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Snobbism and Status Concerns – Primitives of Georgian Socio-historical Psychology and Their Economic Implications

A bit of history:


In 1905, Max Weber, in his masterpiece, “The Protestant Ethics and Spirit of Capitalism”, proposed an interesting hypothesis which claimed that Protestantism, Calvinism and Puritan ethics influenced development of capitalism. Since, Catholic Church rejected worldly affairs and constantly preached for its parish that the goal of existence is afterlife rather than life itself, it also implied rejection of pursuit of wealth and possession. Starting from the 17th century, emergence of various Protestant church movements, first in England (Puritans) and then in the rest of the Northern Europe, set foundations for a revolutionary view of the life and its goals. According to the Protestant work ethics, person’s salvation was no longer possible only through prayers and tranquil humble life rather, hard work, prosperity and frugality turned out to be no less important. For instance, Quakers, Calvinists and other Protestants believed that wealth is bad as far as it is a temptation to sinful enjoyment of life i.e. its acquisition would be bad if it is for purpose of later living without care. Even wealthy men, who have enough capital to hire labor and then relax, must work hard to eat. To have opportunities and potential for acquiring wealth and not to do so is the same as wishing to be unhealthy and is derogatory to the glory of god. The new idea gave a birth to totally new segment of societies which were hard working, accumulated wealth, lived humble lives and used maximum potential of their abilities and skills for the sake of developing life conditions of societies. This sort of ethic was common in Northern Europe and USA thus triggering and then accelerating development of capitalism there.

While this was the case for Northern Europe (Germany, Scandinavia, Netherlands, Switzerland and UK) and USA – Southern and Eastern Europe maintained traditions of Orthodox and Catholic Christianity which rejected acquisition of wealth and innovation and created societies with strict hierarchical structures where status played a huge role. For example, in XVII-XVIII century France was a classical example of such social structure where society was composed of three segments: Clergy, Aristocracy and others. Clergy and Aristocracy enjoyed institutionalized privileges (eg. they were exempt from taxes) because of their status and perceived importance for the society. Weber distinguished between two categories of leading social classes of those times where first category’s life chances were determined by market activity and second category’s life chances were determined by status which was institutionalized in law and expressed via life style. There was a small space for the first category in Catholic countries while there was a small space for the second category in protestant countries.

During that period, Georgia remained an Orthodox Christian country with its leading social class fitting into the second category. Acquisition of wealth, innovation and pursuit of earthly happiness was a Forbidden Fruit for masses. Nobility and aristocracy, under the patronage of clergy, enjoyed all the fruits of life without creating any value. Starting from the mid 19th century Russia started abolishing serfdom in Georgia and by the end of the century the entire system of serfdom and nobility was already a case from past. Such a sudden need for social transformation, which was not preceded by any religious or cultural grounds, left Georgian aristocracy impotent to meet requirement of the new world while on the other hand, reaped benefits for many former peasants and low status clerks who managed to assimilate into the new system quickly and to grab the opportunities brought by capitalism. Fortune was taken away from ex-aristocrats either by Russian Empire or by aristocrats’ own inability to meet the new requirements of the new world. There is a vast literature about characteristics of Georgian aristocracy of that period who because of having "blue blood" would not do any agricultural work or trading and preferred to live with empty stomachs and would not even complain about this. For example, Mikheil Javakhishvili's "Jako's Migrants" illustrates the spirit of those time's social life where aristocrats were becoming poor while peasants who were previously under the rule of those aristocrats start gaining power and become aggressive because now they have chance to prove to themselves that they are no longer inferior to aristocrats. There is also a good old Georgian movie (Lazare) which also has a really great character of Georgian aristocrat of those times.

So, summing up, the industrial revolution, in the West, was not a revolution at all, it was a logical consequence of favorable religious transformations which started in the 17th century and culminated in Capitalism. For Georgia, Capitalism was a revolution coming unexpectedly without having any kind of preceding grounds which would prepare society to assimilate into the system based on the totally new concept of life thus; creating two new segments of society – ex-aristocracy unable and unwilling to meet new requirements because of status and prestige related concerns and; snobs who were previously under the rule of those aristocrats and now that they see opportunities to spread their wings they grab those opportunities, become aggressive and try to prove to themselves and others that they are no longer inferior to aristocrats.

A bit of history… repeated once again:

For the 20th and 21st centuries, the story is similar to that historical one. Until early 90’s, under the rule of SU, Georgian society was getting used to a specific social order and political structure for at least 70 years.  Then, suddenly democracy, rule of law, human rights and liberalism appeared as a flash of light on a cloudless sky. Again, creating two new segments of society – ex-elite (people who held high governmental positions during SU and ex- city coloratura elite) unable and unwilling to meet new requirements because of status and prestige related concerns and; snobs who leave their villages and come to cities either to grab opportunities of liberalized markets or just to mimic the behavior and life style of ex-elite and to prove that they are no longer inferior to them.

The forms of behavior and the tools for achievement goals have changed, for those two segments, but goals and psychological sentiments have remained the same indicating that history is repeating itself over and over again simply disguised differently in various epochs.

Economic implications:

The hypothesis is that snobbism (at least partially) and status concerns lead to market failures by distorting incentives, which then leads to a lower welfare.

The idea is related to Ala Avoyan’s thesis, “Conspicuous Consumption in Education”. In her model, students choose prestigious professions even if those professions have lower expected returns compared to other less prestigious professions. This happens because there is a prestige premium which urges people to choose things with lower monetary payoffs. Now, there are all sort of premiums some of which are objective for instance risk premium, career premium and some of which are subjective (psychological) like prestige premium. Objective premiums are objective in a sense that given data a reasonable person can calculate those and convince other reasonable person that she is right. Subjective premiums are present when, even if calculated, one cannot convince another reasonable person that she is right (defined in spirit of Itzhak Gilboa and David Schmeidler's definition of subjective and objective rationality). From this definition follows that one can estimate objective premiums before a choice is made by an agent and subjective premiums can only be estimated after observing a certain choice.

Prestige premium is an important element in the decision making processes of the two segments discussed above.

Voluntary unemployment case relevant for the first segment:

There is a segment of society mainly consisting of ex-elite who do not possess skills which would be relevant for high-paid jobs mainly because their skills which were useful during SU times are obsolete. However, those people have some opportunities to go out and become taxi drivers or go to construction jobs etc., in order to avoid poverty. In spite of this, they prefer to stay unemployed and to live in poverty because such jobs are unacceptable due to reasons related to snobbism and prestige. On such low-paid jobs average monthly earnings is up to 500-600 GEL. This means that the segment’s prestige premium is minimum 500-600 GEL. Also, taking into account the fact that they are poor and their marginal utility of wealth is high - the forgone utility for the sake of "prestige" is really huge.

Excess urbanization case relevant for the second segment:

At present, there is a tendency in Georgia to leave villages where people usually have house, land and farms and to go to cities where they have nothing, frequently cannot find jobs, or even if they find one they have way lower returns than they would have otherwise (if they stayed home and did farming), live in terrible conditions etc.  So, although there are lower returns and lower living standards in the cities villagers go there. According to the traditional economic theory, rational decision maker should not be behaving in such a way. So, the rhetoric question is - why this happens? And the answer is - snobbism.

Snob believes that because of whatsoever reasons some people are inferior to her. For example, if a snob believes that poor people are inferior to wealthy people then she will try to become wealthy because given such beliefs, the feeling of being inferior is a disutility. Those people having snobbism premium and because of that coming to cities think that city people are superior to non-city people for whatsoever reasons. This distorts competitive market outcomes by shifting people from higher return agricultural jobs to lower return jobs (or frequently unemployment).

Conspicuous Education case relevant for both segments:

Some segments of Georgian society consider education as a signal of high status and prestige. Ideally, education decision is a decision made by youth who did not have any SU experience. If the decision was autonomous I suppose we should see less effect of prestige premium if we assume that youth are less concerned about prestige than older generations which experienced SU rule. The thing is that education decisions are not autonomous (see a blog post: “A personal view on why people choose to get higher education in Georgia”) and frequently parents decide for their children. If those parents belong to those two segments of the society then there is a greater chance that their prestige concerns and snobbism will be spilled over to their children and/or their paternalistic decision will be highly determined by prestige premium. This mechanism creates wrong incentives for youth and distorts optimal decisions leading to large number of students and lower quality of education.

Back to Weber to see a big picture:

Going back to Weber and history of protestant countries vs catholic ones, it is clear that if a society is not prepared for structural changes on conceptual levels then some of its segments start suffering the new consequences and cannot cope with new ways of life. Hence, some segments of pre-new system generations are becoming burden for society and impediments to economic growth because they are voluntarily unemployed, behave in a contradictive way to market forces and spill over negative externalities to future generations.

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Guest - Sanjit Dhami on Thursday, 10 January 2013 11:34

Good stuff Giorgi, although I differ with several things here. I think this is exciting stuff and should be taught in all "growth economics" courses. We have also been thinking of Weber's ideas (and George Akerlof has been advocating him as well). We have used these ideas (among others) to motivate a new solution concept for static games that we call "evidential equilibrium". Here is a link to the paper (alternatively download it from my home page): http://www.le.ac.uk/economics/sd106/Paper.%20Evidential%20equilibria.pdf
I have extracted the following passage from this paper that is related to your ideas.
"This example is considered in Quattrone and Tversky (1984). According to the Calvinist doctrine of predestination, those who are to be saved have been chosen by God at the beginning of time, and nothing that one can do will lead to salvation unless one has been chosen. Although one cannot increase the chance of salvation by good works, one can produce diagnostic evidence of having been chosen by engaging in acts of piety, devotion to duty, hard work and self denial. According to Max Weber, this is exactly how millions of people responded to the Calvinist doctrine and why capitalism developed more quickly in Protestant rather than Catholic countries, an explanation that is popular in sociology; see for example, Nozick (1993)."
Keep up the good work. Well done!

Good stuff Giorgi, although I differ with several things here. I think this is exciting stuff and should be taught in all "growth economics" courses. We have also been thinking of Weber's ideas (and George Akerlof has been advocating him as well). We have used these ideas (among others) to motivate a new solution concept for static games that we call "evidential equilibrium". Here is a link to the paper (alternatively download it from my home page): http://www.le.ac.uk/economics/sd106/Paper.%20Evidential%20equilibria.pdf I have extracted the following passage from this paper that is related to your ideas. "This example is considered in Quattrone and Tversky (1984). According to the Calvinist doctrine of predestination, those who are to be saved have been chosen by God at the beginning of time, and nothing that one can do will lead to salvation unless one has been chosen. Although one cannot increase the chance of salvation by good works, one can produce diagnostic evidence of having been chosen by engaging in acts of piety, devotion to duty, hard work and self denial. According to Max Weber, this is exactly how millions of people responded to the Calvinist doctrine and why capitalism developed more quickly in Protestant rather than Catholic countries, an explanation that is popular in sociology; see for example, Nozick (1993)." Keep up the good work. Well done!
Guest - Giorgi Mekerishvili on Thursday, 10 January 2013 14:56

Thank you Professor Sanjit. I looked over the paper and I think that it really says much about how people reason. When I was reading it, I could identify myself with the theory. We do believe that people have preferences similar to ours and then we act accordingly. As I understand from Quattrone and Tversky (1984) example, the game is plaid between god (nature) and human being where human being has its preferences about the outcomes of the game (prefers to be chosen) and thus believes that it will be the outcome and acts accordingly (hard work, devotion to duty etc).

I think that evidential reasoning works in games where cooperation is possible. Otherwise, it coincides with causal reasoning and gives same outcome. For example, when it comes to status and prestige the game is zero-sum - there cannot be two kings and one throne. Social projection could explain why prestige concerns exist but it cannot lead to outcome which is pareto improvement over outcome of causal reasoning, in the game of prestige.

Thank you Professor Sanjit. I looked over the paper and I think that it really says much about how people reason. When I was reading it, I could identify myself with the theory. We do believe that people have preferences similar to ours and then we act accordingly. As I understand from Quattrone and Tversky (1984) example, the game is plaid between god (nature) and human being where human being has its preferences about the outcomes of the game (prefers to be chosen) and thus believes that it will be the outcome and acts accordingly (hard work, devotion to duty etc). I think that evidential reasoning works in games where cooperation is possible. Otherwise, it coincides with causal reasoning and gives same outcome. For example, when it comes to status and prestige the game is zero-sum - there cannot be two kings and one throne. Social projection could explain why prestige concerns exist but it cannot lead to outcome which is pareto improvement over outcome of causal reasoning, in the game of prestige.
Guest - Sanjit Dhami on Thursday, 10 January 2013 17:17

Giorgi, your understanding in the first paragraph is correct. Evidential reasoning works whenever strategic interaction takes place. In most such games players can improve their payoffs by cooperating in some manner. I do not know how to appropriately set up a game that involves status and prestige. I suppose one must first define these terms carefully. Perhaps something for you to think about. You might also wish to think about what are appropriate ingroups and outgroups and what social projection functions are appropriate for outgroups. We just did not have the evidence for that, so we made a very general theory that can accommodate all sorts of beliefs. Good work!

Giorgi, your understanding in the first paragraph is correct. Evidential reasoning works whenever strategic interaction takes place. In most such games players can improve their payoffs by cooperating in some manner. I do not know how to appropriately set up a game that involves status and prestige. I suppose one must first define these terms carefully. Perhaps something for you to think about. You might also wish to think about what are appropriate ingroups and outgroups and what social projection functions are appropriate for outgroups. We just did not have the evidence for that, so we made a very general theory that can accommodate all sorts of beliefs. Good work!
Guest - Sanjit Dhami on Thursday, 10 January 2013 17:20

And perhaps you could discuss this with Florian, who is not only very knowledgeable but also a broad-minded, thinking person (an increasingly rare quality).

And perhaps you could discuss this with Florian, who is not only very knowledgeable but also a broad-minded, thinking person (an increasingly rare quality).
Guest - Giorgi Mekerishvili on Thursday, 10 January 2013 18:13

Thanks for the suggestions Professor. I'll think about the issue more deeply. Maybe even write something related in my next blog-post.

Thanks for the suggestions Professor. I'll think about the issue more deeply. Maybe even write something related in my next blog-post.
Guest - Florian on Friday, 11 January 2013 17:13

Giorgi, you wrote an inspiring article which nicely connects sociological theory with your observations in Georgia.
I am not sure though whether it is really true that Georgians more than other nationals prefer to stay idle instead of working in inferior jobs. As a matter of fact, those two or three Georgians I know who have a low income are hard-working and willing to take up any job even if below their qualification. Is it really true that Georgians fall victim to their own pride, or is it just some kind of urban legend?
The issue of "prestigious professions" was also raised in Givi's piece on math education. Also there I found pretty incredible what he claimed about the Georgian society. Do professions which are currently unprofitable, like law, international relations etc., really enjoy this high prestige in the Georgian society? In Germany, unprofitable professions, mainly the humanities, are outrightly ridiculed, in particular by the non-academic part of the population. Unsuccessful academics are derided as "Dr. tax. driv." (having a doctor degree in taxi driving) and other nasty nicknames. Is this so different in Georgia?
Finally, I am surprised you attribute the emergence of the protestant movement to England. To my mind, the first major protestant leader was Martin Luther in Germany, preceded by some less radical and less successful forerunners in England (Wycliffe) and Bohemia (Huss). Does Weber attribute the kind of protestant movement he talks about primarily to England? (I haven't read his book, and I am afraid I won't read it in the next decades or so.)

Giorgi, you wrote an inspiring article which nicely connects sociological theory with your observations in Georgia. I am not sure though whether it is really true that Georgians more than other nationals prefer to stay idle instead of working in inferior jobs. As a matter of fact, those two or three Georgians I know who have a low income are hard-working and willing to take up any job even if below their qualification. Is it really true that Georgians fall victim to their own pride, or is it just some kind of urban legend? The issue of "prestigious professions" was also raised in Givi's piece on math education. Also there I found pretty incredible what he claimed about the Georgian society. Do professions which are currently unprofitable, like law, international relations etc., really enjoy this high prestige in the Georgian society? In Germany, unprofitable professions, mainly the humanities, are outrightly ridiculed, in particular by the non-academic part of the population. Unsuccessful academics are derided as "Dr. tax. driv." (having a doctor degree in taxi driving) and other nasty nicknames. Is this so different in Georgia? Finally, I am surprised you attribute the emergence of the protestant movement to England. To my mind, the first major protestant leader was Martin Luther in Germany, preceded by some less radical and less successful forerunners in England (Wycliffe) and Bohemia (Huss). Does Weber attribute the kind of protestant movement he talks about primarily to England? (I haven't read his book, and I am afraid I won't read it in the next decades or so.)
Guest - Giorgi Mekerishvili on Friday, 11 January 2013 19:52

Florian, thanks for the comments. It is true that Georgians fall victim to their own pride. There is such a segment of Georgian society.

Law, international relations etc., really enjoy high prestige in the Georgian society. For instance, that is why we have so many lawyers and doctors who are unemployed.

Right, emergence of protestant movements started in the 16th century from Luther. However, Henry VIII was the first in daring to separate Church of England from Roman Catholic Church. Anglicanism was the first official protestant church and this is important. Protestant religious movements were most active during 17th and 18th centuries (great awakenings, eighty years' war, thirty years' war). So, 16th century was just a start of revolution. People knew that something was wrong with Roman Catholic Church however, there was no clearly formed alternative. This is why Anglicanism was so important - it was the first attempt to institutionalize alternative ideas. Societies would need decades to understand new interpretations of religious ideas and to get used to those new ideas. This was exactly happening during 17th and 18th centuries and this is exactly what we are interested in and not the chronology of facts.

Florian, thanks for the comments. It is true that Georgians fall victim to their own pride. There is such a segment of Georgian society. Law, international relations etc., really enjoy high prestige in the Georgian society. For instance, that is why we have so many lawyers and doctors who are unemployed. Right, emergence of protestant movements started in the 16th century from Luther. However, Henry VIII was the first in daring to separate Church of England from Roman Catholic Church. Anglicanism was the first official protestant church and this is important. Protestant religious movements were most active during 17th and 18th centuries (great awakenings, eighty years' war, thirty years' war). So, 16th century was just a start of revolution. People knew that something was wrong with Roman Catholic Church however, there was no clearly formed alternative. This is why Anglicanism was so important - it was the first attempt to institutionalize alternative ideas. Societies would need decades to understand new interpretations of religious ideas and to get used to those new ideas. This was exactly happening during 17th and 18th centuries and this is exactly what we are interested in and not the chronology of facts.
Guest - Salome on Tuesday, 15 January 2013 23:18

the unemployment ratio is 20 % for the low educated, 31 % for the medium educated
and 30 % for the highly educated

source: Eurostat, 2012

the unemployment ratio is 20 % for the low educated, 31 % for the medium educated and 30 % for the highly educated source: Eurostat, 2012
Guest - Salome on Tuesday, 15 January 2013 23:30

I just looked at other EHEA(The European
Higher Education Area) countries, Georgia is the exception

I just looked at other EHEA(The European Higher Education Area) countries, Georgia is the exception
Guest - Giorgi Mekerishvili on Wednesday, 16 January 2013 17:14

So, according to those figures, chances of being unemployed increases as you get more education. Right? I can think of the following reason why this would happen: oversupply of formally higher educated people plus prestige concerns. For example, an educated guy cannot find job relevant for his skills because there is an oversupply of guys with similar degrees. This increases unemployment ratio for highly educated. Now, as an counterargument one would say that this guy could get a lower status job because for low educated unemployment ratio is lower and thus he has more chances of getting low status job. However, if this guy has a prestige premium then he won't take on a low status job thus staying in the pool of highly educated unemployed people. I think this could be one of the possible stories behind those figures.

So, according to those figures, chances of being unemployed increases as you get more education. Right? I can think of the following reason why this would happen: oversupply of formally higher educated people plus prestige concerns. For example, an educated guy cannot find job relevant for his skills because there is an oversupply of guys with similar degrees. This increases unemployment ratio for highly educated. Now, as an counterargument one would say that this guy could get a lower status job because for low educated unemployment ratio is lower and thus he has more chances of getting low status job. However, if this guy has a prestige premium then he won't take on a low status job thus staying in the pool of highly educated unemployed people. I think this could be one of the possible stories behind those figures.
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