Religion and economics

Wither God?
Wither God?

How does organized religion work? Why do some preachers make a lot, while others make a little?  Can an economic model of religion explain why American football quarterbacks make a lot?

I try to answer these questions in this post.

In economics, we can see religion as a “comfort” good that is also a public good.  It is public because within a church, it is non-rival and nonexclusive.  What this means is that the preacher can expect an honest congregation to donate what each member views as the value of the preacher’s services, i.e. his sermons, etc.  And from the donations, the preacher can derive his livelihood.

The key factor here is honesty.  If church members pay “honestly,” no one “free rides” by donating nothing, while allowing a few rich members to pay for the preacher’s services.

Suppose that we have a 100-member congregation, each valuing his religious “benefit” at $50.  Honesty makes all members donate $5,000.  Suppose that the preacher needs only $1,000.  Organized religion then has a “profit” of $4,000.

Where will the profit go?  It can go to expand the church, and as it expands, the profit may hit a plateau or even decline.  Why?  This is because the additional members will likely value the membership benefit at less than $50.  The preacher may now ask for more for his services since he now has to preach to a larger congregation.  So, there is a limit to the size of a church.  The limit is high the more honest its members, and the less “greedy” are its church leaders. In an economics sense, we can explain the size of a church or sect on these lines.

What will make a church wither?  If the members and its leaders all become “greedy” and try to avoid paying “proper” dues or there is corruption in the use of church funds, then the glue that holds a church together starts to unravel. The value of religion as a comfort good degrades in this case.

What does all this have to do with the pay of football quarterbacks?  Well, a sport is pretty much like religion.  Sports fans are members who pay through ticket sales and TV viewing that generates advertising revenues that pay in part for the sports teams.  The greater the reach of this religion, the more a team can pay its players.  The quarterback is like a preacher, but he can be greedy and demand a high pay.  And he can get this.

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4 thoughts on “Religion and economics

  1. yet most of the extravagance can be seen in the religious sector… its kinda paradoxical to see a poor family or community serves a visiting priest or archbishop/bishop the best it has to offer, more than the bishop can consume as part of as part of a good meal, and leaving little for their own families. a lot of Filipinos try to please the clergy like their happines=chance of getting to heaven. I knew of a mother who bought 200 barbecue sticks to feed 5 visiting priests in a certain locality and just left 5 sticks of barbecue at home for her 3 children. just think of it as GLORY giving SUV’s while giving the taxpayers ‘s…

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