Protestant Entry

Through time, the Church continued to direct doctrine and practice to extract as much consumer surplus as possible from the faithful by implementing various second- and third-degree forms of discrimination. The Church, in short, manipulated both the quality and the full price of its product so as to put members on the margin of defection. Protestantism offered a cheaper, alternative path to salvation by eliminating the priest as middleman. The new religion held that personal salvation did not come from the institutional church but directly from the grace of God; hence the believer was saved by faith, which was considered, in turn, to be a gift from God. In its initial form Protestantism had fewer mechanisms through which its agents could extract rents, so that, in effect, it sold redemption much cheaper, even allowing for the seemingly random allocation of God's grace. This lower-cost alternative might be especially attractive to the wealthy, who saw the prospect of regaining some or all of their consumer surplus that the Catholic Church was taking from them.

Protestantism also repudiated the formalism and much of the complexity of Catholic dogma, as did all of the reform movements, whether espoused by Luther, Calvin, Zwingli, or others. This prospect of independence from the institutional church, with its plethora of rules and regulations, and the emphasis Protestantism bestowed on "in-kind" expenditures, such as "good works,'' instead of monetary payments, constituted a clean break with established religion. This break had its own attendant costs, but such costs may have been perceived as less burdensome than those imposed by the Catholic Church's strategy of price discrimination, which weighed more heavily over time, tending to drive certain believers to the brink of defection. The theology embodied in the new contract offered by Protestantism did not merely substitute an in-kind payment (e.g., "good works") for a monetary one (e.g., the purchase of indulgences). In the new religion the individual who is saved by faith (grace) would necessarily demonstrate that saving grace in the practice of good works. Most laymen probably thought they were earning salvation by good works, not just demonstrating their faith, but this is contrary to Protestant and traditional Christian doctrine. According to Weber, good works "are the technical means, not of purchasing salvation, but of getting rid of the fear of damnation. In this sense they are occasionally referred to as directly necessary for salvation____Thus the Calvinist... himself creates his own salvation, or, as would be more correct, the conviction of it. But this creation cannot, as in Catholicism, consist in a gradual accumulation of good works to one's credit, but rather in a systematic self-control which at every moment stands before the inexorable alternative, chosen or damned.''27 In a further defining moment, Weber asserted, "There was no place [in Protestantism] for the very human Catholic cycle of sin, repentance, atonement, release, followed by renewed sin. Nor was there any balance of merit for a life as a whole which could be adjusted by temporal punishments or the Church's means of grace.''28

Despite the obvious appeal of a simple, direct, and relatively inexpensive path to salvation, Protestantism did not meet with universal success. To understand the ability of the medieval church to maintain its incumbent monopoly status in the face of this new challenge, we look to the supply-side elements of our theory.

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