Understanding the Source of Western Wealth

First, a small confession: When the book, The WEIRDest People in the World: How the West Became Psychologically Peculiar and Particularly Prosperous, came out earlier last year, I ignored it. I found its title, which refers to its acronym for modern society – Western, educated, industrialized, rich, and democratic – gimmicky; and its primary thesis, that the roots of modern prosperity originated from the Church’s prohibition on cousin marriage, absurd on its face.

Both of those first impressions were mistakes.

A prolonged podcast interview with its author, Joseph Henrich, left me impressed with his deep grasp, not only of economics, but also of social psychology, evolutionary psychology, institutional history, and anthropology (the last of which is no surprise, since that was his academic field), so I finally read the book.

If you’re fond of the term “mind candy” to describe novel, intriguing, and insightful concepts, then The WEIRDest People in the World is an eight-pound Costco box of it. Here’s an example, which occupies the first random page I chose: All financial practitioners are familiar with the “endowment effect,” the attachment we form with our possessions, and which, when applied to financial assets, makes us inappropriately resistant to selling them.

When experimental subjects, for example, are randomly given either blue or yellow lighters, they are willing to trade them for one of the opposite color only about ten percent of the time. It turns out that this is WEIRD behavior and is not seen in aboriginal societies; when this experiment was performed, for example, with members of the east African Hazda tribe who live in remote hunter-gatherer settlements, they acted as perfectly rational economic actors, willing to trade about half the time. On the other hand, their more urban cousins, who are exposed their local market economy, will trade only about one-quarter of the time, behavior approximately mid way between Westerners and their rural tribal members.