Cultural environment, values, and well-being – a clustering analysis
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institutions, where the former describes the rules reinforced by the central authorities, and the latter stands for the set of uncodified rules. In the previous chapter, informal institutions were conceptualized as a set of social norms. Social norms can be described as a sort of heuristics, providing some ready-to-use solutions in the complex multi-agent and uncertain social environment. Social norms are endogenous in the sense of being a product of social arrangements and negotiations rather than deliberate optimization design by central authorities. The notion of social norms was juxtaposed to the social preference constraint which serves as the only way to assess social sentiment without violating principles of the neoclassical research program. While social preferences are the attributes of individual agents, social norms are the product of common intelligence, being subject to evolutionary selection, adjustment, and transformation. Although social norms seem to be an appropriate concept for the purely theoretical inquiry, sticking to the same notion might be extremely challenging when performing the empirical analysis. In contrast to the formal institutions, social norms are not codified, and (to the author’s best knowledge), there seems to be no uniformly recognized method of assessing the character of the social norms dominating the society. Therefore, the empirical inquiry into the links between informal institutions, formal institutions, and policy outcomes would require defining different operating concepts for the informal institutional environment. Alesina and Giuliano (2015), addressing the links between cultural environment and formal institutions, argue that the notion of culture captures the traits traditionally associated with informal institutions, i.e., self-reinforcing values and beliefs. Therefore, the authors refuse to use the notion of formal institutions (since it creates an impression of subordination of informal institutions to the formal institutions) and assess characteristics of culture as the features of the informal institutional environment. This study adopts a similar methodology, assessing the character of informal institutions based on the broader concept of culture.
2.1.3. The links between cultural environment and the design of formal institutions There is plenty of evidence demonstrating both how culture shapes formal institutional norms and how changes in the formal institutional environment can trigger informal institutional environment transformation. Fischer (1989) explains cultural and institutional heterogeneity in the United States by analysing dominant views and norms among four massive waves of immigration. The first wave took place in 1629–1640 and was mostly represented by British
