Jun 08 2009

institutions of trust in piracy and terrorism

by at 8:05 pm

We can transpose Greif’s comparative analysis of disparate economic groups to look at two of the emerging models for economic activity among the bottom billion. The two groups I have in mind are Al Qaeda and the Somali pirates. Although, at a first glance, these two networks may appear to be motivated more by destruction than by production and distribution, I would argue that we take a closer look, at the cultural grounds of each collection of actors. We may find that by comparing the structures and behaviors of each group, we can shed a great deal of light on the growth of economic institutions today. But first, we should generally characterize the cultural background of each group. Continue Reading »

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Jun 08 2009

American culture run amok

by at 2:30 pm

Where Douglass North argues the centrality of institutions in checking behavior and reducing uncertainty, Avner Greif takes the argument into the cultural realm by laying out how those institutions are steeped in cultural values and beliefs. Culture too plays an undeniable role in the current U.S. (and global) financial mess.

Piggies pay the piper for overspending

It is not only freewheeling spending and credit addiction that caused the economic downturn, though both are at fault and arguably became part of the American economic culture. Also at fault is the approach to regulation, which helped lead to poor lending standards and overspending. Rather than cut the problem off at the pass as it became apparent a market break down was on the horizon, we reacted afterward, especially with talk of more regulation. Is this our culture at work? I think so.

Let’s use a Greifian approach to look at historical economic challenges in the U.S. An NPR story reminded me of American responses to financial troubles. The Great Depression gave rise to a slew of new regulations and regulatory bodies, such as the FDIC. Trouble in the early 1900s led to the Federal Reserve. One legacy of the savings and loan crisis is the Office of Thrift Supervision. Now talking heads and politicians are bleating about more regulation. What about smarter regulation?

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