The economics of religion

It may seem perverse to look for God in supply-and-demand curves, endogenous growth theory and circular-flow diagrams, but that isn’t stopping economists from bringing their own particular way of thinking to religion. I can hear your objections already – they haven’t exactly covered themselves in glory in our current financial meltdown. But I feel that the dismal science can offer some interesting insights. There are now economists like Larry Iaconne who have specialised in investigating the economics of religion. These economists start from a couple of assumptions. They treat religion as a market in which the religions are like firms.  The producers of religion, be they churches mosques, temples or synagogues, have to compete for by seeking followers. Their other premise is that believers are rational actors – people choose which religion they want to belong to at some level.

One of the lessons taught by economics is the beneficial effects of competition. And in the United States there has been a wonderful experiment in a laissez-faire approach to religion.  It is the ultimate religious marketplace in which faiths compete for followers. The United States is of course an anomaly. In general economic development tends to lead to less religiosity. At least that’s the theory.

Economists also like to examine the role of religion in fostering or hindering economic growth. The seminal work about religion and its role in economic growth is Max Weber’s The Protestant Ethic and the Spirit of Capitalism which first came out in 1905. Weber was definitely on to something. The Calvinist mentality about making money was very different to official Catholic doctrine. The Franciscans in particular seemed to abhor money:

A legend from the Franciscan tradition speaks of a person who, when he entered the church of Saint Mary of the Portiuncula to pray, left some money near the cross as an offering. After he had left, one of the Franciscan brothers simply picked it up and threw it on the windowsill. St. Francis found out what the brother had done. The brother seeing that he was found out, hurried to ask .pardon. He cast himself on the ground and asked to be beaten. St Francis rebuked him most severely and commanded him to lift the money with his mouth and place it with his mouth on the ass’ dung that lay outside the walls of the church.

Having said that, the causes of economic growth are complex, and should not be reduced to one factor. Many of the institutions of capitalism were created in renaissance Italy, a Catholic country. Within Europe, Protestant areas did not necessarily grow faster than other areas.Scotland, a centre of Calvinism did less well than England, which had a more moderate brand of Protestantism.

Now the debate is about Islam. According to Wikipedia in 2008, at least $500 billion in assets around the world were managed in accordance with Sharia law, with the sector growing at more than 10% per year. Islamic finance seeks to promote social justice by banning what they call exploitative practices. This results in a set of prohibitions on:

  • charging interest
  • derivatives and options,
  • investments in firms that make pornography or pork

There are some elements of Islam that do not seem conducive to economic growth. The discrimination against women has important economic costs. These were described by David Landes in his book The Wealth and Poverty of Nations:

“To deny women is to deprive a country of labour and talent, but even worse – to undermine the drive to achievement of boys and men. One cannot rear young people in such ways that half of them think themselves superior by biology, without dulling ambition and devaluing accomplishment. …But it cannot compete with other societies that ask performance from the pool of talent.”

And there is the famous prohibition on charging interest. However it should be pointed out that there are ways round it. The Islamic economic record is mixed. There has been lots of economic populism.Iranhas been heavily statist with a large public sector. I think these policies are bad in themselves, but I wouldn’t want to put all the blame on religion.Turkey,Malaysia and Indonesia seem to have done much better.

Economists analyse the sacrifices that religions place on their adherents in terms of dress code, eating habits etc. Religious groups face a free-rider problem. They want followers who are committed to the cause. What may seem extreme to an outsider is exactly what promotes commitment. The Hare Krishna movement demands that its followers shave their heads, wear those rather garish orange robes and chant in the streets. This will weed out those who are not serious. What’s more it is easy to check compliance. The strict rules that church members have to follow actually help and strengthen the ties within the group. This conclusion is a bit depressing as it suggests that religions will tend to extremism. Doubt and uncertainty don’t seem to do well in the religious marketplace.

My final topic is sainthood. This has been the subject of an economic study by Robert J. Barro and Rachel M. McCleary of Harvard. It’s called Saints Marching In, 1590-2009. The Catholic Church has been making saints for centuries. I should make a clarification here. The church would argue that they don’t “make” saints and neither does the pope. The Church, through the ministry of the Bishop of Rome, recognizes the saints that God has made. Anyway the process typically involves two stages:  beatification and canonization. The academics have produced an extensive data set of the “beatifieds” and saints chosen since 1590. Their conclusion is that the last two popes, John Paul II and Benedict XVI are outliers, creating blessed persons at a much higher rate than that of their predecessors. Barro and McCleary see it as a response to competition from Protestantism. And this competition has escalated in recent years. They claim Pope John Paul II beatified as many individuals as all of his predecessors combined.

In 1984 the process was speeded up. Under the old system you had to perform two miracles in order to be beatified. And a further two miracles had to be performed in order to qualify for sainthood. These miracles had to be posthumous. In addition you had to wait 50 years before you could nominate somebody to even be considered as venerable, the first stage in this arduous process. That’s been shortened; it’s now only one miracle for each stage and you have to wait just five years after the death of the individual before you can promote them to be venerable and then beatified. Benedict has continued the streamlining process. This may be due to a huge backlog of “beatifieds” created by his predecessor.

This has been my brief survey of the economics of religion. I realise that the economic study of religion doesn’t provide any insights into the transcendent aspects of religion, but I feel it can shed light on the behavioural aspects.

One Response to The economics of religion

  1. Alberto says:

    The speed in this “santification” rate must take into account the religious persecutions during the 20th century, which shortens the process to be beatified.

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