MCc MCp

Religious services

Figure 8.2

Perfect price discrimination and Protestant entry percent "biblical" tithe took the place of the many exactions of the Roman Church. In particular, the Protestant price was "cheaper" for those formerly Catholic demanders previously located along AB of the demand curve. Actually, the resulting Protestant price was higher than the resulting Catholic price(s) after entry under either perfect discrimination or simple monopoly. In a way, the Protestants cherry-picked the market for religious services by luring away those for whom religion offered the most consumer surplus. This is another testable part of our theory. Given the realities of medieval life, Protestant entry involved, indeed initially required, the use of political power to legitimize the new religions. In 1517 Luther published his Ninety-five Theses. By 1530, after the failure of Emperor Charles V to restore Catholic orthodoxy in Germany, Lutheran princes formed a league united against the Emperor and Catholic princes. The freedom and the very lives of Luther and Calvin depended on the protection of secular rulers but, as both discovered, political power can be used against particular religions as well. Nevertheless, both Calvin and Luther espoused action by civil authorities to police "idolatry, sacrilege, blasphemy and other public affronts to religion.''15 This meant oppression of Roman Catholicism ("popery") and Anabaptism and other sectarian dissent within emerging Protestantism.

Further, Luther's characterization of the polity was "the sword,'' and Calvin's was "the bridle.'' Around these ideas, monopoly or quasi-monopoly religions formed in Scotland, Scandinavia, more than half of Germany, large sections of the Netherlands and Switzerland, and areas of central Europe. Henry VIII, of course, declared religious monopoly in England as well. After Protestant entry, however, these monopoly religions had to be comparatively efficient to ward off potential entrants in an obviously more competitive market for takeovers. The critical point is that the "savings" in consumer surplus from entry (triangle ABPp in figure 8.2, a measure of the net gain by Protestant entrants) became available to support economic growth. This "supply-side" theory, which emphasizes the impact of the redirection of resources toward economic growth, has testable implications.

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