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What Is Religion, and How Do Economists Think about It?

IT IS 6 A.M. in the South Indian temple town of Swamimalai. The temple is buzzing with activity: priests in traditional dress chant holy scriptures in harmony; sticks of sandalwood incense and oil lamps are lit till they glow brightly; vendors hawk their wares loudly, selling fruits, flowers, and garlands to adorn the temple idols. The idols themselves are bathed in milk and honey and dressed for the day in beautiful rainbow-colored silks, bedecked with jewels. The smell of sweet rice and jaggery cooking together for the morning prasādam (an offering to the gods) fills the air. And yet for all its beauty and grandeur, the exotic sights and smells of a South Indian temple at dawn is just another early morning ritual for the residents of this little town on the banks of the Kaveri River—a heady cocktail of prayer, jasmine, roses, sandalwood, jaggery, oil, and ghee that is believed to preserve and protect them forever.
The aim of this book is to discuss why economists need to be concerned about bringing their insights and methods to bear on the study of religion, and how this might be helpful for development policy—not just in India, with which this book is primarily concerned, but also in other countries characterized by religious pluralism. In The Religion We Need, the distinguished Indian philosopher of religion Sarvepalli Radhakrishnan wrote that religion “is an expression of the spiritual experience of a race, a record of its social evolution, an integral element of the society in which it is found” (1928, 25). Almost forty years after Radhakrishnan wrote his book, two sociologists of religion, Charles Glock and Rodney Stark, defined religion in Religion and Society in Tension as “what societies hold to be sacred, comprises an institutionalized system of symbols, beliefs, values, and practices focused on questions of ultimate meaning” (1965, 4). Scholars have grappled for centuries with the question of how to define religion. For economists, definitions are central to the process of modeling. Yet the vast scholarship on defining religion suggests that it is not possible to define it precisely. Of course, there are very famous textbook definitions that social scientists agree are helpful in this respect. Émile Durkheim’s definition of religion is usually considered one the most famous: “A religion is a unified system of beliefs and practices relative to sacred things, that is to say, things set apart and forbidden—beliefs and practices which unite into one single moral community called a Church, all those who adhere to them” (1915, 4).
Economists use economic theories to understand religion and draw upon both theoretical and empirical economics to help elucidate religious practice and religious change. This chapter draws upon literatures in sociology, philosophy, and history to discuss these issues and illustrate how economists can make useful contributions to existing thinking on religion and its role in society. For example, I explore issues such as the secularization hypothesis; the relationship between religious pluralism and religious participation; why some religions appear to become more flexible or accommodating as they evolve over time, while others develop more fundamentalist groups of adherents; and the resilience of religion (Stark and Finke 2002). I also discuss the manner in which religion contributes significantly to the building of norms and networks among populations. I contrast these economic theories, which claim to account for the resilience of religion, with theories from other disciplines such as those involving family socialization, social networks, and a belief in otherworldly or supernatural elements. The key aim of the book is to view the persistence of religion in societies not merely as the outcome of largely sociological processes, but also as a rational economic response to changes in the political, ecological, and economic environments in which religions operate. The competitive, adaptive, pluralistic, and fragmented character of Hinduism makes the economic approach both particularly helpful and indeed necessary for understanding religion in India. Moreover, while much academic research has been devoted and is being devoted to the study of Christianity and Islam, relatively little work, at least in economics, is devoted to the study of Hinduism. This book attempts to fill that gap in the literature.
One reason for the gap is the distinctive character of Hinduism, relative to the three monotheistic faiths of Christianity, Judaism, and Islam, which scholars and others may be more familiar with. Very often people outside India perceive Hinduism as a baffling tangle of myths. Thus, one issue to clarify, as discussed in more detail in Chapter 2, is that Hinduism is not a unified religion based on one main scripture, and the Hindu religion does not have fundamentals in the form of an organized church. The Hindu caste system, which originated in a very early period of Hinduism, nevertheless has remarkable durability even in the face of massive political, economic, and technological change, and even among the relatively secularized professionals who have migrated to Western nations. Another aspect that I think is particularly relevant to economists is Hinduism’s flexibility, adaptability, and responsiveness to external influences: it is constantly evolving and absorbing doctrines and practices from different religious traditions. Also, Hinduism’s decentralized structure and noncongregational character stand in stark contrast to the Abrahamic faiths, with their limited emphasis on collective temple observance. These are all aspects of the Hindu religion that make it very different from other religions and that make it an appropriate subject of study from the perspective of the economics of religion. Moreover, in light of India’s large population, economic growth, religious and ethnic conflicts, and Hindu nationalism and the continuing migration of Indians to Western nations, it is critical that we devote more attention to India’s religious marketplace.
One issue to consider is the truth content of Hinduism, more commonly studied in the case of Christianity. In non-European religions like Hinduism, there is less emphasis on religious doctrine and more emphasis on morality and rituals associated with religion. Economists of religion in general tend to say less about this issue than do scholars in other disciplines such as philosophy. The truth content of Christianity is discussed because of concerns about religious belief, revelation, and their relationship to science and rationality. This is relevant to religions in which doctrine is very important, such as Christianity—in which doctrine has been developed over many centuries. Consequently, orthodoxy in terms of religious beliefs is central to the religion. But of course any religion has many aspects, which may also involve practices of various kinds including some liturgical practices or more reflective ones (as is the case with Hinduism). The truth content of religion is debated not only between religions, but also between groups within the same religion. This is frequently the case with Hinduism and Buddhism, whose adherents also debate the nature of truth itself and how to conceive of the higher self. In general when religion scholars debate the truth content of religion, they focus on doctrine—which can be either in an oral or a written tradition.
Another issue to consider is the role of religious orthodoxy. For example, in general when we think of orthodoxy, we are thinking of correct belief and correct observance of rituals that are specified by a religious authority. This is in contrast to orthopraxy, which is correct conduct whether it is ethical or liturgical, and which can be contrasted with the role of faith or grace. In the case of many non-Christian religions, such as Hinduism and Islam, morality and ritual are emphasized more than orthodoxy. Also in the case of orthodoxy, there is a much deeper philosophical issue about whether religious claims can be false, which again affects how we then view the truth content of religion. Although these are not debates that economists have engaged in to any significant degree, they are nevertheless important in wider religious debates about the saliency of the truth content of religion.
This book first presents the ideas of and varied approaches used by scholars of economics to understand religious change in developing countries like India. The remainder of the book is organized as follows. Chapter 2 sets the Indian context for this research on the economics of religion in developing countries. India is an important country to study for this topic, as it is characterized both by an abundance of religions and religious institutions and religious conflict that has lasted for several centuries. Chapter 2 first describes the history of religious conflict in India based on data about religious riots from 1955 to 2006 that I put together from newspaper reports from the Mumbai edition of the Times of India. These data include the locations and causes of, and other information about, 2,262 riots in this period across India. I use these data to illustrate changes with respect to religious conflict in India.
Chapters 3–6 discuss how religious organizations in India currently provide their religious and nonreligious services (that is, services provided by a religious organization for which secular substitutes are available). I also examine how this varies by religious groups, and how it is affected by wider changes in the economy such as growth and increases in poverty and inequality. Chapter 3 describes a survey of religious organizations that my colleagues and I conducted from 2006 to 2010 (hereafter called the India Religion Survey), and that is discussed below in this chapter. Chapters 4 and 5 present and analyze the data on religious services and nonreligious services, respectively. Chapter 6 also presents evidence from the survey, to illustrate the broader links between income inequality, demographic characteristics, socioeconomic status, and religion in India.
Some of the findings that I highlight in this book show how religious practices and social practices are changing. The survey questions yielded fascinating answers and revealed differences across religions. Other findings related to more economic concerns. For example, we asked respondents to give details about the services (including those related to education, health, employment, and food distribution) provided by the religious organizations, the channels through which information about these services was communicated, and information about other organizations engaged in similar activities (including perceptions of religious competition). We also gathered information on variations in donations to and expenditures of the organizations to provide more practical context for the main findings. One important theme of Chapter 6 is how religion, income inequality, and education and health services are linked together. This is relevant because our survey also asked questions about background changes in the Indian economy (such as those related to economic inequality and religious conflict) over a twenty-year period.
The first six chapters discuss overall trends in our data, drawing upon state-level variations and examples from specific religious organizations. In Chapter 7, I present one case study in detail, which illustrates some of the broader themes. I focus specifically on religious education in India, since this emerged as the most important service that all religious organizations provided. Specifically, I explore education in madrasas (Muslim religious schools) as an important example of religious service provision. This chapter investigates faith-based school choice, as it assesses the current education that madrasas in India provide, their services for local communities, and under what conditions they will modernize their curriculum by introducing subjects such as science, mathematics, and English. Specifically, the chapter focuses on the madrasa curriculum in terms of religious teaching and secular subjects; the likely further education of students in these schools; the services that madrasas provide, and why they are used; and whether madrasas are likely to benefit from a new plan by the government of India to improve the quality of madrasas. This chapter analyzes responses from the 107 madrasas, a subsample of the 568 religious organizations that responded to the survey. The data include madrasas’ motivations, religious practices, adherents, expenditures, employees, nonreligious services, and competition in service provision with other religions. These data, analyzed using statistical methods, are accompanied by qualitative information from in-depth interviews that I conducted with Muslim clergy between 2011 and 2012, case-studies of particular madrasas that have introduced curricular innovations, and interactive workshops with madrasa teachers. This interdisciplinary approach provides insights into the ground-level realities of teaching in these schools and, I hope, will further our understanding of religion and education in contemporary India. Specifically, the chapter deals with difficult issues such as how education provision and curricular development in this sector can be modernized. In Chapter 8 I discuss how we should be thinking about competition between religions and religious marketing in the future, in light of the survey data and perhaps of other related literatures, such as those on the interactions between religion and strategic management theory—a field that is still only at a very early stage of development. Chapter 9 concludes the book by bringing together the salient findings from all of the other chapters with a discussion of what we know about the economics of religion and development in India. It also contains some reflections on how to manage policy in religiously pluralistic societies more widely in the light of my findings.

The Economics of Religion

Adam Smith first referred to the church and competition between religions in The Wealth of Nations and The Theory of Moral Sentiments. Smith considered the practice of religion as a way for individuals to enhance the value of their human capital. He was also interested in the incentives that prompt individuals to choose to participate in religion-related activities and the effects of different religious beliefs on individual behavior (G. Anderson 1988). Max Weber (1930) discussed the influence of the Protestant ethic on modern capitalism. However, there are also critiques of this thesis based on the view that the capitalist spirit predates the Reformation (Tawney 1926; see also Gorski 2005). This chapter examines both Smith’s and Weber’s ideas in the context of the research of Alfred Marshall—a Cambridge economist who, in his seminal The Principles of Economics (1890), also writes about religion. In addition, this chapter will elaborate on economists’ “rational choice” approach to religion, including their use of club goods models and spatial location models (Iannaccone 1998; see also E. Berman 2000). This approach considers religion as a club good, since it displays all the characteristics of club goods, and examines how religious organizations may use religious prescriptions and proscriptions to maximize the number of their adherents and to limit free riding among them. This approach is able to explain a wide variety of phenomena that concern religious organizations, religious adherence, and participation. This chapter also discusses the increasing importance of religion—especially in developing countries—which has been observed by contemporary scholars investigating the economics of religion (Barro and McCleary 2003; see also Guiso, Sapienza, and Zingales 2003). One topic of these studies is religious organizations’ provision of social services, which is important in societies in which the public provision of basic services such as education and health care may be poor or inadequate, and this chapter discusses the services’ importance in developing countries to set the stage for the remaining chapters.
Because definitions of religion can be either substantive or functional, there is no commonly accepted single definition. Substantive definitions of religion refer to investigating religion as a philosophy or system of beliefs, and using it to try to understand our world. In contrast, functional definitions focus on what role religion plays in people’s lives (for example, does it support them either socially or psychologically?). Although economists are relatively new to the field, the study of religion is ancient: many other disciplines—notably philosophy, theology, history, anthropology, and sociology—have had much to say about religious beliefs, as have scholars of different civilizations around the globe. Since the 1700s scholars and other writers from Galileo and Voltaire to Mark Twain have forecast the extinction of religion in general or of some faiths in particular. But with all its consequences, positive and negative, religion continues stubbornly to persist.
Questions such as why some religions appear to become more flexible or accommodating as they evolve over time, while others develop more fundamentalist groups within them, continue to fascinate scholars who have commented on the resilience of religion (Stark and Finke 2002). This is linked to the manner in which religion constitutes an important source of spiritual capital, contributing significantly to the building of norms and networks among populations that are organized on the basis of religion. Family socialization, the importance of having social networks, and belief in otherworldly or supernatural elements have been used to explain the resilience of religion (Christiano, Swatos, and Kivisto 2008). But it may also be relevant to view the persistence of religion in societies not only as the outcome of these largely sociological processes, but also as a rational economic response to changes in the political, ecological, and economic environments in which the processes operate.
Thus in contrast to the abundance of research on religion in other disciplines, economists have frequently been accused of having neglected the role of religion in the study of economic development. For example, the distinguished development economist Scarlett Epstein wrote over forty years ago: “The number of micro-level social anthropological studies is continually ...