No urge, primal or modern, is more fundamental than the desire to explain existence. Human curiosity concerning mankind's ultimate origins and destinations has motivated multiple belief systems and organized religions, all seeking, more or less, to provide meaning to life on earth. Although we cannot know for sure, it is quite possible that religion is as old as mankind. Can the same be said of economics? Whereas economic behavior is probably as old as Homo erectus, by a common consensus the formal study of economics is only about as old as the United States of America. The origins of formal economic theory go back to Adam Smith (1723-1790), a Scottish political economist and moral philosopher, who published his An Inquiry into the Nature and Causes of the Wealth of Nations in 1776. It might come as a surprise, even to some contemporary economists, that Smith wrote at length about the economics of religion.5 But after Smith, the subject was largely ignored by the chief architects of economic theory.
Two centuries later, economists Corry Azzi and Ronald G. Ehrenberg (1975) reawakened their peers' interest in the subject by examining church attendance within the context of modern economics.6 Their work is a watershed in what has since become a burgeoning field—the economics of religion. The distinguishing feature of this field is the belief that religion and religious behavior are rational constructs. In religious activity, as in commercial activity, people respond to costs and benefits in a predictable way, and therefore their actions are amenable to economic analysis (as well as sociological, historical, psychological, and anthropological analysis). This view is becoming increasingly commonplace, as manifest by an ever-expanding volume of literature from economics and the other social sciences.7 We see this book as a continuation of this young tradition. We take our inspiration from Adam Smith. But our attachment to Smith is more fundamental than the shared assumption of rationality—which, after all, is the foundation of all modern economic investigation. By refusing to make pejorative judgments about religion, Smith distanced himself from his great friend and mentor, Scottish philosopher David Hume (1711-1776), who considered organized religion to be an elixir for the ill-informed and superstitious. Like Smith, we seek to avoid value judgments about religion. Consequently, we take preferences for religion as given and attempt to analyze their effects. We do not argue about why preferences for religion exist, or about whether or not people should believe in supernatural phenomena. For very good reasons, some of which we analyze in chapter 3, individuals have, since the beginning of recorded time, believed in the presence of an eternal spirit or deity, an afterlife, ultimate rewards and punishments, magic, and the existence of phenomena outside the corporeal or empirical. The economist, as any other scientific observer, does not attempt to explain whether such preferences are good or bad. Rather, given that they exist for reasons that are deemed rational, the economist asks what their actual effects might be on society, or on individual or collective welfare.
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