Representations of saving and saving behaviour

Paul Webley and Ellen K. Nyhus

(University of Exeter and Agder College Kristiansand)

Draft chapter for C. Roland-Levy, E. Kirchler and C. Gray, Lay concepts of the economy - social representations of economic phenomena.

Version: 27th August 1999

The work for this chapter was carried out when the first author was a research fellow at the International Centre for Economic Research, Turin. He is very grateful for their funding, hospitality and use of their facilities. The second author gratefully acknowledges financial support from a European Community Marie Curie Fellowship (ERB FMBICT 961080). We would also like to thank the research assistants at ICER (Nicoletta Facincani and Ada Ferraro) for their help

1. Introduction.

In this chapter we are principally concerned with two issues: first the descriptive question of how social representations of saving have developed historically and what they currently are, and second, the relationship between widely held beliefs about saving and saving behaviour. It has to be said at the outset that the evidence available is of very variable quality. Though there is plenty of modern research into saving behaviour, primarily by economists but also by psychologists and other social scientists (see Wärneryd, 1999 for a thorough review), there has been very little into the social representations of saving as such. We will therefore draw on work from a variety of sources: the writings of historians, research on saving attitudes and norms, studies of the media representation of saving and cross-cultural studies of values. Many scholars have commented that the theory of social representations is ambiguous and, in particular, that key theoretical terms are not well specified (Jahoda, 1988, is probably the severest critic). We will not enter into this debate (except to note that some criticisms of the theory are misplaced: see Farr, 1993) but do need to be clear what we are talking about. Two of Moscovici’s definitions are useful starting points. The first describes a social representation as “a set of concepts, statements and explanations originating in everyday life in the course of inter-individual communications” (Moscovici, 1981, p. 181). This makes it clear that social representations are shared (they are social and not individual) and primarily a matter of beliefs. The second, frequently cited definition, is that a social representation is “a system of values, ideas and practices with a two fold function, first to establish an order which will enable individuals to orient themselves in their material and social world and to master it; and second to enable communication to take place among the members of a community by providing them with a code for social exchange and a code for naming and classifying unambiguously the various aspects of their world and their individual and group history” (Moscovici, 1973, p. xiii). This makes it clear that social representations also include behaviour (practices) and that an important role for them is to make sense of the environment. It also means that certain questions cannot be posed: as Bergman (1998) says “just as it is impossible to determine which came first - the chicken or the egg - so it is impossible to determine if social representations are at the base of values, ideas of practices or whether the latter three give rise to social representations”. Nonetheless it is possible to look at the links between widely-held beliefs and behaviour, and in the final section of the chapter we try to do just that. We will look first at the historical development of social representations of saving and how saving is seen now by ordinary members of western society. This section is based mainly on the work on cultural historians and social scientists interested in the consumer society. We will then turn our attention to the beliefs about saving held in modern western society by ‘elite groups’ such as economists and marketeers. These can be seen as important in two ways. First the beliefs of these groups are explicit and are more clearly articulated than those of the society to which they belong - they therefore give an insight into what the wider representations might be. Second, the belief of elite groups help to shape the development of society. We’ll then close with a cross- cultural comparison of the relationship between cultural values and national saving rates, which is used to shed some light on the impact of beliefs on behaviour.

2. The historical development of beliefs about saving

Economists usually see “economic man” simply as an effective, powerful and reasonably accurate simplification of human nature (see section 3.1). An alternative view is that the concept of economic man is a product of our culture, is a legitimisation of a particular set of economic practices and in particular a product of the historical process of individualisation. Given the importance of individualism in Western culture it is not surprising that saving and thrift has been widely seen as a virtue, as it enables the individual to be independent of others. Exhortations to work and store away a surplus are common in ancient literatures, both Christian and pagan: we read that “the wise man saves for the future, but the foolish man spends whatever he gets” in Proverbs (21:20) and are advised by the Greek poet Hesiod (n.d./1914) “do not put your work off till tomorrow and the day after, for sluggish worker does not fill his barn, nor one who puts off his work”. In Aesop’s fable “the ant and the grasshopper”, the sensible and frugal ant spends the summer storing up food for the winter whilst the feckless grasshopper spends the summer just singing. When hard times come and the grasshopper is starving, the ant turns her away# . It is perhaps not accidental that La Fontaine (1668-79/1974), writing in the seventeenth century, put this fable first in his collection. In Victorian England, Samuel Smiles, famous for his mid-century best- seller ‘Self-Help’ (perfectly in tune with Aesop, as it based firmly on the notion that “youth must work in order to enjoy”) also wrote a later book on ‘Thrift’, which he saw as the basis of self-help. And when de Mandeville (1714-29/1924) wrote the fable of the bees, in which he argued that thrift was evil as it causes unemployment, he was dealt with severely. But we do not have to rely solely upon extracts from literature to argue that saving has been seen as a virtue for centuries, as we can draw on the systematic work of historians and on the work of social scientists interested in culture and consumption. Two recent historical investigations provide some interesting insights. The impact of the size and uncertainty of income on the social representations of saving and saving behaviour is demonstrated in the careful study by Johnson (1985), while Tucker (1991) shows how social representations can change over time in his analyses of the cultural shift in the USA from thrift to spending. In addition, two books by contemporary observers give insights of what our present beliefs about saving are like. Lunt and Livingstone (1992) have studied consumerism in England, while Schor (1998) has studied the causes and effects of the upscaling spending patterns in the American middle-class. Johnson (1985) studied the saving and spending behaviour of the working-class in Britain in the years 1870 – 1939. He found that the working-class and the middle class had clearly distinct beliefs about how saving should be done. He attributes this to differences between the classes in income and in uncertainty with regards to future income. This meant that the ability of the middle class to prepare for uncertain events was different to that of the working class. In addition, Johnson attributes differences in behaviour to differences in culture. The middle-class observers and promoters of the Smilesian doctrine of independent self-help failed to recognise and understand the effects that the uncertain and strained economic situation had on the financial management of working-class families, as well as the importance of working-class solidarity. In general, working-class people regarded saving as good, but they did not choose the forms of accumulation that yielded the best interest. They preferred forms of saving that had characteristics better suited to their situation. First, they had low and uncertain income streams. They therefore preferred types of saving that did not include large lump-sum payments or saving for some abstract goal. They preferred small weekly deductions from income which would not be missed as much as large lump-sum payments. The most popular form of saving was insurance for sickness, unemployment and old age and life assurance, where small premiums were paid weekly or monthly. Working-class people did not have the means to save enough to provide for such unpredictable incidents themselves, so pooling of risk in insurance organisations was sensible in spite of the very unfavourable terms offered to them. Second, working class people experienced a constant pressure on spending. There were always rent or other expenses that should be paid, and this made long-term saving difficult. A popular form of cash saving was therefore to become a member of some sort of saving club. Saving clubs for holidays and Christmas were the most popular, but coal clubs, goose clubs, church or schooling clothing clubs, boot clubs etc. could also be found. The attractive characteristic of this form of saving was that, in addition to involving small weekly deductions, money was safeguarded until the saving goal was reached. Similar benefits were provided by the popular Co-operative societies. They promoted a form of forced saving as their members had to pay slightly higher prices on food and other household necessities. The members got their savings back once or twice a year in the form of a dividend, and these payments were used for paying large lump-sum expenses such as rent. Large purchases could also be financed by instalment or hire-purchase credit which also implied that a large total sum was paid in a number of small regular instalments with some external control on saving. This form of financing purchases was popular, although the perception of this behaviour was somewhat ambiguous. Debt was associated with shame. Living on next week’s pay and being unable to pay in cash implied a certain lack of respectability. In addition to being tailored to the economic situation of the working-class, the different ways of saving served to provide other social benefits. Insurance premiums, for example, were collected from subscribers’ homes by an insurance agent (usually weekly), and this could give some status to the family visited as it showed neighbours that they could afford to pay the premium. The collectors had first hand information about a household’s economic well-being and would spread this information to other subscribers. Many forms of saving were also focussed on items or events that gave status. Life insurance was important as the benefits were used to finance grand Victorian funerals (life insurance was also called death insurance). These were important social events, where the status of the family of the deceased was assessed. Saving clubs were often used to accumulate money for other status symbols such as Sunday clothes, boots and holidays. Ownership of a status symbol (such as a piano) could be used to impress neighbours. If it was financed by borrowing, the trick was to manage to keep the financing secret while enjoying the admiration or envy of neighbours. The relationship between debt and loss of respectability was sometimes mediated by the type of product bought. Someone who borrowed to buy food lost more respectability than someone who borrowed to buy a luxury good. The fact that someone was allowed to enter into a hire-purchase contract for the sake of buying a luxury item was sometimes also a source of status. Hence, although the working-class did not buy the financial products that gave the highest economic return on investment, they bought the products that maximised security and social status. Contemporary middle-class observers thought that working-class saving was insufficient and evidence of myopia and a failure to delay gratification. The working-class was seen as accepting expensive credit arrangements on saving with a low pay-off because of their lack of self-control. Smiles (in Workman Earnings) directly attributed the situation of the poorer classes to their thoughtlessness and their failure to make provisions for the future. Mrs Bosanquet (in Wages and Housekeeping) maintained that the mental horizon of the poor tended to be limited to a stretch of seven days. Having a higher and more secure income, middle-class people engaged in long-term saving in saving accounts. They accumulated their unspent income so that they did not need to buy insurance. They could invest their money where the returns were high, and thought that this would also be the best way to save for the working-class. Tucker (1991), studying the American beliefs about and attitudes towards saving throughout two centuries, found the same opposing views between middle-class and working-class in the USA. Typically, the middle-class advocated bank saving, while the working-class people preferred insurance. Moreover, Tucker shows how the view of saving as a virtue has changed over time in the American society. In the 18th and 19th century, religion, specifically the Protestant ethic of work and frugality, played a crucial role with respect to controlling luxury spending and extravagance. Americans responded by saving about 15% of their income. In the 20th century, after consumerism became the dominant culture, the personal savings rate dropped by half. In the past two decades, the decrease in the personal savings rate in the US has continued and has dropped from 8% to below zero (Parker, 1999). The attitude in the 19th century was that vice is wrong, saving is right. The virtue of saving was taught in schools and in churches, promoted by politicians, and advocated in contemporary literature (for example in the writings by Benjamin Franklin, "The Way to Wealth", and in books and magazines edited by Sarah Hale, “Mary had a Little Lamb”, "Boston's Ladies' Magazine", "Godey's Lady's Book", "Keeping House or House Keeping", "Boarding Out"). In a period stretching from 1828 to 1878, Sarah Hale, who Tucker describes as being the most important arbiter of feminine opinion at the time, used her magazines to promote the practice of frugality, values that mirrored the traditional moral and wisdom of the half million women who subscribed to Godey’s Lady’s book. She preached self-help ethics and gave advice about the skills every woman should master, such as baking the family’s bread, cooking, needlework, and economising in all possible ways. In addition, the saving banks that were introduced in the first half of the 19th century produced propagandistic literature in which it was argued that the only effectual way of assisting the poor was to encourage the moral habits of industry, economy and sobriety. One of the first banks, the Dunkan’s bank, even had rules that only allowed withdrawal with the permission of the bank directors and fined depositors if they failed to deposit a certain sum each year. Some schools organised “school banks” in order to teach children to save and thereby benefit both the individual and society. This training in saving was supposed to prevent children and worker’s minds from being influenced by the wrong political theories. In the 1920s, however, Americans long-running affair with the virtue of thrift started to fade. Although many had long regarded America as a thriftless nation, the opinion that saving is for the best had been strong and indisputable. This started to change in the 1920s and the concept of thrift was gradually removed from language, textbooks and reference books. The virtue of thrift was no longer preached or encouraged. Female teachers preferred the concept “scientific management of households” to “thrift” and “frugality”. The magazines that succeeded those of Sarah Hale described saving as a serious financial mistake which was dangerous for the community and the nation. Thrift was described as a curse and a vice and it represented the least praiseworthy qualities a man or woman could have. Self-restraint was rejected, while living for the moment was in fashion. Heavy advertising and increased access to credit and instalment buying played a role in this shift towards consumerism. Economic events such as the stock market crash in 1929 and the Great Depression that followed it also reinforced the belief that saving was pointless. Over 5000 banks shut down without repaying their depositors. Finally, Keynes won recognition when he preached that people should spend in order for the nation to reach full employment. The government practised deficit spending, and this practice trickled down. Schor (1998) supports the views of Tucker, that it is spending and not saving that is in fashion in the American Middle class. She describes the development of the competitive acquisition culture as important. At the turn of the century, the rich consumed conspicuously. In the decades immediately following World War II, Americans spent to impress their neighbours, while today the focus of comparison is reference groups selected or imposed by advertising and the media. People no longer compare themselves with neighbours with similar incomes, but with people who are very affluent indeed. Possessions are tightly bound to personal identity, and consumption of certain product categories and brands supports a particular image. The result is an upscaling of consumption and that people feel poorer in spite of increased spending. Schor’s description of the spending motives and financial behaviour of the middle class of the 1990s has in lot in common with that of the working-class described by Johnson and Tucker. Since people consume to keep up with their reference group, they feel a pressure to spend and save less (on average, too little to provide for their own retirement), they finance most purchases by borrowing and credit card spending, and they buy insurance (as they don’t save to provide for unforeseen contingencies). The impression that readers of Schor’s book are left with is that the current time horizon of the American upper middle class is limited to one month. Keeping up this month is more important than keeping up when retired. Lunt & Livingstone (1992) in their book on consumerism in Britain also link individual identity construction with consumption. In their view, people, in constructing and reconstructing their identities, must do so within one of two opposing discourses: one that sees the consumer society as progressive and facilitation (pro credit card) or one that sees the consumer society as regressive and materialism as a dead end (pro saving). They describe social representations in conflict. Multiple interviews with focus groups of mixed ages revealed that the dominant representation was that credit is wrong and saving before buying is right. Still, most of the group members had, and made use of, a credit card, so this raises some doubts about the relationship between social representations and behaviour. One explanation for these findings might be that the social representations of which products and purchases are necessities have changed, but that the social representations of good financial management have remained unaltered Lunt & Livingstone argue that there is a direct link between the growth in material standards and the enormous increase in personal debt. They found, in line with Katona (1975), that it is people with higher incomes or those from middle and higher socio-economic groups who borrow more. Those in debt can be discriminated in terms of their attitudes. Those in debt believe that credit is useful, convenient and part of modern life, accepting debt as a means of satisfying needs and wants. Those not in debt see credit as a form of debt, as shameful, to be avoided and a source of problems. Lunt & Livingstone also report that those in debt tend to experience pleasure in consumption and express their social worth, social relations and social participation through consumption more than those without any debt.

3. The beliefs of elites about saving and savers

3.1. Economists' perception of savers and saving

Economists' models of saving are often very "middle-class", in the sense that they often embody the assumption that people maximise the returns on their investments (interest) and not other factors. Problems with self-control due to high spending pressure on income, have not, with a few notable exceptions, been incorporated in their models. For example, Christmas-club saving is often described as an anomaly (Thaler & Shefrin, 1981) since this type of saving cannot be explained by the dominant models. The standard framework for explaining saving, the life-cycle hypothesis, states that people try to have a smooth utility stream over their life cycle. As utility is difficult to measure, it is usually operationalised as the price paid for the goods consumed or purchased. Hence, in empirical work, it is assumed that the consumer wants to smooth expenditures over his or her remaining life-time. Saving and borrowing are just instruments which enable the consumer to ensure that the consumption/ expenditure-stream is independent of income. Since the consumer also wants to maximise consumption in each of the periods, s/he will search for the saving or borrowing arrangement with the most favourable terms. Some economists also think that saving behaviour may vary between different social classes. For example, Strotz (1956), being interested in the conflict between temptations to spend and saving goals, described lower income groups in the following way. "Spendthriftiness, in the general sense of inconsistent or imprudent planning, is by no means insignificant. It is especially among the lower-income classes, where education and training are commonly blighted, that one would expect to find imprudent behaviour of this sort. In America, lower-income people tend to gorge themselves with food after pay day ; overheat their homes when they have money for a bucket of coal ; are extravagant, going on sprees on pay-day, not budgeting their money, and engaging in heavy instalment buying ; do not keep their children in school , and are freer in the expression of their sexual and aggressive impulses. Their high birth rate is well-known. All these behaviour characteristics can be explained as a failure to cope intelligently with the problem of the intertemporal tussle." (Strotz, 1956, page 179) This is very similar to the views of British middle-class observers referred to by Johnson. Fisher (1930) in his well-known "The Theory of interest", also mentioned the behaviour of certain groups in a rather critical manner, although it is not altogether clear which groups he is referring to: "In the case of primitive races, children, and other uninstructed groups in society, the future is seldom considered in its true proportions" (page 81). He also describes situations in which it will be more rational to spend than to save, for example, bachelor sailors and soldiers who are uncertain about their lifetime might have low incentives to save for the future. Hence, he acknowledges that saving will be linked to a person's economic situation and his beliefs about the future. Keynes (1936) advocated similar views. Nevertheless, in spite of these beliefs in individual differences, it is only recently that economists have started to try to take differences in saving behaviour between different classes or income groups into account in their models and to be more sophisticated in terms of their assumptions of what consumers derive utility from. The more recent versions of the life cycle model of saving and consumption take into account that utility can also be derived from having a buffer against unforeseen events, leaving money to heirs, social status considerations related to the level on consumption and that the social security systems in some countries directly discourage low-income households to save. This development is important since that might lead to models that can explain and predict the behaviour of all income-groups and not only the median income group, which was the weakness of the older versions of the model. Economists' social representations of saving have influenced the models of saving they have developed which in turn have been used by politicians when developing measures for encouraging or discouraging saving and by financial institutions when developing financial products.

3.2 The marketeers views of saving.

Sonuga-Barke and Webley (1993) carried out two studies to look at marketeers views of saving, to explore what metaphors were used and how saving was portrayed. The first is based on an analysis of adverts for building societies in English quality newspapers, the second on the material aimed at young savers (and their parents) by banks and building societies. The sample for the first analysis consisted of all building society adverts appearing in three quality papers (The Times, The Guardian and The Daily Telegraph) and their associated Sunday papers for one month in 1985. There were 61 unique adverts from 37 separate building societies. What is striking about these adverts is that they place most emphasis on the interest rates offered by the account. So, for example, one advert took up two half pages and simply stated, in letters 27 cm high “8.75%”, with a subtext, in much smaller letters “you only get the extra if you move to the Leicester”. Similarly the Skipton building society advert says “9.7% net. THE BEST ON THE MARKET” and the Birmingham and Bridgewater claims that it is “Definitely first rate”. This material thus embodies a view of savers as rational individuals making an informed choice between the account being advertised and the competition. Though most emphasis is placed on the rate of interest on offer, other features of accounts are mentioned, such as instant access to money and cheque book facilities. There is no moral tone to the adverts: the names of the accounts suggest indestructible value (“Silver link”, “diamond shares” and, cleverest of all “Liquid Gold”) and the metaphors in the graphics convey the idea of security (a pyramid) and saving for a rainy day (clouds and a rainbow). The material aimed at children is rather more interesting. Sonuga-Barke and Webley opened accounts for children at the four main banks (so that the promotional material could be looked at) and leaflets on special children’s accounts obtained from 11 building societies. This very varied material suggests that marketeers view children’s saving as a response like any other, that can be reinforced if appropriately rewarded. Saving was often presented as a habit that could be fostered by extra incentives (e.g. “Young NatWest Piggy Bankers are encouraged to save by a sequence of rewards in the form of beautifully crafted ceramic piggy banks”) or through what was sometimes described as the “prize” for saving, namely interest. There is no explicit mention of the ‘moral’ value of saving though there are shades of Samuel Smiles in some of the leaflets. The Halifax (then the world’s largest building society) mentions in its membership pack that the aim is to foster the “learning of an important lesson which will be of value for the rest of”. These adverts come from one country and from one particular period. The 1980s were the heyday of building societies in the UK: after a decade of demutualisation and conversion into banks there are few building societies left now. So we have supplemented Sonuga-Barke and Webley's analysis with a small scale study of current adverts in Norwegian and Italian newspapers. We sampled quality papers (Aftenposten, La Stampa) in each country published in one month (May 1999). Since advertisers tend to use the same advertisement in different papers, there is no problem in relying on one source. This gave us 20 unique adverts in Norway and six unique adverts in Italy. The Italian material certainly confirms the view that marketeers simply see adults as making a rational choice and assessing the various characteristics of accounts on offer, though they do have a somewhat different flavour to the English advertisements. Thus the adverts just portray the features that the accounts offer (competitive interest rates, bank card, telephone banking, unlimited free transactions) though these now seem to extend beyond the traditional range. So many banks offer discounts for restaurants, hotels and travel and one ('Genius', offered by UniCredito Italiano) supplies an emergency medical card with all ones medical and personal details. The visual material for this account is of the wise consumer, with his superb vision choosing 'Genius', for the others it is mostly a matter of conveying the features of the accounts graphically. So for example Citibank, which claims that ‘we give money life’, backs this up with a picture of paper money being decorated (with glasses and a beard being drawn on the face of the worthy personage depicted on the banknote). The Norwegian paper included many more adverts on loans and mortgages (16) than on saving (4), probably reflecting the falling interest rates in the period of our data collection. The adverts offering loans were typically small and contained a minimum of text: the type of loan (car loan, accommodation), a promise that the terms would be among the best offered, and the phone number of the financial institution offering the loan. These adverts were repeated frequently. For example, the adverts on car loans could be repeated up to three times on the same page (also containing adverts for new and second-hand cars). Similarly, the adverts promoting mortgages were in most cases found among the adverts for second-hand houses. The loan adverts clearly show that consumers are assumed to make the borrowing decision in connection with a purchasing decision and that they are rational and search for the cheapest available offer. Only one of the loan adverts was relatively large and with a picture (a father hugging his child), and this advert promoted a credit card. The headline of the advert was "There are still moments when you can do without Eurocard gold... luckily". The word "credit" was not used in the text; the card was called a "pay card" or just "card". The adverts for saving were larger and with much more text. Only one advert promoted the traditional savings account and high interest rates, but this was combined with promoting Norway's largest Internet bank (as well as their other financial products). Two adverts concerned saving in mutual funds. One was targeted towards people buying pension insurance, and the purpose of the advert was to persuade them to buy shares in mutual funds since that might give a better payoff and ensure that savings will be kept within the family. The other advert promoted the funds of Fidelity Investments. The text was designed so as to build potential investors' trust and to overcome any risk aversion. They did not promise anything in terms of returns on investments, which indicates a belief that trust might play a more important role in this market than the return or that high returns are so obvious that it is not necessary to mention them. The fourth and largest advert concerned a combined offer for parents and their children from an insurance company. The advert included a big photo of a happy toddler eating his porridge on his own. The insurance company offered saving in funds and a savings account combined with insurance for children. The word "secure" was mentioned frequently, but the advert contained no information about interest rates of costs involved. The text "a good start in life should come early", puts a moral pressure on parents who are not engaged in saving for their children. Financial institutions are, however, not the only suppliers of financial services. Credit (instalment) has become easily accessible since it is offered in shops and by mail-order companies. These credit arrangements are seldom the best in the market. The shop-owner offering credit is well aware that it is the desired product that is important, and when customers feel a strong need to buy (for example if the old washing machine has broken down or when Christmas presents have to be purchased), they will accept the terms of the credit even when they are very unfavourable. Combining credit decisions with buying decisions has been shown to be an effective way of selling credit, especially when people’s focus is on the monthly payments that have to be made and not the interest rate charged. These marketeers are very well aware that the standard rational models of consumer choice do not predict the behaviour of all people. The different customer cards also offer some kind of saving which resembles the saving done through the Co-operative societies. These cards are related to one or several different shops co- operating and they involve collection of points when products are bought in the shops. The points can later be used for buying products or for being entitled to discounts on products. For example, the Domino-card offered in Norway is promoted in the following way: "Using the Domino-card is a simple and everyday way of saving small money that you otherwise would loose. If you use the card regularly when you do your shopping anyway, you can, before you know it, use the points to buy a Domino product you otherwise would have to do without." These cards are popular, since customers actually loose money by not having them. The price of products bought is the same for card-holders and non-cardholders. The companies obtain customer loyalty and consumer data by offering this special kind of saving that seems to be popular in all income-groups.

4. The impact of beliefs about saving and thrift on saving behaviour

Implicit in all we have written in this chapter so far is the idea that beliefs about saving matter. Tucker, for example, clearly tries to link the decline in the widespread belief in the thrift ethic to the decline in the rate of saving in the U.S. In this section we use data on cross-national differences in saving rates and data on values, to see if those countries valuing thrift more do actually have higher saving rates. There are, in fact, very large differences in savings rates between countries that are difficult to explain using conventional economic theory (Poterba, 1994, Edwards, 1995). Gross domestic savings rates in 1980, for example, ranged from 2.1 % in Bangladesh to 37% in Singapore. Even if we just consider more affluent countries the range is huge: from a low of 7.8% for the United States to a high of 33.2% in Luxembourg (Carroll, Rhee & Rhee, 1998). Obviously some of these differentials can be explained in terms of economic differences between countries (growth rates, social security systems, institutions, tax incentives etc); the low rate in Bangladesh is related to the country’s extreme poverty and the high rate in Singapore is partly a result of the legal requirement for people to save for their pensions. But because it has proved so difficult to explain the differences in economic terms, some economists have considered the possibility that differences in saving rates are partly the result of cultural factors. To explore this, Carroll, Rhee and Rhee (1994) investigated the saving behaviour of immigrants to Canada but found that there were no differences between immigrants from different countries. More recently, Carroll, Rhee and Rhee (1998), replicated this study using a much bigger and better data set from the USA. They did find that the savings rates of immigrants from different countries were different but not in the way expected: it was not the case that those immigrants from countries with very high saving rates, (e.g. Japan, Korea) and therefore presumably socialised to value thrift, had higher saving rates than the other immigrants. By far the highest saving rates were found among the Italian-Americans. Perhaps the most systematic investigations of the ‘culture’ variable are cross-national studies of values. There have been two streams of research, that of Hofstede (1980, 1991) and that of Schwartz (1992, 1994): each will be described in turn. Hofstede’s work on cross-national differences used an existing very large data bank of employee surveys dating from 1967-73 in the IBM Corporation. This revealed four dimensions of national value differences: large v small power distance, strong v weak uncertainty avoidance, “ the degree to which the members of a society feel uncomfortable with uncertainty and ambiguity - which leads them to support beliefs promising certainty, individualism v collectivism and masculinity v femininity. Thus Italy is middling on power distance, moderately high on uncertainty avoidance, and high on individualism and masculinity, whilst Norway, by contrast, is very low on masculinity and low on power distance, reflecting its egalitarian tradition. In his later book (1991) Hofstede adds a fifth dimension, drawing on the work of the Chinese Culture connection (1987). The latter had been concerned by the possibility that Hofstede’s dimensions might themselves be culture bound and so carried out a cross-national survey of values which reflected the themes and concerns of Chinese culture. One of their dimensions, “Confucian work dynamism”, did not correlate with Hofstede’s dimension and so he added it to his list, and renamed it “long v short term orientation”. It covers thrift, persistence, having a sense of shame, and ordering relationships - on the negative pole are respect for tradition and protecting one’s face. This value looks as though it taps beliefs relevant to saving, as, to a certain extent, does value 2 (uncertainty avoidance). Schwartz (1992, 1994) has developed his own measures of values and has taken a different approach to Hofstede. In particular he has taken great care that the items (measures of values) that he used are equivalent in meaning across cultures. His data were gathered during 1988-1992 from 86 samples from 41 cultural groups. He identifies seven value types (though these are in a two- dimensional space) and provides scores for each culture. The types are conservatism, intellectual autonomy - emphasises autonomy of thought, affective autonomy - emphasis on stimulation and hedonism, hierarchy, mastery, egalitarian commitment and harmony (which emphasises harmony with nature, non-exploitation of people and resources. These are arranged in a two-dimensional space with conservatism at the opposite end of the pole from affective and intellectual autonomy, and mastery and hierarchy at the opposite of harmony (the two dimensions are labelled status quo v openness to change and self-enhancement v self-transcendence) We used the scores for each country provided by Hofstede and Schwartz and looked at the relationship between scores on these dimensions and the mean gross domestic savings rates for 1980-1983. These figures were taken from the World Bank data and correlate very highly (over 0.8) with the figures used for aggregate saving by Carroll et al. The number of cases is very small (19 in the case of the Confucian work dynamism). The analysis revealed that Confucian work dynamism or long v short term orientation was significantly related to saving rates (r = .55, p<.02, N=18) and the growth in GDP (r=.62, p<.01, N=19) whilst the other Hofstede values were not (see figure 1) The Schwartz dimension of status-quo v openness to change was significantly related to

Figure 1

Figure 1. Note that the points labelled D and NZ include Germany (D), New Zealand (NZ) and Australia (unlabelled). NL = The Netherlands, S = Sweden

growth rates (r=.55, p<.01, N=22), but not to saving rates. The correlation between Confucian work dynamism and saving rates was not significant when the relationship with growth rates was partialed out (partial r =.28, p=n.s.) What can we make of these findings? It would not be reasonable, with such a small data set, to expect to be able to show that cultural values add to our ability to predict savings rates. But they are associated with savings rates in a way that makes sense. There are also a number of problems with the data on national savings rates which mean that this exploratory study should be treated with caution. Perhaps the most important of these is that the measure of saving used here (and in most studies) is of aggregate gross saving. It would make more sense to distinguish private and government saving (as does Edwards, 1995) since cultural values are more likely to be an important determinant of the former (though in democratic states if the population values saving, they may elect a government that promise to save). The association between valuing thrift (part of the Confucian work dynamism dimension) and saving rates may be regarded as simply a rational adaptation to the economic system operating in a particular country. We prefer, however, to see this as some evidence that widely held values and beliefs have an impact on aggregate behaviour.

5. Conclusions

The evidence we have considered in this chapter, though very varied in its type, its focus and its quality, suggests that saving and thrift have traditionally been valued greatly and have been seen as positive, indeed as highly moral. This view of saving as part of a responsible approach to the world is still current, and is still being acquired by children (Sonuga-Barke and Webley, 1993) but actually runs counter to many people's current experience. Saving rates have dropped across the western world and borrowing (buying on credit), rather than saving up to buy things is now the norm. Although the evidence, imperfect though it is, does suggest that there is a relationship between widely held economic beliefs and saving, it is not clear which is cause and which is effect. Whilst we believe that cultural values and beliefs have an impact on economic behaviour, it is equally plausible that behaviours such as saving and getting into debt ‘drag’ beliefs along with them. For individuals this certainly appears to be the case (Webley & Nyhus, 1999). If so, it may well be that attitudes and beliefs may be much less important than economic incentives to save. We also do not really know the extent to which widespread beliefs are shared. Within a given culture there may be two or more social representations (as seems to have been the case in different classes in the Victorian England). Individual saving is now a matter of public concern and public policy (so knowledge of social representations of saving should have some policy implications). Many western governments and social commentators are worried about the inadequacy of pension provisions (as pay-as-you-go systems which are not financially viable in the long term are widespread in Europe) and are concerned that people are not saving enough for their old age (though Attanasio and Banks, 1998, have cast some doubt on this diagnosis). So Governments are now getting into the business of encouraging individual saving. But the historical evidence suggests that people do not generally respond to governments attempts to stimulate saving. The only historical periods where such attempts have worked are when a nation is at war. In the US and in the UK World War II was paid for by exceptionally high tax rates and government borrowing, where people were encouraged to save for patriotic reasons. One reason why policy measures haven't worked may be that they are based on the assumption that the whole population will respond in the same manner. Tucker and Johnson have both shown that historically different segments of the population had different social representations of saving and Wärneryd (1999) has demonstrated that different social groups have different saving goals. It would not therefore be surprising if they were to respond differently to economic incentives. What ever else may be the case, it is clear that any attempts to change people's saving behaviours have to be based on a clear understanding of their motives and needs. The study of social representations of saving is still in its infancy, which is why we have gathered a rag-bag of evidence here. We suspect that we may already have gone further than is really justified by the evidence: to make more progress we now need some high quality empirical studies.

# It is interesting that in a modern version of this fable, ‘Frederick’ by Lionni (1971), the eponymous mouse, who spends his time in the summer apparently just day dreaming whilst the other mice prepare for winter, is the hero of the tale. When they get bored of their winter diet he is able to tell them fabulous stories that he thought of during the summer

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