The Joy of Economics:  Making Sense out of Life
 Robert J. Stonebraker, Winthrop University
 

That Old-Time Religion

            There is only one religion, though there are a hundred versions of it.

                                                                                                .....George Bernard Shaw

            Economists stick their collective noses everywhere.  We hold nothing too sacred to invade with supply and demand curves.  Not even matters of faith.

            We treat religion as a differentiated commodity produced and consumed in a competitive marketplace.  Consumers purchase religion in a way that maximizes utility, and churches produce religion in a way that maximizes profit.  Most theologians and sociologists are well aware of the economics of religion, but the politicians, preachers, and media toil in the dark. 

            A casual observer of most religious TV shows will hear that America has lost its spiritual way.  Those listening to political rhetoric about "family values" might reach a similar conclusion.  Former President George H. Bush insisted that the omission of the word "God" in the 1992 Democratic Party platform verified our fall from grace.  Members of the erstwhile Moral Majority claim that our best hope for salvation lies in recapturing the values and the faith of our fathers.  These, we are told, are values and faith that still stand rock solid in the rural heartland of America, but have been lost in the urban sprawl of our modern decadence.

Religion on the rise

            Lunacy.  Objective measures indicate that Americans are as religious as ever.  Attendance and participation in religious activities have not dropped; they stand at or near record-highs.  Roger Finke and Rodney Stark find that U.S. religious adherence and church attendance (as a percent of population) have risen almost continually over time¹. 

            Some 60 percent of current Americans profess religious adherence compared to a paltry 16 percent in the Puritan Commonwealth of Massachusetts at the time of the Revolution War.  Percentage church attendance during the heyday of Cotton Mather in Boston around 1700 pales relative to that of modern day Las Vegas.  In addition, religious participation is higher in our cities than down on the farm.  According to data presented by Finke and Stark, rural America has never been as religious as urban America.²

            Not only is American religiosity on the rise -- especially in urban areas -- it exceeds what can be found in most other countries of the world.  Economist Laurence Iannaccone compared a wide variety of religious measures across 18 industrialized nations³.  The U.S. ranked at or near the top in every one.  If the moral fabric of America is in decay, a lack of religiosity is not to blame. Politicians had better look elsewhere for explanations.  Why this increased religiosity?  To economists, the answer is simple; it is competition.  The modern American religious market has claimed the most adherents because it is the most competitive. 

            In colonial America, as in many modern nations today, religion was dominated by a single church.  Congregational churches dominated colonial New England, just as Catholicism dominates modern Italy and Lutheranism dominates modern Scandinavia.  But consumers have differentiated tastes in religion.  Just as a Baskin-Robbins that sells only vanilla ice cream will lose sales, a country that offers only one brand of faith will lose religiosity.  Anything the monopoly faith does to please one market segment is likely to alienate another.  In addition, an ice cream seller that faces no competitive pressure could easily become lazy and opt for the easy life.  Why try to improve your product and service when customers have no alternatives?  Why try to market your brand aggressively when no other brands are available?  Monopolies in the sacred realm are just as prone to sloth as those in the secular world.  Monopoly power is likely to sap the evangelical fervor of the dominant faith over time. .

            Competition changes the game.  It forces existing religious providers to stay on their toes and provide better products.  It also allows new faiths to emerge through time; some of which will capture the minds and hearts of the heretofore heathen.  Competition creates both more efficient and more varied versions of religion.  This explains the increase in U.S. religiosity over time, and explains why church attendance is higher in the more pluralistic urban areas than in rural areas where residents typically face fewer choices. 

Government barriers

            If monopoly faiths are evangelistically inferior, why have they survived?  Adam Smith had the answer more than 200 years ago.  He knew that if clergy are confronted by competitive pressure "their exertion, their zeal and industry" must rise.⁴  He knew that, like other producers, churches would fight to insulate themselves from the rigors of such competitive pressure; that, barring natural economic entry barriers, they would seek refuge in protective government regulation.  And they did.  The religion of the king became a national, state-endorsed religion, and alternative faiths were repressed through both legislation and violence.  As Iannaccone puts it, "From Old Testament Israel to contemporary Iran, religious uniformity has arrived on the edge of the sword, and only the sword has sufficed to maintain it."⁵

            Although the American colonies were settled by refugees seeking to avoid monopoly church repression, they were intolerant themselves.  They quickly set up government-backed religions of their own.  The U.S. Constitution prohibits any federally-backed religion but, as originally interpreted, it not prevent individual states from establishing preferred religions.  Early colonists and citizens happily used state power to erect entry barriers against new, upstart faiths that disagreed with their own.  Congregational churches received revenues from colonial New England taxes, and itinerant ministers were banned from preaching without the prior approval of local clergy.  Successive waves of immigration helped erode government barriers in the U.S. over time, but many European monopolies have endured.  Despite woeful attendance patterns, the German government still subsidizes Lutheran congregations through state-imposed membership taxes and several Scandinavian governments continue to pay Lutheran pastors as civil servants.

            Government policy seems to be the key element.  When governments favor a particular religion, or a particular brand of religion, religiosity falls.  According to one recent study, when a government establishes an official state religion, attendance falls by between 15 and 20 percent.  On the other hand, when governments treat all religions equally, especially when all brands of religion enjoy equal constitutional protection, faith tends to flourish.⁶  The evidence is clear: Monopoly production restricts output in religion just as in railroads.  If greater religiosity is the goal, laissez faire market competition is the means.    

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Notes:

1.         Finke, Roger and Starke, Rodney, The Churching of America 1776 - 1990: Winners and Losers in our Religious Economy, New Brunswick, Rutgers University Press, 1992.

2.         Ibid., pp. 203-207.

3.         Iannaccone, Laurence R., "The Consequences of Religious Market Regulation," Rationality and Society, volume 3, number 2, April 1991, pp. 156-177.

4.         Smith, Adam, An Inquiry into the Nature and Causes of the Wealth of Nations, 1776, reprinted by Modern Library, New York, 1965, p.740.

5.         Iannaccone, Laurence R., op. cit., p. 159.

6.         See North, Charles M. and Gwin, Carl R., "Religious Freedom and the Unintended Consequences of State Religion," Southern Economic Journal, volume 71, number 1, July 2004, pp. 103-118.

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Testing Yourself

To test your understanding of the major concepts in this reading, try answering the following:

1.         Explain how religious pluralism might impact the percentage of the population that attends worship services.

2.         Explain why monopoly religions might try to protect their market power and give an example..

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