There are several reasons why the study of the causal influence of institutional and cultural
factors on preferences is difficult. One obvious reason is that societies and groups typically differ
in a large number of dimensions but the researcher cannot control for all of them. Another reason
is that due to the existence of multiple equilibria, societies may end up with different institutions,
cultural practices, and preferences despite the fact that they started with similar factor
endowments and preferences. In this case, the co-variation between institutions, cultural
practices, and preferences need not indicate a causal impact of institutions on preferences. The
co-variation may merely reflect the fact that other background variables (which may be
idiosyncratic historical events such as a war or a natural disaster) led to different developmental
trajectories.
Any investigation of causal influences of institutional and cultural factors on preferences
requires settings and techniques in which these potential confounds are addressed. The papers in
this symposium use a caste status divide in India, a language border within Switzerland, and a
manipulation of the decision format in a blood drive to plausibly identify causal influences on
preferences. In this introduction, we put these papers in the perspective of the emerging literature
on endogenous preferences.2
This paper is divided into three parts. We first address the well-known objection that
explaining behavioral changes by preference changes introduces too many free variables. We
argue that today such explanations should be considered on an equal footing with constraint-
based explanations. Recent progress in game theory has provided many free, unobservable,
variables that can explain outcomes, whereas recent progress in modeling and measuring
preferences has put more constraints on preference-based explanations.
In the second part, we discuss the progress in psychology in pinpointing the determinants
of preferences. Psychological research has shown that preferences can be affected by the way
they are elicited, by the framing of situations, by anchoring devices, and by the priming of
individuals’ identities. Thus, to the extent to which social institutions prime individuals’
identities and act as elicitation, framing, and anchoring devices, to this extent the institutions
also shape preferences.
2 Earlier surveys of the literature on endogenous preferences are Bowles (1998) and Lichtenstein and Slovic (2006,
chapter 1).