About the Failure to Frame an Economic Definition of Culture: In my coming book “Five Reasons for Discarding Western Economics: Solutions to Unsolvable Orthodox Problems”

Chapter V.4. The Cause of Confusion in Understanding Culture: Fundamental Failures of Orthodox Economic Theory


The inability of the orthodox economic approach to capture and model most of the fundamental features of the phenomenon of culture has deeply rooted causes which stem from an inability to grasp and model fundamental economic phenomena and processes. The reality is that Western economics cannot model cultural diversity and its accompanying features because it is fundamentally based on the implicit assumption of a universal cultural uniformity, which is based on one culture out of very many. And this implicitly assumed cultural uniformity of humanity precludes not only understanding culture but even understanding basic economic phenomena without which understanding culture is and will remain impossible.

First, a proper economic understanding of culture is precluded by the inexistence of a proper definition of ends, a proper taxonomy of ends, and a sound theory of ends formation. Second, because culture is about emerged values and rules, it is impossible to frame a theory of culture formation and evolution without correct theories of values or preferences and rules formation. Third, because cultures are simultaneously described by values and rules, it is impossible to comprehensively describe and compare real cultures without a theory that grounds the conversion of rules into values and vice versa.

The need for a sound and adequate definition and taxonomy of ends is vital to an economic understanding of culture for two reasons. First, values and rules are ultimately about ranking human ends. Second, since economic science focuses especially on choices and their optimizing bundles, the ends to choose among must not only be assumed generally but also specifically. Unfortunately, in terms of human ends economic science has remained at a very primitive stage. von Mises (1949:92-93) and Robbins (1932:12) could not produce more than tautological definitions of ends that led nowhere, and Knight sealed the impossibility of solving the problem in stating that ends are “the most obstinate unknown of all unknowns” (2009:12).

In terms of values or preferences the state of economic theory is not any better positioned because the nature and formation of values are intimately connected to the formation of human ends. In fact, both are conditioned on a correct identification of the causal principle of the objective phenomenon of life, which to economists at least has retained an implicit mystical nature. For example, in his book Culture and Economics (2009), de Jong gives values nothing more than a definition framed by anthropologist Kluckhohn, which besides its tautological character cannot be used in any economic research.[1] It was within this perspective that incorrect conclusions were drawn: Knight opposed reason to feelings and North went even further and stated that cultural heritage consisting of “myths, taboos, religions, and dogmas” defies scientific explanation and, consequently, hinders economic growth. Becker’s effort to circumvent the general problem of preferences formation by assuming stable and invariable fundamental preferences postponed a sound and lasting solution even longer, after Knight’s groundless idea that formation of values is not economists’ problem had discouraged any renewed effort.

The orthodox perspective on rules further explains economists’ flawed perspective on culture. Economists’ wishful thinking about a kind of culture that is humanly designed, debatable, and modifiable at will, or a culture that is wholly shaped consistently with the objective of economic growth, is mostly derived from a conception of rules (implicitly, institutions) that can only be humanly designed and enforced by a third party. There is no place and no logic within this orthodox perspective for emerged rules, and this situation precludes any possibility to correctly understand culture. But the orthodox perspective on rules not only erases the reality of the most fundamental type of rules and institutions. If thoroughly followed to its ultimate conclusion, it would imply erasing the notions of rules and institutions altogether. For if rules and institutions are ultimately about ranking alternative ends, a theory of rules and institutions that ultimately assumes only one external-component human megaobjective or megaend like “wealth”[2] makes no sense, and is even logically impossible. As a consequence, the orthodox tautological definition of rules and institutions is the only kind of definition possible although it is essentially not a definition at all. And if there is no proper reason for rules and institutions, there must be no proper reason for culture. The phenomenon of culture seems to be meddling in the economic world and prevailing economic theory.

[1] de Jong takes over Kluckhohn’s definition as cited by Hofstede (2001:5): “A value is a ‘broad tendency to prefer certain states of affairs over others.’”

[2] Definitions of institutions by North: “Institutions are a set of rules, compliance procedures, and moral and ethical behavioral norms designed to constrain the behavior of individuals in the interest of maximizing wealth or utility of principals” (1981:201) and “The behavioral postulate of wealth is the cornerstone of economic theory. It is also the cornerstone of this theory of institutions” (North, 1984:32).


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