ABSTRACT
In this chapter, I argue that one reason for Japan’s remarkable postwar economic performance has been that it had an appropriate culture. The Japanese attach importance to (1) materialistic pursuits; (2) hard work; (3) savings for the future; and (4) investment in education. These preferences may be influenced by income, prices, and other economic factors, but they are also influenced by the existing culture. Cultural explanations may not always be primary, or they may be carried too far. The fact that South Korea is more developed today than North Korea, or that China began developing not under Mao but under Deng Xiaoping, is not explained by culture. That institutions are an important determinant of economic development was made amply clear by the neoinstitutionalists. 1 Institutions are certainly important in determining incentives, economic freedom, and transaction costs, but it is wrong to attribute economic development solely to them, as many neoinstitutionalists do. Culture affects economic development through its influence on individual choice and on institutions. Institutional development does not take place in a cultural vacuum.
