A meaningful survey of recent contributions to the economics of religion enables us to appreciate past accomplishments but also to grasp the challenges ahead. A daunting array of issues confronts investigators in this field. Should the objective be to explain religious participation, economic growth, or evolutionary change? Are answers best sought in models of individual or group behavior? Which is the most promising underlying premise of motivation: self-interest or public interest? Should the investigator strive for explanation or prediction? What is the precise nature of the product involved? And finally, how do forms of religion evolve over time in conformance with the principle of utility maximization?
Since choices have to be made, we consider it important to declare ours at the outset. Our goal is to explain institutional change using the tools of contemporary economics. Therefore, our analysis is firmly grounded in the neoclassical economic principle of self-interested behavior. We apply this principle to institutions in order to see how far the analysis can be stretched. Underlying this approach is the proposition that rational choice, exercised under particular constraints, creates and alters institutional arrangements such as contracts, property rights, and forms of government. In the case of religion, rational choice leads, over time, in the face of changing constraints, to altered doctrine, dogma, forms of worship, and, most important, forms of the product demanded and supplied. Religious institutions and the organizations they promote create incentives or establish costs and benefits that, for a time, govern economic activity. Thinking of churches as firms enables us to specify or observe a particular market structure, the degree of competition therein, managerial/organizational behavior, and a resulting pattern of rent distribution.
As economists Barro and McCleary warn, the most difficult inference problem in the social sciences involves the sorting out of directions of causation when using non-experimental data.86 In our case, we want to know how changing constraints on individual behavior lead to institutional change. But we must recognize that institutional change may itself alter constraints on individual behavior. In other words, causation may run both ways. In the final analysis, the intractability of this problem may limit the validity of investigative findings. But it does not nullify the effort to find meaning in the historical record.
A related problem involves model specification and the division between endogenous and exogenous variables. (Endogenous variables are those brought within the framework of analysis; exogenous variables are those that are kept outside.) No social science can consider all aspects of a problem at once. According to standard economic method, problems must be stated in refutable fashion by limiting and identifying the major issue under investigation. This means that certain variables must be excluded from purview because not all factors in a theory can be considered endogenous.
It is common, for example, to place technology outside the standard economic model because factors that seem to drive technology are sporadic and somewhat random.87 Throughout much of its history, economics treated all institutions as exogenous, a practice that has started to break down with the advent of the "new" economic history.88
The opening up of economic analysis to include institutions as endogenous factors in a theory of evolutionary change means that institutions that were traditionally considered beyond the reach of economics, including religion, may now be analyzed in a more scientific manner. Older studies that explored religion from spiritual, sociological, historical, or psychological perspectives may now be seen in a different light. Economic rationality can be seen to derive from either self-interest or public interest. In terms of religious markets, the former may be termed the economic hypothesis whereas the latter may be labeled the spiritual hypothesis. In the spiritual hypothesis, spiritual ends become a collective expression of the common good, and religious organizations motivated by the public interest would be expected to behave in conformity to this proposition. They would be expected to provide spiritual goods (e.g., marriage contracts) at marginal cost or at competitive rates. They would be expected to always enforce property rights for the common good. And, in Christian communities at least, they would be expected to maintain some level of austerity in terms of the riches, sex, and other "things of the world.'' Our reading of economic and religious history indicates that churches do not regularly behave in this way. By contrast, a private interest approach does not burden the economics of religion with any of these expectations, and seems to more closely describe historical events and facts.89
If the task of economic history is to explain the emergence, growth, or decline of institutions—religious or otherwise—and the economic and social impact of such change, then it would appear that the economic model of rational self-interest has much to offer. Of course, it is incumbent on those who choose a different model to bring forth persuasive evidence for the alternative.
The task we have set for ourselves in this book is to employ the tools of modern economics to develop a theory that explains pivotal events in history. This theory is framed with a view to collecting historical, sociological, and ideational evidence that is capable of illuminating refutable hypotheses. In all historical studies, evidence is a slippery concept. The kind of data that informs most contemporary economic studies is simply unavailable for distant periods of time. Almost always, anecdotal evidence must suffice and, even so, available material is often scant and of poor quality. These hindrances, however, do not preclude the presentation of an economic picture of particular historical episodes in the development of modern Christianity. Because this picture relies on a market-oriented framework, this project cannot begin to unfold fully until we identify certain foundational market aspects about the nature of the economic product called religion and its demand and supply characteristics, a task we turn to in the next chapter.
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