The economics of business culture: game theory, transaction costs, and economic performance

This book is an analysis of the economic effects of culture. It demonstrates how these effects can be analysed in a rigorous fashion. The cultural environment influences decision-making through both moral values and fundamental beliefs. These values are developed principally within religious, ethnic, and national groupings and seem to exert a major influence on the economic performance of these groups. The economic analysis of culture should therefore be able to shed light on a wide variety of contemporary social and business problems. The author argues that the gains from technology in modern societies can be offset by high costs if the moral dimension is missing. Overall economic performance depends on transaction costs, and these mainly reflect the level of trust in the economy. The level of trust depends in turn on culture. An effective culture has a strong moral content. Morality can overcome problems that formal procedures - based on monitoring compicance with contracts - cannot. A strong culture therefore reduces transaction costs and enhances performance - the success of an economy depends on the quality of its culture.