A general method for analyzing the economics of religion and changes in religious form was applied to the early medieval church in our earlier book Sacred Trust under conditions of Roman Catholic monopoly. After the twelfth century, Roman Catholicism (with only insignificant fringe competition from Jews and Moors) came to dominate large parts of Western Europe. The legal system of the Catholic Church, canon law, was beginning to supplant and eventually dominate civil law in (then) loosely organized states and other political entities. Ecclesiastical officials enacted laws respecting all aspects of the supply decision of such goods as assurances of eternal salvation, political support from the papacy and clergy, and social services of all kinds. Marriage, trade, and all manner of behavior were regulated in conjunction with the supply of these services. Kings, princes, and aristocrats of all kinds owed much of their power to the approbation of the Roman Catholic authorities who, with full complements of upstream or upper clerical levels (bishops, cardinals, pope) and downstream or lower-level agents (priests and monks), helped negotiate trade deals, wage wars, and maintain armies. The Roman Catholic Church, moreover, was immensely wealthy and was a huge landholder during the medieval period. The retail side of the church offering religious, medical, and social services of all kinds was also a primary source of revenues in addition to payments (taxes and other forms of rents) from monarchs, politicians, and the local religious establishments (monasteries, parish churches, etc.).
The organization of the church was that of a contemporary M-form corporation. The M-form corporation is an internal organization adopted in order to help avoid managerial problems of inefficiency. Responsibility for the firm's various activities—financial, production, marketing of products, and so on—is decentralized into operating divisions, each with their own managerial structures. Division heads typically report to a Chief Executive Officer (CEO). In the case of the Roman Catholic Church, the pope is the CEO, the curia and cardinals are upstream directors of various functions including a financial division collecting revenues called the papal camera (treasury), and a geographically dispersed downstream retail division, local bishops, parish priests, and monks of various orders "sell" products and services.48 The primary role of the upstream church was to provide doctrine and dogma relating to the essential principles of membership (e.g., interpretations of the Holy texts) and to collect downstream rents. It established, with authority centralized in the Pope after the Council of Trent (1545-1563) but formalized only later in the nineteenth century, the often labyrinthine conditions for eternal salvation and the penalties for violating any of those conditions.
Downstream were the geographically dispersed purveyors of local Roman Catholicism. These included the regional mendicant and contemplative religious orders, monasteries (some of which were as much production units of agricultural and other goods as sellers of religious services), parish priests, and other local clergy. While rents were collected at all levels, primary revenues came from these retail agencies of the downstream church. Enforcement policies and assigned agents of the centralized Roman Catholic authorities were necessary to prevent opportunistic behavior in distant locales of the church.
Entry control was obviously necessary to maintain the strength of demand for the products of Roman Catholic monopoly. Misfeasors, when caught, were subject to severe punishments. Interdict, whereby the "sinner" could not have contact or truck with other Christians, was one form of punishment. Most severe was excommunication of the wrongdoer—a total separation from the body Catholic and a sentence of eternal damnation if repentance was not made. Heretics of all kinds (those who did not adhere to the main body of Catholic dogma and interpretations) were of course excommunicants, but many were also subject to violent death through the various holy wars or crusades of the Middle Ages. Later, even more virulent punishments were meted out to Protestants and other heretics through inquisitions in Spain, Rome, and elsewhere. These punishments may be seen as attempts to maintain monopoly.
Doctrinal manipulations were also used by the Roman Catholic Church to make its demand curve more inelastic and/or to shift it rightward. The conditions attached to the Church's chief product— assurances of eternal salvation—were manipulated throughout the Middle Ages in order to increase revenues and the number of demanders. Marriage markets, largely of secular and civil concern prior to the Church monopoly, were taken over by the Church with conditions attached to the simple contract respecting endogamy, presence of a priest, posting of bans, and so on. Regulations respecting divorce and marriage dissolution were intricate and varied with income and circumstances of petitioners. Such price discrimination manifestly increased the Church's rents over the medieval period. Another doctrine that was almost manipulated out of recognition was that respecting usury and "just price.'' When the church was a debtor, it seems, usury prohibitions were enforced, but not when it was a creditor. The same manipulations attended church rules respecting monastery tithes and taxes, the granting of indulgences, jubilee attendance, and benefices granted to bishops and cardinals. Such methods and practices of rent collection reached a limit in the sixteenth century precipitating the Protestant Reformation.
A theory of rational behavior permits an understanding of the church as an economic entity—one that benefited from increasing secularization of European society but one that recognized that science, technology, and humanism would ultimately weaken the kind and form of magic the church was selling. If belief in Christ and Christian principles were the main issue, it would be difficult to explain how Roman Christians issued crusades against other Catholics, the Eastern Orthodox Christian Church, or (later) Protestant Christians of all stripes. Moreover, the emergence of fierce censorship of all kinds in the sixteenth and earlier centuries is also difficult to understand (Galileo was a devout Catholic) except in an economic context, that is, the context of monopoly rent seeking by interest groups in the Church. Economists objectively viewing these policies and doctrines see them as examples of monopoly behavior and all that the model entails. If religious organizations, in this case the Roman Catholic Church, were acting solely in the public interest, they would behave as a "good government''—one that provides information, spiritual goods, and social goods to the faithful at competitive, that is, marginal cost. An economic examination of the behavior of the medieval church does not provide overwhelming support for this view. The emergence of Protestantism, which we analyze as rational economic behavior in chapter 5 and the reaction to entry in the form of a Counter-Reformation, discussed in chapter 6, further unhinges the public interest theory of Christian religious organizations.
Anthropology, history, and psychology provide essential keys to the characterization of market demand and supply in the economics of religion. In the present chapter we have focused on the impact that these elements have on the demand and supply of the forms of religion. Demand for the metacredence good is determined by full price and its proportions of time to resources, and by a set of shifters, including critical factors such as education levels, the state of science and, especially, by income and income distribution (which proxies other factors as well). Product credibility is determined within these parameters for given segments of the total market for magic and religion, given supply conditions as well. Credence, as we interpret it, is created in religious (or magical) products and forms through such factors as priestly celibacy, investments in non-salvageable capital, and specific theologies and rituals. Changes in full price will have both income and substitution effects, given an individual's uncertainty profile and the stock of shifters. Religious participation within a given form of religion will be affected given these parameters, but at critical values individuals will also alter the form of the religion chosen. Two examples in particular—the attempt by Akhenaton to institute monotheism in Egypt and the impact of a techno-scientific discovery (moveable type)—illustrate the impact of the determinants of the form of religion on religious change and evolution.
Income and substitution effects both favor the creation of time-saving religious practices as incomes rise. Religious forms and doctrines within forms thus tend to become less formal and less time-intensive and more money-intensive over time as the economy grows and science and technology expand. We have argued in this chapter that markets of some kind have and always will characterize magic and religion, and those markets, once products are understood, are amenable to economic analysis. We do not dispute any of the characterizations of the product of religion that have appeared heretofore in this literature on the economics of religion (see chapter 2). In this chapter we have attempted to more clearly delineate the nature of the product and how it changes form due to economic factors determining supply and demand. In chapter 5 and ensuing chapters we apply this analysis to a discussion of the historical declension of Christianity from the advent of Protestantism through the early modern period. In a final chapter—chapter 9—we suggest some implications of our study for the state of contemporary Christianity.
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