What Cultural Factors Make Some Economies Bigger Winners?

In this week's Rule Breaker Investing podcast, Motley Fool co-founder David Gardner brings his listeners a special treat: an interview with Dr. Steven Pinker of Harvard University. He's a psycholinguist, award-winning researcher, and, according to Time magazine, one of "The 100 Most Influential People" in the world today.

He's also the author of a number of books - among them The Stuff of Thought, The Blank Slate, Words and Rules, How the Mind Works, The Better Angels of Our Nature, and The Language Instinct - but here's how Bill Gates described his latest, Enlightenment Now: The Case for Reason, Science, Humanism, and Progress. "My new favorite book of all time."

In this segment, they talk about the rise of "gentle commerce" and the underlying societal choices and shifts that correlate with expanding, prosperous economies.

A full transcript follows the video.

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This video was recorded on March 7, 2018.

Steven Pinker: In documenting various kinds of improvements in human well-being -- democracy, peace, safety, knowledge, liberal values like tolerance of racial minorities, rights for women, tolerance of gay people and so on -- it's hard to know what caused all these various improvements because lots of good things tend to correlate with each other.

Societies that give more power to their women also tend to be democratic. They also tend to have low rates of crime. They tend to have moderate-to-high levels of social spending. They tend to have less inequality, and they also tend to be richer.

And so, just as an exercise in trying to infer causation from correlation, which is always challenging because so many things go together. There are just so many reasons why Denmark is a better place to live than Uganda, and it's just hard to know which is the main one. But just sheer prosperity seems to come out in a lot of these analyses as the one thing that just doesn't go away when you control for everything else.

Now, there's some exceptions. Some of the resource extraction states, like the Arab oil states, are very rich and don't have a lot of these benefits. But at least states that get rich through networks of commerce and exchange; everything else tends to be good about them. Even sheer intelligence. In one of the more surprising examples of human improvement, I talk about the so-called Flynn effect, the fact that IQ scores have been rising by three points a decade for a century, and one of the predictors of the Flynn effect in a country is its affluence.

David Gardner: You don't use the word "entrepreneurism" or talk much about entrepreneurs in the book, but I think of the entrepreneurial cultures as often aligning with the most successful cultures. That excludes, maybe, the Arabs but does include a lot of the richer countries that have some kind of a culture of people starting businesses.

Pinker: I think that's right as part of the general networks of exchange and cooperation that tend to make commercial societies less warlike and tends to make the world less warlike as countries are more enmeshed in relationships of exchange. This is a key idea in the Enlightenment, and the book is called Enlightenment Now because I attribute a lot of the kinds of progress that we've enjoyed to some very important ideas that all tended to flower in the end of the 18th century.

And one of them was not just the idea that markets and networks of exchange make us richer, and that was Adam Smith and David Ricardo's ideas on how wealth comes into being, but an idea sometimes called "doux commerce," gentle commerce. That commerce doesn't just make us richer, but it makes us nicer, because we've got to anticipate what our customers want.

When there are networks of exchange it becomes cheaper to buy things than to steal them. It makes other people more valuable to you alive than dead. You don't kill your customers. You don't kill your debtors. And this idea from a variety of thinkers. A number of the American founders and framers -- Hamilton, Washington, Adams, Madison -- but also Immanuel Kant and Voltaire.

And even though today, especially among intellectuals, the idea of commerce is considered rapacity, and exploitation, and the source of conflict, a couple of hundred years ago when there were royal charters, and monopolies, and aristocrats who just lived by extracting rents off their lands; the idea of businesspeople making things and exchanging them freely was a great liberal force.

And the idea of gentle commerce has, in large part, been vindicated in a number of studies that show that nations that trade a lot with each other are at least less likely to go to war. As with all these things, it's never all or none, but in large samples of pairs of countries, that seems to be what shakes out.

Gardner: Have you ever seen Jane McGonigal's work about the power of gaming and games?

Pinker: I have not, no.

Gardner: She's a fellow academic. I think she operates out of Berkeley. She has a few Ted Talks along the lines of gaming will save the world. We're not playing enough video games and the premise is that by playing games with other people -- massively multiplayer games of other cultures -- people that you don't know that are different from you that you discover live half a world away; it knits us all together, so we're not gaming enough. It's more of that same exchange.

Pinker: I was not aware of that. I'm sympathetic to the idea because I'm sometimes embroiled in the controversy over whether video games make us violent, and the evidence suggests that it does not. I was, in fact, invoked just two weeks ago by our president in trying to explain school shootings, but the evidence is that no, the first-person shooter games don't breed actual school shooters.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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