Economists Find Hell Helpful
|August 10, 2004||Posted by Staff under Progress Report, The Progress Report|
Economists Find Hell Helpful
Fear of Hell Might Fire Up the Economy
Here is the third version of a pretty strange article. The first two versions had to be withdrawn by the authors because they attempted to present some actual statistics, and in each case the statistics were mistaken.
So, perhaps taking a cue from the Bush administration, the economist authors simply deleted the statistics. Or were they victims of an evil hex? This junk analysis emanates from, of all places, the Federal Reserve Bank of St. Louis.
by Kevin L. Kliesen and Frank A. Schmid
Economists have long been interested in why some countries are rich and why some countries are poor. Differences in labor productivity, inflation, and saving and investment rates are traditional economic explanations for variations in wealth across countries. But when these explanations fall short, researchers sometimes turn to noneconomic factors. Two such factors are a countrys legal and social institutions. Religious factors can also help explain variations in economic growth, many economists are increasingly finding.
Over time, a countrys economic growth is ultimately a function of growth rates in population and labor productivity (output per hour worked). But since population growth tends to change slowly, a nations labor productivity growth is what ultimately determines whether it will be rich (high productivity growth) or poor (low productivity growth).
The Progress Report notes — that assumption is convenient but quite false. As regular readers of The Progress Report know, it doesn’t matter how much is produced, what matters is how much the producers actually receive, after payments to government and landowners. We won’t go into further details here, but please be aware that if writers start out with incomplete premises, they are on the path to ridiculous conclusions.
What causes productivity growth rates to speed up or slow down? Improvements in the quality of labor, such as a more educated workforce, seem to matter, as do the quantity and quality of the tools and equipment that each worker uses. Also generally deemed important is a countrys saving rate, since saving is used to finance investment in capital goods. Other factors that improve a countrys prospects, but which are not readily captured by measured labor and capital inputs, are improvements in the distribution of goods and services that arise from just-in-time inventory processes.
Another significant influence seems to be a countrys public and private institutions. These include laws and regulations that enforce contracts, guarantee property rights and promote well-developed financial markets. Secure property rights, such as patents and software piracy laws, provide individuals and firms the needed incentive to take economic risks, while deep capital markets better enable financial resources to flow toward promising but unproven technologies.
Also critical are laws that promote good corporate governance by imposing harsh penalties against firms or government officials that have enriched themselves from illegal or immoral activities. When these public and private institutions are lacking, or not very well-developed, there tend to be high levels of corruption and financial malfeasance, which can create economic uncertainty and destroy wealth. Recent examples of corruption and other misconduct can be found even in advanced economies, as in the United States (Enron, Tyco and WorldCom), Italy (Parmalat) and the Netherlands (Ahold).
The Progress Report notes — there’s plenty more to observe in both the private sector and the public sector: Riggs Bank, Diebold, Halliburton, the 2002 Olympic scandal, the 2000 Florida vote fraud scandal, torture and rape in U.S.-run prisons, Bush’s cocaine scandal, Monica Lewinsky, Bush’s AWOL scandal, the Catholic priest sex abuse scandal, corporate welfare, Bush administration lies leading up to war against Iraq — please note such things occur just as easily even among politicians who insist very loudly that they are very Christian.
If you go back in time to when the U.S. had a higher percentage of hell-believers, you still find lots of corruption among public servants. Watergate, for instance. Go back further and you get Teapot Dome. Go back further still and you get an entire book full of examples investigated by Congressman Henry George Jr.
While traditional growth theories go far in explaining cross-country patterns of economic growth, some economists believe they do not go far enough. Instead, many researchers are increasingly turning to noneconomic factors, such as religion.
Religions Early Role
Adam Smith wrote that one of religions most important contributions to the economic development process is its value as a moral enforcement mechanism. He argued that, in a society imbued with these religious mechanisms, fewer resources will be devoted to determining the veracity of an individuals or firms business ethics what economists call the credit or default risk associated with lending to an unknown individual. In short, argued Smith, in societies where there is a widespread belief in God, the values of honesty and integrity are more prevalent.
In a similar fashion, Alexis de Tocqueville, writing about early 19th century America, said that religion . . . for if it did not impart a taste for freedom, it facilitates the use of free institutions, so that Americans held it to be indispensable to the maintenance of republican institutions. To de Tocqueville, a religious country lessened its dependence on the public sector, which not only left a larger amount of resources for the private sector but enhanced the countrys moral fiber.
German sociologist Max Weber argued that the work ethic that was inspired by the Protestant Reformation helped to explain the rise of capitalism in Western Europe and America. According to Weber, capitalism existed in antiquityfor example, in China, India, Rome and Babylonand even during the Middle Ages, but it couldnt have matched the rise and sustainability of Western European and American capitalism because a particular ethos was lacking. The ethos that set the Protestant apart from all other religions, and which facilitated economic growth, was an intense commitment to work, dependability, diligence, self-denial, austerity, thrift, punctuality, fulfillment of promises and fidelity to group interests. Webers critics instead argued that the Protestants, rather than helping to spur the rise of Western capitalism, were much better than other religious adherents in adapting to this newfound economic structure.
Current Topics, Controversies
According to the secularization hypothesis, as a countrys inhabitants become richer and more educated, their faith in religion and religious institutions wanes, and they attend church less regularly. Economists Edward Glaeser and Bruce Sacerdote find some support for this hypothesis. They wrote in 2002 that increased education results in a decrease in the extent of religious beliefs, perhaps because public school systems tend to reinforce secular education that, the economists argue, conflicts with traditional religious beliefs. By contrast, economist Laurence Iannaccone wrote in 1998 that church attendance rises with education, which suggests that rich Western countries should have higher rates of church attendance. Ultimately, then, the issue is whether religious beliefs, as Weber and Smith argued, can be shown to have an effect on a countrys economic growth.
In a paper last year, economists Robert Barro and Rachel McCleary provided evidence that church attendance and economic growth are negatively related, but a belief in helltheir measure of religious beliefswas positively related to increased economic growth. According to Barro and McCleary, increased church attendance could lower growth because of more resources flowing to the religious sector. However, the net effect would be uncertain because increased church attendance may also increase religious beliefs, which, as Weber believed, raises economic growth by spurring individual behavior and actions that are thought to encourage productivity. Interestingly, Barro and McCleary also found that economic performance was largely unrelated to the dominant religious theology of the nation.
Kevin L. Kliesen is an economist and Frank A. Schmid is a senior economist at the Federal Reserve Bank of St. Louis. Thomas A. Pollmann provided research assistance.
Ellen Johnson, president of American Atheists Inc., called the study the latest gimmick from the religious establishment to drum up government support.
“Religious people cannot rely on their theology to promote what they do so they turn to other things,” she said.
“I cannot imagine what the belief in mythological beings or things that don’t exist can do for business. What about the pornographic industry? That is probably very good for growth.”
Say, what about all those corrupt televangelists? Or maybe all the corrupt politicians who claim to be Christian are lying to us? Hmm. Tell your views to The Progress Report!