This is Naked Capitalism fundraising week. 449 donors have already invested in our efforts to combat corruption and predatory conduct, particularly in the financial realm. Please join us and participate via our donation page, which shows how to give via check, credit card, debit card, PayPal, Clover, or Wise. Read about why we’re doing this fundraiser, what we’ve accomplished in the last year, and our current goal, continuing our expanded Links.
By Sascha O. Becker, Xiaokai Yang Chair of Business and Economics at Monash University, Professor of Economics at University Of Warwick, Professor of Economics, Jared Rubin, Professor of Economics at Chapman University, and Ludger Woessmann, Director at ifo Center for the Economics of Education, Professor of Economics at Ludwig-Maximilians University of Munich. Originally published at VoxEU.
Though social scientists have long questioned how religion affects economic growth, a lack of accessible data hindered their efforts. Recently, advances in computing, novel econometric techniques, and the availability of new data have enabled researchers to test how religion has influenced growth in rich and poor countries, both historically and in the present. This column argues that religion is a ubiquitous social phenomena that can spur or impair economic growth by affecting four elements of the macroeconomic production function – physical capital, human capital, population/labour, and total factor productivity.
Ever since Max Weber proposed his ‘Protestant ethic’ hypothesis in 1904-05, social scientists have questioned the role that religion plays in either enhancing or retarding economic growth. The biggest problem for such inquiries was a lack of available data and analytical frameworks for connecting the two. This is no longer true. In the last two decades, social scientists have made significant contributions to our understanding of how religion affects growth.
Figure 1 Michelangelo: The Creation of Adam
Source: https://commons.wikimedia.org/wiki/File:Michelangelo_-_Creation_of_Adam_(cropped).jpg
Religion and the Elements of the Macroeconomic Production Function
Standard growth models consider macroeconomic production functions containing several inputs that can affect economic growth. These inputs include physical capital, human capital, population/labour, and total factor productivity (TFP). In a recent survey article (Becker et al. 2024), we argue that each of these inputs can be augmented or impaired by religion. These connections emerge because religious beliefs, religious practice, religious institutions, and religious doctrine can shape individual preferences, societal norms, and economic institutions. We use the various elements of the macroeconomic production function as proximate determinants in a unifying framework to study religion as one of the deeper, more fundamental determinants of growth.
The availability of new data, advances in computing, and new econometric techniques have greatly improved our capacity to test how various aspects of religion affect each of these growth inputs in rich and poor countries, historically and in the present (see also Becker et al. 2020, 2021). Although few studies seek to understand the broader connections between religion and growth (a well-known exception being the work of Barro and McCleary 2003; see also McCleary and Barro 2019), this literature has flourished to the point that we can begin to generalise by combining and conceptually organising the results of different, often disconnected studies into a unifying framework.
Physical Capital
One of the most well-known growth inputs is physical capital, and one of Weber’s central arguments was that certain ‘Protestant traits’ – such as thrift and saving – were key to Protestant capital accumulation. Several studies suggest that there are indeed differences across religious faiths in these and other economically important cultural beliefs. Yet, the recent literature is rather mixed as to whether this is a specific value that some religions hold, or whether it only arises in certain contexts (e.g. Guiso et al. 2003, Kersting et al. 2020).
Religion also affects financial development, itself a key input into physical capital accumulation. Examples include restrictions on taking interest (Rubin 2011a, 2011b), religious law on commercial activity (Kuran 2011, Kuran and Rubin 2018a, 2018b), and religious institutions that direct capital away from more productive enterprises (Kuran 2023). All of these have been alleged to set some societies on very different growth trajectories than others.
Human Capital
Human capital has long been affected by religion and religious beliefs. Several authors have studied the effect of Islamic education on science (Chaney 2023), labour markets (Saleh 2015), and literacy (Chaudhary and Rubin 2011). Others have studied the crowding-out effect that religious education has on secular education, and its subsequent effects on industrialisation (see e.g. Squicciarini 2020, Bénabou et al. 2022, Liang 2010, Arold et al. 2022a, 2022b). Others have focused on the human capital consequences of Christian missionary activity (e.g. Gallego and Woodberry 2010, Bai and Kung 2015, Valencia Caicedo 2019).
Two faiths have been shown to be positively related to educational outcomes associated with economic growth: Judaism and Protestantism. Jews specialised in high human capital professions beginning in the centuries following the destruction of the Second Temple in Jerusalem (Botticini and Eckstein 2005, 2007), and this human capital advantage has largely persisted to the present day (with some exceptions such as Ultra-Orthodox Jews, e.g. Berman 2000).
Protestants had a cultural inclination favouring human capital accumulation from their beginnings. Martin Luther wanted his flock to know how to read so they could study the bible. This had spillovers into economically relevant human capital that gave Protestants an advantage in the economic development of the 19th century and beyond (Becker and Woessmann 2009).
Population and Labour
Religion also impacts economic growth through the channels of population and labour. The most famous labour channel is Weber’s idea that Protestants developed a stronger work ethic than others to show that they were members of the ‘elect’, who were predestined to go to heaven. Although this thesis has captured the popular imagination, the findings are mixed regarding whether Protestants in fact have a superior work ethic (e.g. Andersen et al. 2017, Spenkuch 2017).
Religion can shape a society’s demographic patterns as well. This can affect economic growth by limiting the number of children families have (thus making more resources available for investment in their human capital, see Becker et al. 2010), by hastening or delaying a country’s demographic transition (Blanc 2023), or by affecting mortality (Becker and Woessmann 2018).
Figure 2 Conclave in the Sistine Chapel
Source: https://www.thesistinechapel.org/conclave
Total Factor Productivity
A final mechanism through which religion affects growth is via its impact on the productive capacity of a society (TFP). There are several mechanisms through which religion affects productivity. One is religious belief. Religious prohibitions, especially of productive activities or technologies, can have a detrimental effect on productivity (Bénabou et al. 2022, Seror 2018, Coşgel et al. 2012). Likewise, religious tolerance can positively impact technology utilisation by opening opportunities to those who would not innovate otherwise (Cinnirella and Streb 2018, Hornung 2019).
Religion can likewise affect productivity via its effect on political economy. Religious rituals can affect productivity by shaping cultural norms and economic behaviour, as in the case of Ramadan fasting (Campante and Yanagizawa-Drott 2015) or Catholic saint day festivals in Mexico (Montero and Yang 2022). Where religion plays an important role in legitimating political rule, it is likely that religious authorities will participate in political bargaining (Rubin 2017). This can have all sorts of unintended consequences for economic growth, as the interests of religious authorities and the mechanisms of religious politics are not always aligned with prosperity (e.g. Chaney 2013, Bazzi et al. 2020). Intertwining religion and politics can also result in religious persecution, which can have negative consequences for long-run growth (Voigtländer and Voth 2012, Johnson and Koyama 2019, Miguel 2005).
Religion Matters for Growth in Multiple Ways
In both past and present, religion impinges on every input into the macroeconomic production function. Although many studies connecting religion and growth focus on narrow events, eras, and locations, the cumulative evidence from these studies is clear: religion matters for economic growth. How, when, and where it matters is context specific, but economists disregard religion at their peril.
References available at the original.
20 comments
Comments are closed.
Interesting to read along side columns of the Dr. Hudson interviews. Awaiting new developments and insights.
Interesting, this modern take of Weber’s classic thesis could be part of an explanation
I would be curious to see how this hypothesis applies to non-European religions and cultures, like China.
Also, in Europe there were other major developments that happened around the same time frame: rediscovery of classical knowledge and texts after the Reconquista (translation of Arabic, Greek texts etc.) and the fall of Constantinople; the massive infusion of gold/silver and other resources from the Americas, the development of nationalism, and organizing resources around nation-states. One could also factor in the “civil religion” becoming part of the culture. After the Treaty of Westphalia, the modern definition of a nation-state, with defined boundaries, arose (after the “religious” 30 years war). That leads to questions about the organization of war and violence.
Words have power. When we talk about people as “human capital” we are reducing them to things, to objects. People are not “human capital”. Capitalist economicist language is so powerful that we unconsciously introduce it into everyday narrative, but in particular into the language of academic circles. People are culture, knowledge, they are not capital.
Yes, but human “surplus populations” can be processed into Soylent Green and traded on the commodities exchange. Then they are “human capital”. The Neo-Malthusians would be happy, climate-change extremists will be happy, and investors can make a “killing” on the new opportunity in commodities markets. (Sorry, my macabre sense of humor is going to get me into trouble)
“Human capital” is not reducing people to inanimate objects, but to livestock.
Amen!
Reminds me of something I once heard from a man with a very heavy Gullah accent: ” Ah wuks en hooman racehorses.” Unwittingly he described the function of that specialty. Run faster!! Employees are reduced to animals – racehorses.
The article speaks a lot about the impact of protestantism and Judaism but the Spanish and Portuguese empires, the Venetian empire and the Genoese Empire were Catholic. As was the Hanseatic League when it was at its peak. Arguably, as the Hanseatic League became more Protestant it lost its effectiveness as a trading empire.
In the 15th to 17th centuries, Western Europe did not control a large part of global GDP compared to Islamic empires, China, or India, none of which were Protestant or Judaic.
And early western nation-states borrowed from the science and tech of the advanced Islamic world; the astrolabe, navigation charts, astronomy, chemistry, mathematics. The Islamic world also was influenced by their contact with Chinese civilization. One could criticize the above for the Euro-centric focus. In light of the relative decline of the West in recent times, this analysis could be updated. It looks like India, China and the rest of the world are retaking their historic positions in terms of share of world GDP and that sort of thing.
In the 16th century Spain had probably at least half the gold and silver – physical capital, money – in the world. And what happened to them? Some say they wound Up financing the industrial Revolution, but not much to their benefit. The structure of a society includes much more than religión.
Having lived in a Muslim Theocracy, the differences in economic and social outlook can be profound.
Public spaces are not respected because the family (the Tribe) is still at the center of society despite the efforts of Muhammad to create an Ummah. NY denizens think of Central Park as “theirs” whereas a similar space in Casablanca or Tangier is thought of as a no man’s land, commonly full of refuse.
Similar thread runs through the bureaucracy. There is little concept of serving “The State” or “The People” but rather acquiring power and advancing reputation for the good of one’s extended family. You see it in the most simple of interactions such as obtaining a work visa where a simple mention of a relative will get you moved to the front of the line.
A system like this I would call archaic, but not primitive. Economically it is quite similar to us here already. Our societal system seems headed in this direction as well precisely because of the loss of the Christian concept of universal service and the dignity of all humans. This idea still survives in the less cohesive secular humanist form based on a vague sense of “empathy” for fellow humans, but whether this can survive the acidic power of faustian economics remains to be seen…
I don’t seem the similarity. In the US at least. families are dispersed as they go where jobs are. The concept of family or tribe is fading fast, if not gone completely. The individual is who matters
Runaway economic growthists have already impaired biophysical survival on the surface of the earth. If runaway economic growthists are not impaired and then stopped in time, they and their growth will destroy biophysical survival on the surface of the earth.
Perhaps we need to find a religion which impaired economic growth and kept it impaired and retool it for our own survival. Perhaps the various Indigenous Nature Spirit Religions did that. They certainly at least channeled their social-economic activity in non-destructive directions and kept it within non-destructionistic bounds.
Agreed. Everybody is still chasing growth as if that’s a good thing. Consider cancer. Growth is not always a good thing.
We need a worldview that encourages us to cooperate to conserve rather than competing to consume. That’s unlikely to be Christianity, Judaism or any monotheistic religion that separates humans from Nature and elevates them above it.
Max Weber and R.H. Tawney are so ‘old-school’. I believe this post omits mention of a couple of extremely important modern religions that dwarf the impact of religions drawn from the menageries of the past. What religions have had greater impact on our modern world than Neoliberalism or Libertarianism? Neoliberalism in particular has accomplished wondrous impacts on u.s. growth and on u.s. future prospects as a nation after it accomplishes the Fall of the u.s. Empire.
Religions, at least organized religions or widely propagated religious beliefs, are as much shaped by the societies in which they take root as the societies are shaped by religion. So untangling the effects attributable to specific religions is not easy. Especially because we are dealing with moving targets: both religions and societies are rarely static for long, but are usually both changing as other factors impinge upon them. One characteristic of both is that they tend over time to be increasingly responsive to the interests of the elites, either in local pockets or across a much wider geopolitical area. And depending on how secular or religious the formal organization of society is, elites and their offspring will gravitate toward leadership positions in the civil government or the church hierarchy respectively.
A while ago I read The WEIRDest People in the World by Joseph Heinrich. He said christianity was correlated with low rates of incest, and therefore higher trust with strangers, which encouraged the growth of markets instead of relying on the kin network. And that was the result of a lot of the economic gains- willingness to be a more “rational” actor instead of being focused on the family. Of course, protestants (and lonely people) also have higher rates of suicide.
Becker avoids the crucial issue, and that is the use of money to ensnare the debtor, and the morality of rent seeking.
I’m not a believing Christian by any means, although I recognise that the fundamental values I accept are those of the Man on the Cross as transmitted as a form of Church of England agnostic tolerance I was exposed to at my school.
Something which confirmed that I might be roughly on the right path, but because it was stated so clearly, it completely changed my my world view, not to mention my teaching, more than 30 years ago in four simple sentences which describe our world all too well:
“When their time comes. seeds germinate and animals grow; but interest begins to reproduce from the moment it is begotten. The beasts become fertile soon, but cease reproducing equally soon. Capital, on the other hand, immediately produces interests, and these continue multiplying into infinity. Everything that grows stops growing when it reaches its normal size. But the money of the greedy never stops growing.” Homily on Usary by Saint Basil the Great (330-378)
I wonder if we might look at this through a materialist lens. Nancy Chodorow, in Feminism and Psychoanalysis (I think thats the title; I dont have it in front of me), cites studies done across several cultures whose modes of production varied, noting the differences in the roles within those modes assigned, typically, along lines of sex difference. In one society which was agricultural without animal husbandry, a certain gendering occurred; in another agricultural society with husbandry, a different one; so on with hunter-gatherer and industrial societies. The treatment of women, or men, or girls and boys and how they are brought up to think, are ideas shaped, in her view, by the realities of the production and reproduction of daily life and its essentials.
Religion, as grand and all-encompassing as it can seem, may be seen as a part of the worldview called up by certain real human activities; it then helps guide them, of course, but – and I am not a biologist – it is my understanding that the brain evolved after the stomach.
What I find interesting about this article is that all of these views really seem to be coming from the viewpoint of the victorious. To pretend jews and christians are pious and hard working, which is why their societies ended up with all the money; is kind of a sick joke.
hello… colonialism? and until recently, how rich were “the jews”?
Right now those industrious jews and christians are working diligently to extract more wealth for their respective societies… and being unable to square any degree of hypocrisy from their respective “religions”, on what they should not be doing….here we are.
So from the tip of the spear to the barrel of a gun…. these people got “religion”
I really find it hard to take people seriously who don’t see the problem when they try to separate people’s supposed beliefs with what they actually do. To ascribe prosperity with religion, as opposed to the spoils of war…. is a fallacy in my opinion.
I like the idea of factoring in religion and have a few thoughts, both about the article and the comments:
For the article itself, it was kind of a brief overview, not too many details. I also wonder if the authors recognize their own values bias (and religions are very much about values) in focusing on economic growth. My personal opinion is that a large part of why the Protestant world triggered the industrial revolution isn’t that others couldn’t. Even if they couldn’t know all the details of global warming et al, they had a sense of limits that Protestantism lacked.
A small criticism about the “human capital” section (beyond all the ways the concept itself smells). I think viewing the Jewish diaspora’s historical approach to skills and education as primarily about “human capital” shows a major misreading of Jewish history. Funny enough, it’s a very Protestant way of looking at it (even if some of the economists arguing that now are Jewish).
While there are some investment dynamics to education (upfront cost, returns, accumulation), capital accumulation usually corresponds to a more specialized, articulated economic structure. For most of the past 2 millennia though, the last thing Jews could count on is being slotted nicely into a precise, stable role by wider society. I could be biased from my own experiences, but I think the uniquely Jewish approach to skills is strongly generalist (thus the tendency to abstraction) and also a bit pessimistic about future conditions (thus the analytic intensity).
I haven’t lived in an Islamic culture like VTDigger, but I can see what he’s talking about for many places after meeting people from there. “Vitamin waaw” (wasta) is a huge thing in some places. At the same time, I definitely don’t think it’s a strictly Islamic or even Arab thing. Even if connections count like everywhere, all of the Turks and Iranians I’ve met seem to genuinely value competence and see the economic consequences of their behavior (probably more than Americans actually).
Among Arabs I’ve met, at least from the oil states, it’s definitely more of a mix: while many do genuinely learn and take pride in their work, others definitely don’t (e.g. wildly unqualified college graduates). I suspect a large part of it is a relatively recent effect of oil money & the resulting rent-seeking. They do all seem to talk about wasta and “gossip” more like it’s an omnipresent force though. Honestly, however I feel about Mohammad bin Salman in general, I am interested in seeing if he can reform the Saudi economy because I think the real key will be whether he can replace the wasta & credentialism with meaningful standards. If he can, it could have a very positive effect on Saudia and the rest of the Arab world.
One other interesting thing related to Matt’s mention of WEIRD people. I randomly stumbled across a random blog-post once arguing that Heinrich’s thesis that the Catholic Church created WEIRD cultures fails some logical considerations. OTOH, Emmanuel Todd’s family systems explain the WEIRD cultures as one of the few places in the world where people retained nuclear families continually from prehistory. I can’t claim to make an informed judgment, but it is interesting:
The Church’s crusade against cousin-marriage did not create the Western nuclear family