September 23, 2010

Better Lives Through Individualism

"Productivity isn’t everything, but in the long run it is almost everything. A country’s ability to improve its standard of living over time depends almost entirely on its ability to raise its output per worker."

— Paul Krugman

Here is a really interesting peice of economic research about the way that productivity changes in collectivist and individulistic cultures. Their model, which seems to fit the data that they provide, is that more collectivist cultures will be better at working smoothly together to make an existing process efficient. If the world was static then this would mean that more collectivist cultures would be better places to live than more individualistic ones, but the world is not static. The second part of their model is that innovations can make a big difference to productivity by finding radically better ways of doing things, and individualism better encourages innovation than collectivism because it places a greater value on outstanding individuals rather than everybody being the same. Over time this means that more individualistic cultures gain a higher GDP per worker (productivity) because they are more innovative. So over time a more individualistic culture will have better standards of living than a more collectivist one. This conclusion is baked up by the data that they provide showing that more individualistic cultures have better GDP per worker than collectivist ones. This will mean that more individualistic cultures will have better standards of living than collectivist ones.


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