It's In Your Head.(Business)(influence of social attitude in economic growth)

Byline: Stefan Theil

A new spate of economic studies say growth may come down to attitudes.

Much of the worldwide economic and political debate these days circle around ensuring continued growth--which, it's hoped, will help various countries escape the global downturn, create more jobs and finance the rising cost of social services. What the conversation overlooks is that it turns out some countries might not want to grow. At least that's what Meinhard Miegel, director of the Bonn-based think tank Denkwerk Zukunft, argues in a book just published in May. Analyzing a mass of survey data, Miegel finds that while two thirds of Germans favor economic growth in principle, only about a sixth of them are willing to work for it. The rest value leisure, safety and early retirement over work and achievement. Given these attitudes, says Miegel, the popular idea that a low-birthrate country like Germany can grow its way out of the rising costs associated with an aging population "is reckless and built on sand."

Miegel might be unduly pessimistic, but he is part of a growing movement of experts who argue that economic growth is actually dependent on a state of mind. In fact, the idea goes back to Max Weber, the German sociologist who argued more than a century ago that England's Protestant work ethic gave rise to modern capitalism. Today's Weberians aren't sociologists wielding historical arguments, however, but economists, pollsters and biologists working with actual numbers and data sets. Their interest in how personal attitudes might affect growth is part of the broader reinvention of economics, in which the classical view--that people make rational choices in a world of perfect information--is coming under increased scrutiny. The movement also reflects rising concern over whether growth can be increased--especially now with the ugly specter of stagflation in large parts of the globe.

It's certainly clear, looking at the developing world, that economic success requires good government policy such as ensuring property rights, access to start-up capital and a bureaucracy that doesn't stand in the way. But new research suggests that policy may not be the most important thing. Edmund Phelps, a Columbia University economist and Nobel laureate, discovered in a 2006 study that attitudes toward markets, work and risk-taking--as measured by a number of international surveys--are significantly more powerful in explaining the variation in countries' actual economic performance than the traditional factors economists have looked at, including tax rates, social spending and labor-market regulation. Now, he is looking at how a more dynamic economy, in turn, raises the level of happiness and job satisfaction. Another recent study, by the Cambridge, Massachusetts-based Monitor Group, looked at nine countries from the United States, to ...