Cultural Paradigms in Property Institutions

In a recent article I examine whether ‘cultural factors’ substantively influence the creation and evolution of property institutions. For the past several decades, few legal scholars have answered affirmatively. Those inclined towards a law and economics methodology tend to see property institutions as the outcome of self-interested and utilitarian bargaining, and therefore often question the analytical usefulness of ‘culture’— defined here as social norms, values, and beliefs that are embraced and internalized without empirical discovery or analytical justification—in understanding this process. The major emerging alternative, a progressive literature that emphasizes the social embeddedness of both property institutions and individuals, is in theory more accommodating of cultural analysis, but has thus far done very little of it.

Seeking to move beyond this status quo, my article develops a ‘cultural’ theory of how property institutions are created, and seeks to demonstrate that such a theory is particularly powerful—perhaps indispensable—in explaining large-scale institutional differences between societies. To this end, it argues that, in the two centuries before large-scale industrialization, China, England, and Japan displayed systematic and fundamental differences in their regulation of property use and transfer. It further argues that these legal and institutional differences are best explained by certain aspects of social culture, specifically by the criteria for sociopolitical status distribution. Some of these criteria are distinctly “cultural” in the sense that utilitarian, self-interested bargaining alone could not plausibly have created them. Instead, they were probably generated, in large part, by the widespread social internalization of moral values.

These historical arguments pave the way for a broader theoretical claim: ‘culture’ is often a major determinant of property institutions, so much that we can actually identify societal ‘cultural paradigms’ in property institutions. Even if we assume, as conventional law and economics urges, that individuals generally approach property use, alienation, and regulation through a self-interested and utilitarian mindset, their pursuit of perceived personal utility is nonetheless constrained or empowered by social norms of status distribution that determine their relative bargaining power.

To demonstrate this, my article builds a straightforward social choice theory of property norm bargaining: the higher someone’s social and political status, the more capable they are of advancing their own norm preferences over the competing preferences of others. A society in which, for example, large landholders monopolize social and political positions of high status and prestige will have far more ‘rich-friendly’ property norms than a society in which such positions are distributed somewhat equally between rich and poor.

Building on this basic observation, I argue that different societies often have fundamentally different ‘status distribution criteria’—that is, the social norms that determine how individuals obtain social and political status: some societies rank individuals primarily by wealth, whereas others rank by electoral or social popularity, by academic achievement, by age and generational seniority, by hereditary bloodlines, or by caste systems. What status distribution criteria a society abides by has enormous consequences for the power balance between its various social groups and classes, and therefore great impact on its choice of property norms.

What distinguishes this article from other theories of property norm formation is, ultimately, its insistence that these ‘status distribution norms’ are often cultural. It argues that purely utilitarian theories of norm formation often fail to explain why different societies tend to adopt different status distribution norms. Instead, these differences are often best explained by differences in social culture—social values that are systematically embraced and internalized, perhaps ‘taken for granted’ by large segments of the society as innately ‘right’ and ‘moral’, and are not regularly re-justified or re-examined based on their material consequences. Some status distribution norms can, in fact, enjoy long-term popularity despite having strongly negative material consequences, whether for society as a whole or for its elite members. Their longevity is understandable only if we accept that individuals can morally internalize status distribution norms that actually damage their material self-interest. There is, therefore, a chain of causation from these cultural norms of status distribution to the power balance between different social classes, to the shape and substance of property institutions. In other words, property institutions can be determined by certain aspects of social culture.

Taisu Zhang is an Associate Professor of Law at Yale Law School.