This paper develops a framework which analyzes how a population's culture affects the decisions of rational profit maximizing firms, while simultaneously exploring how the actions of these firms in turn affect the population's culture.By endogenizing culture as well as the more usual economic variables, it shows how an economically valuablebehavioural trait can be sustained as part of a competitive equilibrium.It is shown that, for given primitives, an economy can be in either a 'good' steady state, in which the valuable cultural trait is present, or a welfare dominated 'bad' one in which the valuable cultural trait disappears.Starting from the 'good' steady state and implementing productivity improvements raises welfare, but if changes are too rapid this steady state will not be reached from the old one.Instead, the unique trajectory is to the bad steady state where welfare is reduced.
