The Divine Economy

Thoughts inspired by Paul Seabright's new book

Paul Seabright’s new book The Divine Economy is an original and deeply insightful contribution to the social scientific study of religion. I first encountered Seabright’s work when reading his brilliant 2004 book The Company of Strangers, as a graduate student. At the time when my mind was absorbed solving differential equations and Hamiltonians, The Company of Strangers provided a welcome break: a wide-ranging, perspective on the division of labor and the market economy.

The Company of Strangers is a great book because it took ideas that have been in the ether since Bernard Mandeville and Adam Smith and connected them with insights and evidence from evolutionary biology and anthropology. The Divine Economy does something similar.

The main thesis of The Divine Economy is that religions can be analyzed as platforms akin to Facebook or Amazon. Religion is a difficult topic to study. I should know. Together with Noel Johnson, in our book Persecution & Toleration, we struggled with questions such as how to define religion and religious toleration. Many scholars of religion claim there is no single definition of religion; that our conventional understanding only obtains for Judaism and Christianity. Indeed there are many puzzles in the study of religion: what distinguishes a cult from a religion? Is Confucianism a religion (or a philosophy?) Is Marxism a religion? Religious experiences are so diverse and multifaceted that it is difficult to study them within a single framework.

There is a lot in the book! So if you want a short review mine is: “The Divine Economy is an original and important contribution to the economics of religion. It is accessible and readable but there is also much for specialists and scholars to discuss and debate”.

Below the break, I’ll explore in more detail some specific points of interest. But it should be noted I’m only exploring a small portion of the topics that the book goes into.

---

Religion and the Economics of Identity

The standard framework for studying religion in economics is the club goods model. Pioneered by Larry Iannaccone in the late 1980s and early 1990s (see here for his seminal paper), the club goods framework is squarely in the Beckerian tradition of analyzing social phenomenon through the lens of microeconomic theory.¹ It offers a simple and compelling explanation for the collective aspects of religious experience. Religion cannot be an entirely sole activity. In Iannaccone’s model the religious good is a club good: up to some point, the utility I get from the religious good is increasing in the inputs (effort or money) of other people. Highlighting this club good aspect of religion allowed Iannaccone, and fellow-travelers in the sociology of religion such as Rodney Stark, to address some important puzzles.

Why do stricter, that is, more costly, religious organizations often out-compete their laxer counterparts? If Episcopalianism can offer a similar religious good as Pentecostalism, and the latter makes greater demands on one’s time or wallet, why wouldn’t everyone join the less demanding church? Iannaccone’s model made it clear that the character of the religious good is not independent of the costs it imposes. A more demanding church will also provide a more “intense” religious experience for those who want it because it will weed out the less committed or the free-riders (see here).

Stark and Iannaccone similarly took on the secularization hypothesis. Various versions of the secularization hypothesis all seemed to suggest that religious activity and belief would decline with economic development. By the 1980s, this was clearly not happening in the United States. For Stark, Iannaccone and their collaborators, secularization occurred under religious monopolies (like Scandinavia) but not where there was a flourishing market for religion capable of supplying a natural human demand for religion (see here). Seabright too, as we will see, has much to say about the secularization hypothesis.

The club goods model of religion was thus a major breakthrough, and it laid the foundation for what has become a new subfield within economics: the Economics of Religion, with its own conference ASREC. But it has also long been apparent that there are limitations to the club goods approach. One common criticism has been that there is little or no actual religion in it. What distinguishes a religious club from another club good like the neighborhood swimming pool? What role does belief play? What room is there for the supernatural? The club goods model appears most appropriate for studying competing Christian denominations in the developed world (though it has been used by Jean-Paul Carvalho and myself to study post-Emancipation Reform Judaism). It appears less useful as a model for medieval Christendom or other parts of the world with very different religious traditions.

Seabright takes a broader approach. For him religions are communities and belief systems which offer individual interlocking relationships with others and a sense of personal mission. What distinguishes religions from other similar belief systems is that religions rely on the supernatural. This is important because it means that the claims of religion cannot be falsified.

What does economics have to say about any of this? Nothing, you might think! In fact, economics has made considerable progress is better appreciating the role of culture and identity. George Akerlof and Rachel Kranton introduced the idea of identity economics more than two decades ago and deserve much credit. In recent years, however, this line of research has taken-off.

The basic idea is simple. Individuals care about their self-image as well as the goods or experiences that they consume. Some choices are orthogonal to identity. But many signal to ourselves and to others what our identity is. The precise location where I fill up my car doesn’t say much about my identity. But maybe whether my car runs on gasoline or is electric does. Identity can be more or less salient. And individuals can have multiple social, religious, or racial identities. But it is indisputable that these identities matter for what we choose to consume and produce, as well as who we choose to interact with or marry.

What is the connection between identity and religion? For many people, religion is perhaps their central or core identity. Certainly for much of history, religious identity was their most salient identity (at least those living in Europe and the Near East). But there is more than this. Religions shape and form identity. And this is not coincidental. In an AEA papers and proceedings paper, Jean-Paul Carvalho shows that because the process of identity formation relies on a cultural transmission process that is characterized by externalities, it is natural that organizations like religions would emerge to internalize them.

Seabright’s view of religious organizations as platforms fits nicely with this perspective. Religious choices involve identity. They are therefore different from deciding how many bananas to buy today. But they also involve mundane economic calculations. Religious organizations need resources to survive. Individuals have to tradeoff how much they give to their religion versus how much they spend or save for themselves. The club good model explains why individuals want to be in religious organizations with other likeminded individuals. The insights of the economics of identity help to explain why religious clubs are distinct and religious choices different from the decision whether or not to join a local swimming club. The platform perspective adds the insight that religious communities themselves offer more than just a pure club good. As Seabright sees it, therefore, his platform perspective builds on the club goods model of religion but “takes the idea a step further” because it appreciates that religious members are not just consumers of the religious good, “they are assets of the platform, and active in the delivery of such benefits to each other” (p 99). This helps to explain why religions which are successful in building large “platforms” can be extremely robust and long-lived.

Narratives and the Origins of Religious Belief

The next part of the book considers the origins of religious belief. Seabright draws on the work of evolutionary psychologists who have investigated where religious belief comes from.

Humans excel at social learning and imitation. Indeed humans are “extravagant imitations” who are prone to over-learning. These tendencies have likely been selected for by evolution and are part of what Joseph Henrich calls “the secret of our success,” the ability of human groups to rapidly evolve new cultural practices. These practices involve rituals which are hard to rationalize or explain logically but often appear highly functional. The ability to suspend belief is thus something that evolution appears to have selected for. Ritual practices are so ubiquitous (and are common among non-religious organizations) that likely predate theological commitments.

Seabright argues that theological commitments can be understood as strengthening the beliefs and religious identity of members. Few people, he argues are attracted into a religion by its theology. But once they are members, the obligation to commit to a set of beliefs plays a critical role in strengthening their identity and demarcating their beliefs from those of rival sects. According to this account then, ritual predates belief, whereas theology is a later development, a way for the faithful to distinguish their beliefs, to take pride in them, and to limit the attraction of other faiths.

To explain why religious doctrines and beliefs give meaning to individuals and indeed structure their identities, we have to go beyond viewing religion simply as a club good. Here, Seabright is able to take advantage of a stream of new research analyzing narratives and motifs (see here for the paper that laid the ground work for much of this). Humans are particularly attuned to common narrative structures (for example, the hero motifs studied by Joseph Campbell). These narratives are not culturally invariant but vary across cultures. Seabright contends that successful religions both feed into and fit with compelling narrative motifs.

In this perspective, the Axial Age religions (Judaism, Buddhism, Hinduism - and Christianity and Islam) were successful, and outcompeted traditional religious beliefs (such as those we call Greco-Roman paganism) because they employed grander and more ambitious narratives, narratives which were a better fit with the more complex and hierarchical societies that emerged after 500 BCE. These compelling narratives also explain the robustness and longevity of many of the world’s religious traditions. This emphasize on the importance of narratives thus complements the other elements of the platform perspective that Seabright argues for.

The Political Economy of Religious Organizations

The third chunk of The Divine Economy focuses on the political economy of religion. This is a topic where a lot of recent work by economists has focused.

Should a religion seek or flee political power? On the one hand, such power gives a religious organization access to untold resources that it can use to spread its message. On the other hand, as Adam Smith noted, political patronage and support for the religious authority is a double-edged sword: it confers power and resources but it erodes legitimacy. Politics is corrupting as political leaders have strong incentives to use religion to justify actions which are hard to otherwise justice — witness the way Vladimir Putin has used the Russian Orthodox Church to justify his invasion of Ukraine. The more religion becomes involved in politics, the greater the risk of delegitimization. Seabright provides as a recent example the Unification Church in South Korea which used its political involvement to acquire tremendous wealth but now appears to have undermined its long-term future because it is widely seen as corrupt. He argues that the decline of Catholicism in Spain post-Franco and in Ireland since the 1980s reflects a similar dynamic.

Seabright notices that there is a cyclical feature to this relationship. Highly successful religious organizations often evolve independently of politics. Their success, however, tempts secular rulers into co-opting them. This co-option then leads to decline,

Marcus Shera (an incoming postdoc at Chapman University) has just written a dissertation which sheds light on precisely this phenomenon within Christianity. His argument is that it was the rise of monasticism in the 4th century CE that played a critical role in allowing Christianity to navigate this dilemma. Put simply, his argument is that while Christianity was a persecuted sect, it necessarily selected for devout and sincere members. The worldly payoffs of membership were low (and negative during periods of persecution) so it could only attract members who believed in other worldly payoffs. This changed when Constantine made Christianity part of the Roman state in the early 4th century. There were strong worldly returns to entering the Church.

This threatened the legitimacy of the early Church and could have resulted in a devastating schism (Donatism can perhaps be interpreted in this light). Shera argues that the emergence of monasticism prevented this. While religious leaders like bishops could not credibly isolate themselves from the corrupting effects of political power, monks could do so. Monks could therefore play a role in legitimating bishops and other religious leaders in the eyes of the wider population. Of course, Western Christianity was not immune to the problems of political entanglement, and this conflict continuously reemerged during medieval and early modern history. But its survival and success surely owe much to its ability to maintain a degree of independence from secular power.

Secularization and the Future of Religion

In his conclusion, and in the appendix which comprises the final chapter, Seabright provides some speculations about the future of religion and returns to the secularization hypothesis. Looking at data from the World Values Survey, he finds that the story of secularization only really applies to a small part of the world. There has been a recent decline in religiosity, especially among young people in North America. But elsewhere in the world we see religiosity either remain high in Africa or remain stationary at fairly low levels (much of Western Europe). In Europe Catholic and Protestant countries have lost believers in the last few decades while Orthodox countries have gained them. Religiosity remains very high in Bangladesh, Ethiopia, Indonesia, Kenya, Myanmar, Niger, the Philippines, and Zimbabwe (over 90% reporting the religion is important or very important).

Precisely because religiosity is a complex and multifaceted phenomenon capable of evolving with the times, and because of the platform character of large-scale religion, we should not expect it to disappear any time soon.

Many more subjects are tackled in the book, including the problem of abuse within religious organizations and the relationship between technology and how religious organizations are structured. I urge those interested into dig into the book for themselves.

In The Divine Economy, Seabright has perhaps written two or even three books in one. The first is popular take on an important social scientific topic - how religions organize and compete. Popular social science books provide an important niche in the market; but they often frustrate experts in the field (perhaps a better word is infuriate, see, for a case in point, Sapiens). This is assuredly not the case with The Divine Economy, which offers much for both experts and the ordinary reader.

1. This is unsurprising. Becker was Iannacone’s thesis advisor.