Politics, religion and money

By: José Azel - 28/09/2023

We have all been warned: politics, religion, and money are subjects we should not talk about with our dinner guests. And, for the most part, economists have heeded this advice and have sought to explain economic development without much reference to religion. That is, economists have failed to consider if religious beliefs make us richer or poorer. This is unfortunate because many societies spend significant time and money on religious practices. So, what is the economic impact of our religious practices?

In this explanatory vacuum, professors Rachel M. McCleary and Robert J. Barro explore in their book The Wealth of Religions, how religious beliefs and practices impact productivity and economic growth. They are not concerned with theology or doctrine. Their interest is in the economic costs and benefits of holding certain religious beliefs. This column follows their work.

Due to the sensitivity of the subject, it is perhaps necessary to mention at the outset that this is not an attack on religion by anti-religious authors. Professor Barro is an economist that describes himself as Jewish with more of an ethnic than religious affinity. Professor McCleary, is a philosopher, Methodist and religious, and this columnist is best described as a lapsed Catholic.

Interestingly, there seems to be a two-way interaction between religion and economic growth. Religiousness affects economic outcomes, and economic outcomes influence religiousness. One direction of causality is represented by the secularization hypothesis whereby, “increases in income, education, urbanization, and life expectancy…diminish individual religiousness and the role of religion in governance.” Broadly speaking, economic development leads to a decline in individual religious participation and beliefs when measured by attendance at religious services.

The other direction of causality - how does religion affect economic outcomes? - looks into German sociologist Max Weber’s arguments in his classic work Protestant Ethic and the Spirit of Capitalism (1930 for the English translation). Weber looked for “the influence of certain religious ideas on the development of the economic spirit, or the ethos of an economic system.” For example, Protestantism’s emphasis on individual reading of the Bible is believed to have led to higher literacy rates and thereby promoting economic development. In Weber’s thesis, religious beliefs impact economic development by fostering character traits such as work ethic, honesty, trust, and thrift.

In other words, richer countries are less religious than poor ones, and religiosity falls as countries get richer. One finding sure to please libertarians is that, when a state sponsors a religion the result is poor religious service, leading to a decline in religious participation and beliefs.

What about the economic impact of other religions such as Islam, Judaism, Hinduism or Buddhism? The topic is too vast for a newspaper column, but some scholars have argued, for example, that after the twelfth century Muslim countries began to decline economically following the suppression of independent thinking by religious elites. As the argument goes, Muslims became occupied with rote learning and memorization rather than critical thinking and independent judgement. Since all answers were provided by religious texts and religious authorities, Muslims were not exposed to new ideas and innovation. This is not an intellectual environment conducive to economic development.

In contrast, a standard argument for the economic success of Judaism seeks to explain why Jews became highly educated and specialized in professional fields. The argument emphasizes that persistent discrimination and the need for high portability of Jewish human capital are significant factors in motivating the pursuit of high levels of education. Also, the religious prohibition in Christianity and Islam of certain types of economic activities, for instance money lending for interest, created a demand for this occupational specialization by Jews in financial matters.

On balance, McCleary and Barro’s research shows that the effects of religiosity on economic growth are positive. They speculate that religious beliefs stimulate growth because they help to sustain aspects of individual behavior that enhance productivity such as honesty, thrift, and work ethic. Perhaps now it should be ok to talk about religion with our dinner guests.

«The opinions published herein are the sole responsibility of its author».