Events during the last decade of the twentieth century, such as the fall of the Berlin Wall, have triggered an interest in the role of formal institutions and culture in the desired design and performance of economies. Culture refers to norms and values shared by a group. Empirical studies have investigated the link between dominant values in countries, measured by answers on questionnaires, formal institutions, and the national economies’ performance. In these studies, the academic researcher acts as an impartial observer. This is a questionable assumption as academics are human beings and thus subject to similar cognitive biases and limitations as others.
This chapter, therefore, argues that the ideas of economists correlate with those of other people in a country. Similarly, economic policy will reflect the national culture and economic ideas. This book studies the interaction between these three areas – economic ideas, national culture, and policy – for three countries, namely the United States of America, Germany, and France. These countries represent, respectively, the free or liberal market economy, the coordinated market economy, and the hierarchical market economy. For each of the countries, the book investigates the labour market, financial system, competition policy, and monetary policy.