Rachel McCleary and Robert Barro on The Wealth of Religions: The Political Economy of Believing and Belonging

mcclearyWhich countries grow faster economically—those with strong beliefs in heaven and hell or those with weak beliefs in them? Does religious participation matter? Why do some countries experience secularization while others are religiously vibrant? In The Wealth of Religions, Rachel McCleary and Robert Barro draw on their long record of pioneering research to examine these and many other aspects of the economics of religion. Places with firm beliefs in heaven and hell measured relative to the time spent in religious activities tend to be more productive and experience faster growth. Going further, there are two directions of causation: religiosity influences economic performance and economic development affects religiosity. Dimensions of economic development—such as urbanization, education, health, and fertility—matter too, interacting differently with religiosity. State regulation and subsidization of religion also play a role. Timely and incisive, The Wealth of Religions provides fresh insights into the vital interplay between religion, markets, and economic development.

How did you come to write the book?

Robert is an economist and Rachel is a moral philosopher. In thinking about religion, we took as our starting point the work of Adam Smith, the founder of economics, who believed that moral values and organized religion were key forces in political economy and society. Nevertheless, social scientists—particularly economists and political scientists—have tended to underestimate the importance of religion, particularly the role of beliefs and values. We think that Adam Smith was right. Beliefs and religiosity are central determinants of which societies prosper and which deteriorate.

What does your book bring to the conversation on the economics of religion that hasn’t been discussed before?

Another contribution to the study of religion is bringing together the ideas of Adam Smith with those of the German sociologist Max Weber. Religious beliefs and values motivate people to behave in certain ways. This view, as we discuss in our book, is integral to forms of Protestantism with its emphasis on unmediated, individual responsibility for one’s salvation. We bring a quantitative approach to the relationship between beliefs, values, and economic behavior. In so doing, we examine the role of religious beliefs across world religions and countries. Our research has an international perspective with a focus on believing and belonging in the major religions of the world.

We focus on the role of religious beliefs and belonging to organized religions in the economic, political, and social development of nations and individuals. We are filling an important gap in the literature on religion by providing an international perspective. Much of the work in the sociology of religion is focused on local or regional patterns of religiosity. The sociology of religion has a strong focus on the United States, centering research around assumptions about religious patterns and organizations in the United States. In our research, we apply economic analysis to world religions and across countries.

How does religion fit into the story of developing nations? Does religious fervor help or hinder efforts to increase economic development?

To better understand the relationship between religion and economic growth, we need to look at a two-way causation. Religiosity has a two-way interaction with political economy. With religion viewed as the dependent variable, a central question is how economic development and political institutions affect religious participation and beliefs. There is a clear overall pattern whereby economic development associates with decreasing religiosity. However, there is no evidence that greater education diminishes religious beliefs.

Looking at the other direction of causation with religion as the independent variable, we study the effects of religion on economic, social, and political behavior. A key issue is how religiousness affects individual traits such as diligence, honesty, thrift, and integrity, thereby influencing productivity and economic performance. Another channel involves religion’s effects on literacy and education (human capital) more broadly. For example, there is evidence that Protestantism is more favorable than Catholicism as an influence on education and work ethic.

We find that social capital and cultural aspects of religion—communal services, rituals, religious schools—are significant mainly to the extent that they influence beliefs and, hence, behavior. For given beliefs, more time spent on communal activities would tend to be an economic drag for the believer as well as the entire community. Moreover, the costs of formal religion include the time spent by adherents and religious officials on religious activities. In addition, time and money are expended on buildings, sacred objects, and so on. Our general view, based on empirical evidence, is that believing relative to belonging (attending) is the main channel through which religion matters for economic and other social outcomes.

Can religion help to explain why some nations develop faster than others?

We found evidence that economic growth was stimulated when religious beliefs were high compared to religious participation. This pattern applied, for example, to Japan and parts of Western Europe. An overall expansion of religiousness—greater beliefs accompanied by the typically associated attendance at formal religious services—was not strongly related to growth. Religiously sponsored laws and regulations hindered economic growth in some places, notably in Muslim countries, which typically did not have favorable institutions with respect to corporations, credit markets and insurance, and inheritance.

How did the conflict between Protestantism and the Catholic Church affect economic development in early modern Europe? Do we still see the impact of that today?

As Max Weber argued, the rise of Protestantism beginning with the Reformation in the 1500s enhanced work ethic and the accumulation of human capital and, thereby, contributed to the industrial revolution. We found evidence that this mechanism still operated in Western Europe in the modern era.

Competition increases the quality of services provided by different religions. The introduction of Protestantism into Western Europe challenged the monopolistic status of the Roman Catholic Church, pressuring that organization to respond in two ways. First, by lowering the nature and pricing of religious goods, the Catholic Church sought to retain believers. Second, the Catholic Church promoted those aspects of its theology that distinguished it from other religions.

We discuss in our book how the beatification of saints is a unique mechanism of the Catholic Church. With the rise of Evangelical faiths, religious competition became particularly strong in Latin America, vernacularly referred to as “The Catholic continent,” where Catholicism had enjoyed a monopoly since the region was colonized by Spain in the 1400s. Today, in regions of the world where competition with types of Protestantism is increasing, the beatification of local saints revives religious fervor and deters adherents from converting to types of Protestantism.

Is religious fervor impacted by fluctuations in the economy? If so, how?

There is evidence that adverse economic shocks and natural disasters tend to increase the demand for religion. This pattern has been observed, for example, for earthquakes in Italy, flood-related declines in agricultural harvests in Egypt, declines in incomes during the Asian Financial crisis, and adverse effects from a poorly designed land reform in Indonesia. In the other direction, increased economic development—particularly movements away from agriculture and toward urbanization—tend to lower the demand for religion. However, it is wrong to conclude that sustained economic growth causes religion to disappear.

What do you hope readers will take away from reading this book?

We hope our readers will appreciate the possibilities of interdisciplinary research on a variety of religion topics. The application of economic ideas to religion broadens our understanding of ways in which beliefs and practices influence individual and group behavior.

We find that social capital and cultural aspects of religion—communal services, rituals, religious schools—are significant mainly to the extent that they influence beliefs and, hence, behavior. For given beliefs, more time spent on communal activities tend to be an economic drag for the believer as well as the entire community. The costs of formal religion include the time spent by adherents and religious officials on religious activities and the time and money expended on buildings, sacred objects, and so on. Our general view, based on empirical evidence, is that believing relative to belonging (attending) is the main channel through which religion matters for economic and other social outcomes.

Rachel M. McCleary is lecturer in the Department of Economics at Harvard University. Her books include The Oxford Handbook of the Economics of ReligionRobert J. Barro is the Paul M. Warburg Professor of Economics at Harvard. His books include Education Matters: Global Schooling Gains from the 19th to the 21st Century and Economic Growth. They both live in Massachusetts.