Introduction to the Economics of Religion Laurence R. Iannaccone Journal of Economic Literature, Vol. 36, No. 3. (Sep., 1998), pp. 1465-1495. Stable URL http flinksjstor-org/sici?sici=0022-0515%28199809%2936%3A3%3C 1465%3 AITTEOR%3E2.0.CO%IB2-Z. Journal of Economic Literature is currently published by American Economie Association Your use of the ISTOR archive indicates your acceptance of JSTOR’s Terms and Conditions of Use, available at bhupulwww.jstororg/about/terms.hunl. JSTOR’s Terms and Conditions of Use provides, in part, that unless you have obtained prior permission, you may not download an entire issue of « journal or multiple copies of articles, and you may use content in the JSTOR archive only for your personal, non-commercial us. Please contact the publisher regarding any further use of this work. Publisher contact information may be obtained at hupulwww jstor.org/journalvaca htm. Each copy of any part of a JSTOR transmission must contain the same copyright notice that appears on the screen or printed page of such transmission, JSTOR is an independent not-for-profit organization dedicated to ereating and preserving a digital archive of scholarly journals. For more information regarding JSTOR, please contact support @jstor.org, hupulwwwjstorore/ ‘Mon Dee 4 04:29:03 2006Journal of Economic Literature Vol. XXXVI (September 1998), pp. 1465-1496 Introduction to the Economics of Religion LAURENCE R. IANNACCONE! 1. Introduction ITH TWO CENTURIES separating its first and second publications, there is no denying that the economics of religion got off to a slow start. Yet de~ spite this leisurely launch, dozens of economists (and several sociologists) have now picked up where Adam Smith ({1776] 1965) and Corry Azzi and Ronald Ehrenberg (1975) left off. Armed with the tools of economic theory and a large body of data, they have written nearly 200 papers concerning issues that were previously confined to other social s ences—the determinants of religious be- lief and behavior, the nature of religious institutions, and the social and economic impact of religion. If the study of rel gion does not yet warrant a JEL classi cation number, let alone the subfield status that it enjoys within every other social science, it nevertheless qualifies as ‘Santa Clara University, Acknowledgments: 1 am indebted to many colleagues for thelr com- tents and suggestions, pardculaty Cary Ander. son, Christopher Elson, Ross Emmett, Timur Kuan, John Murray, John Peneavel, Fred Pryor, Jonathan Sarna, Darren Sherkat, Jonathan Wright 4nd two anonymous reviewers. My work on ths per was supported by grants fom the Lily Es owment (81006 0784-000) and Santa Clara U verity: Leavey School of Business, and was com- pleted while Tas a Visiting Scolar at the Hoover estittion new territory within the expanding do- main of economies.? Studies of religion promise to en- hance economics at several levels: gen- erating information about a neglected area of “nonmarket” behavior; showing how economic models can be modified to address questions about belief, norms, and values; and exploring how religion (and, by extension, morals and culture) affect economic attitudes and activities of individuals, groups, and so- cieties. At the same time, the studies promise to influence sociology, particu- larly the sociology of religion, which has developed a serious interest in the eco- nomic approach. Because nearly all this work is new and scattered over a variety of journals both in and out of econom- ies, an introduetory survey would seem to be in order. A survey serves also to dispel the il ng of cg ae ene tegtinns wii soley: pyle, eee oa yn eo oe Pac Seid Pin a ie Jey ay Rell rman ete Sociological Bian, Cama ated Senile Sie ta ton of age mee See ia eee ae 14651466 popular but untenable view of religion as a fading vestige of prescientific times. The resurgence of evangelical Christianity in the United States, the rise of Islamic fundamentalism in the Middle East, the explosive growth of Protestantism in Latin America, the re- ligious ferment in Eastern Europe and the former Soviet Union, the role of re- ligion in political and ethnic conflicts worldwide—all testify to religion’s per- vasive and continuing importance. In the United States, where data are most detailed, rates of religious belief and behavior show little or no decline over time. Indeed, American rates of church membership have actually risen throughout the past two centuries. So- cial scientists have little choice but to take account of religion, because reli- gion shows no sign of dying ont. Studies of religion and economies can be segregated into three major lines of inquiry. This essay emphasizes the line of research that interprets religious be- havior from an economic perspective, applying microeconomic theory and techniques to explain patterns of reli- gious behavior among individuals, groups, and cultures. Studies of the economic consequences of religion form a second line, which I will review in less depth. Finally, a large body of writings invoke theological principles and sacred writings to promote or criticize eco- nomic policies. This last line, which one might call religious economics, is. pri- marily of interest to philosophers, theo- logians, and economists seeking to evaluate economic policies from a reli- gious perspective.t I will not review religious economics, 4 Yot another set of studies includes the small cong orate tha eaten ego nizations from a. practical business perspective {rar to use resources more efit, market Inore effectively, and. stimulate church growth (Cig: Robert Stevens and David Loudon 1988), Journal of Economic Literature, Vol. XXXVI (September 1998) since its literature is broad and far re- moved from the research and profes- sional interests of most economists. Re- ligious economics includes a large body of writings by self-described “Islamic economists” who seek to analyze, jus- tify, and implement systems of banking, taxation, income redistribution, and fi- nance consistent with economic prinei- ples derived from the Qur'an and the Sunna. It also includes the writings of Christian theologians, clerics, and economists spanning ‘centuries—from medieval Catholic bans on usury, to contemporary Catholic pastorals on the ‘economy; from official pronouncements of mainline Protestant denominations and the National Couneil of Churches, to the diverse writings of evangelical Protestants and self-styled “Christian Economists.” Some of these writings question the very concept of religious economies, criticizing its logie, claims, and assumptions (Kenneth Elzinga 1989). Others propose radical critiques of capitalism, socialism, taxation, bank- ing, and income redistribution. Inter- ested readers can consult a variety of reviews, including Craig Gay (1991), Kuran (1993), Fred Pryor (1990), Mu- hammad Siddiqi (1981), and A. M. C. Waterman (1987). Like the work that comes before it, this essay sidesteps questions about the validity of religious beliefs or authentic- ity of religious institutions. Insofar as an explicit definition of religion proves necessary (for example, to exclude po- litical ideologies and secular philoso- phies), it suffices to define a religion as any shared set of beliefs, activities, and institutions premised upon faith in su- pernatural forces.’ In practice, how- This definition, adapted from Rodney Stark and William Bainbridge (1085, p. 5), excludes purely indvidualste spietualty and systems of Inetaphysical thought, Including some variants of Buddhism, that border on pure philoophy. SecTannaccone: Economics of Religion ever, the analysis cannot remain this abstract. Because there is little social- scientific research on religion outside of the United States and other developed Western countries, this essay is largely focused on Judeo-Christian beliefs, ac- tivities, and institutions Before proceeding, I must comment on the empirical basis for religious re- search. Religious data are, on the one hand, limited and unreliable. Govern- ments collect few religious statisties and sponsor little religious research; most religious organizations keep sloppy finan- cial records and overly inclusive mem- bership lists; and many aspects of reli- gion are inherently difficult to observe. Yet religious data are more abundant than most academics realize and far more extensive than those pertaining to many other “nonmarket” activities and institutions, such as clubs, friendships, recreational activities, self-help groups, and most social movements. Surveys provide a wealth of self-re- ported information about religious be- liefs, activities, and affiliation.® Since the late 1930s, the Gallup organization has repeatedly polled people about their denominational preference, church attendance, and religions b liefs. Beginning in 1972, NORC’s Gen- eral Social Surveys provide (nearly) an- nual responses to many more religious questions (James Davis and Tom Smith Keith Roberts (1990, pp. 3-28) for other defini tons ands discussion of th diferences between “fintionais” substantive and. “phenome nologia definitions {fe th most survey questions concerning per sonal and pate baw a to ates the overall necaraey of people's responses to religious questions. Kink Hadaway, Penny Marler, tnd’ Mar Chaves (1985) present evidence Ut Go pis soniye ata ates a sure tendance. Working with data rom the {975-6 and. 1981 Michigtn Time-Use Studi Je dale (100, p27 one wosky at Aioe rates about 16 percent lowe than those ported by Gallup. 1467 1996).7 Hundreds of other national sur- veys include basic questions about church attendance and denominational preference. And hundreds more, spon- sored by denominations, interdenom national agencies, and philanthropic or- ganizations, provide highly detailed, though less representative, information about denominations and their congre- gations, members, and leaders. Institutional records _ complement self-reported survey data. Nearly all de- nominations track their membership, contributions, expenditures, number of congregations, and number of clergy, and many also keep records on bap- tisms, conversions, ordinations, mission- ary activity, and attendance.’ The U.S. government collects some relevant data, including statistics on clergy employ- ment and church construetion and TRS tax records (which, together with survey data and denominational reports, yield estimates of religious giving and its de- terminants).° Other useful, though largely neglected, information includes 1 The Canadian General Social Surveys, World Values Surveys, International Callup polls, and Surveys ofthe International So prod aalogons,thongh less dete, satis for many other countries ® Antal summaries of denominational statistics have appeared in the Yearbook af American and Canadian Churches since 1013, and many denom fatloos publish annual repor's and/or alan that provide more detailed Information dsaggre- gated tothe loa level The U.S. governments de. enna’ Consur of Tligious Bodies, conducted from the. 1850 through the 1030s, reports a wide range. of church attic. dsagaregsted tothe level of cites and counties; series of privately sponsored censuses provide. analogous” county iEvel membership stalstics for 1952" 1971, 1980, and 1990 (Martin Bradley etl. 1902, p vi) ® See annual editions ofthe Statetleal Abstract of the Unted States and Historical Statstis of the United States Colonial Tines to 1970 for these and other daia pertaining to religion, Only one U.S. Consus Bureau survey, the March 1087 Cu tent Population Survey, atked people their reli: ous aflistion, Other goveroments collet more fligns data in Candin, amaze, and population censuses ask people thet Swedish church statistics, whic includ1468 sales of religious books, periodicals, and music; church telephone listings; clergy salaries; chureh-school and seminary enrollments, and data on religious broadcasting, 2. The Continuing Importance of Religion Psychologists, anthropologists, and sociologists have long viewed religion as a category of behavior largely immune to the rational caleulus. Indeed, for many nineteenth-century scholars—is cluding Marx, Freud, and Comte—i tense religious commitment sprang from nothing less than outright irration- ality. From this assumption it was but a small step to the so-called “seculariza- tion thesis,” which came to function as the principal paradigm for the social- scientific study of religion. According to the prominent sociologist Gerhard Len- ski (1963, p. 3), sociology was thus “from its inception . . . committed to the positivist view that religion in. the modern world is merely a survival from ‘man’s primitive past, and doomed to disappear in an era of science and gen- eral enlightenment.” Never mind that the secularization thesis is wrong (Andrew Greeley 1989; R. Stephen Warner 1993); it has spawned a body of stylized facts that few dare question. For example: that re- ligion must inevitably decline as seience level records of church participation, date ek to the IT century (Thorlet Petterson 1968). British denominational statstis from 1700 through 1970 have heen tabulated by Robert Cur- He, Alan Cilber, and Lee Horsley (1977). David Barrett (1952) his compiled numerous 20th cen- tury religions statistic for more than 200 coun. tres Stil other sourees include the Human Rela: tions Area Files, which code. anthropologists observations about hundreds of premodern socie- ties (Brooks Hull 1094), and volumes of historical Satitles concerning the medieval Catholic church ‘Robert Bkelond etal 1996), local congregations, and religious communes (Murray 19986, Journal of Economic Literature, Vol. XXXVI (September 1998) and technology advance; that individu- als become less religious and more skeptical of faith-based claims as they acquire more education, particularly more familiarity with science; and that membership in deviant religious groups (so-called “sects, cults, and fundamen talisms”) is usually the consequence of indoctrination leading to aberrant val- ues, or abnormal psychology due to trauma, neurosis, or unmet needs. Most people “know” these statements to be true, even though decades of research have repeatedly proved them false. As survey, census, and historical data have piled up, the continuing vitality of religion has become apparent, and no- where more so than in the United States. Consider, for example, the fol- lowing statistical portrait, gleaned from a variety of contemporary studies (1) American church membership rates have risen throughout most of the past two centuries—from 17 per- cent of the population at the time of the Revolution, to 34 percent by the mid-1800s, to more than 60 percent today. (2) The fraction of the U.S. popula- tion employed as clergy has remained around 1.2 per thousand for the past 150 years. See Figure 1, based on data from various government re- ports, including the 1850, 1880, and 1906 Census of Religious Bodies, His- torical Statistics of the United States Colonial Times to 1970, and the Bu- Working. from fairly tellalechute-level ndluding the US. government Census jous Bodies, Finke and Stark (1992, p. 16) estimate church. membership rates. from i776 through 1980. In Gallup pols, rates of seve ported churel membership lave declined. very Highly, from 79 percent in 1997 to.70 percent in 1905, nd the ration of respondents climing no Feligons preference ae increased from 8 percent In Ltt and about 3 percent throughout the 19505 sad 196s 08 pee n 1085 hough pat of ais is attributable to changes in questionTannaccone: Economies of Religion 1469 4 2 a dno g gs bo e Ba 2 ° wsio 1800881800108 19802000 Year Figure 1. US. Clergy Employment, 1850-1095, Source: 1850, 1850: Religious Bodies (US, Burean of Census, 1850 and 188). 1900-1070. Historical Statistic ofthe United State: Colonial Times to 1970 (iS, Bureau of Census 197, series C458), 1977-1985: Employment and Farming (US. Bureau of Labor Statistics, January ies). reau of Labor Statistics’ January re- ports on Employment and Earnings (3) Since the advent of national opin- ion polls in the late-1930s, the per- centage of Americans claiming to attend church in a typical week has_re- mained remarkably stable, around 40 percent of the total population. Figure 3, based on responses to Gallup polls, plots attendance trends for self- identified Protestants, self-identified Catholics, and all Americans (includ- ing non-Christians). No real pattern ‘emerges apart from a downward shift in Catholic attendance immediately following a series of controversial papal pronouncements in the mid-1960s (Michael Hout and Greeley 1987). (4) Surveyed religious beliefs have proved nearly as stable as church a tendance. For decades, about 95 per- cent of Americans have professed be- lief in “the existence of God or a universal spirit” and a large fraction continue to believe in heaven, hell, an afterlife, and the divinity of Jesus. See Table 1 and also Greeley (1989) for details. (5) Total church contributions appear to have remained around 1 percent of GNP since at least 1955. Religious giving consistently accounts for about half of all charitable giving in the United States (approximately 64 billion dollars in 1995); religious vol- unteer work is more common than any other form of volunteer work (Charles Clotfelter 1985, p. 145); and the majority of nonprofit institutions are or were religiously based.! ‘Compared to other forms of giving, religious contributions display a relatively" low eross-soc- tional income elasticity (between -4 and 6). Clot- felter (1985, pp. 64-65) summarizes results from three studies that estimate individual-level peice tnd income elasticities for religious giving, J. F1470 Journal of Economic Literature, Vol. XXXVI (September 1998) 0 a 70 a, a a Aa o a s Peroent Attending Weekly 0 Py 0 ° 1890 1010 1850 1860 170 1980 1990 2000 Year Figure 2. US. Church Attendance Rates, 1950-85. Notes I respondents 49- selidentifed Protestants ‘A = seidentifed Catholics Source: Gallup opinion pll statis, reported In annual editions of Rlision x America (Princeton Religion Research Center 1900, 199, 1995) an in Host snd Greeley (1987) (6) Religion is not the province of the poor or uninformed. In numerous analyses of cross-sectional survey data, rates of religious belief and religious activity tend not to decline with in- come, and most rates inerease with education.!2 On the other hand, Pickering (1985) and Jody Lipford (1995) estimate corresponding income elasticities across the con- regations of individval- denominations. Cin S.A. reports annual estimates of religious an nonreligious giving from 1955 throwgh 1995 (see AAERC Trust for Philanthropy, 1996 and earlier {tinual editions), Historical Stotistcs ofthe United Ste: Clot Taner o 1970 (0S Beau o the Genus 1975, p. 359) provides analogous statistics for 1930 through 1970. “s "2 Over the past 40 years, scores of sociological studies have snvestigsted the empirical relation- Ship Between income andior education and mu tnerous messures of religiosity see, for example, Lenses (1963), Stark (1072), Wade hoof and Wil Kam McKinney (1087), and. Ross Stolzenberg, Mary Bat-Loy and Linda Wale (1095) Since the styles of religion do vary with income and education. Theologically conser- vative denominations (typically labeled “fundamentalist,” “Pentecos- tal,” or “sectarian” draw a dispropor- tionate share of their members from among the poorer, less educated, and minority members of society (Stark tmid-1970s economist have weighed in, estimating tmodels more sonstve to nuances of economic theory. Thets basi results, However, mieor those of the sociologist: education is a weak but gener. tly postive predictor of religious participation; in cone isa song, postive predictor of religous cntebutions, but very weak predictor of most ther, measures of religious netivity, such as church attendance, ‘church’ membership fe ienoy of prayer and rates of religious bell I hme or wage effects are almost abrays dared by those of age, gender, and religous upbringing See. Aza “and” Ehrenberg (1873), Ehrenberg (977) Stephen Long and. Russell Settle (1977), Holly ‘Ulbrich and Myles Wallace (1985, 1984), and bide (1993)Tannaccone: Economics of Religion TABLE 1 POLLS OF RELIGIOUS BELIEFS God Jesus Life Heaven Hel 1915 «85 6 109877} 1965597 u 196097 “ 1659775 19798 B 1975 OF 19895 BTL 185k 5TH 1990 “won oO 199596 m Noes: Where data are lacking fora given ear, t valle for one fhe to years elo orale the sverage cf these values entered ‘Source: Callp poll, reported in “Reign in Amer- se" (1985, 1, 199295, 109) Variables Gar = Percent of Ye" responses to “Do you inv nthe extenceof Cod ora iver pnt?” Jesus = Perent of "Yes. God” responses to ‘Do you believe esis Chis ever actually Heed? Doyou think He was Goal or just another lade ike Mohammed or Boda? Life = Peroent of Yer responses to “Do you believe in aie afer death?” Heaven = Percent of "Yo" responss to “Do ou think theres abesven where people sho have led god ves are ternal rewarded?” el Hell = Peroent of Ye" responses to “Doyou iniove there tw hell” 1972; Roof and McKinney 1987; Tannaceone 1992). (7) Media hype notwithstanding, most members of “extremist sects and cults” show no signs of deviant per- sonality, such as neurosis, manic depression, or excessive authoritari- anism. Charges of forced indoctri- nation, coercive “brainwashing,” and “mind’ eontrol” have been so. thor- oughly debunked that few courts and even fewer scholars now take 1471 them seriously (James Richardson 1991) (8) College professors are, on aver- age, somewhat less religious than the general public, but it is not at all clear that this reflects a fundamental tension between faith and science. Ir- religion is most pronounced in the humanities and the social sciences; faculty in the physical sciences and professional fields are much more likely to attend church, profess faith, and approve of religion (Robert Wathnow 1985). Tt is, in fact, only within the social sciences most com- mitted to the secularization thesis (psychology, anthropology, and, to a lesser extent, sociology) that one finds high levels of antireligious sen- timent (Stark, Tannaccone, and Finke 1996). Among. leading | physicists, chemists, and biologists, belief in a god who answers prayer is as wide- spread today as it was in 1916 ( ward Larson and Larry Witham 1997). (9) Throughout the world, fast grow- ing religions tend to be strict, sectar- ian, and theologically conservative In the United States, such groups continue to gain members, even as theologically liberal Protestant de- nominations (ineluding Episcopalian, Methodist, Presbyterian, and United Church of Christ) struggle with relative and absolute losses.!¥ Mormons and 18 annual editions ofthe Yearbook of Amertcon Canadian Churches provide membership figures {or numerous denominations. The growth of con- serative denominations might seem to contradict indie dat decnenting the say of rople's professed. religions elit. However, Froth findings are consistent with « long recog: nized tendeney for denominations to liberalize and fccularize over time (James Montgomery 19963). ‘The apparent shit ofthe population toward more consenative groups is best seen as an individual. level attempt to stay put (theologically and so Gialy) in the face of Grganizational dai (Finke Sind Star 1992).1472 Jehovah's Witnesses, long-regarded as highly deviant groups, continue to double their membership every 15 to 20 years, and now outnumber all but the largest five or six Protestant de- nominations in America. In Latin America, conservative Christian groups (Fundamentalists, Pentecostals, Mor- mons, and Jehovah's Witnesses) are growing so rapidly that they may soon outnumber Catholics in several coun- tries (David Stoll 1990). Rates of growth are not the only characteristic that varies across denomi- nations. Virtually every measure of religious involvement or commitment— beliefs, attendance, and contributions— correlates positively with the denomina- tion's overall level of conservatism, strictness, or sectarianism. The result: ing pattern, known as the church-sect typology, proves useful for classifying denominations. For example, the mem: bers of liberal Protestant denominations contribute a relatively small proportion of their income to their churches {around 1.5 percent), whereas the mem- hers of conservative Protestant denomi- nations, such as the Southern Baptists and the Assemblies of God, contribute significantly more (between 2 percent and 4 percent), and Mormon contribu- tions average 6 percent of income. Co tributions of time, as measured by rates of church attendance, follow a similar pattern, with liberal Protestant denomi- nations’ ranking lowest, conservative Protestants attending more, and sect members, such as Mormons and Jeho- vah's Witnesses, attending still more (Dean Hoge and Fenggang Yang 1994; Iannaccone 1992, 1994). Measures of doctrinal orthodoxy (such as belief in the divinity of Jesus, the inerrancy of the Bible, and the existence of a literal heaven and hell) follow the same pat- tern (Roof and McKinney 1987). Ameri- Journal of Economic Literature, Vol. XXXVI (September 1998) can Judaism contains its own spectrum of denominations—Reform, Conserva- tive, and Orthodox—and Jewish survey data reveal patterns analogous to those observed across the spectrum of Chris- tian denominations. For example, Or- thodox Jews report the highest rates of religious observance and commitment, and Reform Jews report the lowest (Bernard Lazerwitz and Michael Harri- son 1979; Tannaceone 1994, p. 1196} ‘The National Opinion Research Gen- ter’s General Social Surveys provide de- tailed self-reported data on Americans’ religious beliefs and behavior. Table 2 reports regression results for Christian respondents to the 1986 through 1990 surveys. In columns 1 and 5, individ- ual rates of church attendance (meas- ured in services per year) and religious contributions (measured in dollars per year) are regressed onto standard socio- economic variables. Columns 2 and 6 introduce a set of denominational dum- mies. The dummy variables (Cons_prot, Sect_mem, and Catholic) distinguish the members of theologically liberal “mainline” Protestant denominations (the omitted category) from members of the Catholie Church, two. theologi- cally conservative Protestant denomina- tions (Southern Baptists and Missouri Synod Lutherans), and a variety of highly conservative sects (including most. fundamentalist groups, Pente- costals, Jehovah’s Witnesses, Advent- ists, and Mormons). Columns 3 and 7 add two measures of the respondent's religious beliefs and a dummy that indi- MNORC has conducted the General Social Sur- voy (almost) annually from 1972 through 1996, Each survey's data come from face-to-face inter ews with an independently drawn sample of shout 11500 English speaking, noninsttutionalized gpl ged 18.0 or (Da and. Sith 199) sble 2 reports results for surveys which bracket the three years 1981-80, in which the GSS asked aout religious contributions. Other yeas, etter istore" 1986 or alter 1990, yield essentially the sme attendance resultsIannaccone: Economics of Religion 1473 TABLE2 DETERMINANTS OF RELIGIOUS PARTICIFATION ny @ @ @ © © m Attend Attend —_Atend Attend Conte) Gontrib__ Contrib Education 0851 10 1311 2010 @aoal 74458 ogIS _LlO.T7® (81M (982) (9.09) (72) HT) (798) (75) (@.85) Income 083-019-880 BK 1A TOONS 113, 799—1S.B9 (06) a3) 156) (1.78) (5B) (605), (655) (@.66) Age 259-285 HS OSARTBL 13654 = 1RGR 186M (1486) (1667) (1098) 40.72) (882) (953) (770) (10.75) Sex 500 583356657 ©9865 «HZ R85 ISAS (LOLOL. (10.10) (10.17) (7.63) (768) (058) (052) (0a) (1.74) Married «5.506 «5.150 4274-6982 .9H1 8579316249 -T.190 ($92) (645) 415) 860) (8.26) (712) 1183) 085) Black 496341854720 TOW 1OLOTS 33629 © 4491540160, (635) 481) IT) G57) (8.63) 055) 065) (149) Cons_prat 4612 1322 2508 ss631 205523360862 55) (126) (14a) (6.00) Gis) (420) Sect_mem 1319958217776 765005 GTM 824.169, 33) 48) 51) (748) a) (7) Catholic 6576 6402.24 T0553 1ITSSL 23.735 (045) 03) (754) (182) (-263)—(-02) Literal 9.140 15:58 267491 987.835 auis) ars) (490) 10) Poste 76 12404 208973 202.704 (638) (809) (358) (8.90) Marsame 1333321562 498731 720.886 (37) 387) (744) (8.60) Cons 549 12901-23775 82.157 -1ss75-19036 31927 ro oF 10 2» = ir 5 19 = Cases 6561058595800 2550 Source; 1996-90 General Soil Survey, exchding non-Chiistian respondents [Notes statistics in parentheses. Table entries in columns (1) through (8) and (5) through (7) report OLS eoef- ents for column variables (annual church attendance rate and annual church contsbutions) regressed onto row variables; table (4) and (8) are tobi regressions. Variable definitions: attend = respondents (Rs) church atten- ‘dance (sericesyea); contrib = R's church contributions (in 1960 Svea); education = Rs years of schooling; in ‘come = househeld income (in 1990 Slyear age = Rs age; sex, marred, and black = dummy variables that equal 1 IF Ris female, black, or marsed;cons_prot, sec mem, and marsame » dummy variables that equal LF R belongs to a conservative Protestant denomination (Souther Baptist or Missouri Synod Lutheran), belongs toa sect (Fun- ‘damental, Pentecostal, Jehoval’s Witness, Adventist, or Mormon), or has a spouse belonging to the same de nominations: Merl and poste» dummy vasables equal to 17 R believes the Bible i erally tue or believes in Ife after death cates whether the respondent is mar- range restrictions (because annual con- ried to someone who shares his or her tributions are censored below zero dol- denominational preference. The Tobit lars, and annual attendance rates are regressions in columns 4 and 8 reesti- censored below zero and above 52 mate these equations, taking account of weeks per year).1474 The results confirm many of the gen- eralizations noted above. Family. in- come, for example, has little effect on rates of church attendance but a strong positive effect on total giving.! The ef- fect of education is positive and statisti- cally significant throughout. Women at- tend church much more than men, an effect that appears in numerous studies and virtually all measures of personal religiousness. Blacks attend church ‘more than whites, and their rates of gi ing are somewhat higher after control- ling for age, income, and education. Age is an especially strong predictor; older people are more religious (and this effect remains even after control- ling for period and cohort effects; Hout and Greeley 1987, p. 328). Columns 2 and 5 confirm the importance of sec- tarianism. Members of conservative and sectarian denominations attend and give much more than members of liberal denominations even after con- trolling for socioeconomic differences. (Catholics break the pattern, in that they attend substantially more than mainline Protestants but contribute substantially less.) The remaining col- umns show that sectarian effects re- main strong even after introducing individual-level measures of belief orthodoxy and religious endogamy, suggesting that denominational differ- ences reflect. more than the mere sorting of highly religious people into theologically conservative denomina- tions. Despite all these “significant” effects, observable factors account for only a’small fraction of the total vari- ance in these (and all) survey data on religious behavior. 19] also ran the regressions including a measure of wages, but found its effect to be virtually nil in A eres, ining hve reed em ployed respondents, male respondents, and em- ployed males Journal of Economic Literature, Vol. XXXVI (September 1998) 3, The Economic Consequences of Religion Over the past century, scholars have made many claims about the economic consequences of religion, but none grander than those associated with Max Weber's The Protestant Ethic and the Spirit of Capitalism ([1905]1958), Pro- ponents of Weber's thesis argue that: [t]he Protestant Reformation triggered a mental revolution which made possible the advent of modem capitalism. The worldview propagated by Protestantism broke with tra- Aitional psychologteal orientations through its temphasis on personal diligence, frugality, and tha, on individual responsibilty, and through the moral approval it granted to rsk- taking and to financial sell improvement (acques Delacroix 1992, p. 4) Despite numerous studies challenging the empirical validity of this argument, the Protestant Ethic thesis lives “as an article of faith in such varied texts as (nearly all) sociology primers, interna- tional business textbooks of all stripes, [and] the middlebrow press” (Delacroix 1995, p. 126; ef, Shmuel N. Eisenstadt 1968). Ironically, the most noteworthy fea- ture of the Protestant Ethie thesis is its absence of empirical support. Econo- mists tempted to carry Weber's myth into their work would do well to heed the rebuttals of Anderson and Robert Tollison (1992), Delacroix (1992), Rich ard H. Tawney (1926), and especially Kurt Samuelsson (1993) who, in the words of the renowned sociologist George Homans, does not “just tinker with Weber's hypothesis but leaves it in ruins.” Samuelsson and Tawney demonstrate that nearly all the capitalist institutions emphasized by Weber preceded the Protestant Reformation that he viewed as their cause. Samuelsson further finds that early Protestant theologians were not particularly interested in economicIannaccone: Economics of Religion matters, nor did they seem to_under- stand markets. And like their Catholic counterparts, most took a dim view of credit and interest. Finally, Samuelsson refutes Weber's stylized account of European economic history, demon- strating that, across the regions cited by Weber, economic progress was uncorre~ lated with religion, or was temporally incompatible with Weber's thesis, or ac- tually reversed the pattern claimed by Weber. As Delacroix (1995, p. 126) ob- serves, “Amsterdam's wealth was cen- tered on Catholic families; the eco- nomically advanced German Rhineland is more Catholic than Protestant; all- Catholic Belgium was the second cou try to industrialize, ahead of a good half-dozen Protestant entities.” Com- paring levels of economic development across the Protestant and Catholic countries of Europe, Delacroix (1992) finds no evidence that one group out- performs the other. Still, there is more to the story of re~ ligion’s effects than Weber's thesis.1® At the level of individuals and house- holds, economic behavior and outcomes do correlate with religion. It is, for ex- ample, well known that American Jews werage significantly higher wages and income than non-Jews, a difference largely attributable to their high levels of education (Barry Chiswick 1983, 26 0ne may reject Weber's thesls about Protes- tants and Catholic without concding that all = Higlour traditions are equally conducive to. cco. nomic growth or capitalist institutions. Avner Greif (094) combines historical evidence. and fume-thooretial analysis to argu that “individual EEC (as opposed to “eollecivs’) cultural beliefs foster social institutions that encourage anony- ‘ous exchange, initiative, and innovation shih tm {im simulate Tongerun economic growth, Kuran (G67) notes thatthe economic and tteleetal rent in Tslamie countries has lagged that est for most of a millennium, an outcome that many scholars trace to Islas “tate world. ew." Kiran’ (1905) theory of “preference flit Cation” may help explain the persistence of this Sind other economically inefficient cultural norms 1475 1985).17 More striking are the links be- tween religiosity and a wide range of economically important social behavior, such as criminal activity, drug and alco- hol consumption, physical and mental health, and marriage, fertility, and di- It is possible, of course, that reli- gion’s statistical “effects” are entirely spurious. One may readily posit the e istence of underlying characteristics that shape both religious behavior and any other behavior. “Good” kids may avoid drugs, stay in school, and go to church. People with liberal values or deviant lifestyles will probably sort themselves out of conservative denomi- nations. One must agree with Richard Freeman (1986, p. 371) that nothing short of a (probably unattainable) “genuine experiment” will suffice to demonstrate religion’s causal. impact. Yet one should also recognize that there exist plausible a priori arguments for re~ ligion’s impact and that despite numer- ous attempts to root out spurious corre- lation, many religious effects remain ac iain Brno ad hls tr teeentured of pengeation which sated the aes of grail e-epenae ay ptl Shen Ua nee “pepe ampli, bec ih tk agate ae meme ila hn ik ol eg By ae rl ies rc ance None cent So, unr ae ee (86 Fos cs fhe Hh ig of oe eaten east liealao Kecmeeminy i he Yo wih nage roo eaeeealedeeel raed ie tesla Nasa onr a1476 substantively large and statistically si nificant.1® Freeman’s (1986, pp. 372-73) own study of churchgoing among black male youth illustrates this last point. Based ‘on a careful analysis of NBER and NLS survey data, he concludes that “[elhurchgoing [favorably] affects the allocation of time, school attendance, work activity, and the frequency of so- cially deviant activity (erime, drugs, and alcohol” and that “the pattern of statis- tical results suggests that at least some part of the churchgoing effect is the re- sult of an actual causal impact.” Other economists—Lipford, Robert MeCor- mick, and Tollison (1993) and Hull and Frederick Bold (1995)—have obtained analogous results using aggregate data not based on self-reports. Even after controlling for police expenditures and crime-related socioeconomic variables, they observe significantly lower rates of violent and nonviolent crime in states and counties with higher rates of reli- gious membership. There is, in fact, a large empirical lit- erature on the relationship between re- ligion and different forms of “devi- ance,” including crime (T. David Evans 18'The argument for genuine impact begins with the fact that most religious institutions are orth Sight and specific about their moral-behavioral in junctions and do employ many time-tested meth fas of indoctrination and social control: early education, parental reinforcement, conditional Status and membership, appeals to tradition and an allseeing judge, and collective actotis that foster soca des faclitate monitoring, and rlse the cost of disobedience. Chureh members in gen- tral, and parents in particlar, da seem to believe that religous training makes a diference, and do Invest atta resoures in veligous stig lesigned to help ther caldren grow up "go ‘Though I know of no attempts to formally model these effets, the religions household. production framework reviewed in Section IV proves «nat ral place to start. *Ethese studies replicate the results of a sock ‘logist, Bainbridge (1988), who obtained essen ally the same eligious effect using the same ‘ate, a somewhat different set of control, and & “ferent level of aggregation Journal of Economic Literature, Vol. XXXVI (September 1998) et al. 1995), suicide (Bainbridge 1989; Bernice Pescosolido and Sharon Geor- gianna 1989), divorce (Timothy Heaton and Edith Pratt 1990), drug and alcohol use (John Cochran and Ronald Akers 1989), and nonmarital sex (Arland Thornton, William Axinn and Daniel Hill 1992).2° Studies of teenage delin- quency are particularly abundant, and typically find that youth raised in highly religious homes are less likely to engage in criminal activity, use drugs or aleo- hol, or engage in premarital sex. These effects are particularly strong for chil- dren raised in strict denominations or religiously homogeneous communities. For at least two decades, the criminolo- gists and sociologists producing this re- search have focussed their efforts on identifying and overcoming spurious correlation. In so doing they have em- ployed sensible theories, sophisticated models, rich and varied data, and nu- merous controls. The few analogous economic studies, including Freeman (1986), Lipford, McCormick, and Tol- lison (1993), and Evelyn Lehrer and Carmel Chiswick (1993), have obtained similar results Religion seems to affect both mental and physical health. Despite the nonempirical Freudian tradition that blames religion for neurosis, prejudice, and authoritarianism, empirical studies consistently find that high rates of reli- gious commitment and activity are asso- ciated with mental health, reduced stress, and increased life satisfaction (Christopher Ellison 1993). Here again, research has focused on problems of spurious correlation, and here again re- ligious effects tend to persist even after 2% according to.Cochran and Leonard Beeghley (1901p. 48)."Lelvidence of director ind fects of religion andor rligiosiy on nonmarital tonal ates or behaviors an Be found In tore than 80 studies” Stark and. Bainbridge. (1997) summarize the sil lager erature of religion and ern,Tannaccone: Economics of Religion controlling for age, income, education, gender, race, marital status, place of residence, social ties, and previous trau- matic events (Ellison 1991). Medical researchers have reported statistically significant religious effects in hundreds of epidemiological studies, many of which have appeared in leading journals such the New England Journal of Medicine, JAMA, Lancet, and the American Journal of Epidemiology (Jef- frey Levin and Harold Vanderpool 1987; Levin 1994).2! ‘The causal mecha- nisms are sometimes clear-cut: Mor- mons, Seventh Day Adventists, and members of other strict religious groups enjoy longer lives and lower rates of cancer, stroke, hypertension, and heart isease because they tend to follow their religions’ strictures governing smoking, drinking, drug use, and other health-related behavior 22 Broader cor- relations between health and religiosity seem to have many causes, including a negative link between faith and stress or a positive link between church involve- ‘ment and social support (Levin 1994). Religious affiliation also affects pat- terns of marriage and marital stability, and it does so in ways consistent with economic models of marriage markets and household production. One may view the religious commitments of hus- band and wife as complementary, but 2% Levin (1904, p. 1477) reports that “A signi cant, postive religio effect on health was found in prospective and retrospective stale, in cohort and case-control stdles, In stiies of ehildsen and Ofolder adults in studies of US. White and Black Protestants, European Catholics, Pars fom Tn dia Zils from South Aiden, Japanese Buddhists tnd Israel Jews, among others in sties from the 1880s and the 1980s; and in studies of self-mitin acute conditions, of fatal chronle diseases and of iinesses with lengthy, brief. or absent latency pe- ods, agnosis ad morality P “Bi see clear wy nonmembers fll to adopt equally healthy lifestyles. One might argue that r= iigions might help people overcome self-control problems or that religious strictures cause people Teoverinvest in health 1417 denomination-specific, human capital inputs to household production (Gary Becker, Elizabeth Landes, and Robert Michael 1977; Iannaccone 1990). This complementarity encourages marriage within one’s denomination, particularly if it has few close substitutes, and e hances the stability of same-faith mar- riages. There is strong support for these predictions, particularly in Lehrer and C. Chiswick (1993), the most sophisti- cated study to date. Lehrer and Chiswick find high rates of “religious endogamy” within all denominations and especially high rates among Jews, Catholics, and Mormons. They also con firm that interfaith marriages are more likely to end in divorce, particularly for members of exclusive religious groups. A Mormon’s marriage to a non-Mormon is thus three times more likely to end in divorce than a marriage to another Mor- mon. Lehrer (1996a, 1996b) also ob- serves more subtle intermarriage ef- fects, including higher rates of female employment and lower rates of in- tended fertility, which she interprets as reduced marriage-specific investment due to the increased risk of divorce.28 Although the research cited above demonstrates a relationship between re~ ligion and economically relevant behav- ior, there may be no comparable rel tionship between religion and economic attitudes. People’s religious affiliation or degree of religiosity seems not to in- fluence their attitudes concerning capi- talism, socialism, income redistribution, private property, free trade, and gov- ernment. regulation. Within virtually other forty effets exist only for specie denominations. Mormons sverege much higher than normal fry, and Jews a people with no felis aft have ever that neta fer i Fundamentalst are les ely than others to the elfectve methots of contraception, and hen faced wilh an unwanted progetogy” ae. more key 0 choose adaption over abortion {Marsal Medoft 1988).1478 every religious tradition or denomina- tional grouping (fundamentalist versus liberal, Protestant versus Catholic, or Western versus Asian) one finds a’ be- wildering variety of economic statements emanating from the representative bod- ies and leading thinkers of most de- nominational families (Gay 1991; Kuran 1993), It would seem that every reli- gious tradition and sacred literature contains enough ambiguity to justify any number of economic positions. ‘The economic attitudes of a denomi- nation’s rank-and-file members are even more diverse than those of its offi- cials. For example, despite media hype concerning the conservatism of “the Re- ligious Right,” opinion polls consis- tently find that the economic attitudes of evangelical-fundamentalist Protes- tants are no more “conservative” than those of other Protestants (Ralph Pyle 1993). Indeed, on several dimensions, most notably income redistribution and aid to the poor, they are significantly less conservative than the average American (even after controlling for their race, in- come, and education). This is not to say that conservative Protestants are indis- tinguishable from other Americans, but that their conservatism revolves around a set of theological, moral, and social issues (such as school prayer, abortion, and sexual conduct), which prove largely independent of their economic attitudes. This lack of correlation be- tween religious and economic thinking is, of course, just one more blow to Weber's “Protestant Ethic” thesis. In sum, religion seems to matter, but its impact is far from uniform. It affects some behavioral outcomes (such as earnings, education, and economic atti- tudes) much less than others; many ef- fects vary across denominations (and are often strongest in sectarian groups); and some effects, such as life satisfac- tion, relate most strongly to levels of ‘Journal of Economic Literature, Vol. XXXVI (September 1998) belief, whereas others, such as physical health and most forms of deviance, r late more strongly to levels of involv ment. As Freeman (1986, p. 372) notes, this very lack of uniformity argues against spurious correlation due to any simple form of omitted heterogeneity. Religious effects do not reduce to a sin- gle unobserved factor, such as good- ness, conservatism, credulity, or tisk aversion—a finding that motivates the search for more sophisticated models of religious behavior. 4. Economic Analyses of Religion Adam Smith ({1776]1965, pp. 740— 66) laid the foundation for the eco- nomic analysis of religion in a largely ignored chapter of The Wealth of Na- tions.24 Smith argued that self-interest motivates clergy just as it does secular producers; that market forces constrain churches just as they constrain secular firms; and that the benefits of competi- tion, the burdens of monopoly, and the hazards of government regulation are as real for religion as for any other sector of the economy. For nearly 200 years, Smith's state- ments constituted “almost everything that economists, qua economists have said on [the] subject” of religion (Kenneth Boulding 1970, p. 188). But since the 1970s, and especially in the past few years, economists and sociologists have re- turned to Smith’s insights. Viewing re- ligious behavior as an instance of ra- tional choice, rather than an exception to it, they have analyzed religious be- havior at the individual, group, and market level 24 mith (120]980)adresesehigous mora isn md ene he Theo af orl Sonnet ache th antolon sade So dy el tg alae TSL39F Foran extensive dseussion of Smits eee Iigous sews, te Peter Mino 88)Tannaccone: Economics of Religion ‘The preceding sections lend plausi- bility to this enterprise by underscoring religion's continuing appeal in the face of unprecedented prosperity, education, and freedom. By all accounts, Ameri- cans choose to remain relatively pious and religiously active. They are under no compulsion to claim a faith or join a church as many Europeans were in times past; they have access to an im- mense market of more than 1,500 de- nominational alternatives (Gordon Mel- ton 1989); they can, and often do, vary their level of religious involvement or move between congregations or de- nominations (“shopping” for the church that best meets their perceived needs); and they readily justify their religious involvement in terms of its perceived benefits. Although many of these bene- fits might be illusory, or at least un- knowable, many others (in the realm of health, deviance, and family life) stand up to methods of inference far more so- phisticated than those which charac- terize most personal judgments. 4.1 Religious Household Production Contemporary research on the eco- nomics of religion begins with Azzi and Ehrenberg’s (1975) household produe- tion model of church attendance and contributions. Within this provocative model, individuals allocate their time and goods among reli d secular commodities so as to maximize lifetime and afterlife utility. Azzi and Ehrenberg posit “afterlife consumption” as the pri- ‘mary goal of religious participation, an assumption that implies a strong restrie- tion on the way religious commodities enter household utility functions. For- mally, households are assumed to maxi- mize ‘an intertemporal utility function which depends upon both (secular) con- sumption, Z), in each period and ex- pected afterlife consumption, A; 1479 U= Us, Za, 01, Za, A): a Secular consumption in each period is a standard household commodity, which depends upon household inputs of time, Tz, and purchased goods, Xz. Afterlife rewards depend upon the household's entire history of religious activities, Ra, Ry, which in turn depend upon the time and purchased goods devoted to religious activities in each period, Hence, = UTas Xz) Ri= R(x, Xe) A= ACR «Bo ® Although Azzi and Ehrenberg ac- knowledge that religious activities may yield utility in the here and now, they structured their model to emphasize and analyze what they perceive as the fundamental feature of religious behavior. When combined with a standard life- cycle budget constraint and the assump- tion that the marginal product of reli- ious activity does not decrease with age, the A-E framework leads to the formal conclusion that religious activity should increase with age. This age effect arises because resources devoted to afterlife salvation are assumed not to accumu- late interest throughout the life-cycle, whereas standard investments do. (The age effect is partially offset by wage growth, leading A-E to predict stronger age effects for women, whose age-earnings profiles tend to be flatter than men’s, and the possibility of declining religious activity at young ages when wages rise most rapidly.) The model also predicts substitution between time and money devoted to religion. Thus, standard effi- ciency conditions imply that households with lower values of time will produce religious commodities in a more time- intensive manner and that, within a given household, members with lower wages (typically, wives) will supply more time to religious activity.1480 ‘The empirical support for Azzi and Ehrenberg’s predictions is mixed. Their own analysis of survey data and that of Ehrenberg (197) tend to confirm their predictions, most notably the predie- tions that women’s age-attendance pro- files will be steeper than men’s and that men’s profiles will be U-shaped.29 Working with detailed time-use data for Jewish male workers in Israel, Shoshana Neuman (1986) obtains results suppor- tive of the A-E model, including U- shaped age effects. But surveys ana- lyzed by Ulbrich and Wallace (1983, 1984) find no evidence that afterlife ex- pectations cause religious participation to increase with age, nor that women’s higher rates of religiosity can be ex- plained in terms of lower alternative ‘wages. Dennis Sullivan’s (1985) simulta- neous equations test of the relationship between church contributions and at- tendance finds weak support for Azzi and Ehrenberg’s model.2° On balance, it seems clear that the opportunity cost of time does affect re- ligious behavior, leading to variation in both the level and time intensity of re- ligious activity. Regression analyses of survey data consistently find that as wage rates increase, religious participa- tion becomes more money-intensive, with rates of church contributions rising = Ehreberg (97) exes th onal AE osaeerbgs AT, ead he ga AS Pena ee en ee We prin fy both aig dt ram e100 Neca! eet Populi is soe Baked ey na ial a DRE anon Joey ated ego ee mathly a eee e oa uy ms fae nr on ae ha te 8 ae meets Journal of Economic Literature, Vol. XXXVI (September 1998) relative to rates of church attendance. This pattern holds over the life cycle (with participation becoming most money-intensive in the prime earning years), across households (with higher rates of attendance relative to contribu- tions in lower-wage households), and across denominations. Denominations whose members average relatively high levels of income and education rely more heavily on the services of profes- sional ministers, teachers, choir directors, and janitors. They also tend to hold fewer and shorter meetings and require less time-consuming rituals. (For addi- tional work emphasizing trade-offs be- tween time and money, see Amyra Grossbard-Shechtman and Shoshana Neu- man 1986; and C. Chiswick 1995.) It is less clear, however, that afterlife ex- pectations and interest rates explain religious age trends; and it is. virtually certain that different values of time do not account for the large gap between female and male rates of religious activ- itya? Despite its limitations, the A-E model remains important, both as the first formal model for religious partici- pation (within any discipline) and as the foundation for nearly all subsequent economic models of religious behavior. These later models retain Azzi and Ehrenberg’s household production framework, while broadening its as- sumptions. In particular, they de-em- phasize afterlife expectations, positing instead a wide range of payoffs to reli- gious activity (including a sense of purpose, moral instruction, group iden- tity, social support and’ status, and 27 The large gap between male and female rates of selfreported religionty and religious pete flon has fot nareowed over the past fow deta, deste the werendous nee a woe bot force participation rates, nor do controle for wage {ates and employment ints sccount for much of the male-female gap in cross-sectional surveys (David de Vane 1084)Tannaccone: Economics of Religion mutual aid).28 Other changes concern the goods-time production framework which, in its initial formulation, ab- stracts from the collective side of reli- gious activity, suggests statistical models much like those already employed by sociologists, and has little to say about the strongest predictors of individual participation: denomination, personal belief, and family background. 4.2 Religious Human Capital Intuitively, a person’s capacity to pro- duce or appreciate religious commodi- ties will depend not only upon their i puts of time and goods, but also upon religious knowledge, familiarity with church ritual and doctrine, and friend- ships with fellow worshipers. This sug- gests a natural extension to Azzi and Bhrenberg’s model: the inclusion of “religious human capital,” Sx, which in- dexes the stock of religion-specifie ex- perience derived from one’s past relig- ious activities (Iannaccone 1984, 1990; cf, John Durkin and Greeley 1991). The religious commodities produced in pe- riod ¢ then become By= R(T Xrv Sed ®) and increments to religious human capi- tal arise as a form of “consumption eapi- tal” or learning by doing (George Stigler and Becker 1977). ASie= F(Tre-tXeet,Ser) (4) This amounts to a model of religious habit (or taste) formation, and thus pro- vides an alternative to Azzi and Ehren- berg’s original explanation for age trends. Participation can grow over time See, for example, Hull and Bold (1989) who or die ene aie wth religion temporal bliss, social goods, deferred perpetuity and aered fate, or Ekiehart Schitht (1985) who emphasies religion's capacty to create mean One should als note tats when asked hy they 1d church or maintain & religous afiation, ople tend to emphasize concrete, here-and-now eft, 1481 due to (rational or myopic) “addiction” rather than afterlife expectations Most religious capital is quite spe- cific, because doctrine, ritual, and styles of worship vary greatly from one de- nomination to the next. Moreover, most religious experience and training (un- like general education and occupational training) is received directly from par- ents and the religious institutions that they support. This leads to various pre~ dictions, nearly all of which receive strong empirical support: (1) As children mature and begin to make their own religious decisions, they gravitate toward the beliefs and de- nominations of their parents. And even those who switch religions will tend to choose religions similar to those in which they were raised. Hence, the likelihood of conversion between par- ticular religious groups is greater the more similar the groups, and overall rates of conversion to and from a par- ticular group are lower the more di nctive the group. (2) Religious switching, like job changing, will tend to occur early in the life eycle as people search for the best match between their skills and the con- text in which they produce religious commodities. Over time, the gains from further switching diminish, as the po- tential improvement in matches dimin- ishes and the remaining years in which to capitalize on that improvement de- crease, whereas the costs of switching increase, as one accumulates more eapi- tal specific to a particular context. Con versions among older people should be very rare (lannaccone 1990).29 (3) Insofar as the religion of husband The model alo predicts, and data confirm, that oem nity ome danoia: tional mabiitypeople raised in relatively poor (Gundamentalt Protestant) denominations are tore likely to switch to relatively rch (wa Protestant) denominations Hf they themselves a prosperous and wel educted1482 and wife are complementary inputs to household production (and the divorce statistics suggest that they are very complementary; Lehrer and Cl 1998), the same forces that lead people to adopt their parents’ religion also lead them to marry within their religion. Those who do intermarry will face a strong incentive to adopt the religion of their spouse (or vice versa), and the ef- ficiency gains from such marital realign- ments will tend to be greater when the less religious spouse does the convert- ing 4.3 Religious Groups and Institutions The preceding models manifest an ironic shortcoming: though designed to explain church attendance and. affili- ation, they never really address the ex- istence of churches. Formally, all reli- gious production occurs at the level of individuals or households. In practice, however, religious behavior is anything but an individual matter.° Recent work in the economies of religion has thus shifted its focus from individuals and households to groups and institutions. Simple models of isolated utility maxi- mizers, constrained only by personal in- come and commodity prices, have given way to models that emphasize the role of specialized firms or clubs in the pro- duction of religious commodities Though some of this work views churches as standard, neoclassical firms in which (priestly) producers “sell” their religious goods and services to (lay) consumers, other papers take club theory as their starting point. Club models are motivated by the observa- tion that, despite its firm-like charac- teristics, the typical congregation fune- 20 The famous sociologist. Emile Durkh (915] 1965, p62) went so Taras to define el gion in terms Of its collective dimension, and ob- Served that “ln all history we do not finda single religion without « Church” (p. 59), Journal of Economic Literature, Vol. XXXVI (September 1998) tions as a mutual-benefit organization, dedicated to the collective production of worship services, religious instrue- tion, social activities, and other quasi- public “club goods.” Except for a few full-time religious professionals and a handful of benchwarmers, most mem- bers contribute both to production and consumption of these religious com- modities Churches as clubs. Club models of re- ligion may be framed as an extension to the household production approach. The religious commodities that enter a household’s utility function now depend not only upon their own inputs of time, goods, and capital, but also upon the in- puts of fellow church members. So, for example, the pleasure and edification that I derive from a worship service does not depend solely on what I bring to the service (through my presence, at- tentiveness, public singing, and’ so forth); it also depends on how many other people attend, how warmly they greet me, how well they sing, how en- thusiastically they read and pray, how deep their commitment, and so forth. Formally, the household's religious pro- duction funetion becomes R=R(Tx, Xn, Se: Q) 6) where Q indexes the quality of the group, which is in turn a function of the religious inputs of the other group mem- bers (Iannaccone 1992; see also Jack Carr and Janet Landa 1983; B. Chiswick 1991; Sullivan 1985; and Joe Wallis 1990). In many ways, this model turns the standard club story on its head. Rather than emphasize problems of congestion, it emphasizes the positive externalities associated with religious participation. In congregational settings, an active member (who attends regularly, sings wholeheartedly, and greets others en- thusiastically) increases the utility ofTannaccone: Economics of Religion other members. Conversely, free (or “easy”) riders, who participate less fre- quently and less energetically, threaten to undermine the viability of most reli- gions—a problem well-documented by sociologists of religion. It can be shown, both formally and empirically, that apparently gratuitous sacrifices can function to mitigate a re- ligion’s free-rider problems by screen- ing out half-hearted members and in- ducing higher levels of participation among those who remain. Perfectly ra- tional individuals may thus find it in their interest to join so-called “sects” and “cults” that demand. stigma, self- sacrifice, and bizarre behavioral stan- dards concerning dress, diet, grooming, sexual conduct, entertainment activi- ties, and social interaction. At the same time, other people (particularly those with higher market opportunities) will find it optimal to form less demanding groups, such as mainstream churches (Iannaccone 1988, 1992, 1994; Murray 1995a, 1995) Club-theoretic models of high-cost “sects” and easygoing “churches” ex- plain and integrate a large body of em- pirical findings that have fascinated so- ciologists of religion for more than a century (and before that Adam Smith 1965, p. 747). The predicted correlates of sectarian religion include strict be- havioral standards, high rates of church attendance and giving, small congrega- tions, dramatic conversions, and a rela- tively large number of minority and lower-class members. The intuition be- hind many of these predictions is straightforward. For example, sectarian congregations tend to be small because each congregation must monitor mem- bers in order to maintain its behavioral requirements. Because monitoring costs increase with group size, sects cannot exploit economies of scale as fully as can the larger congregations of mainline 1483 churches. Conversion, apostasy, and other abrupt shifts in behavior are more common in sectarian groups than main- line churches because sect membership is a kind of corner solution, requiring total abstinence from many secular commodities. With no room for com- promise, a member's optimal response to a change in the shadow price of these commodities is discrete: continue ab- staining and remain a member, or leave the group and jump to a standard, non- religious optimum. By restricting access to secular activities and rewards (in- cluding high-paying jobs and high- status social networks), sects impose e: pecially high costs on individuals with high wages and good career prospects. Thus, sect membership is. relatively more attractive to people with limited secular opportunities. (See Iannaccone 1992, pp. 283-89 for details.) Montgomery (1996a) carries the church-sect framework into a dynamic, overlapping generations model that cap- tures the documented tendency for new religions to originate as high-cost sects ing churches. Within his model, peo- ple’s utilities depend on their endow- ‘ments of religious human capital, which ind them to their denominations of origin, and their (stochastically deter- mined) secular human capital, which yields higher payoffs in nonsectarian groups. As the children of low-wage sect members regress toward the earn- ings mean, they switch to looser groups or pressure their sect to moderate its costly demands. Economic and reli ‘mobility thus leads to denominational drift along the church-sect continuum. Insofar as churches function like standard economic clubs, one also ex- pects to find more free riding in larger congregations. Contributions data pro- vide the most direct test of this predie- tion, and Sullivan (1985), Robert Stone-1484 braker (1993), and Peter Zaleski and Charles Zech (1994) all report a nega- tive relationship between congrega- tional size and per-member rates of an- nual giving. Zaleski and Zech’s results are particularly. interesting, because they concern both Protestant and Catholic congregations. All recent stud- ies of giving find that even after con- trolling for income Catholies contribute much less than Protestants—about two- thirds less in Zaleski and Zech’s data (and one-half less in the GSS data an: 1d in Table 2). But Zaleski and Ze \d that the much larger average size of Catholic congregations accounts for 35 percent of this giving gap, more than all other variables in their congrega- tional data set (which includes mea- sures of income, clergy costs, and lay- leader assessments of the pastoral staff's effectiveness and the member- ship’s involvement, influence, and mo- ale). Before advising the Pope, how- ever, one must note that Lipford (1995) estimates a positive relationship be- tween size and giving across a large sample of Baptist, Presbyterian, and Episcopal congregations in North Caro- Tina. Because all these contribution studies employ different data and different specifications, future research may ree- oncile their results. Additional work is especially needed to address the endo- geneity of size, specifically the selection bias that occurs if large, poorly financed congregations shrink and die more readily than large, well-financed con- gregations. Churches as firms. Whereas club models address the collective side of re- ligious production, other models draw attention to the differing roles of clergy and lay people. Viewing churches as profit-maximizing firms, one may in- voke standard insights ‘of neoclassical theory to analyze the development of Journal of Economic Literature, Vol. XXXVI (September 1998) religious doctrine, the organizational structure of religious institutions, and the evolution of religious practices. For example, Stark and Bainbridge (1985, pp. 171-88) have emphasized the role of individual entrepreneurship in the formation of new religions. Richard Dolin, Frank Slesnick, and John Byrd (1989) compare the structure of con- temporary denominations to those of standard franchises, suggesting that economic theories of franchising can enhance our understanding of church growth, Drawing upon a raft of histori- cal sources, Finke and Stark (1992) gue persuasively that the explosive growth of the Methodist and Baptist de- nominations in nineteenth century America was due to their clergy’s more effective marketing and superior incen- tives relative to that of the older Con- gregational, Presbyterian, and Episco- palian denominations. To date, the most ambitious work analyzing churches as firms is Ekelund et al’s (1996) recent book on the p cal economy of the medieval Catholic church. Building from Adam Smith’s ([1776]1965, p. 749) classic insight that “the clergy of every established church constitute a great incorporation,” Ekelund et al. explain numerous fea- tures of medieval Catholicism in terms of its monopoly status. They view the church as a monopolistic “multi-divi- sional” firm characterized by a central office that controls overall financial al- locations and conducts strategic, long- range planning, but allows its (usually regional) divisions a high degree of autonomy in day-to-day operations. Drawing upon standard theories of mo- nopoly, rent seeking, and transaction costs, they offer economic explanations for interest rate restrictions, marriage laws, the crusades, the organization of monasteries, indulgences, and the doc- trines of heaven, hell, and purgatory.Tannaccone: Economics of Religion As one example of the approach, con- sider Ekelund et al.’s treatment of the church’s usury doctrine (analyzed more formally in Ekelund, Robert Hébert, and Tollison 1989). Here rent seeking is seen as the primary motivation for the maintenance of a particular doctrine. The central church's monopoly position allowed it to extract rents from down- stream producers (the clergy) and from input suppliers (banks) by’ controlling the borrowing and lending interest rates. The authors argue that usury rules enabled the church to borrow at low rates while lending (through papal bankers) at much higher rates, and they cite many sources spanning several cen- turies to defend their claims. One can, however, tell a very differ- ent, though perhaps not mutually exclu- sive, story. Carr and Landa (1983, p. 153) and Edward Ghieser and José Scheinkman (forthcoming) argue that usury laws acted as a form of social in- surance against shocks that were not otherwise insurable. In all societies, but especially simple agrarian ones, indi- viduals face the constant threat of bad harvests and other unpredictable disas- ters. Interest rate restrictions can bene- fit the victims of bad shocks (who will have high demand for credit) while pe- nalizing those who had experienced good shocks (and are thus in a position to lend). Glaeser and Scheinkman for- malize this model and derive a variety of nonobvious predictions, including some that they test using American data. The model's greatest appeal lies in its ability to account for the pervasive nature of interest restrictions, which arise in so- cieties and religious traditions far re- moved from those of medieval Europe. Testing theories about hell, purga- tory, and the crusades is even more dif- ficult than testing theories about inter- est rate restrictions, particularly when the relevant historical evidence is 1485, largely anecdotal and widely scattered over time and space. For the most part, Ekelund et al. must therefore limit them- selves to interpretations that provide economic rationales for these practices. Nevertheless, they deserve credit for opening the door to economic theorizing about the content of a religion, and for motivating other economists to follow in their path. Other recent contribu- tions to the economics of the medieval church include Hull (1989) and Dieter Schmidtchen and Achim Mayer (1997). Still other recent work offers eco- nomic explanations for a much broader range of religious phenomena: the Calvinist doctrine of predestination (Glaeser 1994), the emergence of Ju- daic monotheism (Alexander Raskovich 1996), the distinctive character of reli- gious texts (Geoffrey Miller 1994), cross-cultural and intertemporal vari- ation in beliefs about the afterlife (Hull and Bold 1994), and the relationship between different styles of theology and different styles of religious organization (Douglas Allen 1995). The papers by Glaeser and Scheinkman, Schmidtchen and Mayer, Glaeser, and Raskovich il- Iustrate ways that economists can model doctrines formally and (sometimes) ar- rive at nonobvious testable predictions 44 Religious Markets If individual denominations function as religious firms, then they collectively constitute a religious market. Recogniz- ing this, Adam Smith ((1776]1965, pp. 740-41) argued that established relig- fons face the same incentive problems that plague other state-sponsored mo- nopolies: ‘The teachers of [religion]... in the same manner as other teachers, may either depend altogether for their subsistence upon the vol- tuntary contributions oftheir heaers; or they may derive it from some other fund to which the law of their countsy many entitle them.1486 ‘Their exertion, their zeal and industry, faze likely to be much greater in the former situation than the latter. In this respect the teachers of new religions have always had a considerable advantage in attacking those an cient and established systems of which the clergy, reposing themselves upon their bene fices, had neglected to keep up the fervour of, the faith and devotion in the great body of the people Anderson (1988) reviews Smith's ar- guments in some detail, citing the many benefits—individual and collective, moral and economic—that Smith as- cribed to religious competition. Charles Leathers and Patrick Raines (1992) di pute Anderson's interpretation, arguing that Smith’s own statements are less clear-cut, but the empirical issue re- mains: does competition stimulate lev- els of religious activity, and do upstart sects display more vitality than estab- lished churches? Confirming evidence has begun to appear on many fronts. Consider, for example, Figure 3, which graphs the strong and striking negative relationship between church attendance and a Her- findahl-style index of religious concen- tration in 12 predominantly Protestant countries.5! Weekly church attendance rates range from 40 percent of the total population in the United States (where the Constitution guarantees religious competition), to less than 10 percent in 2. The Herfindahl index. for the denominations R copntey jas the form 5,82, a Sy Ca the share 3 peapl in sot’ belong i de. homination The country’s’ overall attendance cea tl equal the weighted sun Zaysyhore oy denis dominance, a fey depends Cogatney) on Sp then fis-der cy ene ngayon hs rte ‘Seat parameters, dB for all noe Cabote Henouteaton? "oon ans equations sitale for oguston’ andy sacaSans + Gprei8iSy* BestiSZuny+ OprorSp. where the 2's Tange ovée all nom’Gathblic “denominations. Tans ‘cine Beth eres em Ste fn national rates of church attendance, fe- quency of prayer, and belitin God Journal of Economic Literature, Vol. XXXVI (September 1998) Scandinavian countries (where a single, state-run Lutheran church dominates the market, runs on tax dollars, and pays its clergy as civil servants). Indeed, every available measure of piety, includ- ing frequency of prayer, belief in God, and confidence in religion, is greater i countries with numerous competing churches than in countries dominated by a single established church, and these relationships remain strong even after controlling for income, edueation, or urbanization. It is also true that within each country the average level of religious belief and participation is eon- sistently lower in the established churches, which enjoy the financial and regulatory support of the state, than among the small denominations operat- ing at the competitive fringe of the country’s religious market. A correlation between rates of reli- gious diversity and religious participa- tion has been observed in many other settings, contemporary and historic, re- gional and cross-national. Finke ‘and Stark’s (1988) analysis of church mem- bership in. turn-of-the-century Ameri- can cities finds higher rates of religious affiliation and Sunday school activity in cities with higher rates of religious di- versity. Finke, Avery Guest, and Stark (1996) replicate this finding for the cit- ies and towns of New York state, using detailed data from the 1850s and 60s Working with contributions data from 177 contemporary U.S. congregations, Zaleski and Zech (1995) find higher per capita rates of giving in congregations located in areas where their denomina- tion enjoys a low market share and where the overall religious market is more diverse, Even within Sweden, a country known for its lick of religious activity, Eva Hamberg and Thorlief Pet- tersson (1994) find that local religious diversity correlates with local rates of religious participation.Tannaccone: Economies of Religion 1487 musa 8 Canada 8 Netherlands TW Ssitesand g Astra mW. Germany, 8 New Zealand Percent Attending Weekly 8 me bstin Norway Finland Dennatk i Sweden 00 02. o4 08 os. 10 Protestant Concenteation Index Figure 3. Market Goncenteation versus Church Atendance Rates. Source: lannacone (1991). country’s "Protest ‘concentration index eleulated fom the 1980 population shares of| the countrys non-Catholic denominations. Weekly church altendance rates come from international Gallup polls, condacted nthe late 1970s. See footnote for details Studies of Catholic religious partici- pation provide partial support for the “lazy monopoly” model. Analyzing data from the 102 Roman Catholic dioceses in the United States, Stark and James McCann (1993) find that, relative to the total Catholic population, the number of children attending Catholic schools and the number of priestly ordinations tend to be higher in regions where Catholics make up a relatively small fraction of the population. Stark's (1992) analogous cross-national study, based on aggregate data from 45 na- tions, finds a strong negative correlation between the number of priests per Catholic and the percentage of Catho- lics in the total population. Although both these studies suggest that Catholic commitment is lower where Catholi make up a larger share of the popula- tion, they must be set against the fact that’ church attendance rates are not consistently low where Catholics make up a large share of the population. Among the predominantly Catholic na~ tions of Western Europe, weekly church attendance rates range from a low of 12 percent in France to a high of 82 per- cent in the Irish Republic.®® It is, of course, risky to infer causa- 2 Stark (1992) has argued thatthe traditionally hgh eof ei lind a oan onerweimingly Catholic nations ae lest anoma- Tous than they at fist seem, because in each cas the Church has functioned at a vehicle of resi tance to external polite! domination (fom En. nd and the Soviet Union, respectively) One Inight thus view these "monopoly” churches. as Freely competitive Institutions within thle broader polital markets, The observed decline in Polish Cltholle religious activity fllowing the fll ofthe Soviet Unton provides some support for this interpretation1488 tion from correlations. But the causal story is strengthened by studies that track the effects of increased competi- tion over time. Finke (1990) and Finke and Stark (1992) document the impact of “deregulation” in American religious history, showing that rates of church membership rose as the colonial pattern of established churches and de facto re- ligious monopoly gave way to a free ious market. Kelley Olds (1994) provides detailed and statistically so- phisticated evidence that the number and wages of preachers in colonial Ni England rose in response to the di establishment and privatization of re- ligion. Both Finke and Olds find that dises- tablishment produced both winners and losers, a First Amendment effect dis- cussed by Michael McConnell and Richard Posner (1989). Despite the substantial inerease in overall church membership, the major denominations that originally enjoyed state support suffered severe losses relative to “up- start sects.” Thus, from 1776 through 1850, the combined market shares of the Episcopalian, Congregationalist, and Presbyterian denominations dropped from 55 percent to 19 percent of all re- ligious adherents, while the fraction of Methodists and Baptists rose from 19 percent to 55 percent. Nor is this pat- tern unique to America—similar effects have been noted in Korea, the Philip- pines, Eastern Europe, the former So- viet Union, and Japan (lannaccone, Finke, and. Stark 1997). Perhaps the most dramatic and colorful case is post- World War II Japan, where the aboli- tion of state-Shinto and advent of reli- gious freedom led to a five-year period known as “The Rush-Hour of the Gods” during which some 2,000 new sects and cults were formed, Studies of religious competition and deregulation have caused a stir within Journal of Economic Literature, Vol. XXXVI (September 1998) the sociology of religion, which tradi- tionally viewed religious pluralism as a secularizing threat to faith and fervor. Some of the field’s best-known scholars have, in fact, gone so far as to advocate market models as a “new paradigm” for the sociology of religion (Warner 1993). Ironically, however, this new paradigm resurrects an old view, shared not only by Adam Smith, but also Alexis de Toc- queville, and even Thomas Jefferson, who once advised that in matters of re- ligion “the maxim of civil government” should be reversed to read “Divided we stand, united, we fall."85 5. Policy Implications Jefferson's quip is, of course, em- blematic of the radical commitment to religious freedom and the separation of church and state embodied in the U.S. Constitution’s First Amendment Yet even in the United States, where a “wall of separation” has characterized church-state relations for more than two centuries, policy debates persist. The Waco fiasco, which ended in the fiery deaths of David Koresh and his followers, is but the latest in a long string of confrontations concerning the government's role in regulating deviant religious groups. Though small in mem- bership, such “sects” and “cults” feature prominently in media stories, public de- bates, and legal disputes about the place’ of religion in society. One en- counters repeated claims that participa- tion in such groups should not be viewed as the exercise of religious free- dom but rather as enslavement to or- ganizations bent on “brainwashing” and exploitation, Indeed, many popular writings, psychological articles, and le- gal decisions have approached cult 89See Robert Healey’s (1984, p. 360) discussion of this and other Jeffersonian statements concern- Ing religious minarites.Tannaccone: Economics of Religion membership as a priori evidence of pa- thology or coercion, Economic models tend to undermine the presumed validity of these interpre- tations. As noted in the discussion of club models, many of the bizarre and apparently pathological practices of de- viant groups can function as rational, utility-enhancing attempts to promote solidarity and limit free riding. At the same time, a large body of empirical re- search from the 1970s and 80s refutes most charges of “brainwashing” and co- ercion (Richardson 1991). Theory and data thus combine to suggest that gov- ernment regulation of religion tends to reduce individual welfare, stifling reli- gious innovation by restricting choice, and narrowing the range of religious ‘commodities. Beyond the question of deviant sects and cults, one encounters a broader but related set of issues concerning the overall consequences of regulating re- igion. Here again we find Smith claim- ing that competition would not only generate more religion but also better religion: religious laissez-faire is the best way to satisfy the demand for reli- gious instruction, reduce religious con- flict, and promote “pure and rational re- ligion, free from every mixture of absurdity, imposture, or fanaticism." There are, as yet, no direct tests of Smith's claim that religious competition benefits societies, by providing better religion, less civil strife, and (by exten- sion) more prosperity. But at least one relevant empirical regularity does exist. ah 6 9.14 ely td echt a te iui cue eta ad Se jee an Al hoe = 1489 Several studies have found that demo- cratic regimes seem more likely to arise and survive within Protestant Christian cultures, a regularity that S. Martin Lip- set (1993) and others attribute to tradi- tions of tolerance embraced as a matter of political necessity by the members of ‘competing Protestant groups.85 6. Conclusions In the 20 years since Azzi and Ehren- berg’s pioneering article, the economics of religion has grown into a sizable body of research. Papers are appearing with ever-greater frequency, and virtually every topic familiar to sociologists of re- ligion has received some attention: the nature of religion; the determinants of individual religiosity and participation rates; conversion, commitment, and re- ligious mobility; the emergence and evolution of religious institutions; seeu- larization and pluralism; deviant reli- gions; the socioeconomic correlates of sect membership; church-state issues; the economic consequences of religion; and more. How should one judge this work? Perhaps one should begin by recogniz- ing that the economic approach has set off a small revolution within the sociol- cantata omen coe Be Pin Gabe a Fan ob (le) fo eel tana Rs el Fit Sgr percent ONE werag i eve see Bre ae at a) ne Abe deo lt ys SEs eyperie of ea e Ke chine a fey chitin ot Seteed tack Sms pl Tae it sete coe cman pal they oder1490 ogy of religion, a sizable subfield that sustains four journals, four associations, and three annual meetings in the United States and Europe. The Interna- tional Society for,the Sociology of Re- ligion based its 1990 meetings on the theme of “religion and economics” (and subsequently published the plenary pa- pers in the March 1992 issue of Social Compass). The Journal for the Sctentific Study of Religion devoted most of its March 1995 issue to economic articles and a symposium on the rational choice approach. Papers from a recent special conference on rational choice theories of religion recently appeared in a vol- ume edited by Lawrence Young (1997). And, as I have already noted, several prominent sociologists of religion have gone so far as to characterize market models or rational choice theory as their field’s “new paradigm.” To be sure, not all the attention has been posi- tive, but given the disciplinary barriers separating sociology and economics, the amount of attention is itself remarkable. Within economics, research in the economics of religion has grown from a trickle in the late 1970s and 1980s to a steady stream, though by no means a torrent, in the 1990s. Most AEA confer- ences now include one or two sessions on religion, such as the religion and economics session featured in the AER's May 1996 Papers and Proceed- ings. Other recent papers on the eco- nomics of religion have appeared in a variety of journals, including the Jour- nal of Political Economy, Economic In- quiry, Explorations in’ Economic His- tory, Public Choice, the Journal of Law, Economics, and Organization, the Jour- nal of Economic Behavior and Organi- zation, and the Journal of Institutional ‘and Theoretical Economics. These last two journals also published special col- leetions of papers on religion and eco- nomics, in 1994 and 1995, respectively, Journal of Economic Literature, Vol. XXXVI (September 1998) and the JITE devoted its March 1997 issue to papers from a recent confer- ence on the subject. The economics of religion is by no means a tightly integrated whole, and most of its contributors have worked in- dependently. I have tried to present a fairly systematic overview, emphasizing the connections between different con- tributions and the progression from households to markets. In the process, however, I have had to overlook some topics that have, as yet, received little attention, but that may grow increas- ingly important. In my view (and that of the sociologists most critical of rational choice), a better treatment of these top- ies would fill the most important gaps that now exist in the economies of reli- gion, specifically: (1) Research has tended to sidestep questions concerning the substance of religion, taking the demand for religion as given and keeping the character of religious commodities loosely defined While this approach avoids narrow for- mulations, it provides little insight into the difference between a congregation and a social club, or church attendance and bowling. Clearly, one would like to do better. Recall that for Azzi and Ehrenberg, religion's distinguishing feature is to be found in its promise of afterlife rewards. For Stark and Bain- bridge (and many other sociologists of religion) this definition is broadened to accommodate a wide range of “super- natural” commodities. For Schlicht (1995) and many theologians, the criti- cal feature is broader still—a set of be- liefS and behavior that give meaning to life. Others have stressed religion’s ca- pacity to support collective goods, such as property rights and public morality (Hull and Bold 1989, Anderson and Tol- lison 1992). It is not, as yet, clear how these broader conceptions can be cap- tured within formal models.Tannaccone: Economics of Religion (2) However one defines religion and igious goods, it is clear that religious activities involve a large amount of risk The promised rewards may never mate- rialize, the beliefs may prove false, the sacrifices may be for naught. In this re- spect, religion is the ultimate “credence good"—a fact noted by several authors. Hull and Bold (1989) and Tannaccone (1995) argue that many standard fea- tures of religious institutions exist to re- duce (or at least appear to reduce) the risk of fraud and misinformation (e.g., congregational structures, which limit the need for full-time professionals, and regular group activities, which augment the supply of product testimonials). For the most part, however, the problem of ious uncertainty has received little attention and scarcely any formal analy- sis. Expected utility models might seem like the natural first step, but as Montgomery (1996b) has emphasized, objective religious “information” may simply not exist, leaving no rational way to assign probabilities to most religious claims. (3) Although beliefs lie at the core of every religion, economists have yet to say much about the formation of be- liefs, religious or otherwise, nor have they given much attention to the pro- cess by which religions seek to shape people's beliefs and values. Although this issue is important in all economic settings, religion would seem to be the ideal testing ground for models of value change and belief formation. Note, for example, that religions are both forth- right and specific about the beliefs and values they seek to inculeate, making it relatively easy to estimate their impact through surveys and observation. Note also that religions employ a vast arsenal of weapons in the war to shape souls: childhood education, parental forcement, selective membership, rites of passage, group monitoring, public 1491. declarations of commitment, sanctions and status, promises of supernatural re- wards and punishment, appeals to his- tory and sacred authority, and so forth Kuran (1995) has studied the effects of such pressure in some detail and pro- vides stark examples of “religious pref- erence falsification” in Middle Eastern countries. Models of religious habit for- mation, based perhaps on the experi- ence effects framework reviewed above, offer a somewhat different approach. Montgomery (1996b) advocates a (non- rational) cognitive-dissonance theory of belief formation, whereas Russell Hardin (1997) emphasizes the costs and benefits that lead people to favor some beliefs and some sources of information over others. Each approach remains largely undeveloped. Progress on these topics requires not just more and better models, but also more attention to the large body of em- pirical regularities documented by soci- ologists of religion. Without doubt, the sociology of religion has suffered from a poverty of theory, but itis rich in data, particularly compared to related areas of inquiry (such as the study of gangs, social clubs, and political movements). Religious censuses stretch back over centuries; religious beliefs and behavior have been documented in great detail ‘over many years and across many cul- tures; and much more is known about the membership, finances, and history of churches and denominations than any other type of social organization Economists of religion would do well to study this literature, for the best pros- peets for progress in the scientific study of religion rest in the marriage of eco- nomic theory and sociological data Nigel Tomes (1985, p. 245) once be- gan a paper by observing that “econom- is fundamentally atheistic. 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