ABSTRACT
This chapter discusses the broader theme of how economic development is accompanied by a process of interactions between evolving socio-cultural values and the introduction of a modern market economy. The nature of these interactions, in turn, largely determines the quality of the functioning of markets and the effectiveness of development interventions. Of particular interest is how social norms of trust, reciprocity and cooperation evolve in ways not easily explained by the pursuit of self-interest only. In the contemporary literature on economic development, there is a new emphasis on “governance”, originating mostly from the Bretton Woods institutions; the usual policy advice is mainly to do with devising and enforcing appropriate administrative policy reforms and enforcing regulatory laws aimed at building market-friendly institutions. Such a technocratic approach to reforms, it is argued, is unlikely to succeed without an understanding of how incentives for deviant behaviour arise and how legal and regulatory enforcement mechanisms interact with the evolution of behavioural norms and ethical standards in a society.
