Monday, October 12, 2009

Religion and the Nobel Winners

With all economists say about markets in which products are bought and sold, you might want to stop and think about all your interactions that are outside of such traditionally conceived markets. The two 2009 Nobel Prize winners in Economics Elinor Ostrom and Oliver Williamson made their careers exploring the boundaries of markets. But do their insights have any bearing on the economics of religion?

Elinor Ostrom is best known for her work on common property resources. Think of the overfishing of lakes or overgrazing of pastures. Her work shows that, although people usually cannot enforce the most efficient consumption of common resources, they often are able to coordinate efforts to do better than what simple theory predicts they would do. Some of her insights into how people work within communities to detect and punish free-riders are directly relevant to our study of how religious groups coordinate their own actions. Groups devise internal ways to enforce good behavior, and they are very creative in doing so. We will talk about religious groups in this way, i.e., as institutions that have developed ingenious ways of solving collective action problems.

Oliver Williamson's work focuses on the boundaries of the firm. His ideas confront why it is that firms even exist, why some exchanges occur at prices, and why some exchanges occur within hierarchies, like boss-to-underling. Firms often must decide which decisions to make via the price mechanism and which to make through hierarchies, and his work argues that the cost of engaging in transactions--the so-called transactions cost--determines, in part, which method is used. Churches face similar problems in deciding how best to structure their congregational activities, which goods to produce themselves, and which to have group members get from outside markets, and so on.

Though I see connections between the Nobel winners' work and the economics of religion, I know of no systematic attempt to tie their work more directly to religion. Maybe the announcement of their prize will help spark such work. I would love to see it.


  1. In the case of Elinor Ostrom, I believe if the common property is in any case a religious facility- be it a synagogue, church, temple or praying place-the attendees (in Elinor's case the resource users) have created a certain amount of rules in order to keep the "religious market" in order and functioning at a high level. Surprisingly the religious faculties function quite well without central authorities and thus with these rules, surprisingly have lead to the spread of religion by the positive success. People have joined religious groups through attraction rather then promotion, for they see the prodigious results and want to be a part of the "successful outcomes". Just as Elinor mentions that the resource users develop sophisticated mechanisms for decision-making and rule enforcement. In saying this, the expected benefits of making rules may be relatively low, however in making the rules, the actual benefits the religious facility gains surpass the anticipated benefits thus making the rule enforcement a positive attribute to religions, by changing the old tastes and preferences activities and changing to up-to-date trends, in other words by catering to current tastes and preferences of people, religion is able to shift the demand curve to the right and successfully increase demand. This is the same point that Elinor makes about challenging conventional wisdom of common property needing central authorities or to be privatized (old tastes/old beliefs) and recognizing that surprisingly the rules enforced by the resource users themselves are reaping better benefits and thus greater returns is a way to increase supply and solve problems in the most cost and time efficent manner.

    Religious groups also do the same in attempting to solve problems in a cost and time effective manner in order to attract more members for their perspective congregations.

  2. The relation between Elinor Ostrom’s work on how groups deal with the issue of common property resources and how religious groups use methods of solving collective action problems is interesting. The problem that both groups face is free-riders, people who enjoy the benefits without paying the cost or contributing. This is a problem because free riders do not pay or contribute for a good/religious good in the expectation that others will. One way in which religious groups enforce good behavior to regulate free riding is by emphasizing the idea of unity. By doing so, hopefully members will choose to contribute instead of choosing to free ride. In an economic approach, because people behave to promote their self-interest, if the idea of unity is a part of a person’s self interest than that person will most likely choose to contribute because the benefits of contributing will outweigh the costs.

  3. Excellent comments Courtney and Kendra. Extra credit worthy, in fact.


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