Cultural Beliefs and the Organization of Society: A Historical and Theoretical Reflection on Collectivist and Individualist Societies

TLDR

Economists and economic historians have largely ignored the link between culture and institutional structure, limiting understanding of why societies fail to adopt more successful institutions. The paper aims to integrate game‑theoretical and sociological concepts to conduct a comparative historical analysis of culture‑institution relations. It examines cultural factors that led two premodern societies—one Muslim, one Latin—to evolve distinct institutional trajectories. The study shows that culture determines institutional structures, creates path dependence, and hinders successful intersociety adoption, with medieval patterns echoing contemporary development differences.

Abstract

Lacking an appropriate theoretical framework, economists and economic historians have paid little attention to the relations between culture and institutional structure. This limits the ability to address a question that seems to be at the heart of developmental failures: Why do societies fail to adopt the institutional structure of more economically successful ones? This paper integrates game-theoretical and sociological concepts to conduct a comparative historical analysis of the relations between culture and institutional structure. It examines cultural factors that have led two premodern societies--one from the Muslim world and the other from the Latin world--to evolve along distinct trajectories of institutional structure. It indicates the theoretical importance of culture in determining institutional structures, in leading to their path dependence, and in forestalling successful intersociety adoption of institutions. Since the distinct institutional structures found in the late medieval period resemble those differentiating contemporary developing and developed economies, the paper suggests the historical importance of distinct cultures in economic development.