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The Economic Consequences of Legal Behavior

Many thriving societies, such as Germany and Japan, adhere closely to the letter of the law. However, allowing for a certain degree of latitude for individual interpretation, as the United States has done throughout its history, can foster creativity, enhance efficiency, and stimulate economic growth.

NEW YORK – The way people navigate traffic can tell us a lot about their respective cultures. Recently, while walking to my office in midtown Manhattan, I stopped at a red light when an elderly woman with a walking stick caught my attention as she cautiously looked both left and right. When she saw that no car was close enough to hit her – assuming they adhered to New York’s speed-limit laws – she gave me a puzzled look and crossed the street. I must admit, I felt a bit foolish.

Such an incident would be unthinkable in Japan. Years ago, on the first night of a weeklong visit to Tokyo, my young, jet-lagged children, who had lived only in India and the United States, were amazed by the law-abiding Japanese. Peering out of our apartment window at midnight, they observed a man standing alone at a crosswalk. Even with no cars in sight, he waited patiently for the light to turn green.

While these normative differences may seem trivial, societal attitudes toward the law can significantly affect a country’s economic performance. Whereas the New Yorker’s actions could be interpreted as aligning with the spirit of the law, the Tokyo pedestrian adhered to its letter.