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Why religion kills economic development but makes people happier

Why religion kills economic development but makes people happier

Many faith-based organisations target their activities at the ultra-poor, delivering their services through faith-based channels such as churches or local religious leaders. In addition to spiritual renewal, a key tenet motivating faith-based service delivery to the ultra-poor is the belief that promoting religious values will lead to improved economic outcomes. Indeed, Sir John Templeton believed that “High ethics and religious principles form the basis for success and happiness in every area of life.” Briefly looking at past literature, per capita GDP has negative effect on all measures of religiosity. Some have theorized religion provides existential certainty, making life more coherent and comprehensible, which leads to better physical and psychological health, especially under high levels of stress.

One day, wandering around the streets of Kathmandu, I asked myself why all the poor people I was meeting looked happy. Based on my knowledge of the above mentioned research, I ended up thinking that these people were happy thanks to their religion, but this was also the reason why they were poor.

Nepalis believe, as Hindu or Buddhist, in reincarnation. It means they know that this life is a result of the previous one and the next life will be a consequence of the current one. It also means they know that if they are poor it is because of a greater plan extended to all of their previous and future lives. The only way to improve their status in the next lives is to accept the current one. Nepalis are therefore happy because they know there is a greater plan for them and their goals will be achieved in another life.

The big and crucial difference between Southern Asian philosophy and Western approach is that Westerners perceive to have shorter time to improve their existence: they need everything here and now because they don’t believe in another life, or better, they rely too much on the current one.

There is an almost perfect positive correlation between faith and fatalism. Economically and socially speaking, accepting the Big Plan could be seen as a synonymous of killing any stimulus or ambition. In this sense, castes in India are the most common example: this is the life you deserve after your previous one and trying to improve it will lead you to worse conditions once you will reincarnate. So why should one struggle in this life if getting over his/her status will lead him/her to a better future? In Nepal people are happy because they are patient, they are looking forward to their next life, considering the current one just as a transition. Their apparent, lack of ambition is instead part of the greater goal of reaching nirvana. International NGOs are now focusing their policies on improving the future-mindedness of the poor. Religion is the key.

I joined Innovations for Poverty Action (IPA) for a project on religion, which consisted of an randomized evaluation (RCTs) that intends to disentangle the effects of religion on character and economic development among ultra-poor Filipinos. The Philippines is a country with a huge Christian community (92%) inherited from four hundred years of Spanish colonization. Also in the Philippines, people are happy thanks to their faith but are poor because of it.

Fate plays a negative role on socioeconomic outcomes. But my question turned into a more complex dilemma: are some countries more developed because of the lack of a strong faith among their citizens, or is it the other way round? According to previous literature, there is a strong relationship, even more if one is checking for this relationship within each country.

I could use proxies and macro indicators and build a sophisticated econometric model, but every consideration would be biased because unfortunately there is not (or at least not yet) an indicator that show how much a person is committed to his/her religion. Another issue is that, even if we had reliable data, we could not be statistically sure about this correlation: it would be an hazard, as many other exogenous factors affect the development of a country.

Based on empirics, a matter of fact is that secular nations have a much stronger positive correlation with socioeconomic wealth than those considered as highly religious countries. Colonization, dictatorships, wars, some geographical, political and many other socioeconomic factors play a big role in the development of the countries too and there are many isolated nations that do not reflect this trend, but what it is clear to me is that religion acted as an obstacle for social and economic development. Or, if one doesn’t accept this theory, he/she should admit that this was true in the past and now we are just seeing the consequences of faith-based education.

While correlation is assumed, causality isn’t, as Sosis and Ruffle (2004) had to admit. A causal relationship goes beyond a simple correlation: we are concerned about a cause-effect relationship. I used to think that looking at macro data would never give a comprehensive answer. Looking at micro data, one realizes that we are facing a typical problem of reverse causality: x explains y but y can also explains x. It is the typical chicken-egg problem. And this is where economics, econometrics and any other quantitative science die.

In the descriptive framework, we couldn’t really say anything about causality. However, in decision-making situations, causal questions are typically those we need to answer. To say something about causality we need to make some more assumptions. In practice, these assumptions will have to be checked using a common sense and knowledge of the real problem.

Hence it doesn’t matter if the egg comes before the chicken or it is the other way round, what is important is that people, poor or rich, should be happy. This is the main goal of every development policy and one should not be distracted by fancier indicators such as GDP or HDI when religion could be the answer.

Filippo Minozzi holds a Master of Science in Development Economics from Carlos III University of Madrid (Spain). He is currently working in the Philippines as Field Researcher at Innovations for Poverty Action (IPA), a Yale University-based research outfit. His areas of expertise range from impact evaluation and policy analysis to behavioural economics and socioeconomic development.

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4 thoughts on “Why religion kills economic development but makes people happier

  1. “unfortunately there is not (or at least not yet) an indicator that show how much a person is committed to his/her religion”

    Do you mean that there isn’t a GDP of religion? It seems like there might be some good individual indicators of religious observance, like regular attendance at place of worship, religion as a factor in decision, marrying someone of the same religion, etc.

    Overall, a very interesting correlation to consider!

    1. Agreed, Tanya. In the research I’ve conducted, frequency of attendance at a place of worship has always been used to indicate religiosity – it’s not hard to understand that someone attending church weekly is pretty committed to their religion.

      I think talking about “religion” as one monolithic concept is too broad. Buddhism and Protestantism and Islam are all quite different and to suggest their adherents will view the afterlife or this current life in a similar way is a bit of a stretch.

      Protestantism is interesting to examine in the context of discussion about not having ambition – the phrase “Protestant work ethic” entered our lexicon because Protestants were historically known for being very hardworking (as opposed to the lazy Catholics! 😉

      1. Andrés Mella

        Interesting post!!! I agree that we should search deeper in the differences between religions and not make broad assumptions. In my opinion Catholicism isn’t that different than the others. For example, Catholicism until very recently not only accepted poverty, but understood it as a faith test from God in order to decide if the person is going to heaven or to hell.

        The problem is complex and as the author says, the causality could be the other way. This is, people from a country that develops quickly no longer need religious faith to explain their poor circumstances because they don´t suffer from them.

      2. Laurie

        Great point Allison, and I agree. It’s interesting to point out the correlation between reincarnation orientated religions and self-efficacy, but it could also be the case that this particular religious view of poverty has gained such traction because of the very high barriers to social mobility in Nepal and other such countries.

        I’d also argue though that it’s important to look at the internal dynamics of the religion. Like Allison pointed out, Max Weber’s “Protestant Ethic” thesis pointed out that Calvinist beliefs that God’s favour is shown in ones prosperity act as incentives to entrepreneurship. As far as I understand it too, Mormonism has a very strong entrepreneurial focus to it.

        I’d be interested to know if the US is considered a secular country in studies like this.

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