The Economics of Religion

The clergy of every established church constitute a great incorporation. They can act in concert, and pursue their interest upon one plan, and with one spirit as much as if they were under the direction of one man; and they are frequently, too, under such direction. Their interest as an incorporated body is never the same with that of the sovereign, and is sometimes directly opposite to it. Their great interest is to maintain their authority with the people, and this authority depends upon the supposed certainty and importance of the whole doctrine which they inculcate, and upon the supposed necessity of adopting every part of it with the most implicit faith, in order to avoid eternal misery. Should the sovereign have the imprudence to appear either to deride, or doubt himself of the most trifling part of their doctrine, or from humanity, attempt to protect those who did either the one or the other, the punctilious honour of a clergy, who have no sort of dependency upon him, is immediately provoked to proscribe him as a profane person, and to employ all the terrors of religion, in order to oblige the people to transfer their allegiance to some more orthodox and obedient prince. Should he oppose any of their pretensions or usurpations, the danger is equally great. The princes who have dared in this manner to rebel against the church, over and above this crime of rebellion, have generally been charged, too, with the additional crime of heresy, notwithstanding their solemn protestations of their faith, and humble submission to every tenet which she thought proper to prescribe to them. But the authority of religion is superior to every other authority. The fears which it suggests conquer all other fears. When the authorized teachers of religion propagate through the great body of the people, doctrines subversive of the authority of the sovereign, it is by violence only, or by the force of a standing army, that he can maintain his authority. Even a standing army cannot in this case give him any lasting security; because if the soldiers are not foreigners, which can seldom be the case, but drawn from the great body of the people, which must almost always be the case, they are likely to be soon corrupted by those very doctrines.

This lengthy passage from Adam Smith's famous 1776 The Wealth of Nations talks about state-church relations. But it does so in the overall context of Smith's analysis of businesses and people engaged in commerce, who act for their own gain but, under conditions of free competition, are "led by an invisible hand" to promote the best interests of society generally. Meanwhile, Smith noted, "I have never known much good done by those who affected to trade for the public good."

Smith clearly thought of religious organizations and especially clergy as also being engaged in a kind of business or, at least, playing a similar role in society. In fact, Smith specifically describes the organized clergy as "a great incorporation." And his analysis of state-church relations parallels that between the political powers and those engaged in worldly commerce. That is, he saw that religious groups vie for the favor of the government, and to some extent the government seeks the support of the clergy. But the various combinations are fraught with danger, one of which is that established churches become vulnerable to upstarts, just as commercial monopolies become vulnerable to the appearance of new and nimbler competitors. The best arrangement, Smith thought, was a multitude of sects competing among themselves with none being powerful enough to want to risk causing too much trouble. Adam Smith was as opposed to church-state complicity as he was to what are now euphemistically called "public-private partnerships." And for much the same reasons. So, here, in the late 18th Century, was already, in embryonic form, what has developed — mostly over only the last 50 years or so — into what is now known as religious economics.

Religious economics applies the tools of economics, and especially rational choice theory, to the study of religion. And I know what you're thinking now: what in the world does "rational choice" have to do with religion? Well, rational choice has to do not so much with the idea that it is rational to believe in absurd things but with the idea that, given appetites for such beliefs, people make rational choices as to how to satisfy those appetites. That is, people seek to maximize utility.

What, after all, is so rational about wanting a car that has certain lines or design features that give it a certain appearance and "sex appeal?" It's a car for goodness sake! People should only care about the price, the gas mileage, the cargo space and seating, the safety features, and, well, OK, maybe the comfort of the ride. But people care about many more things than this and the car industry knows it and behaves accordingly. It's the same way when it comes to religion.

Now one interesting thing about the production of goods and services is that economists see that the coordinated actions of many people can be organized in different ways. Two broad groups are referred to as the club and the firm. The club is what it sounds like: a kind of closed group that produces pretty much exclusively for its own consumption. It does this by imposing costs on its members that weed out the "free riders" who would otherwise come in and take without contributing. So, a sect that required that you turn over all of your possessions and move to Guyana like Jim Jones' Peoples Temple would be, in economic terms, a club, and, of course, a rather extreme one at that. A firm, on the other hand, is more like a company or business that produces goods and services for public consumption. Firms usually manage the "free rider" problem by keeping expenses down and trying to limit their losses to goods and services where the marginal cost of production is low or zero. So, for example, a religious service in a huge mega-church costs no more when performed for 1001 people than for 1000 people, especially when the building has 2000 seats.

You may have noticed that this makes sense of the perennial argument about what distinguishes a cult from a religion. Cults make use of the club model of producing religious goods and services whereas "real religions" are organized like firms. Many religions begin as cults, just as some businesses do: Mrs. Fields was baking cookies for her family before she opened her first store in 1977. This very church, the NTCOF, was started up after its founders studied atheist groups operated as clubs charging dues and that often expected their members to participate in picketing and other activism.

Religion is usually classified as a "credence good" by those who study the economics of religion Credence goods are products and services that people consume on the basis of promises that they may not be able to verify. So, for example, when a radio ad says that a certain vitamin supplement can prevent cancer and people buy the product and take it, they can't really tell if its preventing cancer or not. For all they know it might be causing cancer! Used cars are frequently cited as an example of credence goods, since it is often not possible to tell if such cars are worth what is being asked for them. And this is another common feature of credence goods: buyers tend to pay too much for them and sellers have an incentive to cheat.

Bell CurveThe promise of a religion to get you into heaven and keep you out of hell is probably the ultimate credence good. And the abuses of the Catholic Church in selling this sort of product, which took the form of the sale of indulgences — years off of purgatory for yourself and your dead relatives — ultimately contributed to bringing about the Reformation and European religious wars in which millions died. Getting your prayers answered is another credence good: you pray and things work out, but how do you know they wouldn't have worked out anyway? And if things don't work out, maybe you just didn't do it right.

Remember I said earlier that there is a more-or-less stable set of preferences that people have when it comes to different economic goods and services. Yes, when it comes to cars some people really do care mostly about price, gas mileage and safety features. And others care more about speed and thrills. But the vast middle — that wonderful majority in the middle of the statistical "normal" bell curve — are somewhere in between. They want a cool-looking car that won't break their budget. When it comes to religion, similar things apply. But here the spectrum runs from theologically "liberal" churches to stricter, more dogmatic, and even more cult-like sects. On the one end not too much is required in the way of devotional work and rule-following and, on the other hand, you have to eat a certain way or wear magic underwear, protest at women's clinics or go on mission trips. In the larger religious denominations you might have your choice just as car manufacturers often offer cars that go fast and suck gas as well as others that are fuel-efficient and have all the safety features.

Daily PrayerI probably don't need to tell you where the NTCOF falls on this spectrum. HINT: we are so theologically liberal that we take the position that god(s) are no more than a kind of thought experiment.

All these ideas and others are being studied closely by comparing them to a growing amount of data, much of which is being gathered in very innovative ways. With respect to church attendance, for example, it is known that surveys generate spuriously high numbers. So some researchers go out and count heads — or cars in church parking lots. One source that you could spent many hours poking around is the Pew Charitable Trusts website at — they have a "Religion and Public Life" section that is loaded with interesting information including charts and graphs, particularly under the "U.S. Religious Landscape Survey? based on interviews with over 35,000 Americans.

Look at this, for example, which shows the percentage of praying for members of a dozen different religions. Here is evidence of the very spectrum we were just talking about, with the strictest, most dogmatic religions to the left and the more moderate, theologically "liberal" ones to the right.

The percentage of people who pray was also broken down by age, gender and income. These are harder to interpret but I think any of us could come up with some hypotheses. For example, women as a group may pray more because, in the strictest of religions they tend to be forced into an inferior status. Or maybe it is, at least in part, related to income and age, since women live longer than men. The point is: fascinating information with which socioeconomic theories of religion can be developed and against which they can be tested.

Mormons by State

By the way, there are some interesting maps on the Pew site as well. Which religion do you think is represented here as far as geographic distribution? [RIGHT! Mormon! — 2% of Americans]

Evangelical Protestants by State

How about this one? [Evangelical Protestants — 26% of Americans]

Catholics by State

And this one? [Catholics — 24% of Americans]

Unaffiliated by State

And this one? ["Unaffiliated" — 16% of Americans!]

Marketplace of the GodsIf you would like to know more about this fairly new and developing science of religious economics, here is a good book. It explains how economic concepts began to be applied in religion, which was not met with enthusiasm from some people, as you might expect. It discusses some of the findings I have mentioned about the religious marketplace. And it also deals with the trend of secularization and where it might go. Highly recommended if you have space on your booklist.

And, as always: