Culture and the Historical Process

This article discusses the importance of accounting for cultural values and beliefs when studying the process of historical economic development. A notion of culture as heuristics or rules-of-thumb that aid in decision making is described. Because cultural traits evolve based upon relative fitness, historical shocks can have persistent impacts if they alter the costs and benefits of different traits. A number of empirical studies confirm that culture is an important mechanism that helps explain why historical shocks can have persistent impacts; these are reviewed here. As an example, I discuss the colonial origins hypothesis (Acemoglu, Johnson and Robinson, 2001), and show that our understanding of the transplantation of European legal and political institutions during the colonial period remains incomplete unless the values and beliefs brought by European settlers are taken into account. It is these cultural beliefs that formed the foundation of the initial institutions that in turn were key for long-term economic development.