Tuesday, June 21, 2005

It is the attitude, stupid! II

Economists typically have little eye for irrational behavior as it is too difficult to model. And the homo economicus is typically a rational actor. However when irrational behavior comes about, there are two ways out, one of them is behavioral economics which has its focus on the individual level; the other option is economic sociology, which has more focus on the group level.

Go out now and read Edward Banfield's The moral basis of a backward society, a book on a small Southern Italian village. Although it is a small book I believe it contains quite a few lessons on economic development, not only for Italy ...

Let's look at today's Iraq. Steven Vincent reports in National Review from Basra on what he calls 'self-defeating behavior'. The examples are quasi-absurd:
-a 911 line that receives 95% of useless calls,
-collecting the garbage that is already collected,
-having a weekend from thuersday to friday,

But again why wouldn't democracy florish in the Middle East? Which cultural obstacles?


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