Preferences as Human Capital: Rational Choice Theories of Endogenous Preferences and Socioeconomic Changes
Finnish Economic Papers 21(2), 2008, pages 81-94
We discuss the theoretical and empirical foundations of modern economic theories of cultural transmission. The importance of cultural factors in shaping economic and social transformations has been the focus of a long-standing debate in social sciences since the XIXth Century. Neoclassical economics has remained at the marging of this debate. However, there has been a recent surge of interest among economists for cultural factors. The economic models of cultural transmission borrow the main ideas from the anthropological literature, but endogeneize the efforts parents exert to transmit specific cultural variants or preference parameters. We distinguish between paternalistic models where parents use their own values to evaluate their children’s utility, and non-paternalistic or utilitarian models in which parents choose their children’s preferences to maximize the children’s well-being. We discuss recent examples, focusing in particular on corruption, patience, and work ethic.