by Kirzner and Schumpeter. Kirzner (1973) stressed alertness to hitherto unnoticed profit opportunities as essential to entrepreneurial behavior.  Schumpeter, on the other hand, saw opportunity exploitation as the essential aspect of entrepreneurship. Unfortunately, that cultural and institutional factors can differentially affect the different moments of entrepreneurship is somewhat underappreciated in the “stage model of entrepreneurship” literature.  In the final essay, I highlight the possibility that the same cultural and/or institutional environment can differentially affect Kirznerian and Schumpeterian entrepreneurs. In order to demonstrate this point, I show that understanding entrepreneurship in Trinidad and Tobago requires that we focus on how Trinidadian culture and institutions differentially affect both moments of entrepreneurship.