Hell is Good for Growth (or maybe vice versa)

December 8, 2009

     By Duncan Green     

The Protestant Work Ethic is back, this time supported by econometrics….. A recent article in the Boston Globe summed up research showing that a belief in hell is good for growth, and other linkages between religion and pergatorydevelopment. Highlights:

‘A pair of Harvard researchers recently examined 40 years of data from dozens of countries, trying to sort out the economic impact of religious beliefs or practices. They found that religion has a measurable effect on developing economies – and the most powerful influence relates to how strongly people believe in hell.

That hell could matter to economic growth might seem surprising, since you can’t prove it exists, let alone quantify it. It stands as one of the more intriguing findings in a growing body of recent research exploring how religion might influence the wealth and prosperity of societies. In recent years, Italian economists have presented findings that religion can boost GDP by increasing trust within a society; researchers in the United States showed that religion reduces corruption and increases respect for law in ways that boost overall economic growth. A number of researchers have documented how merchants used religious backgrounds to establish one another’s reliability.

In a sense, religion and economics have long been intertwined. There are more verses on money and finance in the Bible than there are verses on prayer. Religious denominations affect economics by creating bonds of trust and shared commitment among small groups, both necessary qualities for lending and trade. In the Middle Ages, studies show, monk-run estates outperformed those that used serfs, thanks to religiously inspired cooperation and frugality. The Quakers of 18th-century Britain, renowned for their scrupulous honesty, came to dominate British finance. Ultra-orthodox Jews similarly dominate New York’s diamond trade because of levels of trust based on religion. Modern religious kibbutzim on average outperform their secular rivals, in part because of trust built through engaging in communal religious rituals.

In 1905, Max Weber, a German sociologist who studied religions, identified

Engines of Growth?

Engines of Growth?

what he called “the Protestant work ethic” as the driving force behind modern capitalism in the West. But by the middle of the 20th century, most sociologists had dismissed Weber’s thesis as based on bad theology and bad statistics.

But over the last several decades, better sets of statistics on religion have become available, and improvements in computing power and mathematical techniques have made it easier for economists to run very large statistical analyses, with hundreds of variables.

Robert Barro, a renowned economist at Harvard, and his wife, Rachel McCleary, a researcher at Harvard’s Taubman Center, collected data from 59 countries where a majority of the population followed one of the four major religions, Christianity, Islam, Hinduism, or Buddhism. They ran this data – which covered slices of years from 1981 to 2000, measuring things like levels of belief in God, afterlife beliefs, and worship attendance – through statistical models. Their results show a strong correlation between economic growth and certain shifts in beliefs, though only in developing countries. Most strikingly, if belief in hell jumps up sharply while actual church attendance stays flat, it correlates with economic growth. Belief in heaven also has a similar effect, though less pronounced. Mere belief in God has no effect one way or the other. Meanwhile, if church attendance actually rises, it slows growth in developing economies.’

Why? Possible answers include:
– all major religions extol sacrifice, hard work and thrift
– ‘Those who believed in a punishing God cheat less’, according to behavioural experiments
– ‘private property protections developed by the Church to guard against grasping secular rulers gave Catholic – and eventually Protestant – nations stronger protections for individual rights than other nations, creating incentive for individual success.’
– Some religions spark growth by promoting literacy to read holy books

(Or maybe they’ve got the arrow of causality the wrong way round and high speed growth makes you believe in hell…….)

Anyway, Weber may be rehabilitated, but no-one is suggesting (yet) that the IMF should start insisting on belief in eternal damnation as one of its standard loan conditions…… [h/t Nicholas Colloff]

December 8, 2009
Duncan Green