Recent insights on the role of religion in economic history

Sascha O. Becker, Jared Rubin, Ludger Woessmann 12 July 2020

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Historically, religion has played an important role in Western societies, affecting or even defining individual beliefs and traits, cultural norms and values, social groups and organisations, and political and military power. Over the past two decades, analysis of the relevance of religion has entered centre stage in the study of economic history. Of course, the economic study of religion has a long history itself, with a chapter of Adam Smith’s (1776) Wealth of Nations famously exploring the market for religion. But in Larry Iannaccone’s (1998) seminal survey on the economics of religion, only 13% of the cited articles could reasonably be construed to be historical, and many of those were directly related to Max Weber’s (1904/05) thesis of a Protestant ethic. This has changed in the last two decades. The rise of the economics of religion (Iyer 2016, McCleary and Barro 2019) has met the digitisation revolution affecting the study of economic history (Abramitzky 2015, Mitchener 2015) and the credibility revolution dominating recent empirical economics to create the new but rapidly growing field of ‘religion in economic history’.

General insights emerging from the new literature

The study of religion in economic history covers two broad areas of investigation. The first area is which (economic) factors cause religious adoption, religiosity, and religious change. The second area is which consequences religion exerts on economic development, seeking the ‘deep roots’ of larger economic differences between regions and religious communities. The vast majority of the recent literature has concerned one of the three main monotheisms – Judaism, Christianity, or Islam. In a chapter prepared for the forthcoming Handbook of Historical Economics (Bisin and Federico 2020), we provide an extensive overview of this literature and highlight three general insights (Becker et al. 2020).

First, the monotheistic character of the main Abrahamic religions facilitated a close historical interconnection of religion with political power and conflict. The doctrine that there is ‘one true God’ that is the defining characteristic of monotheistic faiths was both a stabilising factor for societies – because monopolised rule could curtail disagreements within religious groups – and at the same time a destabilising factor because it spurred conflict between religions (Iyigun 2015). Some of these aspects have been shown for Catholicism, where the institutionalised Church acted as a strong political player and religious doctrine influenced the development of communes, guilds, and lending markets. Similarly, different features of Islamic law affected conflict, finance, and many other aspects of economic development in the Islamic world.

Second, human capital often played a leading role in the interconnection between religion and economic history. Religious norms spurred or prevented literacy and mass education in many societies. Religion-induced human capital has been a defining element both in Jewish economic history and in the Protestant-Catholic divide in Christian economic history, as well as in how Christian missionaries impacted the historical development in affected areas.

Third, it is possible to describe economic and wider factors that have facilitated the adoption and spread of religions and religious beliefs. While the specific causes studied in the literature are clearly diverse – ranging from practices of the incumbent religion and earthquake incidents to economic potential, trade routes, printing technology, competition, educational expansion, and personal ties – it is fair to conclude that the recent literature has produced ample evidence that socioeconomic factors matter in the historical development of religions.

Topics covered in the economic history of Judaism, Christianity, and Islam

We organise our survey by religion: Judaism, Christianity, and Islam. There are two primary aspects of Jewish history studied in the literature: the Jewish edge in human capital accumulation and persecutions of the Jewish peoples. In the human capital literature, a key finding is that the Jewish focus on high-skilled occupations is not so much the result of their minority status and persecution in the diaspora, but the result of religious norms on reading the Torah (Botticini and Eckstein 2012).

Jews have always constituted a minority outside their homeland, and discrimination and ethnic violence have been a recurrent theme in their history. Anti-Semitism has shaped Jewish life for centuries and has been shown to be persistent as a result of both cultural and economic factors (e.g. Voigtländer and Voth 2012). The period of Jewish emancipation in the 19th century in many European countries brought with it a widely studied bifurcation between Orthodox and Reform Judaism. This period came to a tragic end with the fascist period and the Holocaust that eliminated Jewish life in vast parts of Europe. Recent research has studied the causes and consequences of anti-Semitism in many different countries.

The study of Christianity covers three parts: Catholicism, Protestantism, and missionaries. The literature on Catholicism focuses largely on the role the institutionalised Church played in various economic outcomes (e.g. Ekelund et al. 2002). This includes prohibitions on cousin marriage and usury, as well as human capital accumulation in monasteries and religious schools. The Church was also a major political player in the medieval and early modern periods, and some aspects of Church involvement in politics such as guild participation and the Counter-Reformation have been studied in the recent literature.

The largest literature in the field of religion in economic history is on Protestantism, taking advantage of massive amounts of newly digitised data since the Reformation period, the enormous political and religious heterogeneity of the Holy Roman Empire, and advanced econometric techniques. Several economic, social, political, and technological factors have been shown to have contributed to the adoption and spread of the Reformation (e.g. Rubin 2014). While some studies reveal limited support of Weber’s Protestant ethic hypothesis on the connection between Protestantism and economic success in certain contexts, others suggest that – just as for Judaism – there is a human capital channel: Protestants have emphasised the need for every Christian to read God’s word for themselves (Becker and Woessmann 2009). In addition to human capital, the Reformation has been shown to have affected secularisation, political change, technology diffusion, and social outcomes (e.g. Becker et al. 2017, Becker and Woessmann 2018, Cantoni et al. 2018).

While the work on Catholicism and Protestantism per se mostly focuses on European history, recent works on missionaries show that early access to Christian missions still has educational, political, and economic consequences in present-day sub-Saharan Africa, Asia, and Latin America (e.g. Woodberry 2012, Valencia Caicedo 2019).

Much of the economics of Islam focuses on the role that Islam and Islamic institutions played in political-economy outcomes and in the ‘long divergence’ between the Middle East and Western Europe (e.g. Kuran 2011, 2018, Kuran and Rubin 2018, Rubin 2017). Various works have shown how the presence of Islam in law and politics has affected economic outcomes such as corporate development, usury restrictions, conflict, finance, and human capital development.

A final group of studies exploits the wider historical variation in religions and religiosity that exists across countries, using either variation across different world religions or variation in religiosity that pools individuals from different religions.

Ample room for future study

While the religion in economic history literature has blossomed over the last decade, there is still much low-hanging fruit for future generations of scholars to pick. Maybe the most challenging direction for future research is to dig deeper into the link between economics and religiosity rather than religious affiliation – what people think and feel and which specific beliefs they do and do not adhere to. Measuring religiosity and beliefs is demanding in contemporary work, and it is even harder in the historical context where the option of fielding a survey is no longer viable.

Furthermore, many of the covered topics – for instance, anti-Semitism or the sources of religious feelings – inevitably are much more complex than the literature on the economics of religion alone can cover. Yet, economics offers a complementary perspective to the richer coverage of these topics by historians, theologists, ethnographers, and other disciplines. While recent work has clearly shown that religion has played an important role in economic history, there remains ample room, not least for multidisciplinary approaches, to advance our understanding of how religious thoughts and activities changed people’s economic lives over the course of history.

References

Abramitzky, R (2015), “Economics and the Modern Economic Historian”, Journal of Economic History 75(4): 1240–1251.

Becker, S O, M Nagler, and L Woessmann (2017), “Education and Religious Participation: City-Level Evidence from Germany’s Secularization Period 1890–1930”, Journal of Economic Growth 22(3): 273–311.

Becker, S O, J Rubin, and L Woessmann (2020), “Religion in Economic History: A Survey”, CEPR Discussion Paper 14894, forthcoming in A Bisin and G Federico (eds), Handbook of Historical Economics, Elsevier.

Becker, S O and L Woessmann (2009), “Was Weber Wrong? A Human Capital Theory of Protestant Economic History”, Quarterly Journal of Economics 124(2): 531–596.

Becker, S O, and L Woessmann (2018), “Social Cohesion, Religious Beliefs, and the Effect of Protestantism on Suicide”, Review of Economics and Statistics 100(3): 377–391.

Bisin, A and G Federico (2020), Handbook of Historical Economics, Elsevier (forthcoming). 

Botticini, M, and Z Eckstein (2012), The Chosen Few: How Education Shaped Jewish History, 70-1492. Princeton: Princeton University Press.

Cantoni, D, J Dittmar, and N Yuchtman (2018), “Religious Competition and Reallocation: The Political Economy of Secularization in the Protestant Reformation”, Quarterly Journal of Economics 133(4): 2037–2096.

Ekelund, R B Jr., R F Hébert, and R D Tollison (2002), “An Economic Analysis of the Protestant Reformation”, Journal of Political Economy 110(3): 646–671.

Iannaccone, L R (1998), “Introduction to the Economics of Religion”, Journal of Economic Literature 36(3): 1465-1495.

Iyer, S (2016), “The New Economics of Religion”, Journal of Economic Literature 54(2): 395-441.

Iyigun, M (2015), War, Peace and Prosperity in the Name of God: The Ottoman Role in Europe’s Socioeconomic Evolution. Chicago: University of Chicago Press.

Kuran, T (2011), The Long Divergence: How Islamic Law Held Back the Middle East. Princeton: Princeton University Press.

Kuran, T (2018), “Islam and Economic Performance: Historical and Contemporary Links”, Journal of Economic Literature 56(4): 1292–1359.

Kuran, T, and J Rubin (2018), “The Financial Power of the Powerless: Socio-economic Status and Interest Rates under Partial Rule of Law”, Economic Journal 128(609): 758–796.

McCleary, R M and R J Barro (2019), The Wealth of Religions: The Political Economy of Believing and Belonging. Princeton: Princeton University Press.

Mitchener, K (2015), “The 4D Future of Economic History: Digitally-driven Data Design”, Journal of Economic History 75(4): 1234–1239.

Rubin, J (2014), “Printing and Protestants: An Empirical Test of the Role of Printing in the Reformation”, Review of Economics and Statistics 96(2): 270–286.

Rubin, Jared (2017), Rulers, Religion, and Riches: Why the West Got Rich and the Middle East Did Not. Cambridge: Cambridge University Press.

Smith, A (1776), An Inquiry into the Nature and Causes of the Wealth of Nations. Oxford: Clarendon Press [1979].

Valencia Caicedo, F (2019), “The Mission: Human Capital Transmission, Economic Persistence, and Culture in South America”, Quarterly Journal of Economics 134(1): 507–556.

Voigtländer, N, and H-J Voth (2012), “Persecution Perpetuated: The Medieval Origins of Anti-Semitic Violence in Nazi Germany”, Quarterly Journal of Economics 127(3): 1339–1392.

Weber, M (1904/05), “Die protestantische Ethik und der „Geist“ des Kapitalismus”, Archiv für Sozialwissenschaft und Sozialpolitik 20: 1-54 and 21: 1-110. Reprinted in: Gesammelte Aufsätze zur Religionssoziologie, 1920: 17-206. [English translation: The Protestant Ethic and the Spirit of Capitalism, translated by Talcott Parsons, 1930/2001, London: Routledge Classics.]

Woodberry, R D (2012), “The Missionary Roots of Liberal Democracy”, American Political Science Review 106(2): 244–274.

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Topics:  Economic history

Tags:  religion, economic history, Judaism, Christianity, Islam

Xiaokai Yang Chair of Business and Economics at Monash University, Melbourne, and part-time Professor at the University of Warwick, England

Professor of Economics, Chapman University

Professor of Economics, University of Munich; Director, ifo Center for the Economics of Education

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