Economic Analysis and Organized Religion

by Ekkehart Schlicht

In: Vernon Reynolds and Eric Jones (eds.), Survival and Religion: Biological Evolution and Cultural Change, Chichester: John Wiley 1995

Introduction

Economics tends to view institutions as optimal responses to scarcities, environmental conditions, incentive problems, and so forth. Many religious institutions appear, however, bizarre and wildly inefficient. Yet these institutions seem important, influence human behavior, and are remarkably stable. This poses a problem for economic analysis and highlights its general quandary over integrating cultural factors in a non-trivial way. We may hope to enhance our understanding of the culture-economics interface by studying the particularly salient cultural phenomenon of religious organization. This provides the motivation for this essay.[1]

The recent literature on the economics of religion provides an excellent starting point, but it systematically sidesteps questions about the nature of religious activity.[2] It takes the specifics of demand and supply for religion simply as given. In this, it must remain ad hoc, and obliged to remain silent about the culture-economics issue. By treating the market for religion just like the market for apples, we will certainly find many features that these markets have in common, but since we exclude cultural considerations, we will be incapable of dealing with them; they will escape our analysis just like a stealth bomber escapes the enemy's radar. In order to spot something, we must employ other instruments. I shall thus draw on arguments from social psychology in addition to using economic tools in order to address the problems of economic-cultural interaction. By doing so, we may also find some footing for our assumptions about demand and supply, from which the features of religious organization emanate; these will appear less ad hoc.

Religion is certainly an extremely interesting topic in its own right, and this justifies its analysis. I think, however, that an analysis of religion from the point of view of economics is of much broader significance for economics and social theory in general. Let me just stress two aspects.

Religion as Freewheeling Superstructure. The interface between culture and economics or law and economics is of particular importance with regard to our understanding of the formation of economic institutions. Although it seems that the effectiveness of economic organization depends crucially on organizational features, economics is silent about all that. Applying standard economic analysis it could be easily argued that making civic rights salable will increase economic welfare for everybody; or that socialism is as efficient as capitalism if only the competences and responsibilities of the functionaries are sharply defined; or that institutions really do not exist but are only "legal fictions". All this points to a fundamental weakness of economics with regard to cultural phenomena where it is absolutely imperative to improve our understanding in order to come to grips with quite obvious efficiency aspects of economic organization on a theoretical level. To understand, however, how the superstructure affects economic performance, we need to know how the superstructure itself works. The easiest case is the case of freewheeling superstructures, or superstructures that are not too closely tied to economic exigencies. Several topics come to mind here: For just that reason Claude Lévi-Strauss (1964-71; 1967) has taken mythology as his object of study. More closely related to organizational questions are, however, phenomena of organized religion and organized sports activities, and the systems of rules evolving there. One reason for being concerned with religion is, thus, that I take it as an instance of a partially autonomous superstructure that I would like to understand in order to draw lessons with regard to economic organization.

Religion as a Testing Ground for Models of Man. The application of economic analysis to religious phenomena may reveal the limits of economic analysis and may, at the same time, highlight aspects of human nature that economists neglect. Since religious activity is so important in almost all cultures, it is a feature any theory of man must account for, and I find it most unsatisfactory to assume that most of the people are most of the time ridiculously foolish and superstitious. Although I do not subscribe to the economists' assumption that human beings are always rational and selfish, I do not think either that they are never selfish and cunning, nor do I think that human beings are systematically schizophrenic in being always virtuous in some activities and self-seeking in others. I would like to start from a model of man that encompasses all these features in a coherent way - or else I would know in fact that my theories rest on wrong assumptions to begin with. It seems to me, thus, that the combination of mundane economics and otherworldly religion is a particularly demanding testing ground for any model of man.[3] Before developing a theory, as before developing an automobile, it may be advisable to invest in a suitable testing ground in order to be able later on to do some testing.

The chapter is organized as follows. In the first part I review briefly why and in what sense economic arguments are applicable to the analysis of organized religion. Parallels between the formation of firms and churches are stressed. Both are rooted in specialization and the division of labor. They rely on routines that have proved successful (in some evolutionary sense), and so forth.

In the second part I turn to some characteristics of religious activity that may help us to understand various specific features in the supply of and demand for religion. The central idea here is that religious activity is rooted in the desire of men to understand the world and their own place therein, and to justify their actions and make moral judgements. This "quest for sense" is however not confined to religious activity but permeates many aspects of culture. As the second part is written under the presumption that it presents fairly new material to the reader, I found it necessary to elaborate and illustrate the argument quite extensively.

In the third part, I turn to very specific questions: Why do we find specialization in religious activity, what determines the product mix offered by the churches, and why do we find monopolistic market structures, with a few big churches dominating the market and sects as small specialized suppliers? What explains why the churches do not charge for their services individually but rather finance themselves through tax-like contributions, and how does all this relate to the "quest for sense" or to other motives and functions of religious activity?

The last part of the paper deals with a problem of notorious difficulty in institutional analysis: The problem of inefficient but persistent institutional arrangements. This pertains to the general question of whether religion matters in the sense that it really influences human behavior in a significant way. In many ways this seems not to be the case. Religions are adaptive and malleable in many ways. It is hard to detect instances where religion drives behavior directly, and not merely as an intervening variable. We find however inefficient, and even harmful, religious practices like male and female circumcision that can hardly be interpreted as optimal institutional solutions as brought about by evolution unless the specific nature of religious activity is taken into account.

In conclusion it is argued that those features of religious organization which pose problems for economic analysis suggest at the same time that the "quest for sense", as crystallized in interpretations, religions and other cultural phenomena, should be seen as a independent driving force of societal processes. It may be very weak as compared to other forces, but it may work cumulatively over the long term.

Keywords: economics of religion, religion and competition, division of labour in religion, institutional economics and religion

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