equal, while people in other societies lack this ability. The cross-cultural experiments by Segall
et al. (1966) document striking cultural differences in the susceptibility of people to the Müller-
Lyer illusion. In a few societies, the illusion was completely absent while among European and
US subjects the illusion was strongest. Segall et al. (1966) suggest that the exposure to
“carpentered corners” of modern environments may have favoured certain optical calibrations
and visual habits that perpetuate the illusion. Thus, in line with Henrich, Heine, and Norenzayan
(2010, p. 64), one may ask the question: If “even a process as apparently basic as visual
perception can show substantial variation across populations, .... what kind of psychological
processes can we be sure will not vary?”
The recent work in psychology and economics has implications that are only beginning to
be explored for the examination of the question how different aspects of society affect
preferences, but which promise to undermine long-held standard assumptions in economics. If
historical institutions shape preferences, which shape the choice of public policies and their
effects, then societies almost surely have different optimal paths of development. If individuals
understood these processes, they could design policies to nurture or dampen desirable
preferences and in turn shape the paths of economic change. At a minimum, these findings
should give pause to those who accept WTAs, WTPs, and market prices as stalwart guides to
welfare.12
In a plea for bringing cultural elements into economic models, McCloskey (1998) imagines
the following riposte by an economist defending the standard paradigm in which there is no role
for culture: “Give me a break: I’m not in the business of explaining all behaviour. I propose
merely to explain some portion, and in many cases a large portion.” (p. 308)
If culture had just a “level” effect on the performance of economies, something like the
initial “imprinting” of preferences with anchors that was done in Ariely et al. (2003), but an
imprinting that was done just once and so could be treated as a fixed effect, then this objection
would stand on solid ground. Economists would not be able to explain certain level effects—
leave that to the Department of Psychology or Sociology, as McCloskey’s imagined interlocutor
says—but they could still explain the behavioural changes in response to changes in constraints.
A growing literature provides some evidence, on the contrary, that preferences change in
12 For an early discussion of the consequences of endogenous preferences for welfare economics see Gintis (1972).
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