Satan, the great motivator

The curious economic effects of religion

By Michael Fitzgerald
November 15, 2009

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What makes economies grow? It’s a question that has occupied thinkers for centuries. Most of us would tick off things like education levels, openness to trade, natural resources, and political systems.

Here’s one you might not have considered: hell.

A pair of Harvard researchers recently examined 40 years of data from dozens of countries, trying to sort out the economic impact of religious beliefs or practices. They found that religion has a measurable effect on developing economies - and the most powerful influence relates to how strongly people believe in hell.

That hell could matter to economic growth might seem surprising, since you can’t prove it exists, let alone quantify it. It stands as one of the more intriguing findings in a growing body of recent research exploring how religion might influence the wealth and prosperity of societies. In recent years, Italian economists have presented findings that religion can boost GDP by increasing trust within a society; researchers in the United States showed that religion reduces corruption and increases respect for law in ways that boost overall economic growth. A number of researchers have documented how merchants used religious backgrounds to establish one another’s reliability.

The notion that religion influences economies has a long history, but the specifics have been vexingly difficult to pin down. Today, as researchers start to answer the question more definitively with the tools of modern economics, what’s emerging is a clearer picture of how nations’ prosperity can depend, in part, on seemingly abstract concerns like theology - and sometimes on quite nuanced points of belief or religious fervor.

The work is preliminary, but offers the hope of useful findings. Knowing exactly how and when God influences mammon could lead to smarter forms of economic development in emerging nations, and could add to our understanding of how culture shapes wealth and poverty. And it stands as part of a larger movement in economics, in which the field is looking beyond purely material explanations to a broader engagement with human culture, psychology, and even our angels and demons.

In a sense, religion and economics long have been intertwined. There are more verses on money and finance in the Bible than there are verses on prayer. The New Testament stakes out clear if seemingly contradictory positions: on the one hand is the admonition that a rich person has little chance of getting into heaven; on the other is the parable of the talents, which praises the servant who got the biggest return on his money. Islam, to this day, outlaws the charging of interest; Buddhism instructs its followers to abjure desire for material goods.

On a larger scale, religious denominations affect economics by creating bonds of trust and shared commitment among small groups, both necessary qualities for lending and trade. In the Middle Ages, studies show, monk-run estates outperformed those that used serfs, thanks to religiously inspired cooperation and frugality. The Quakers of 18th-century Britain, renowned for their scrupulous honesty, came to dominate British finance. Ultra-orthodox Jews similarly dominate New York’s diamond trade because of levels of trust based on religion. Modern religious kibbutzim on average outperform their secular rivals, in part because of trust built through engaging in communal religious rituals.

But the ways that religions can influence entire economies - and the extent to which they do - are less clear. In 1905, Max Weber, a German sociologist who studied religions, identified what he called “the Protestant work ethic” as the driving force behind modern capitalism in the West. But by the middle of the 20th century, most sociologists had dismissed Weber’s thesis as based on bad theology and bad statistics. Modern economists haven’t looked much at the question, in part because it’s difficult to quantify something like religious belief, or to compare statistics on religious beliefs across countries. Scientists also find it hard to prove that religion, or any aspect of culture, causes economic behaviors.

But over the last several decades, better sets of statistics on religion have become available, and improvements in computing power and mathematical techniques have made it easier for economists to run very large statistical analyses, with hundreds of variables.

Among the most provocative findings have come from Robert Barro, a renowned economist at Harvard, and his wife, Rachel McCleary, a researcher at Harvard’s Taubman Center. McCleary, the daughter of a Methodist missionary, felt that she had seen religion change people’s economic behavior, and wondered why economists didn’t look at it as a potential factor in economic development. Barro found the idea intriguing.

The two collected data from 59 countries where a majority of the population followed one of the four major religions, Christianity, Islam, Hinduism, or Buddhism. They ran this data - which covered slices of years from 1981 to 2000, measuring things like levels of belief in God, afterlife beliefs, and worship attendance - through statistical models. Their results show a strong correlation between economic growth and certain shifts in beliefs, though only in developing countries. Most strikingly, if belief in hell jumps up sharply while actual church attendance stays flat, it correlates with economic growth. Belief in heaven also has a similar effect, though less pronounced. Mere belief in God has no effect one way or the other. Meanwhile, if church attendance actually rises, it slows growth in developing economies.

McCleary says this makes sense from a strictly economic standpoint - as economies develop and people can earn more money, their time becomes more valuable. For economic growth, she says, “What you want is to have people have their children grow up in a faith, but then they should become productive members of society. They shouldn’t be spending all their time in religious services.”

After Barro and McCleary’s initial work was published in 2003, other economists started looking more seriously at the impact of religious beliefs. Researchers based at the New University of Lisbon and the University of Illinois used a model that showed European industrial development between 1645 and 1850 took place roughly 35 years earlier in Protestant countries than Catholic ones. (The researchers posited that Protestant beliefs in economic success as a sign one might get to heaven inspired people to work harder and invest.) The German economist Sascha O. Becker looked at Prussia’s economic development and found that, at least for Germany, Weber was right about the Protestant work ethic: Protestants were more likely to be entrepreneurs than Catholics, and more likely to create bigger firms. (Becker argues the cause isn’t religious belief itself, but an accidental offshoot of Protestants needing to be literate enough to read the Bible.)

So what is it about religion that creates these economic effects? On one level, the connection seems intuitive: All the major religions extol virtues like self-discipline, sacrifice, and thrift. Some even preach that earthly success translates to good things in the afterlife, a kind of gold-plated stairway to heaven. Religion can, quite directly, affect what you earn - fundamentalists and evangelicals in the United States tend to have lower savings rates and incomes than members of other religions, in part because they have larger families and give away more of their money.

Belief’s influence on our economic behavior might even reflect biology. The special motivational power of hell, for instance, may lie deep in the human psyche. Ara Norenzayan, a psychologist at the University of British Columbia, and his graduate student Azim Shariff set up an experiment that would make it easy for people to cheat on a difficult math test. They found that people who believed in an omniscient, vengeful God typically chose short-term suffering - that is, facing the test without the crutch of cheating - over possible eternal suffering. “Those who believed in a punishing God cheated less,” Norenzayan said in an e-mail. He considers his findings to be consistent with Barro and McCleary’s research.

Of course, belief might just spark behavior that affects economic growth, rather than causing the growth itself. Charles M. North, an economist at Baylor University, argues that private property protections developed by the Church to guard against grasping secular rulers gave Catholic - and eventually Protestant - nations stronger protections for individual rights than other nations, creating incentive for individual success. Similarly, literacy seems clearly connected with economic development, and mass literacy is a Protestant invention, says Robert D. Woodberry, a sociologist at University of Texas at Austin. He has mapped how missionaries spread literacy, technology, and civic institutions, and finds that those correlate strongly with economic growth. He argues in part that this helps explain why the once-poor but largely Protestant United States surpassed rich, Catholic Mexico after 1800.

If religious belief does have important effects on prosperity, it raises a difficult question for anyone concerned with economic development: What should we do with that knowledge? Does it make sense to put up religious billboards in struggling countries, or to appoint a minister of belief? Probably not. For one thing, religion is just one among many factors that affect economies. And for another, it seems to take a long time for religious shifts to catalyze economies. The Protestant work ethic may indeed have some economic importance, but the Industrial Revolution in Germany came 300 years after Martin Luther’s 95 theses. Many countries in the developing world shifted from ethnic religions to Christianity or Islam during the 20th century, and few miracles have so far occurred in those economies.

Many think we can just pluck out the secular lessons from the new findings, and no longer need religion as a spur for, say, property laws and literacy. Norenzayan thinks that people originally developed the idea of “supernatural monitors” - a fear of being punished by an omniscient watcher - at a time when secular institutions either didn’t exist, or might as well not have. Today, he thinks, developing nations can simply adapt proven, secular approaches to governing.

Then again, cloning institutions without certain intangible aspects of culture often proves futile. When Italy imposed identical forms of government across its regions, the new institutions worked well in some parts of the country but performed poorly in others with different underlying traditions. Governments worldwide have tried to foster their own versions of Silicon Valley, and, lacking the California Bay Area’s particular culture and history, have mostly failed. While education and rule of law might seem straightforward secular policies, the cultural forces that carry them into a society, including religion, have a lot to do with whether people respect them.

Barro and McCleary, for their part, think religion and policy are difficult to mix. McCleary says the lesson of their results isn’t that governments should boost religion, but simply that they should recognize it has some value, and avoid regulating it too heavily. The bigger application of research into religion, she thinks, isn’t to foster religious imperialism but to build a better-informed economics, and in the long run, better policy. There won’t be manna from heaven. But there might, over time, be less poverty here on earth.

Michael Fitzgerald is a freelance writer in Millis. He researched this while a Templeton-Cambridge Journalism Fellow.

Correction: Because of a reporting error, this article on religion and economics in the Ideas section mischaracterized Charles M. North's research. He found that the medieval church developed private property protections to guard only against secular rulers, not against popes and bishops.