Where Culture Meets Economics

As described in my previous post, due to culture’s ubiquitous nature, economists found it difficult to formulate clear hypotheses regarding the intersection of culture and the economy. Even prescribing a more specific definition (culture = the values that ethnic, religious, and social groups traditionally pursue), the boundaries seem endless. We can attribute so many aspects of our life to these factors: what we eat, the clothes we wear, our social etiquette, and of course, the way we spend our money.

Luckily, the invention of recent techniques and data has allowed economists to identify people’s beliefs and cultural influences. Cultural indicators serve the function of quantifying cultural aspects, and their recognition has allowed us to analyze trends in the intersection of culture and economics. By examining them, economists have confirmed that the ethnicity, race, and social values of an individual that have existed for generations before them are rooted in their behaviors, and greatly determine their practices and financial habits.

Because culture is directly correlated to beliefs, values, and decision-making tendencies, it greatly shapes the way consumers anticipate products and services--from brand images, to marketing, to prices. Here are just a few of the cultural characteristics I've studied over the past 4 years that influence economies:

• Temporal orientation: whether communities are focused on the past, present, or future. Some cultures place a heavy importance on generations-old traditions. For example, rural Indian communities continue to uphold arranged marriage, caste customs, and multigenerational living. These factors greatly influence household decisions and societal structures. Others are trying to break through old norms and accept societal change as it comes, like South Korea, where youth are increasingly rejecting traditional family expectations and driving new consumer sectors like solo dining and self-care. Lastly, some areas, like Lastly, some areas, like Singapore and the United Arab Emirates, are futuristic and constantly strive for innovation. They are investing in smart cities, AI governance, and innovative infrastructure to remain global leaders.

• Masculinity vs. femininity: some societies favor patriarchal norms, promoting men and pushing the narrative that they are meant to undertake strenuous labor and that they are the sole providers of their households. For example, in Afghanistan, traditional gender roles and legal restrictions have limited women’s access to education and employment. In contrast, countries like Rwanda, driven by both necessity and policy shifts, have elevated women’s roles in governance and entrepreneurship. Over time, this has led to rising female labor force participation and changes in household spending patterns.

• Vertical vs. horizontal orientation: this one may be less commonly known. Really, what we're getting at here is individualism vs. collectivism. Vertical cultural orientation emphasizes on individual responsibility and competition. Essentially, you are in charge of your place in the social ladder. It's every man for themselves. An example is the United States, where individual ambition and success is rewarded heavily compared to group cohesion. In an individual status-conscious culture, consumption of luxury goods is also significantly higher. On the other hand, horizontal cultural orientation focuses on ensuring that everyone benefits collectively. If you experience something great, you want to share it with your closest family and friends. It's never every man for themselves--you are always a participant of a larger unit, and the unit moves together. For example, in Indonesia, cultural aspects like gotong royong (mutual aid) lead to shared financial responsibility and communal labor.

There are also some more obvious ones. Some cultures prefer certain products due to traditional norms (traditional clothing, etc.). Some foods are preferred over others due to historical importance and religious affiliations in the region. Those are just some of the vast cultural topics I'll be exploring through The Asian Perspective. Clearly, one's culture influences their decision-making and economic behavior in endless ways. I'll dive into the specifics of culture and the economy in Asia in my next posts :)

REFERENCES

Shavitt, S., & Cho, H. (2016). Culture and consumer behavior: The role of horizontal and vertical cultural factors. Current Opinion in Psychology, 8(PMC5222543), 149–154. ncbi. https://doi.org/10.1016/j.copsyc.2015.11.007

Texas A&M University. (2023). CULTURE. People.tamu.edu. https://people.tamu.edu/~i-choudhury/culture.html

The Brookings Institution. (2020). How cultural factors shape economic outcomes. Brookings. https://www.brookings.edu/collection/how-cultural-factors-shape-economic-outcomes/