David Emanuel Andersson

Entries categorized as ‘The Social Sciences’

#6 Douglass Cecil North: The Big-Picture Thinker

December 29, 2009 · Leave a Comment

There is no economist who has been more useful to me as a teacher of institutional economics than Douglass North. This is because he is the main provider of a unified and consistent conceptual framework for the study of institutions and their effects. Using the Coasean concept of transaction costs, North understands institutions as the main influence on overall transaction cost levels in specific societies.

North’s starting point is that institutions constrain human behavior, which reduces uncertainty and thereby transaction costs, which in turn explains long-term processes of economic development. And institutions do not only refer to the formal codified rules of the game as embodied in legal and political systems; they also refer to various cultural norms and habits that act as informal constraints on human action. On the basis of this conceptual framework, North studied the comparative institutional frameworks of England, the Netherlands, Spain, and Portugal as a means of explaining the long-run economic performance not only of these societies, but also of their colonial offshoots in North and South America.

The main conclusion of his analysis is that institutions that promote well-defined property rights and free trade generate higher long-term growth than unstable institutions and barriers to economic or political entry that protect a dominant rent-seeking elite. North’s analysis thereby illuminates the “macroeconomic” framework that supplies the rules of the game for firms and other organizations. The organizational analysis of Oliver Williamson and others can thus be seen as the microeconomic counterpart to North’s analysis within the research program that has become known as the New Institutional Economics.

North belongs to a select group of economists whose theorizing is constantly evolving, unlike most economists who keep repeating the same basic theory with few changes except for some minor theoretical or empirical details. It is therefore not the case that the reader of North’s work confronts a situation of rapidly diminishing utility when consuming an increasing quantity of his output. In his early work, the approach is much more neoclassical than later on. After about 1990, North has seemed increasingly disillusioned with the maximizing assumptions of mainstream models. As a result, he has come to rely to an increasing extent on the results of cognitive science and tends nowadays also to refer to the “non-ergodic” economic environment (which brings to mind some of the more heterodox Post Keynesians and Austrians).

He has also recently written about the effects of the long-term evolution of the human brain on economic outcomes, referring repeatedly to the transition from primate to human communities and from pre-literate to textual societies. So while he was always more of a big-picture guy than the average economist, he is perhaps now the biggest-picture economist ever, surpassing even Hayek in this respect (who tended to avoid discussing other primates than homo sapiens).

As an octogenarian, North has yet again developed a new framework for analyzing economic development, this time together with the political scientist Barry Weingast. The main idea is that the state arose to suppress violence among contending groups, and that these contending groups form a sometimes divided elite in what North and Weingast call “limited-access orders.” Such orders are essentially rent-seeking coalitions that enforce limited access to sources of economic and political power (i.e. they exclude most of the population). All states before 1800 and most states today are limited-access orders, which is why North also calls them “natural states.”  A few dozen countries are however open-access orders, where the rule of law guarantees more-or-less equal rights to entry into markets and politics for all citizens. Certain preconditions (rule of law for elites; elite organizations with perpetual life; centralized control of violence) have to be met for a limited-access order to make the transition into an open-access order, and these preconditions are not always achieved, nor do they automatically lead to a successful transition. (One might add that even after a successful transition, problems with rent-seeking interest groups and discretionary market distortions may persist, although not solely for the benefit of a small power-wielding elite). All in all, the natural state framework is quite depressing, but nevertheless mostly persuasive.

As should be evident from this brief overview, Douglass North has been a major supplier of intellectual nourishment for the past 50 years.

Categories: Economics · Reflections · The Social Sciences
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#7 Brian J. Loasby: The Eclectic Subjectivist

December 28, 2009 · Leave a Comment

I discovered Brian Loasby by accident as I was browsing the shelves of a college library. Being generally interested in institutions and evolution, I was attracted by the title of his 1999 book; “Knowledge, Institutions and Evolution in Economics.” It turned out to be a challenging read. Indeed, this book is the only one I have read four times. Nowadays, I assign it as one of twelve books in my Ph.D. seminar course, and students tend to find it much more difficult than the two books that precede it (Schumpeter’s Theory of Economic Development and Kirzner’s Competition and Entrepreneurship). Loasby’s texts are not only difficult because of their density of ideas; they are also difficult because they combine ideas that are not usually combined.

It goes without saying that  Loasby does not belong to any single school of thought. And yet his thinking is remarkably consistent in its subjectivism. While radical subjectivism is usually associated with Ludwig Lachmann and George Shackle, I would argue that Loasby’s subjectivism is at least as radical. Sometimes I even find him too extreme (and being criticized by me for being too extreme a subjectivist is quite a feat). For example, Loasby has stated that policy implications offered by economists are almost always unfounded. I’m not at all convinced by this, but maybe the difference between me and Loasby is that I believe that institutions stabilize expectations to a greater extent than he thinks they do (he is more Shackleian — institutions make people march together in an arbitrary direction – while I am more Hayekian — some such institutional directions are more likely to spread because they promote survival and material accumulation).

In spite of this reservation, I wholeheartedly recommend Loasby for providing numerous insights. His discussion of economists’ conventional treatment of evolution deserves to be considered a classic (Alchian made some minor mistakes which led to greater mistakes by Friedman and even greater ones by Becker). His notion that the history of economic thought is not a history of continuous progress but rather a sequence of confused detours down blind alleys punctuated by the occasional brilliant insight is spot on. And his analysis of entrepreneurship is a very creative combination of ideas from Schumpeter, Kirzner, and Popper.

Indeed, it is in his wide-ranging knowledge of economic ideas that Loasby’s thought becomes most challenging, since the reader is not likely to be as erudite as the author (I assume here that I’m a typical reader, which is not necessarily true). A typical paper by Loasby may discuss topics as different as Adam Smith’s observations about the development of astronomy, Menger’s view of the emergence of money, Marshallian economics, Hayekian psychology, the philosophies of Popper and Ryle, Penrose’s resource-based view of the firm, Chamberlin’s theory of monopolistic competition, and Shackleian surprise functions. His criticisms of various economists may not even be noticed by the uninformed reader, since they often take the form of understated but nonetheless lethal asides. His endorsements are also somewhat vague, and can usually only be identified as such by an absence of parenthetical observations that subtly undermine the theory in question. Loasby’s own conjectures and hypotheses are similarly elusive: he has a penchant for what I would like to call “carefully considered and precise imprecision.”

The conclusion is that reading Loasby can be a very rewarding experience, but only if one is patient and shares some of his disillusionment with mainstream economics. In particular, I would recomment the above-mentioned book as well as his book dealing separately with a number of prominent economists; “The Mind and Method of the Economist.”

If my interpretation is correct, Loasby has a generally favorable view of A. Smith, Menger, Marshall, Chamberlin, Coase, Hayek, Popper, Ryle, Penrose, Richardson, and Lachmann. But he seems closest to Shackle. He is mostly critical of another almost equally prominent group of economists: J. Robinson, Alchian, Friedman, Becker, Lucas, Baumol, and Williamson. I have still not figured out his overall views of Schumpeter, Keynes or Kirzner, even though they figure prominently in his narratives. The resulting fusion in terms of new ideas is perhaps best described as “an evolutionary radical subjectivism which is powered by entrepreneurial imagination and cumulative knowledge.”

Categories: Economics · Reflections · The Social Sciences
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#8 Ronald Harry Coase: Economy of Expression

December 27, 2009 · Leave a Comment

Ronald Coase, who will be celebrating his 99th birtday the day after tomorrow, is perhaps the best living exponent of the principle that ideas impress more when they have not been designed to impress. Unlike many contemporary economists, Coase was never interested in developing mathematical models. Unlike most sociologists, he did not have a penchant for impossible-to-understand words. He simply wrote about his ideas in the most intelligible way possible. But his ideas had consequences.

In “the Nature of the Firm,” Coase attempted to explain why firms exist, and also to offer propositions for why firms stop expanding after a certain point. This paper laid the foundation for the development of the huge literature on transaction costs and governance costs by economists such as Douglass North and Oliver Williamson. What I find especially impressive about this paper is its apparent simplicity. Using everyday language, North explains seemingly self-evident phenomena in terms that are accessible to the general reader. But in spite of being obvious as well as important, transaction costs had not focused anyone’s attention before the publication of the paper in 1937.

His other well-known paper – “the Problem of Social Cost” – is similar: seemingly simple and obvious. But that didn’t stop those economists who were driving at high speed down the cul-de-sac of equilibrium theorizing from misunderstanding Coase . The explicit conclusion of the paper is that externalities don’t matter in a world without transaction costs. Since the typical equilibrium model does not contain transaction costs, equilibrium modelers concluded that externalities don’t matter. But the real conclusion of Coase’s paper was the opposite one: because transaction costs are pervasive, externalities do matter. The paper even had an important policy implication: vague and uncertain property rights are associated with high transaction costs, and thus with big externality problems. Consequently, the best way to deal with both externalities and transaction costs is to strive for less ambiguous and more predictable property rights.

Coase also made other contributions to our understanding of the world. In his historical investigation of the organization of lighthouses along the British coast, he showed that public goods can be provided by private organizations. Again, Coase was prescient: there are now numerous studies that show how the old assumption of “public good = public sector” may ultimately lead to the socialization of almost everything.

All in all, however, Coase’s substantive contributions consist of a few articles that together make up a relatively thin book (his “greatest hits” have been published as “The Firm, the Market, and the Law”). But these papers are among the most cited papers of all time. Interestingly, Coase has said that he never submitted unsolicited papers to journals. He only wrote because he was asked to do so or because a certain subject took his fancy. This laid-back attitude to publishing is evident in the quirkiness of some of his non-seminal papers. As an example, the title of one paper is “Alfred Marshall’s Mother and Father.”

In any case, Coase is living testimony that the publish-or-perish mindset may not be the optimal strategy, either socially or individually. Reaching an age of at least 98 years and 363 days and receiving a Nobel Prize for one’s contributions is an indication that economizing on one’s intellectual resources may yield both a few path-breaking papers and a long life.

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#9 Joseph Alois Schumpeter: The Creative (but Destructive) Genius

November 9, 2009 · Leave a Comment

If Schumpeter should be summed up with one adjective, “creative” is the most suitable one. And this is why he ranks higher than Kirzner in my view. While Kirzner is by-and-large right about most things, his creativity is more incremental and his interests more limited.  Schumpeter, on the other hand, was wrong about a lot of things, although sometimes it is difficult to tell whether he was just plain wrong or if he drew erroneous conclusions for ironic purposes.

I think that what most characterizes creative people is their ability to combine apparently distant ideas, theories, or approaches. Schumpeter was a master of such creative combinations. If one looks at his two most famous works-The Theory of Economic Development and Capitalism, Socialism, and Democracy – it is clear that there are four recurring components that are combined in different proportions in Schumpeter’s thinking: dynamic Austrian economics; Walrasian equilibria; Nietzschean notions of ubermenschen; and Weberian sociology. To this stew, Schumpeter added his own brands of ironic pessimism.

Needless to say, I’m skeptical – to say the least – about some of these components. But all are actually needed to produce a coherent theory. Without entrepreneurial heroes, it is difficult to see how the “circular flow” can be rescued from the destruction of a continuous swarm of local entrepreneurs; it is also difficult to see how anything approaching equilibrium can ever be approximated in an industrialized economic system. Likewise, the supposed “efficiency” of bureaucratic, large-scale entrepreneurship depends on the existence of a superior class of innovating supermen who can be put in charge of corporate decision-making.

But even though I don’t believe in supermen or circular states (in a post-agricultural economy) or share the Weberian faith in bureaucracy, I still think that Schumpeter’s contributions represented real progress. He was the first one to give us a coherent theory of entrepreneurship, where entrepreneurs are (correctly) understood as the creative-destructive agents that cause economic development and introduce innovations into the economy. The theory is both evolutionary and based on the implicit recognition that individuals have to interpret economic data; they are not simply given as unambiguous and universally recognized bits of information. Indeed, it is Schumpeter’s focus on innovation and suboptimal equilibria – rather than arbitrage and optimal equilibria – that makes his theory more satisfying than Kirzner’s later attempt, in spite of also having more blatant shortcomings.

Another fascinating aspect of Schumpeter’s writings is that he reveals himself both as a conservative and as a pessimist. His most well-known conclusion is that socialism is inevitable. But unlike socialists with this belief, Schumpeter thought that the inevitability of socialism is as inspiring as the inevitability of death. The historian Jerry Z. Muller (The Mind and the Market , 2002, p. 294) points to Pareto’s influence on Schumpeter:

“In attempting to account for the appeal of socialism, Schumpeter … borrowed from … Pareto. Pareto’s 1901 essay … conveys two themes to which Schumpeter would return time and time again: the inevitability of elites, and the importance of nonrational and nonlogical drives in explaining social action. Pareto suggested that the victory of socialism was “most probable and almost inevitable.” Yet he predicted [that] the reality of elites would not change. It was almost impossible to convince socialists of the fallacy of their doctrine … since they were enthusiasts of a substitute religion. In such circumstances, arguments are invented to justify actions that were arrived at before the facts were examined, motivated by nonrational drives.”

Schumpeter considered the capitalist system superior to its alternatives, as Muller (2002, p. 306) also explains:

“Schumpeter was skeptical of …  antitrust … What those who criticized monopoly in the name of free competition failed to understand was that it was in the very nature of dynamic capitalism to produce high, “monopoly” profits for those who were the first to innovate successfully, [thus] large firms had to continue to innovate or face decline …. the interpretation of the Depression by intellectuals had led to a “radicalization” of the public mind in the United States, which in turn had resulted in policies that left capitalism in shackles.”

A very interesting assertion of Schumpeter’s was that even if the proponents of capitalism manage to succesfully defend capitalism against one of the charges raised against it – for example that decentralized planning is less efficient than central planning – it is inevitable that the critics will find some other argument that becomes as important as the refuted argument had been previously. According to Schumpeter, the fact remains that intellectuals and many others do not like capitalism on the basis of their unexamined and irrational subjective judgments.

Although I am not as pessimistic as Schumpeter, I think we can now agree that he was prescient about the difficulties faced by the defenders of free markets. There is now a general agreement that markets work better than Soviet-style central planning. But there is no shortage of people who (erroneously, in my view) believe that the current financial crisis was caused by free markets rather than government regulations and subsidies, and an even greater number of people who think that markets are bad for the environment (in spite of the positive correlation between air/water pollution and the absence of clearly defined private property rights).

Categories: Economics · Politics · Reflections · The Social Sciences
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#10 Israel Meir Kirzner: A Gateway to Economic Sanity

November 4, 2009 · Leave a Comment

I start the countdown by selecting Israel Kirzner as my 10th favorite thinker. I do not think that he is right about everything, but it is hard to overestimate his ability to make the reader (i.e. me) think.

When I first read his most well-known book, Competition and Entrepreneurship, it was akin to a revelation. My vague dissatisfaction with mainstream theory seemed explained and solved: the source of the problem is that there is no entrepreneur in contemporary neoclassicism, because end-state equilibria assume that the entrepreneurial problem has already been solved.

This had the effect of making me a downright “Kirznerian” for a while (my paper “The Spatial Nature of Entrepreneurship” is almost as Kirznerian as Kirzner himself). But then I became increasingly skeptical, and in my later writings I have spent more time criticizing than defending Kirzner’s conception of  entrepreneurial “alertness,” “discovery” and so on. But this does not mean than I don’t like his theory. I think we should all be grateful to Kirzner for having articulated an extraordinarily consistent, thin, and elegant theory.

The reason I call Kirzner a gateway to economic sanity is that he is sufficiently grounded in the neoclassical tradition to be taken seriously by the more open-minded of mainstream economists, yet he explains some of its most serious flaws in a way that is more likely to keep such economists reading than more heterodox or less polite critics of the received view.  In other words, Kirzner’s work is a sort of “gateway drug” to the even more mind-altering substance of, say, “The Economics of Time and Ignorance” or “Knowledge, Institutions, and Evolution in Economics.”

Unfortunately, the neoclassical sponge has lately had a tendency to integrate the form of Kirzner’s theory while draining it of its substance. In the expansive field of “entrepreneurship studies,” Kirzner is often referred to but seldom understood. Contrary to superficial interpretations, Kirzner’s theory is not a theoretical foundation for empirical studies of small business formation, unless it’s understood that business formation is only a minor subset of profit-yielding human action.

An attractive aspect of Kirzner’s work is that he never emphasizes the policy implications of his theory, which are numerous. While these implications are largely pro-market of the classical liberal variety, policy advocacy never seems to be his main objective. He is first and foremost an economist, who will occasionally provide the reader with understated observations regarding the benefits of free markets, but it’s mostly left to the reader to draw their own conclusions. I think this style is much to be preferred over more passionate policy advocacy (I don’t mind passion, but I think someone who gets passionate about tax rates has got his priorities jumbled up; surely there are other things that should be more likely to excite the passions of homo sapiens).

Israel Kirzner has an interesting background. While he was born in London, he has lived in New York for many years. When listening to a recording of one of his lectures, I was struck by his unique brand of spoken English: an idiosyncratic mixture of British intonation and two types of American pronunciation (New York and standard American).

Another unusual aspect is that he is not only an economist; he is also an Orthodox rabbi and scholar. Indeed, one might even call his style of economic analysis “rabbinical.” And it is perhaps this other occupation that explains his relative lack of passion when he does discuss economic policy choices.


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Top Ten Countdown of My Favorite Thinkers

November 1, 2009 · Leave a Comment

I have decided to reveal my intellectual preferences by doing a countdown of my 10 favorite thinkers. Given my educational background, this will be a very subjective list and limited to economics and adjacent disciplines. I will also attempt to motivate my choices, and  give an indication of what I like and don’t like about each individual (obviously, the pros will have to outweigh the cons). I haven’t decided the exact ranking yet, but I have a general idea about who will be included. Watch this space.

Categories: Economics · Personal stuff · Reflections · The Social Sciences

Handbook of Creative Cities

September 28, 2009 · Leave a Comment

One of the more exciting things that I’m involved in at this time is the planning and editing of a new book, entitled “Handbook of Creative Cities.” It is to be published by Edward Elgar in 2011 (hardcover) and 2013 (paperback). My co-editors are Charlotta Mellander and Ake Andersson, both of the Department of Economics at Jonkoping International Business School. Charlotta Mellander is a frequent traveler to Toronto, where she is doing research within projects initiated by Richard Florida (in fact, she is used as an example of a “creative class” mother in Florida’s latest book; “Who’s Your City?”).

One of my aims as co-editor is to stimulate discussion about the roles of planning (both public and private) and markets in urban development, and how the balance may shift with the emergence of post-industrial society. To this end, we have invited contributors with different theoretical perspectives, with a possible clash of ideas, which I would find very exciting.

While I don’t want to divulge the identities of the contributors yet, suffice it to say that they are a diverse and creative lot, and they represent the following creative or not so creative cities as residents: Chicago, Copenhagen, Jena, Jonkoping, Kaohsiung, Kyoto, London, Los Angeles, Milan, New York, San Francisco, Stockholm, Toronto, Vancouver, Washington, and Wellington.

Categories: Economics · Politics · The Social Sciences
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Cosmos and Taxis in Religious Life

September 9, 2009 · Leave a Comment

I have just completed a draft of a new paper.  In the past, the only sensitive topic that I have addressed is politics, but in this paper I deal with the three topics that are likely to upset some people if you express your personal opinions: politics, religion, and sex. While I have tried to keep as low a profile as possible regarding my personal opinions, the implications of the paper are clear:

1 Deregulated religion implies more religion

2 Postmodern (postindustrial) society implies that religions that are tolerant of sexual minorities are more likely to achieve positive growth, other things being equal.

3 Other things have usually not been equal in the past: conservative religions have been more successful because they exclude free-riders to a greater extent than religious liberals.

4 A pattern prediction is that if religious entrepreneurs are able to combine liberal (tolerant) values with high-tension (costly) religion, they are more likely to be successful among people with postmodern values than both low-tension religious liberals and high-tension religious conservatives.

The paper is an attempt to combine  Stark’s sociology of religion and Inglehart’s postmodernization theory within a Hayekian spontaneous-order framework:

Introduction

Most studies of spontaneous orders[1] have focused on markets, with some recent extensions to science, democracy, and legal systems. The religious life of an open society – the religious cosmos – is however also an example of such an order. The systemic feedback of religious spontaneous orders is distinct; religious organizations do not use money revenue or vote totals in assessing their performance. The systemic resource of the religious cosmos coincides with what Rodney Stark and Roger Finke (2000: 103) call “objective religious commitment.” Commitment consists of factors such as religious service attendance, adherence to prescribed religious norms, as well as in-kind and money contributions.

        A number of empirical studies have corroborated Adam Smith’s ([1776] 1965) insight that government involvement in the religious life of a nation leads to a less religious society. This proposition is at the core of the new “religious economy theory” as developed by Stark and Fiske (2000), which is a forceful rejection of sociological theories of religion that rest on the secularization thesis. A further component of religious economy theory is that there are tensions within organizations; expansion beyond some upper limit induces difficulties in maintaining behavioral rules that reduce free-riding.

        Behavioral rules serve the purpose of restricting membership in religious organizations to individuals with “virtuous” behavior and organization-specific contributions. Such rules improve the religious experience since worshippers are both producers and consumers. Rules can however be made too costly, since benefits must exceed costs; organizations have therefore adapted their rules in response to aggregate changes in commitment.

        Religious economy theory has so far not analyzed the relationship between the religious cosmos and social values; the unstated implication is that the ongoing transformation from a modern into a postmodern society does not affect the competitiveness of the distinct religious organizations that constitute the religious cosmos (Inglehart, 1997). Surveys show that individuals with the new value structure (often termed “postmodern values”) are less likely to attend religious services but spend more time thinking about “the meaning of life.” There should thus be ample opportunities for religious entrepreneurship.

Religious entrepreneurs face lessons from the past as well as new challenges. Historical experience shows that the intermingling of politics and religion increases hostility or apathy vis-à-vis organized religion (Iannaccone, 1991; Stark and Finke, 2000). The second history lesson is that “liberal faiths” have been less successful than their “conservative” rivals in modern (rather than postmodern) liberal democracies. Religious liberals have offered a less intense religious experience since they have tended to be more tolerant of free-riders and – in many cases – professed vague religious beliefs.

        Religious entrepreneurs face the challenge of devising costly exclusion rules that reward behavior that desirable recruits are willing to accept while repelling undesirables. Success in systemic resource terms requires that desirable adherents perceive the rewards of commitment to be greater than the perceived costs. As we shall see, both rewards and costs depend to some extent on the prevailing value system of the social environment.

In what follows, I first discuss a few of Stark and Finke’s terms and propositions so as to make their relevance to spontaneous order theorizing more apparent. I then attempt to make the theory even more comprehensive by introducing three extensions to the theory: a distinction between long-term and short-term costs; value system effects; and the relation between value systems and the competitiveness of various sorts of tension. Tension refers to the cost that religious organizations impose on members for the purpose of reducing free-riding and raising commitment (Stark and Finke, 2000). Finally, I discuss some of the future challenges that a religious organization (i.e. a “taxis”) is likely to face in a postmodern religious cosmos.  

Recasting Stark and Finke (2000) as a spontaneous order theory

 

The once dominant secularization thesis was a reflection of the modernist faith in the perfectibility of both government and science, and was often an unexamined assumption in twentieth-century sociology and anthropology. It also reflected the hostility to religion of nineteenth century thinkers such as Auguste Comte, Emile Durkheim, and Karl Marx.

Over the past 40 years, Rodney Stark, William Sins Bainbridge, Lawrence Iannaccone, and Roger Finke have developed the new religious economy theory, which is opposed to the secularization thesis on both theoretical and empirical grounds. Their most conspicuous difference from earlier sociologists of religion is that they assert that religious choices can – and tend to be – rational. Early attempts at using rational choice theory to formulate a general theory of religion include Stark and Bainbridge (1980; 1986). Gary Becker’s neoclassical rational choice framework exerted a strong influence on these contributions. The most ambitious attempt to date, however, is the comprehensive religious economy theory that is expounded in Acts of Faith: Explaining the Human Side of Religion (Stark and Finke, 2000).

The later version (ibid.) of the theory is more comprehensive and much less wedded to conventional neoclassical concepts. It integrates anthropological insights as well as a more evolutionary approach to a process that involves boundedly rational individuals, as is apparent from Proposition 1: “Within the limits of their information and understanding, restricted by available options, guided by their preferences and tastes, humans attempt to make rational choices” (Stark and Finke, 2000: 85, italics added).

A short paper such as this could never do justice to a theory as rich and subtle as Stark and Finke (ibid.). The theory encompasses 36 definitions and 99 propositions, which the authors manage to integrate into a seamless and persuasive whole. Acts of Faith also contains a wealth of empirical evidence ranging from summaries of regression results and case studies of individual religious organizations, almost all of which are compatible with the theory but incompatible with the secularization thesis. I shall therefore only highlight a handful of features that are especially relevant to an understanding of the religious cosmos as a spontaneous order.

 

Religious commitment as a systemic resource

A problem with religious economy theory is that it does not provide an explicit recognition of the systemic differences between the spontaneous order that coordinates profit-seeking firms and that which coordinates commitment-seeking religious organizations. Frequently, Stark and Finke (ibid.) offer propositions that treat religious rewards and costs as perfectly analogous to market revenues and costs.

A separation is desirable since there are systematic differences between the information-disseminating capacity of the systemic resources (money and commitment). Unlike money, religious commitment is a vague construct that may encompass various combinations of measurable variables. A commitment measure could for example be an index that attempts to combine measures of money donations, unpaid labor by members, the number of members, total attendance at services, and adherence to organization-specific behavioral prohibitions. Any attempt to convert different qualities of commitment into a single index of aggregate commitment is not as straightforward as calculating money revenues on the basis of market prices, and the relative weight of a commitment variable could at best emerge as an arbitrary social convention. For a religious organization to accept such a social convention as valid would however depend on its sharing this convention with the wider society, which in itself implies a lower level of tension with the social environment than a deviant convention, other things being equal. 

The religious cosmos therefore relies on a fuzzier performance measure than does the market order. But this does not mean that religious organizations must succumb to calculational chaos on a par with a state-owned enterprise in a centrally planned economy. Few would argue against the contention that the Roman Catholic Church has more aggregate religious commitment than the Episcopal Church. But Jehovah’s Witnesses may with some justification claim to have more systemic resources in the United States than the Roman Catholic Church, although most disinterested observers would probably disagree.

We should also note that there is a good reason for why money as expressed in market prices should not substitute for seemingly less “efficient” measures of religious commitment. First, the dominant religious faiths consider the willingness to pay money among adherents as a substandard measure of overall commitment, since it penalizes those with little money. Second, most religious organizations and most believers – regardless of religion – consider the explicit purchase of religious virtue as illegitimate. Like love or trust, but unlike sex or socks, religious virtue is an attribute that is (partly or wholly) devalued by an attempt to buy it. It is also symptomatic that the alleged sale of indulgences – implying purchased virtue – by Pope Leo X was one of the causes of Martin Luther’s Ninety-Five Theses.

 

The religious cosmos

In spite of not differentiating enough between the market order and the religious order, Stark and Finke’s theoretical propositions (ibid.) make up a logically consistent and convincing depiction of causal processes, which are in turn reinforced by the empirical evidence[2]. On the one hand, this is because the market analogy is often close enough to warrant an identical abstract theory. On the other hand, they also note many – if not all – of the circumstances by which the religious cosmos differs from markets that rely on market prices as the coordinating mechanism. The religious cosmos is more similar to the market order than the “marriage market” as theorized by Gary Becker (1973; 1974); therefore some of Israel Kirzner’s (1999) criticisms of Becker do not apply. They also do not apply because of Stark and Finke’s (2000) much more nuanced and realistic treatment of human knowledge and rational behavior.  

The starting point of a spontaneous order theory of religion is that the religious cosmos is a process without any goals of its own. This process coordinates religious individuals (consumers and co-producers) and organizations (producers). The systemic resource is objective religious commitment, which also functions as a signal that guides domain-specific action.

From the individual’s point of view, there is both subjective and objective commitment. Subjective commitment refers to “belief in, and knowledge of, the explanations sustained by a religious organization and having the appropriate emotions” (Stark and Fiske, 2000: 103). Such commitment reflects an individual’s explicit or implicit relational contract with a religious organization. The individual agrees to the contract in the expectation of a bundle of supernatural and natural benefits. The expectation of at least some supernatural benefits is the criterion for demarcating religious from non-religious exchange (ibid: 90).

The subjective commitment of the individual gives rise to various observable attributes of individual behavior. It is these observable attributes that constitutes objective religious commitment, which is the systemic resource that guides the religious cosmos.

Religious organizations are commitment-seeking producers of religious services. They therefore monitor commitment such as “religious participation or practice (taking part in rites and services, for example), material offerings (sacrifices, contributions, and offerings), and conformity to rules governing action (not sinning)” (ibid: 103). A religious organization accumulates commitment in a number of ways, for example by achieving higher attendance rates among existing members or by adding new members.

 

Tension and free-riding

Religious organizations operating in a competitive environment can only achieve (aggregate individual) commitment growth if it undertakes measures to exclude free-riders. The reason for this is twofold. First, a religious service is a territorial public good, which means that some consumers may choose not to contribute toward the cost of providing the service if it is not rationed (cf. Olson, 1965). Second, free-riders tend to have lower levels of objective religious commitment. A lower level of commitment matters, since consumers of religious services are not merely passive consumers but also co-producers (Iannaccone, 1994). A religious service is similar to other experience goods that depend on enthusiastic participation: a congregation of listless skeptics is akin to a heavy-metal concert in front of deaf octogenarians. Stark and Finke provide an example:

Think of a congregation in which individual levels of religious commitment fluctuate on a scale of one to ten. Suppose that there are the same number of people at each level, which yields an average commitment level of 5. Now suppose that this congregation imposes a rule requiring a commitment level of 5 or above in order to remain a member. The immediate result is an average level of commitment of 7.5. Moreover, people who previously had scored 5 and thus had been average members in terms of commitment, now find themselves at the bottom. Many of these are likely to respond by increasing their level of commitment in order to once again become average members. As they do so, the average level of commitment also rises, and the returns on their investment increase correspondingly. (Stark and Finke, p. 148-49).   

 

The required commitment level is not only a measure of the minimal cost that members must pay for inclusion; it is also a measure of the tension of the organization vis-à-vis the surrounding society (ibid: 143). Tension refers to how much a religious group differs from a reference group, usually the general population of some geographical area. One key proposition is that higher-tension organizations tend to grow at the expense of lower-tension ones (ibid: 154), since higher tension both reduces opportunistic behavior and increases the perceived value of the supernatural and natural benefits. However, the transaction costs of excluding undesirables increase with the size of both congregations and organizations, which implies that there is a gradual decrease in tension for those that are most successful in recruiting new adherents (other things being equal). 

Not every prospective member of a religious organization desires high rewards in exchange for high costs – this is why there is a range of religious offerings from low-tension Episcopalians to ultra-strict Holiness sects. But low-tension organizations face difficult commitment problems. For example, they may have funding problems because of their tolerance for listless members who primarily use their membership for infrequent wedding and funeral services, in exchange for low or non-existent contributions. Funding problems and low attendance rates do not usually inspire confidence in the organizational ability to produce rewards, whether uncertain supernatural rewards or observable natural ones such as inspirational sermons or social networking opportunities.

 

State suppression of the religious cosmos

The American religious cosmos has generally been successful in providing a variety of “brands” that can meet the demands of a diverse set of consumers. American history tells of a remarkable variety of organizations and entrepreneurs in a free religious cosmos, which in the aggregate manifests itself as a higher level of commitment than in Europe.

What then is the reason for the lower levels of commitment in Europe? According to Stark and Finke (ibid: 228-39), this is not due to secularization. Contrary to much conventional wisdom, Stark and Finke (ibid.) claim that there never was an “Age of Faith” in Europe, since the historical record shows that most European religious activity prior to the twentieth century was both involuntary and reluctant. A political analogy would be the claim that there has never been an “Age of Communism” unless most people at that time voted for communist parties in free and fair elections.

European religious history is the history of how governments suppressed the religious cosmos and imposed religious taxis. Before the twentieth century, governments imposed religious monopolies on their subjects, while state-sponsored religious leaders colluded with secular rulers in extracting forced contributions. Later religious toleration did however not end European religious regulations. Instead, each European government subsidized one or two dominant religious organizations, while “unusual” religions were – and in most cases still are – the subject of regulations and taxes that exceed those for other types of non-profits.

Italy offers an interesting counterexample in that the government granted all religious organizations the same rights to state support in 1984. It has subsequently experienced rising levels of objective religious commitment among Catholics and non-Catholics alike (Introvigne and Stark, 2005). Introvigne and Stark (ibid.) ascribe increased Catholic attendance rates to increased Catholic product innovation and market segmentation. The innovation and segmentation policies have been in response to the emergence of small high-growth competitors such as various Pentecostal churches, Jehovah’s Witnesses, and New Age movements.

The ability to receive tax revenues and other state support has had the consequence of high nominal membership counts and low levels of average commitment among Europe’s established churches. European history has borne out Adam Smith’s assertion that religious teachers “in the same manner as other teachers, may depend altogether for their subsistence upon the voluntary contributions of their hearers; or they may derive it from some other fund to which the law of their country may entitle them … Their exertion, their zeal and industry, are likely to be much greater in the former situation than in the latter.” (Smith [1776] 1965: 740; quoted in Iannaccone, 1991, p. 156.)

Nowhere is Adam Smith’s assertion more evident than in Sweden, where the Church of Sweden relies on government taxation to generate revenue and is governed by representatives of secular political parties, who need not have any religious faith (Rydenfelt, 1985). The Church of Sweden is assured of a large number of nominal members, since newborn babies become members without a parental application – as long as one of the parents is a member of the Church of Sweden.

The commitment outcome is consistent with religious economy theory: while 67 percent of Swedes claim that they are affiliated with the Church of Sweden, attendance rates at services hover in the low single digits. Indeed, the overall attendance rate in Sweden is only eight percent (World Values Survey, 2006), at least half of which is accounted for by Roman Catholics, Muslims, and Pentecostals. This figure is even lower than the 10 percent attendance rate among unaffiliated Americans (Pew Forum on Religion and Public Life, 2008).  

  

 

The religious cosmos, the market process, and democracy

A religious monopoly, a centrally planned economy, and an authoritarian state are three different types of taxis without cosmos. In an unregulated system there is both cosmos – the unplanned order that gives rise to denominational expansions and contractions – and taxis – the made order of each religious organization. The knowledge problems inherent in central planning (Hayek, 1945) explain why large religious organizations with centralized decision-making face internal feedback problems. Some large organizations, for example Southern Baptists and Unitarian Universalists, have however mitigated these problems through decentralized congregational competition and entrepreneurship.

Within this framework, most of contemporary Europe constitutes a “hampered cosmos,” where certain organizations are penalized and others are subsidized. The result should be unsurprising to those who are familiar with the effects of state intervention on markets: less overall religious commitment and entrepreneurship, even allowing for the long-term lock-in effects of previous monopolization.

There are certain pattern regularities that position the religious cosmos between the market order and democracy. David Emanuel Andersson (2008b: 66) writes that the “market process sorts endowment-weighted, fine-grained, individual priorities. Democracy sorts priorities that are egalitarian, coarse, and aggregated.” Using the same general formulation, we may view the religious cosmos as being roughly egalitarian, fine-grained, and individual. At first sight, these characteristics would seem to imply a knowledge-disseminating capacity that is superior to both markets and democracy (cf. Andersson, 2008b), but this impression would be mistaken. The systemic feedback – the signaling system of commitment gains and losses – is much fuzzier than either the accumulation of money or votes. Table 1 provides a comparison of the systemic performance properties of these three spontaneous orders: the religious cosmos; the market order; and democracy.

 

Table 1: Systemic properties of three spontaneous orders

 

Religious cosmos

Market order

Democracy

Ranking of knowledge dissemination effectiveness

Preferences

Continuous

(individual commitment)

Continuous (willingness to pay)

Discrete

(one person, one vote)

1 Religion/Market

3 Democracy

Distribution of endowments

Roughly equal

Roughly equal to highly skewed

Equal (for insiders)

1 Democracy

2 Religion

3 Market

Aggregation of priorities

No: Individual choice

No: Individual choice

Yes: Collective choice

1 Religion/Market

3 Democracy

Systemic resource

Commitment

Money

Votes

1 Market

2 Democracy

3 Religion

Typical taxis

Denomination

Business firm

Political party

-

Effect of abolishing cosmos

Monopolistic religious organization

Centrally planned economy

Autocracy

-

  

Extension I: Long-term and short-term subjective cost

 

Stark and Finke (2000, p. 85-6) use the conventional treatment of subjective rewards and opportunity costs when analyzing religious choices. But they do not discuss the diversity and ambiguity of subjective cost considerations, which is of more than passing interest. First, a high-cost (i.e. high-tension) religion does not uniformly increase costs by, say, introducing a general requirement that members become vegetarians. Some people may have no individual desire for meat or seafood, and do not face any additional subjective cost. This requirement would only impose costs on individuals with diets that are at odds with the doctrine of the organization.

        Second, it is common for individuals to engage in intra-personal bargaining between their long-term and short-term preferences. A compulsive gambler may have a short-term preference for playing the roulette wheel, but at the same time be convinced that it would be in her long-term interest to abstain. In this case, membership in a religious organization could be a way of enforcing the lexicographic priority of long-term values over short-term preferences. People may purposefully join a religious organization in order to tie their hands in the manner of Odysseus.

        In a static theory of individual choice, it is possible to disregard such inner conflicts and only be concerned with a momentary cost that (at least implicitly) is the present value of the expected future flow of combined long-term and short-term costs. For changes in aggregate demand, however, cost heterogeneity and the trade-off between long-term and short-term costs clarify the effects of changes in social values on subjective cost. Heterogeneous costs imply that value shifts may lead to corresponding shifts in the subjective costs associated with a behavioral rule, even if no single individual changes their perceived cost. This is possible because individuals have finite life spans. Continuous cohort replacement may shift the distribution of perceived costs in the population (Inglehart, 1997). Value shifts may engender new assessments of virtuous behavior, rewards, and costs.

Aggregate assessments affect the capacity of an organization to accumulate objective religious commitment. If the dominant value system in a society makes people believe that homosexuality is a sin, it may be possible for religious organizations that ban homosexual behavior to gain gay members. Conversely, if the dominant value system is that homosexuality is legitimate and that sexual tolerance is a virtue, the effect may be that the anti-gay denominations will repel not only gays, but also heterosexuals. As it happens, exactly this value change has gradually emerged in the most economically developed regions of the world over the past 40 years, according to survey results from the World Values Survey.

 

Extension II: Changing values imply changing subjective costs

 

Increasing sexual tolerance is only one aspect of a shift in social values that was first noticed in the 1970s (Inglehart, 1977). Ronald Inglehart calls this change “postmodernization,” which refers to the process whereby postmodern values gradually replace modern ones. According to Ronald Inglehart (1977; 1997), values reflect childhood experiences and are relatively stable after individuals reach adulthood. A consequence is that changes in social values primarily reflect cohort replacement: as new adults enter the population, they replace the values of the recently deceased.

        The cornerstone of Inglehart’s theory is that children who perceive their physical well-being as secure develop a different value system from those who experience subsistence conditions or war. The first cohorts that generally took their survival for granted were those North Americans and Western Europeans who were born in the late 1940s. They came of age in the late 1960s, so that the first measurable changes in social values should have occurred around 1970. The results of various cross-national surveys show that this was indeed the case (Inglehart, 1977).

        The key indicator of postmodern values is Inglehart’s postmaterialism index, which measures interviewees’ priority ordering of four or 12 societal goals. In the original four-item index, postmaterialism is defined as those whose first and second priority exhausts the set [freedom of speech; greater citizen participation in governmental decisions] while materialists give priority to the set [law and order; fighting rising prices]. The combination of one priority from each set corresponds to a mixed category. This index exhibits positive correlations with other postmodern values that reflect increasing tolerance of various ethnic, cultural or sexual minority groups.

        Two tolerance variables measure sexual tolerance: acceptance of homosexual neighbors and degree of justification of homosexuality. These two variables are even more robust than the postmaterialism index during economic downturns.

Analyses of partial correlations (controlling for the postmaterialism index) reveal that acceptance of gay neighbors exhibits consistently significant correlations with a host of indicators of national socio-economic development, unlike the postmaterialism index (controlling for tolerance) or other types of tolerance (controlling for postmaterialism). The simple correlation between tolerance of homosexuality and development is .727 if development is measured as freedom from corruption (Transparency International 2009), .704 if as political rights and civil liberties (Freedom House 2009), .667 if as human development (United Nations Development Programme 2009), and .564 if as economic freedom (Fraser Institute 2009)[3].

        On a less aggregated level, Richard Florida (2002) has shown that America’s most postindustrial metropolitan regions are also among the most tolerant, with greater than average representation of gays. In Sweden, questionnaire surveys from the 1990s showed that postmodern values were most prevalent among highly educated women in the largest conurbations, while they were least common among elderly men in rural settings (Andersson, Holmberg and Furth, 1997).

        While postmodern values are especially prevalent in North America and Northwestern Europe, the levels of religious commitment represent opposing poles in the developed world, with the United States and Sweden as extreme cases (Inglehart, 1997). As a believer in the secularization thesis, Inglehart dismisses the American results as an aberration, even though Canadian and Australian religious commitment align more closely with the United States than with Sweden. But nowhere does Inglehart mention the historical impact of state regulation in Europe.

        Stark and Finke (2000) not only contend that high-tension religious organizations tend to grow, while lower-tension ones are in relative decline. They also contend that higher-tension faiths are more conservative, and thus that conservative faiths are most successful. Pentecostal churches, Mormonism, and Jehovah’s Witnesses are indeed among the fastest-growing as well as among the most culturally conservative of America’s denominations. Table 2 shows attitudes toward homosexuality among American adherents of different religious traditions, along with their respective shares of all adults and all adults with a postgraduate degree. Most Hindus, Muslims, and Orthodox Christians are immigrants, while majorities of all other faiths were born in the United States. The unaffiliated category is made up of atheists (1.6 percent), agnostics (2.4 percent) and interviewees claiming to belong to “nothing in particular” (12.1 percent).   

 

Table 2: Percentage agreeing with the statement homosexuality is a way of life that should be accepted by society”; religious composition of adult population, United States, 2007

Religious affiliation

Percentage2 agreeing with statement

Percentage of US adult population1

Percentage with postgraduate degree2

Other faiths (Unitarian Universalist, Pagan etc.)

84

1.2

21

Buddhist

82

0.7

26

Jewish

79

1.7

35

Unaffiliated

71

16.1

13

Other Christian (Spiritualist, Unity Church etc.)

69

0.3

20

Catholic

58

23.9

10

Mainline Protestant

56

18.1

14

United States adult population

50

100.0

11

Orthodox Christian

48

0.6

18

Hindu

48

0.4

48

Historically black churches

39

6.9

5

Muslim

27

0.6

10

Evangelical Protestant

26

26.3

7

Mormon

24

1.7

10

Jehovah’s Witness

12

0.7

3

 Source: The Pew Forum on Religion and Public Life: US Religious Landscape Survey, 2008.

1 The maximum 95% confidence interval is ±0.6%; 2 Maximum 95% confidence intervals range from ±1.5% (Catholics, Evangelical Protestant, and Mainline Protestant) to ±10.5% (Muslim).  

 

We should note that one of Stark and Finke’s success stories – the Jehovah’s Witnesses – is the least tolerant of the major American religious organizations. Minimum costs include attendance at two religious services, four hours of missionary work per week, and a ban on all forms of political participation. While these costs may have caused considerable religious rewards and high aggregate growth in the past, it is questionable whether the organization can maintain such growth if the social values of the surrounding society become increasingly contrarian.

The evolution of social values over the past 40 years shows an ever-growing[4] endorsement of postmodern priorities such as freedom of speech, democracy, and acceptance of alternative lifestyles. This evolution has occurred in tandem with a continuous increase in average educational attainment. Will future generations be attracted to a denomination where an unelected leadership imposes a doctrine that is unusually difficult to reconcile with natural science? The Jehovah’s Witnesses may be an extreme case, but many other conservative churches have behavioral rules that are quite similar, albeit to a lesser extent.

More liberal religious organizations tend to subscribe to doctrines that are better suited to the emerging postmodern value system. But most of them offer low-energy religion and rarely promise a transformative spiritual experience; they have for many years seen a net loss of members. Can strict behavioral rules (high tension) somehow be reconciled with a tolerant postmodern doctrine? It is to this question that we turn in the next section.  

       

Extension III: High tension need not imply cultural conservatism

 

Stark and Finke (2000, 195-217) discuss the matching of the supply of religious organizations to a demand that is divided into niches, reflecting population diversity both in religious preferences and in opportunity costs. The assumption is that the population is normally distributed around two large “moderate” and “conservative” niches. Organizations that straddle these two niches are most successful in the long term (e.g. the Roman Catholic Church). One proposition of the theory is that the strict niche (i.e. stricter than conservative) generates the most new organizations, but that these organizations then relax their tension if they become popular. Groups that exemplify this process include the Methodist and Presbyterian denominations.

        While this view of the relationship between niches, tension, and historical evolution is both theoretically and empirically persuasive, a longer time perspective shows that high tension need not necessarily be associated with cultural conservatism in the sense of behavioral rules that corresponds to earlier norms. It is of course true that Mormons and Jehovah’s Witnesses embody “old-fashioned” values and have experienced rapid commitment growth, while the declining Episcopal Church promotes mainstream values and rules that do not require any deviations from the cultural environment. But the history of the past two millennia shows that there are many instances of organizations that combined high tension, high growth, and what were then liberal breaks with past practice.

        Examples include the practice of early Roman Christians to care for the elderly and sick; the Jewish promotion of literacy and learning; and the Buddhist principles of non-violence and tolerance. If we look at the “ultra-liberal niche,” which supposedly signifies a complete absence of tension with the environment (p. 210), Unitarian Universalists[5] (UU) and New Age groups are mentioned as examples. It is worth noting, however, that 653 out of 1,096 UU Congregations in the United States and Canada are so called “Welcoming Congregations,” which represents a promise that the congregation “affirms and celebrates bisexual, gay, lesbian, and transgender issues and history during the church year (possibly including Gay Pride Week, which is in June)[6].”

        In a society where only about half of the population considers homosexuality a legitimate way of life, and about a quarter of the population would not like to have a gay neighbor (World Values Survey 2006), this signifies a certain degree of liberal tension with the surrounding society. Symptomatically, the Unitarian Universalists is the only historically Christian church that has combined positive growth (since 1983) in religious objective commitment and liberal behavioral rules.

        Unitarian Universalism is not the only liberal organization that has experienced growth. A recent survey (The Pew Forum on Religion and Public Life, 2008) reveals that 73 percent of all American Buddhists have converted from another religion or were previously unaffiliated, and are predominantly non-Asian. The most popular Buddhist sub-religions in the United States are Zen and Tibetan Buddhism, which are relatively high tension religious schools that are compatible with tolerant, postmodern values. Participation in Zen is quite costly since Zen teachers often expect adherents to participate regularly in group meditation retreats that last several days.

 

Future Challenges

 

In spite of these exceptions, Stark and Finke (2000) are correct when they link high tension, religious commitment, and cultural conservatism in modern twentieth-century societies. I would like to conjecture that this situation arose as influential modernist thinkers promoted faith in the potential perfection of both society and science. The ruling elites of industrializing Europe and North America were mostly technocrats with more faith in omniscient social engineering than in an omniscient God. High tension in modern society thus implies a rejection of a social value system that celebrates supposedly scientific social engineering, while tension in pre-modern societies often implied rejection of systems that celebrated war and conquest. But absolute faith in one’s own prescriptions unites the modern technocratic state and modern high-tension Christianity.

        Friedrich Hayek’s work in economics (1937, 1945) and psychology (1952) set the stage for a reassessment of the ability of planners and scientists to create a perfect society. The gist of his message is that the cognitive powers of humans are never sufficient for a detailed understanding of society. But long before that, Charles Darwin (1859) had shown that a literal reading of the Bible is untenable. With the spread of higher education and the implosion of the Soviet Bloc, Western populations are gradually, albeit slowly, catching up with Darwin and Hayek.

        The postmodern value system is associated with declining confidence in all types of authority figure, whether politician, scientist or priest. People with a postmodern value structure tend to spend more time thinking about spiritual concerns such as the meaning of life and morality (Inglehart, 1997). These trends offer opportunities for religious innovators, but constitute a challenge for authoritarian creeds.

Individuals do not generally choose religious organizations on doctrinal grounds (Stark and Finke, 2000, p. 116-118). Most potential new adherents are recruited by friends or relatives. Subsequently, recruits will convert if they expect the rewards to exceed the costs, where the rewards are contingent on “belief in, and knowledge of, the explanations sustained by a religious organization” (Stark and Finke, 2000: 103). It seems reasonable to assume that such belief is more likely to be forthcoming if the doctrine harmonizes well with the value system of the individual.

The importance of social networks in religious recruitment implies that Christian organizations have an inherent recruitment advantage in American society. Most Americans are Christians who are for the most part connected to other Christians. People who were raised as Christians also have a greater stake in Christianity, since they have accumulated religious capital that is costly to give up. Christianity thus benefits in proportion to its attained popularity[7]. A prediction is therefore that if a large Christian church manages to combine high tension with postmodern values, it should have extraordinarily good prospects for long-term commitment growth. Perhaps the high-tension religion of the future will resemble a doctoral program more than a military academy[8].    

         

References

Andersson, Ake E., Thomas Furth, and Ingvar Holmberg. (1997). 70-talister: om varderingar forr, nu och i framtiden. Stockholms: Natur och kultur.

Andersson, David Emanuel (2008a). Property Rights, Consumption and the Market Process. Cheltenham: Edward Elgar.

Andersson, David Emanuel (2008b). “The double-edged nature of the Hayekian knowledge problem: systemic tendencies in markets and science.” Studies in Emergent Order. 1: 51-72.

Becker, Gary S. (1973). “A theory of marriage: part I.” Journal of Political Economy. 81(4): 813-46.

Becker, Gary S. (1974). “A theory of marriage: part II.” Journal of Political Economy. 82(2, Part II): S11-S26.

Darwin, Charles. (1859). On the Origin of Species by Means of Natural Selection, or the Preservation of Favoured Races in the Struggle for Life. London: John Murray.

diZerega, Gus (2008). “New directions in emergent order research.” Studies in Emergent Order. 1: 1-23.

Florida, Richard. (2002). The Rise of the Creative Class: And How It’s Transforming Work, Leisure, Community, and Everyday Life. New York, NY: Basic Books.

Fraser Institute. (2008). Economic Freedom of the World: 2008 Annual Report: http://www.freetheworld.com/2008/EconomicFreedomoftheWorld2008.pdf

Freedom House. (2009). Freedom in the World: 2009 Edition: http://www.freedomhouse.org/template.cfm?page=25&year=2009

Hayek, Friedrich A. (1937). “Economics and knowledge.” Economica. 4(13): 33-54.

Hayek, Friedrich A. (1945). “The use of knowledge in society.” American Economic Review. 35(4): 519-30.

Hayek, Friedrich A. (1952). The Sensory Order. Chicago, IL: University of Chicago Press.

Hayek, Friedrich A. (1982). Law, Legislation and Liberty: A New Statement of the Liberal Principles of Justice and Political Economy, Vol. 1-3. London: Routledge.

Iannaccone, Laurence R. (1991). “The consequences of religious market regulation: Adam Smith and the economics of religion.” Rationality and Society. 3: 156-77.

Iannaccone, Laurence R. (1994). “Why strict churches are strong.” American Journal of Sociology. 99: 1180-1211.

Inglehart, Ronald. (1977). The Silent Revolution: Changing Values and Political Styles among Western Publics. Princeton, NJ: Princeton University Press.

Inglehart, Ronald. (1997). Modernization and Postmodernization: Cultural, Economic, and Political Change in 43 Societies. Princeton, NJ: Princeton University Press.

Introvigne, Massimi, and Rodney Stark (2005). “Religious competition and revival in Italy: exploring European exceptionalism.” Interdisciplinary Journal of Research on Religion. 1 (1), Article 5 (1-17).

Kirzner, Israel M. (1999). “Rationality, entrepreneurship and economic imperialism.” In Sheila C. Dow and Peter E. Earl (Eds.), Economic Organization and Economic Knowledge: Essays in Honour of Brian Loasby (Vol. 1). Cheltenham: Edward Elgar: 1-13.

Nozick, Robert (1993). The Nature of Rationality. Princeton, NJ: Princeton University Press.

Olson, Mancur (1965). The Logic of Collective Action: Public Goods and the Theory of Groups. Cambridge, MA: Harvard.

Ormerod, Paul (2002). “Social networks and information.” In Edward Fullbrook (Ed.), Intersubjectivity in Economics: Agents and Structures. London: Routledge, pp. 216-30.

Pew Forum on Religion and Public Life (2008). US Religious Landscape Survey: http://religions.pewforum.org/pdf/report-religious-landscape-study-full.pdf

Rydenfelt, Sven. (1985). “Sweden and its bishops.” Wall Street Journal. August 21: A25.

Smith, Adam. ([1776]1965). An Inquiry into the Nature and Causes of the Wealth of Nations. New York: The Modern Library.

Stark, Rodney and William Sims Bainbridge. (1980). “Towards a theory of religion: religious commitment.” Journal for the Scientific Study of Religion. 19: 114-28.

Stark, Rodney and William Sims Bainbridge. (1987). A Theory of Religion. New Brunswick, NJ: Rutgers University Press.

Stark, Rodney and Roger Finke (2000). Acts of Faith: Explaining the Human Side of Religion. Berkeley, CA: University of California Press.

Transparency International. (2009). 2008 Corruption Perceptions Index: http://www.transparency.org/news_room/in_focus/2008/cpi2008/cpi_2008_table

United Nations Development Programme. (2009). Human Development Report 2007/2008: http://hdr.undp.org/en/reports/global/hdr2007-2008/

World Values Survey. (accessed 2009). WWS 2005-2008: www.worldvaluessurvey.com

 

Notes

 


[1] In this paper, spontaneous order and cosmos are interchangeable terms, as are the terms planned or made order and taxis. The underlying theory is based on Hayekian theory (Hayek, 1982, Chapter 2). Gus diZerega (2008) coined the term “systemic resource.” My use of the term is the same as his. The religious cosmos, the market order, and democracy are my preferred terms for the religious, economic, and political spontaneous orders.

[2] For a discussion of the relationship between the causal and evidential utility of a theory, see Andersson (2008a: Chapter 1), and Nozick (1993).

[3] This is based on my own calculations, using the most recent data from the 83 countries that carried out surveys between 1990 and 2008 and the most recent data from Transparency International (2009), Freedom House (2009), the United Nations Development Programme (2009), and the Fraser Institute (2009).  

[4] This is true of both North America and Western Europe, although the results of the World Values Survey (accessed 2009) indicate that the social values of the American population were slightly less postmodern in 2006 than in 1999.

[5] Strictly speaking, the UU does not meet the criterion that a religious organization should promise supernatural rewards. While originally a heterodox Christian church, UU is no longer a Christian organization. Instead, it may be described as a secular facilitator of dialogue between different faith traditions, including three UU groups that organize Buddhists, Christians, and Pagans, respectively. 

[6] Quotation from www.uua.org/leaders/leaderslibrary/welcomingcongregation

[7] Individuals are more likely to be connected to other individuals who belong to a large religion than to a small one, ceteris paribus. But the cost of joining a religion, given its level of tension, depends on the religious capital of the potential convert (Stark and Finke, 2000: 118-125). Thus, people who have been socialized into a Christian faith will find it less costly to join a Christian organization, since the marginal cost of denomination-specific doctrinal knowledge within Christian faiths is lower than the marginal cost of learning the doctrine of a religion of which they have no prior knowledge. In addition, “distant” religions imply opportunity costs associated with giving up one’s religious capital (which has both human and social capital attributes). Consequently, societies lacking in religious commitment (few religious connections) and religious socialization (low religious capital) should only experience substantial effects of religious deregulation after a long period of time (cf. Ormerod 2002). On the other hand, the lack of specifically Christian socialization in such societies implies greater opportunities for non-Christian religious organizations than in the United States. 

[8] In my experience, doctoral students tend to have greater faith than members of low-tension religions in their respective hard-core propositions.

Categories: Economics · Politics · The Social Sciences
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The Social Importance of Tolerance

May 16, 2009 · Leave a Comment

Inglehart likes to argue that postmaterialist values are strongly associated with democracy (see my preceding blog entry). Inglehart further contends that postmaterialists – according to his four-item, eight-item, or twelve-item indices – will be increasing as a proportion of the population as long as there is sustained economic growth and peaceful external relations. This should reflect a stable cohort effect where values are established during childhood socialization processes.

While I agree with the thrust of Inglehart’s arguments and hypotheses, I think that the latest wave of the world values survey demonstrates that other measures are better at identifying cohort effects than any index of postmaterialism.  For example, the percentage of American WVS respondents who identified strong defense forces as their top priority – one of the key materialism indicators – was 15.5% in 1990, 14.3% in 1995, 16.0% in 1999, but 29.0% in 2006. Meanwhile, “protecting freedom of speech” – a key postmaterialism indicator – was 22.6% in 1990, 21.2% in 1995, 25.4% in 1999, but then went down to 17.8% in 2006. This is not what we would expect from a stable cohort effect — instead I suspect that the perceived insecurity of adulthood rather than childhood explains the greater proportion of materialists in the United States in 2006 than during the 1990s.

However, Inglehart’s charts indicate that intolerance is as strongly associated with modernism as postmaterialism is with postmodernism. But tolerance seems less susceptible to external shocks such as terrorist attacks or preparations for war. For example, the percentage of Americans that would not like neighbors of another race than their own was 8.7% in 1990, 6.6% in 1995, 8.0% in 1999 and 4.1% in 2006. A similar downward trend is for the most part evident for the percentage wishing to avoid gay neighbors: 38.6% in 1990, 29.5% in 1995, 23.3% in 1999 and 26.0% in 2006. And I think the greater stability of the tolerance measures makes a lot of intuitive sense: why would an economic recession or a war make me less willing to have gay neighbors, assuming that I grew up in a non-homophobic environment? On the other hand, it is plausible that a recession would focus my attention on the prospects for economic growth and that a war would make me worry about the nation’s defense capabilities (admittedly the second scenario is not plausible in my case; I have always been an admirer of the defense policies of Costa Rica, the Norwegian territory of Svalbard and the autonomous Finnish island of Åland).

To back up my hypothesis, I have spent the last week estimating associations between tolerance and various measures of institutional performance that I believe are relevant for anyone with broadly democratic values: freedom of the press (Freedom House), political rights and civil liberties (Freedom House), corruption (Transparency International) and the Democracy Index of the Economist magazine. I also looked at a performance measure that appeals beyond committed liberals or democrats: the Human Development Index of the United Nations, which reflects per capita GDP, life expectancy, and literacy; to complete the picture I then looked at a favored measure among classical liberals: the Economic Freedom Index of the Fraser Institute. Finally, I combined all these indices into an aggregate index that should reflect combined performance in terms of civil liberties, democracy, rule of law, economic freedom, and material standard of living (I call it the Socio-economic Development Index, or SDI).

There is a very predictable pattern that is revealed when perusing all these indices: the best-performing ten countries are almost always the Nordic countries, the Netherlands, Switzerland, Canada, Australia, and New Zealand, closely followed by countries such as the US, the UK, Germany, Belgium, France, and Spain. The exception is the economic freedom index, where the top 10 consist of English-speaking countries, Switzerland, and two well-known Asian city states, closely followed by the Nordic countries with the notable exception of Sweden.

Anyway, the correlations between a special Tolerance Index (acceptance of other-race, immigrant, and gay neighbors and general acceptance of homosexuality, divorce, and prostitution) and the various performance measures turned out as follows, including all 83 countries that took part in the WVS at least once between 1995 and 2008 with the  relevant questions included:

Socio-economic Development Index: .807

The Economist’s Democracy Index: .791

Corruption Perceptions Index: .727

Freedom of the Press Index: .704

Political Rights and Civil Liberties Index: .704

Human Development Index: .667

Economic Freedom Index: .564

Partial correlation analysis revealed that the effect of the Tolerance Index remained highly statistically significant after controlling for Inglehart’s Postmaterialist Liberty Aspirations Index (e.g. .596 as the partial Tolerance Index -SDI correlation), while the reverse was not true (only  .165 between Inglehart’s index and the SDI when controlling for the Tolerance Index, which is insignificant at the one-tailed .05 level). The Tolerance Index also remains significant after controlling for per capita GDP (e.g. .486 between the Tolerance Index and the Democracy Index when controlling for per capita GDP in purchasing power parity dollars).

Another interesting result is that the two measures of tolerance toward gays were almost as strongly correlated with the various freedom and democracy measures as the Tolerance Index itself. For example, the simple correlation between acceptance of gay neighbors and the aggregate SDI index is .762, which is a remarkably close association.

Inglehart emphasizes that the evolution of values, economies, and political systems are interdependent, and that consequently there is neither a Weberian priority given to values as ultimate deteminants, nor a Marxian priority of economic relationships. I agree. But what I think this simple analysis shows is that tolerance is closely associated with freedom, democracy, the rule of law, and economic well-being. This is not a new insight, but I think that the relationship is much stronger than most people (including me) would have dared hope for.

I have to admit that I am not a value-neutral analyst in this case. I actually think that tolerance is the greatest of the social virtues. And it’s great to have a good evidential argument against social conservatives: whether your priority is freedom of speech, democracy, free markets, the rule of law, or economic development it follows that social tolerance is your friend, not your enemy. And the tolerance that matters most is sexual tolerance, closely followed by multicultural and racial tolerance. In other words, intolerant goals can probably only be attained at the cost of living in a less free, less democratic, more corrupt, more regulated, and less prosperous society.

This conclusion actually echoes Richard Florida’s arguments, whose main point has been that economically dynamic and culturally creative regions require tolerant values, as well as talented individuals and high technology. Florida is of course also famous for his “gay index,” which measures regional concentrations of gay residents rather than national attitutes toward gays or homosexuality. While I was originally a little skeptical (I thought that the notion of a “gay index” is more likely to be noticed than other indices, and is therefore an attractive self-promotion strategy), I now think that Florida is really onto something with his “3T” message. And this is all to the best.

Meanwhile, these indices and results can be used to offer location advice in a globalized world:

For tolerant free-market types: Switzerland

For tolerant welfare-state types: Sweden

For intolerant free-market types: Singapore

For intolerant welfare-state types: France (ok, intolerant by OECD standards only, not by global standards)

For homophobes: Jordan, Pakistan, and Bangladesh should all be ideal, although Iran is a close runner-up.

For tolerant people who don’t like snow: Spain

In case you are wondering, the top ten countries according to the tolerance index are Andorra, Sweden, the Netherlands, Switzerland, Spain, Iceland, Denmark, Australia, Germany, and New Zealand. The bottom ten (of 83 surveyed nations) are – beginning at the bottom of the list – Bangladesh, Jordan, Iran, Pakistan, Turkey, Indonesia, Georgia, Rwanda, Nigeria, and Morocco.

Categories: Economics · Politics · The Social Sciences
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Postmaterialist Liberty Aspirations

May 1, 2009 · Leave a Comment

I’m spending a lot of time reading articles related to the World Values Survey, Postmaterialism and “Postmodernization” processes at present. The reason for this is that these studies are directly related to my ongoing project on emerging values in the Oresund region. Today I read an unusually interesting article by Christian Welzel and Ronald Inglehart, entitled “Liberalism, Postmaterialism, and the Growth of Freedom” (International Review of Sociology, 15: 81-108, 2005). In that article, they use a subset of the 12-item Postmaterialism Index that only includes those postmaterialist options that signal a prioritization of liberal democracy over other social objectives. The priorities in question are “freedom of speech,” “giving people more say in important government decisions,” and “giving people more say at their jobs and in their communities.”  Using regression analyses, Welzel and Inglehart show that this index is the best possible predictor of the direction of change over time in the index of civil and political liberties as measured by Freedom House, after controlling for per capita GDP (a significant variable) and a host of other variables that turned out to be insignificant when combined with the liberty aspiration index (i.e. income inequality, ethnic diversity, religious diversity, tolerance of out-groups, share of Protestants, and the level of political and civil liberties 10 years prior to the study period).

Interestingly, Taiwan is identified as an outlier. According to the results of both the 1994 and 2006 surveys, Taiwan’s population has the second-lowest (!) liberty aspirations in the world, after Pakistan. And I can personally attest from informal surveys of Taiwanese students that very few of them select “freedom of speech” as a priority, and many of them even indicate that there is too much freedom of speech in Taiwan. This is something that I find difficult to understand, given my values. Indeed, Taiwan has greater freedom of speech than almost any other Asian country, and is perhaps the main reason why I am prepared to live here. And though I like to complain about the two main Taiwanese parties (the KMT and the DPP), I have to grant them a greater concern with maintaining freedom of speech than is typical of the general population. I would guess that the Taiwanese anomaly is the result of two reinforcing factors: the need for American moral support and the fact that a majority of government ministers – in both KMT and DPP governments – were educated at American universities.

The other interesting observation is that the liberty aspiration of the American population declined substantially between 1999 and 2006. The only fully developed Western democracy that had lower liberty aspirations (in 1999) than the United States (in 2006) was Israel. In both cases, “strong defense forces” were prioritized over “giving people more say at work and in their communities.” War, in other words, seems especially destructive of the values that are the foundation for sustainable liberal democracy. In the American case, I also think that the Patriot Act and other assaults on the freedom of expression caused many of the less-informed citizens to waver in their support for free speech. In my view, the combined effects of an open-ended and ill-defined War on Terror and ever greater powers for the federal government to snoop on private written and spoken communications were the worst consequences of the Bush presidency, and the real reason why he was the worst president in American history. The economic mismanagement of the Bush administration was regrettable, but very similar to the ill-conceived plans of countless other governments, whether Democrat, Republican or European.

Anyway, here is a table with “liberty aspirations” around the world. The index ranges from 0 (no-one has any postmaterialist liberty aspirations) to 5 (everyone selects the options in a way that gives priority to liberty aspirations to the maximum extent possible). Highly developed and durable liberal democracies are in bold style:

Postmaterialist liberty aspirations index, 1999-2006

Country Index    
Andorra

3.047

Cyprus

1.628

Canada

2.939

Malaysia

1.627

Britain

2.889

Singapore

1.614

Netherlands

2.795

Turkey

1.611

Switzerland

2.795

Thailand

1.592

Sweden

2.760

Moldova

1.580

Finland

2.726

Kyrgyzstan

1.577

Puerto Rico

2.656

Uganda

1.562

USA 1999

2.623

Algeria

1.551

Germany

2.591

Ghana

1.540

Slovenia

2.584

Bangladesh

1.524

Italy

2.512

Ukraine

1.490

New Zealand

2.505

Serbia

1.482

Mexico

2.500

Vietnam

1.473

Australia

2.490

Bosnia

1.430

Dominican Republic

2.441

Burkina Faso

1.420

France

        2.386

South Korea

1.395

Peru

2.350

India

1.377

Chile

2.211

Mali

1.321

Spain

2.187

Romania

1.252

Poland

2.170

Morocco

1.250

Japan

2.129

Bulgaria

1.242

Venezuela

2.127

Macedonia

1.233

Argentina

2.077

Indonesia

1.209

Brazil

2.073

Tanzania

1.186

USA 2006

2.022

Armenia

1.172

Trinidad

1.940

Georgia

1.169

Ethiopia

1.911

Russia

1.152

Rwanda

1.906

Egypt

1.128

South Africa

1.876

Jordan

1.078

Zambia

1.829

China

1.074

Israel

1.819

Albania

1.018

Philippines

1.754

Taiwan

.855

Nigeria

1.707

Pakistan

.807

Iran

1.649

 

 

Categories: Life in Taiwan · Politics · The Social Sciences
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