Buchanan on increasing returns and anticommons

Independent from Buchanan’s work on ethics, there is a growing literature on culture (or ethics) and economic performance. For example, Becker and Woessmann (2009) show that the Protestant work ethic works through human capital accumulation by Bible reading and improved literacy. Arruñada (2010), based on his analysis of survey data, claims that there is no difference in work ethics between Protestants and Catholics. Instead he notes Max Weber’s “Protestant Sect and the Spirit of Capitalism,” and emphasizes that Protestantism is conducive to social ethics that facilitates impersonal trade. These authors argue against the simplistic interpretation of Weber’s work ethics. Generalized increasing returns discussed in this paper is an abstract model that does not conflict with their findings. Guiso et al. (2006) provides a useful prolegomenon for culture and economics.

Congleton (1991) also argues that a work ethic can increase economic efficiency, but stresses inefficiencies (free riding and other intra-organizational incentive problems associated with team production), rather than economy-wide increasing returns. The latter are mentioned only in passing.

See Stokey et al. (1989).

The implication of the model is that economic outcomes depend on trust in society. Guiso et al. (2006) emphasize that the concept of trust is the channel through which culture enter the economic analysis. In his support to social ethics hypothesis than to Weberian work ethics hypothesis, Arruñada (2010) predicts that Protestants would have more interpersonal general trust than the Catholics.