Thursday, October 15, 2009

Book Club - God is Back #2

In chapters 1-4 of God is Back, the authors offer an explanation for why religion is so different in the United States than in Europe. One of the biggest factors they cite is the American First Amendment. In the authors' words:
[The First Amendment] created tolerance in its fullest sense: not just the top-down tolerance involved in allowing dissent but the bottom-up tolerance that recognizes that individuals have a right to choose their own religious opinions. And it introduced competition: churches had to get people in through the door. (P. 62)
Why did this make lead to religious vitality in the U.S. while religiosity declined in Europe?
Adam Smith gave the best answer to this question more than two centuries ago in The Wealth of Nations: a free market in religion forces clergy to compete for market share. (P. 64)
By drawing lines between churches and the state, religion was actually, and perhaps surprisingly, strengthened. This is less surprising if we imagine that government, should it intrude into churches, would undermine churches' innovation in the face of competition, just as government intrusions into other markets could undermine innovation. In fact, religion might be one of the best examples of this.

Government involvement in religious markets can be justified by arguments similar to those used to justify other government interventions. For example, if religion is a public good that is under-supplied in open markets, then government intervention would be warranted according to standard economic theory. The fact that religion thrives in places like the U.S. where it is not provided by government raises questions. Is there something about religion that makes it different from other goods that we believe ought to be supplied by government? What exactly makes it different? What are the economics behind any difference?


  1. I think religion is different from many other kinds of goods because its utility or service that it is providing is not the same for all people. Depending on the individual, the service could be seen differently, or for an atheist it could have no service or benefit at all. In general, goods all hold to the economic understanding of costs and benefits, but for some religion may have no benefit or utility. Also, the costs and benefits for religion are not straight forward, but rely on the individual's value it puts on that religion, if there is one at all. If the government were to supply us with religion, it would not be possible to offer every kind of religion, since there are new religons formed all the time, or variations from already existing religions.
    -Heather S.

  2. Michael Chan (14741172)October 17, 2009 at 2:26 PM

    Catholicism in the 1500's tried to turn itself into a marketable good and sold indulgences in order to raise money to build St. Peter's Basilica. Indulgences in Catholic theology is the full or partial reduction of punishment due for sins. Buyers would be absolved of all sins and were granted salvation.

    Johann Tetzel was hired by The Pope basically to create a marketing campaign to sell indulgences around Europe. He even came up with one of history's first product slogans: "As soon as a coin in the coffer rings, a soul from purgatory springs".

    Not only were indulgences being sold, but in Rome itself, priests would charge entry into temples and even confessions. These events basically resulted in the Protestant Reformation, led by Martin Luther. He was appalled by the flow of money The Church was producing, and saw it as not only those practices were against God's will, but unethical in general.

    One of the reasons why America decided to seperate church from state during the nation's early formation was because they did not want to make the same mistake again. Most of the founding fathers of the US were either Protestant or anti-clerical and opposed an organized religion/government state. The Roman Catholic Church basically charged for salvation, and Martin Luther knew that the only way to receive salvation was by believing in God without any materialistic influence.

    Religious goods such as the promise of salvation cannot be taxed or sold. It goes against the teachings of those religions. From an economic standpoint, salvation is a very inelastic good. It can be compared to gasoline for your car. It is essential to get from point A to point B, no matter what the cost. In the case of salvation, you need it to enter Heaven. By placing a dollar value on salvation, this religious good that ought to be paid with spiritual credit was then turned into an economic good paid with financial credit.

  3. Michael Chan (14741172)October 17, 2009 at 2:34 PM

    Also, the Roman Catholic Church was, by law, the only business in town that was given the right to sell its product. Given that the Church was a monopoly, it could then charge whatever price it wanted, knowing that the goods it offered were inelastic and always in high demand.

  4. The sole reason for the separation of church and state in the U.S's early years is the fact that in the end it put a hold on Great Britain, because instead of the nation policing its own territory, they had the church basically being the police.

    If religion is supplied by the government only, then there is a lack of competition basically acting as a monopoly, the lack of choice for consumers could also be a hindering effect on religion. Just the basic fact that since there is no freedom of choice makes consumers less interested in the product almost in a logical sense which in turn would weaken religiosity.

    However, just the basic notion that there is a 'freedom of choice' when it comes to religion creates competitive markets. It is as if in the United States, religion falls in (what we call in economics) perfect competition. Perfect compeition would make the costs of religion lower than if it were imposed in a church controlled state. This in turn, gives people an incentive to believe in anything they desire which strengthens religion as well.

  5. Religion brings certain things to the table that other economic goods cannot. For instance, statistics have shown that religion has the potential to increase our well-being in material ways as well as spiritual ways. Many American Evangelicals are, in fact, well-educated and well off. "Faith has become a lifestyle coach for them" and a very valuable good. Allowing the government to supply religion would give the government control over our very own potential to prosper. And in turn, this would take away from the free market of religion and reduce choice and competition in that market (the very two things that helped religion flourish in the first place).

    - Andrew Sherwin

  6. In the same way that the first amendment created the separation of the church and state it also served to revive religion and to further strengthen its beliefs.

    The downfall of religion in Europe was greatly due to the very fact that it was very difficult to differentiate the State from religion. The social structure of many European countries was that of a monarchy in which a divine ruler was the link between the people and god, in order to legitimize and sell this belief the clergy must have recognized and promoted this idea. So, the state relied on the clergy to legitimize its ideas on wars, social structure, and politics and the clergy of the church relied on the state to constrict the market to only consist of itself. In a way the downfall of the church state in European nations such as France and Germany was in part due to the Principal Agent problem in which the church/state, the principal, had ideas and goals which greatly differed from the agent, the people who it relied upon for financial support and the execution of its ideas and goals, who no longer believed in the ideas nor the goals of the church and state.

    In the United States the separation of the church and state served to open the markets to other religions and prevented people from just becoming non-believers rather than simply converting to another set of beliefs that more closely fit into their lives (provided more substitutes). The ability of one to choose their religion also produced an atmosphere of very vocal followers, and when combined with the endowment effect created by the fact that followers chose their religion rather than it being forced upon them by the state created a very loyal group followers who felt that losing their faith was now much more costly and thus more heavily promoted their own. Thus the opening of the religious market reduced the concentration of market power created by European monarchies in the form of requiring the support of state sponsored religion, and decreased the large gap between the bargaining power of its citizens and the supplier of the religious goods. These changes in American views and laws regarding religion more closely satisfied the criterion for allocative efficiency in the market, where consumer and producer surplus are maximized.

    The difference between religious goods and other goods often regarded as public goods is the degree to which they benefit the general population. Goods such as clean water or basic infrastructure benefit the population as a whole, the use of the roads, the use of sewage system, or the use of fast internet service as in the case of Finland, all benefit the population as a whole regardless of the number of freeloaders. In the case of religion many view the intervention of the state on the religious market in the same way that they observe the government’s auction of private contracts to the highest bidder, in which the church with the highest amount of campaign contributions benefits most from its government aid. The old view of Europe will drastically cause people to overweigh the view against the state providing religious goods, as the effects of framing (proposed by prospect theory) are much more pronounced when it relates to religion as opposed to clean water or the creation roads.

  7. Heather, I disagree with one of you points but agree with another. People vary in how much they demand just about any good, not just religion. But you're point about government being able to provide that wide range of services is a good one. Extra credit!

    Michael, Your example is an intriguing one. If one church dominates the area, then the case for using government to subsidize religion has more merit than otherwise, though it would still be problematic. But remember that the First Amendment at first only applied to the federal government. Most states had official state churches at the time, so there was not yet a clear sense in America that complete separation was best. Your claim about promises of salvation not being bought or sold depends entirely on the teachings of the religious group. There is nothing to prevent one group from trying to sell such things.

    Ahmed, Interesting comments, but I think you are missing something. You can actually observe very religious behavior in highly regulated places, such as in many Islamic states today. Why does choice imply more religiosity in one area while a lack of choice implies less religiosity in another area?

    Andrew, I'm curious to see the statistics you mention. I think it is hard to disentangle the different factors that drive prosperity.

    Ramiro, I like your point about how people agree more about how clean water benefits the public than religion. People will disagree about which religion is best. Extra credit! But I don't understand your reference to framing and prospect theory. What is the connection?

  8. The First Amendment led to religious vitality in the U.S. because it changed the "economy for religion" from a monopoly to laissez-faire. And we have seen through history that government implementing a "hands-off" policy worked better than when the market was controlled. The same theory applies to religion. When the church and state is separated, religious bodies must rely on using thier own resources and abilities to survive. Thus, they take more action to protect their religion. The value of their religion rises when the national religious population become more diverse. If religion is seen as a public good, the churches, temples, and mosques are seen as the "producers" and they compete for "consumers" by fighting for members from the secular society. I think that religion is different from other goods that we believe ought to be supplied by government because the producers would make great sacrifices for religion to gain consumers that producers of other goods wouldn't do. We see churches send people to go door-to-door and make many missionary trips throughout the year to spread God's word. THey feel like they are making modest sacrifices for a great cause like how kamikazes sacrificed themselves. There are not many goods like religion that produce as great of a reward as going to heaven. The religious market also prospers because as people have less time to attend church, they often end up spending more money on religion. They would buy small statues of Mary or donate more to the church when they do attend to atone for spending less time on their religion.

    -Christine Liao (50551814)

  9. Professor,

    My reference to the framing effects on religious choices in terms of prospect theory was that it is very easy to frame the state sponsoring of religion as a loss vs. try to frame clean water as a loss. Prospect theory says that gains and losses are weighed differently, where we are risk averse when it comes to gains but risk loving when it comes to losses. The framing of religion as a public good in a negative way will cause people to change their opinions about it and choose to take a gamble and risk the loss. Even if it were to benefit the population as a whole such as in getting a tax break for paying a church membership, those who do not participate in church activities or simply do not believe will view something like this as a loss, as in failing to get a tax break even though it is in fact not necessarily a loss as you did not pay a membership. But of course there are other reasons such as a candidate favoring his church and such which also make people weary of that choice.

    The other thing is economically why people choose to follow religion even though there is no empirical evidence to back the claims it makes? Basic economics says, “Well the benefits exceed the costs”, but how do we arrive at that conclusion? If we feel losses more heavily than we do gains then we can start to explain why the benefits are greater than the cost. If the potential loss of one’s soul which is heavily marketed by some very demanding religions is felt more heavily than the potential gain of one’s freedom to participate in acts such as drinking, gambling, dancing, etc. then that explains why people choose religion, not because of it gains but because of the potential loss from avoiding it. Therefore it influences people to take the gamble where everything that it taught and preached could be wrong but with a probability that it is true.

  10. Christine, I'm curious about your proposed idea that as people have less time to attend church then then donate more money. I have heard this proposed before but am not sure of the evidence on this. There is some evidence of the opposite, i.e., that people who attend more often donate more as well.

    Ramiro, This is an interesting application of prospect theory. I'm not sure I see how this framing is to go society-wide.

  11. The First Amendment was the founders' gift to God because it allowed
    people to practice whatever religion they preferred and it also stated
    that they wouldn't base laws and decisions off of religion. This makes
    sense that it was a gift to God because it allowed him to be a part of
    government. I think religion is different then goods we think must be
    supplied by government because it is not something that is necessarily
    universal and since people have different views it is better that
    government does not intervene. And like stated in the blog it does definitely create more strength in religion due to government not

  12. I think it is interesting how alike and yet how different Bush and
    Blair were. I also think it was hypocritical that Blair tried so hard to
    deny his faith yet after he left office he started his Faith Foundation, I
    think it is great that he does have a foundation however, to deny it and
    dismiss it for so long is hypocritical. Bush was very upfront with his
    faith which is admirable because he didn't seem to care if the people
    agreed or not and that is something to look up to, being able to be who
    you are. You do have to take into account that European beliefs of
    religion in politics is very different from American which definitely explains the differences between these two icons. This book really makes you think, and I find it very interesting to read!

  13. Jenna, Yes, I think that religion's place in European politics made is more difficult for Blair to be open about his religious beliefs.

  14. I think for one thing religion, in the American sense, is believed to be a possitive industry. This makes it very different from other industries. We feel that governemt intervention into other industries is acceptable and almost neccessary to prevent the development of monopolies and destructive bussiness practices. In contrast, when governments choose the religion it becomes a monopoly, limiting its innovation. The first amendment is acting as other regulations on busiiness and industries act -- to maintain and support the free market. In a way by staying out of religion the government is regulating religion.

  15. The first amendment, the freedom, set up the free market, it was an inovation, introducing competition and choice in the US. It allowed the US more options than other countries; allowed (in the future of course) websites to be made with freedom to publish what they want and believe without persecution.
    Religion became a public good that didn't need to be equally agreed upon by each and every person, nor by the government.
    People's religious capital is increased when they are granted the choice to participate in the religion of their choice and will therefore put more time into it.
    "If you don't stand for something you will fall for anything." they might as well speak there mind and for things that they want to do.

    Alexis Waggoner

  16. Jana, Let me explore your idea a little bit more. Government involvement could potentially disrupt innovation in just about any market in which they intervene. That would be true for religion or another market. Do you think that they would be suppressing innovation more in a religious market than another market?

    Alexis, We don't normally describe religious capital in the way you mention. Capital is not increased by virtue of having more choices. Instead capital results from investment.


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