More risk-averse and less entrepreneurial people grew up listening to stories wherein competitions and challenges are more likely to be harmful than beneficial

See Folklore by Stelios Michalopoulos & Melanie Meng Xue. From The Quarterly Journal of Economics, Volume 136, Issue 4, November 2021. Excerpts:

"Abstract

Folklore is the collection of traditional beliefs, customs, and stories of a community passed through the generations by word of mouth. We introduce to economics a unique catalog of oral traditions spanning approximately 1,000 societies. After validating the catalog’s content by showing that the groups’ motifs reflect known geographic and social attributes, we present two sets of applications. First, we illustrate how to fill in the gaps and expand upon a group’s ethnographic record, focusing on political complexity, high gods, and trade. Second, we discuss how machine learning and human classification methods can help shed light on cultural traits, using gender roles, attitudes toward risk, and trust as examples. Societies with tales portraying men as dominant and women as submissive tend to relegate their women to subordinate positions in their communities, both historically and today. More risk-averse and less entrepreneurial people grew up listening to stories wherein competitions and challenges are more likely to be harmful than beneficial. Communities with low tolerance toward antisocial behavior, captured by the prevalence of tricksters being punished, are more trusting and prosperous today. These patterns hold across groups, countries, and second-generation immigrants. Overall, the results highlight the significance of folklore in cultural economics, calling for additional applications."

"Two broad observations motivate our study. First, narratives are central building blocks of our societies. We think in stories and explain the world by telling stories. Harari (2015), for example, identifies in the myths present in people’s collective imagination the roots of their successes and failures. Despite their central role in connecting actions to values and needs, economists have only recently turned to the study of narratives (e.g., Akerlof and Snower 2016; Shiller 2017).¹

Second, during the past two decades, a burgeoning body of work exploring the cultural, historical, and institutional roots of comparative development highlights the significance of ethnic, linguistic, and religious groups (Michalopoulos and Papaioannou 2017; Nunn 2020). Much of this research, however, relies on valuable but incomplete ethnographic sources including the widely used Ethnographic Atlas (EA). Furthermore, the absence of proxies of historical norms renders inquiries into how attitudes change and why they persist intractable.² Other weaknesses of the EA, the celebrated compilation of George Peter Murdock (1967), concern the uneven coverage of groups and attributes and measurement error."

"In this study, we leverage a group’s oral tradition to shed light on its cultural heritage and past social and economic structures. According to the Oxford Dictionary, folklore consists of the traditional beliefs, customs, and stories of a community, passed through the generations by word of mouth. This corpus is the subject of the discipline of folklore. We do three things to reveal the potential of integrating traditional narratives in the toolset of economists and political scientists interested in the origins of comparative development, gender norms, morality, psychology, and culture.

First, we introduce to economics a catalog of folklore that codes the distribution of thousands of motifs across 958 world societies. This database is the lifetime work of eminent anthropologist and folklorist Yuri Berezkin. A motif, according to the author, is an episode or an image found in the set of narratives recorded in an ethnolinguistic community. We validate the catalog’s content by establishing that images and episodes in a group’s oral tradition reflect salient features of its physical environment. For example, groups closer to earthquake-prone regions have a higher incidence of earthquake-related motifs, groups on fertile land have more crop-related images, and groups living close to rivers (or in colder climates) have more episodes reflecting their respective landscapes. Then we link the groups in Berezkin’s collection to the EA and show that the folklore-based measures of political complexity, family structure, and subsistence mode robustly correspond to EA’s analogous traits.

Second, we illustrate how to use a group’s oral tradition to fill in gaps in the ethnographic record, focusing on the degree of political complexity and the presence of high gods. In addition, we show how one can use folklore to quantify the extent of the preindustrial market economy, a key economic aspect that the EA does not cover.

Third, we present a method to uncover a group’s cultural heritage that involves reading and classifying motifs by multiple individuals.³ We focus on trust, risk-taking, and gender norms to illustrate our approach. To capture trust, we look at how tricksters (a common archetype in oral traditions) are depicted in the motifs, distinguishing between cases where their deceiving behavior is successful or punished. Regarding risk-taking, we look at how challenges and competitions are portrayed, differentiating between tragedies and victories. To measure gender norms, we classify the various stereotypical roles males and females play in the motifs.

These folklore-based measures of historical attitudes are robust predictors of contemporary values and economic choices. Folks who grew up listening to stories where tricksters often fail to deceive their victims are more trusting and prosperous today. Groups with oral traditions rich with heroes who successfully tackle challenging situations tend to display more appetite for risk and appear more entrepreneurial. Societies whose folklore portrays women as less dominant, more submissive, and more likely to engage in domestic affairs than men tend to relegate their women to inferior roles in their communities, both historically and today. These patterns hold across countries, second-generation immigrants, and ethnic groups, suggesting that folklore may be one of the vehicles by which norms are intergenerationally transmitted."

Also see my blog called Dollars and Dragons: A look at the intersection of economics and mythology. It has many posts on economics and storytelling.

Related posts: 

London School of Economics Professor Mary Morgan says storytelling continues to play a key role in economic analysis today (2023)

Is good business as much about storytelling as the stock market? (2023)

Is Storytelling Important For The Economy?  (2021)

Economists Love Fables And Parables (Or, The Essence Of Economic Analysis)

The Next President Inherits a Remarkable Economy

The high quality of recent economic growth should put a wind at the back of the White House’s next occupant

By Greg Ip of The WSJ. 

There is some good economic news out there. A related post was one from two weeks ago was A comparison of the inflation rates, unemployment rates and poverty rates from 1975-83 with the current rates. All three of those rates are much lower now. 

Another one was Oct. 28. U.S. Economy Again Leads the World, IMF Says: International Monetary Fund upgrades U.S. growth outlook as strong investment boosts productivity.

Excerpts from The WSJ article:

"Through the second quarter, the U.S. grew 3%; none of the world’s next six largest advanced economies grew more than 1%."

"inflation has fallen in the past year, to 2.7% in the third quarter, using the Fed’s preferred underlying measure. That’s still above the Fed’s 2% target, but the progress was sufficient for the Fed to cut rates in September and pencil in more cuts"

"productivity—i.e., output per hour—probably rose around 2% or more, annualized, in the third quarter, after rising 2.7% in the prior four quarters, above the 1.5% average annual rate from 2007 to 2019."

"thanks to higher productivity, the U.S.’s potential growth—what it can sustain over the long run—might be higher than the 1.8% that many forecasters like the Fed have long assumed. 

Satyam Panday, an economist at S&P Global Ratings, thinks the potential might be 2% to 2.3%, citing booming investment in artificial intelligence, data centers, and renewable energy."

"no other country has witnessed it [Productivity trend]."

"from the end of 2019 to the end of 2023, total output rose 7.9% in the U.S., of which 1.2% came from more hours worked and 6.7% from productivity—more output per hour. In the eurozone, output was up 3% in the same period, entirely due to more hours."

"European Union companies still pay two to three times more for electricity and four to five times more for natural gas than their U.S. counterparts"

"No EU company worth more than 100 billion euros, equivalent to $108 billion, “has been set up from scratch in the last 50 years,” while all six U.S. companies worth more than $1.08 trillion were created in this period"

"America’s companies are also faster to adopt technology such as artificial intelligence, which explains much higher productivity in professional services, finance, insurance, and information technology services."

"These differences are mostly the product of the intrinsic dynamism of American capitalism"

"Average wages since mid-2023 have outpaced inflation as the latter fell." 

Inflation Has Cooled, but Americans Are Still Seething Over Prices

Many people—though not all—saw wage increases that kept pace with the pandemic’s rapid price hikes, but the psychological toll remains

By Jon Kamp, Joe Pinsker and Aaron Zitner of The WSJ. 

I have done several posts on how people have been dealing with the inflation of the last few years as well as how they have been affected. Those are listed after some excerpts from the article.

"Americans are grappling with dramatic price hikes that, for most, are unprecedented. In the latest surge, inflation peaked in mid-2022, with prices up more than 9% from a year earlier. In the years prior to the pandemic, inflation was unusually cool, and the last time it was a real problem was the 1970s and early ’80s."

"Inflation has slowed dramatically in the past two years, and it was down to 2.4% in September"

"At the same time, employment and consumer spending have stayed strong, and wages have on average grown faster than prices."

"people continue to face painfully high and sometimes rising prices for big-ticket items, including housing, cars, child care and insurance, which contributes to their sense of unease."

"a Fed report Wednesday noted some signs of Americans shifting toward cheaper purchases."

"Others are simply irritated by having to pay much more for groceries, a deli sandwich or their morning coffee—even if their own pay hikes have made such items even more affordable than they were before the pandemic. Some in this camp feel the higher prices have devalued raises they worked hard to get."

"The latest Wall Street Journal national survey, released Wednesday, shows about three-quarters of respondents believe costs for everyday goods and services outpaced household income in the past year."

"38% of voters said the cost of living was still rising and creating major financial strains for their families."

"if there were five stages of inflation grief, Americans have yet to reach acceptance."

"The University of Michigan’s Surveys of Consumers from late September and early October show Americans have significantly lowered their expectations for continued inflation. At the same time, 44% of those surveyed said high prices were worsening their personal finances. This is near the 47% who said the same thing just after the 2022 inflation peak."

"Survey data show consumer sentiment has improved from its mid-2022 trough, but it remains well under where it was before the pandemic took off."

"Ulrike Malmendier, an economics and finance professor at the University of California, Berkeley’s Haas School of Business, has studied the way living through inflation and other economic turbulence affects people long afterward. This is even true for members of the Federal Reserve, whose views on inflation often appear linked to the times they lived through.  

Most models say that once problems like high inflation subside, people are expected to resume their prior behavior, Malmendier said. But her research shows people actually carry scars that can long influence how they spend and save."

"A key question is how long those scars last, and there are limited examples to draw on for answers. During the 1970s and early ’80s bout, as Volcker described, people became somewhat conditioned to high inflation because it went on for so many years. The phase also ended with the U.S. plunging into a recession that led to high unemployment.

This time, high inflation was intense but relatively brief, and came under control much faster than many people expected, Malmendier said. But the calm that preceded it meant the sudden surge upended peoples’ expectations.

“There was this long period of stability before, people were totally anchored on that,” she said. “Their world was shaken.”"

"what many voters seem to want is prices to go back to where they were. That is deflation, the opposite of inflation, and economists say it generally only happens when the economy is deeply depressed."

"Peoples’ sour views of inflation are fed in part by a belief that their wages aren’t keeping pace, according to Stefanie Stantcheva, an economics professor at Harvard University. She surveyed people early this year to explore the public’s inflation views.

She also found that even when people receive wage increases during times of inflation, they tend to peg increases to their job performance or career advancement, and not a cost-of-living increase. “This contributes to the dislike of inflation and the feeling that it erodes your living standards,” Stantcheva said."

"Inflation also raises feelings of inequity, Stantcheva has found, due to a perception that high-income people see faster wage increases to offset the high prices. Since the start of the pandemic, wages for lower-income earners have actually tended to grow faster, and are outpacing inflation by more than wages for higher-income earners, economic analyses of Labor Department employment data have found.

Stantcheva emphasized these findings don’t mean people’s feelings are off base, and she said inflation is measured in a broad way that can miss many subtleties. Different people buy different things, exposing them to different price changes. Her survey work shows news reports of inflation are especially likely to set off despair, stress or fear among low-income people.

Her surveys also found people estimated inflation in the prior 12 months to be higher than it actually was, while also finding people predicted higher inflation than the U.S. has seen this year." 

This graph shows the annual percentage change in the Consumer Price Index from 1960-2023. It shows how much the monthly average of the CPI increased year over year. It is from Federal Reserve Bank of St. Louis. 

Related posts:

Child Care, Rent, Insurance: Where Inflation Hits Hardest Now (2024)

Why do workers dislike inflation? (2024)

Inflation Usually Hits Harder for Poor Families. For a Couple of Years, It Didn’t. New research on how inflation varies between the poor, middle class and rich paints a different picture of poverty and inequality (2024)

The Haves and Have-Nots at the Center of America’s Inflation Fight: There’s a growing gap between Americans who are battered by high inflation and interest rates and those who are actually benefiting (2024)

An Increase in Uninsured Drivers Is Pushing Up Costs for Everyone Else (2024) 

Inflation has caused consumers to choose what they need to cut back on (insurance)

Costco and Sam’s Club Aisles Are Full of Gen Z Shoppers (2024)

Consumers are buying in bulk to save money by getting a lower per unit price

Inflation is mentally taxing (2024)

Inflation is mentally taxing. Dealing with a straitened budget exacts a psychological toll as well as a financial one

Store Brands Are Filling Up More of Your Shopping Cart (2024) 

People are on the look out for cheaper alternatives due to inflation

Consumers Fed Up With Food Costs Are Ditching Big Brands (2024) 

After years of price increases, food companies say more consumers pull back; fast-food chains and snack makers plan new deals and flavors

Are Americans Worrying Too Much About Inflation? Two opposing views (2024)

The Era of One-Stop Grocery Shopping Is Over (2024)

One thing that I always talked about with inflation was that one of its costs was all the things we had to do to avoid it. Consumers are making 8% more trips to different retailers as inflation continues to upend household budgets. They are going to more stores to find lower prices. But it costs time to do that and probably more money on gas.

When workers were paid twice a day and given half-hour shopping breaks (Germany, 1923) 

By mid-1923 workers were being paid as often as three times a day. Their wives would meet them, take the money and rush to the shops to exchange it for goods. However, by this time, more and more often, shops were empty. Storekeepers could not obtain goods or could not do business fast enough to protect their cash receipts. Farmers refused to bring produce into the city in return for worthless paper. The requirements to calculate and recalculate commercial transactions in the billions and trillions made it practically impossible to do business in paper Marks.

Are Moral People Happier?

The full title is Are Moral People Happier? Answers from Reputation-Based Measures of Moral Character by Jessie Sun, Wen Wu, & Geoffrey P. Goodwin.

Here is the abstract:

"Philosophers have long debated whether moral virtue contributes to happiness, or whether morality and happiness are in conflict. Yet, little empirical research addresses this question. Here, we examined the association between reputation-based measures of everyday moral character (operationalized as a composite of widely accepted moral virtues such as compassion, honesty, and fairness) and self-reported well-being across two cultures. In Study 1, close others reported on U.S. undergraduate students’ moral character (two samples; Ns = 221/228). In Study 2, Chinese employees (N = 711) reported on their coworkers’ moral character and their own well-being. To better sample the moral extremes, in Study 3, U.S. participants nominated “targets” who were among the most moral, least moral, and morally average people they personally knew. Targets (N = 281) self-reported their well-being and nominated informants who provided a second, continuous measure of the targets’ moral character. These studies showed that those who are more moral in the eyes of close others, coworkers, and acquaintances generally experience a greater sense of subjective well-being and meaning in life. These associations were generally robust when controlling for key demographic variables (including religiosity) and informant-reported liking. There were no significant differences in the strength of the associations between moral character and well-being across two major subdimensions of both moral character (kindness and integrity) and well-being (subjective well-being and meaning in life). Together, these studies provide the most comprehensive evidence to date of a positive and general association between everyday moral character and well-being."

Hat tip: Koen Smets. 

Related posts:  

The Invisible Hand Increases Trust, Cooperation, and Universal Moral Action   (2022)

Conspicuous Consumption, Conspicuous Virtue, Thorstein Veblen (and Adam Smith, too!)  (2007)
 
Is altruism a result of selfishness? (2017)

Do you have to be selfish to make more money? (2018)

Does collective self-deception mask selfish behavior? (2018)

Why Doing Good Makes It Easier to Be Bad (2019)

The Dalai Lama Says It Is Sometimes OK To Be Selfish (2013)

Why Being Kind Helps You, Too—Especially Now: Research links kindness to a wealth of physical and emotional benefits. And it’s an excellent coping skill for the Covid-19 era (2020)

Adam Smith vs. Bart Simpson (2011) (Relates to Smith's book on sympathy The Theory of Moral Sentiments)

 

People sometimes pay for for goods even when they don't have to (2019).

 

Want to be happy and successful? Try compassion (2017)    

Why being kind to others is good for your health (and that can include donating money) (2020)

The Instinct to Share Our Good Fortune (2023) 

There is a positive relationship between prosociality and labor market success (2021)

You Don’t Have to Be a Jerk to Succeed (2024)

The % of 25-54 year olds employed fell from 80.9% in Sept. to 80.6% in Oct.; Average hours worked had no change

One weakness of the unemployment rate is that if people drop out of the labor force they cannot be counted as an unemployed person and the unemployment rate goes down. They are no longer actively seeking work and it might be because they are discouraged workers. The lower unemployment rate can be misleading in this case. People dropping out of the labor force might indicate a weak labor market.

We could look at the employment to population ratio instead, since that includes those not in the labor force. But that includes everyone over 16 and that means that senior citizens are in the group but many of them have retired. The more that retire, the lower this ratio would be and that might be misleading. It would not necessarily mean the labor market is weak.

But we have this ratio for people age 25-54 (which also eliminates many college age people who might not be looking for work).

It is up 0.2 this year. It had not fallen in any month this year until Oct. It was 80.9 for 2 months in 2023 and the last time it was that high before that was in 2001. We have now had 23 straight months of 80% or higher.

It was 80.6% in Jan. 2020 just before Covid. The 80.9% in June & July 2023 was the highest since the 80.9% in April, 2001. It was 80.6% in Jan. 2020 and 69.6% in April 2020.  Click here to see the BLS data. 

It was 79.875% for all of 2022 & 80.667% for all of 2023. So far this year the 10 month average is 80.77%. So the average this year is still higher than for 2023.

The unemployment rate was 4.1% in Oct. after being 4.1% in Sept. The unemployment rate was 3.6% for all of  2022 as well as 2023.  Click here to go to that data.

The labor force participation fell from 62.695% to 62.564%. 

The % of the adult population employed fell from 60.155% to 59.971% (that is people 16 years old and older).

60.0% of the adult population was employed in 2022 (that is people 16 years old and older). 

60.3% of the adult population was employed in 2023. So we had a slight increase.

This negative jobs report is partly due to hurricanes and the Boeing strike. See U.S. economy added just 12,000 jobs in October, impacted by hurricanes, Boeing strike by Jeff Cox of CNBC.

Here is the timeline graph of the percentage of 25-54 year olds employed since 2014.

 

Now since 1948.   

Now hours worked. This comes from the St. Louis FED. See Average Weekly Hours of All Employees, Total Private. It was 34.2 in both Sept. & Oct. Shaded areas indicate U.S. recessions.