Lecture 11: Can values explain
“The Rise of the West”?
ECON 451
Fall 2012
Professor David Jacks
1
Brief refresher: values as the oldest explanation
of all.
Aristotle wrote that “the ancient Greek world
lived like the barbarians of today.”
Cultural/material wealth of city-states uniquely
Greek in his mind.
Introduction
2
Generally, Landes’ question of “why are we so
rich and they so poor” answered in two ways:
1.) the rich are deserving and the poor are
undeserving
2.) the poor are deserving and the rich are
undeserving
Introduction
3
Pros for the values approach:
1.) Undeniable that the values an individual
possesses are going to have some effect on
things like their attitude and approach to
work, life, and others.
2.) It fits some real world examples, c.f.
Europe and North America.
Introduction
4
Introduction
5
Cons for the values approach:
1.) Leaves the explanation of growth outside
the realm of economics.
2.) Hard to describe the values of a nation or
society beyond superficialities, much less
draw reliable conclusions about growth.
Introduction
6
With these caveats (seriously) in mind, this week
look at the question of whether values can
explain “the Rise of the West”.
What we will consider today is the role of
religion in defining the opportunity sets
available to societies.
Specifically, what has been argued for the
relative merits of the world’s religions in
promoting economic growth.
Introduction
7
We will briefly consider the literature in turn on:
1.) Christianity (2.1 billion)
2.) Islam (1.4 billion)
3.) Hinduism (1 billion)
4.) Buddhism (.35 or 1.45 billion?)
Values & religion
8
Christianity, of course, was the dominant
religion of Europe during the GD.
In fact, given the lack of insurmountable barriers
Christianity
9
This view, of course, suffers from an overly
optimistic view of the:
1.) historical place of religion in the sciences,
2.) historical place of the sciences in technology,
3.) constraints put upon the European economy
by religion, e.g. usury laws.
Christianity
10
In closest cultural, geographical, and even
theological proximity to Christianity is Islam.
Recent correlation between Christianity and
economic growth; recent correlation between
Islam and economic stagnation.
Strictures of Islam coupled with authoritative
political systems put a severe brake on growth.
Islam
11
But this views conveniently ignores that:
1.) such prohibitions were in effect in Europe.
2.) as in Europe, such prohibitions were
routinely ignored.
3.) commercial and mercantile activities were
generally approved of in the Islamic world.
4.) standards of living in the Middle East and
Persia
Islam
12
Predominant religion of India with a significant
presence in former parts of a greater Indo-Asian
commercial “empire” of the 10/15th Century.
India perhaps best demonstrates the fragility of
the religion/ growth approach…N=1 so no
conditioning on other variables like geography.
Hinduism
13
However, as many have pointed out, social
forces surrounding Hinduism might have had
(and continue to have) bad effects.
The caste system has its heart:
1.) a rigid occupational structure according to
castes (first based on religious/social/
ethnic classes);
Hinduism
14
At the same time, a new line of research
suggests that the caste system was:
1.) not universally enforced;
2.) adaptable over the medium- to long-run;
3.) not based on occupation until the British
Hinduism
15
From India, Buddhism spread into East Asia
from the date of Ashoka’s conversion in 250 BC.
Less of a religion than a set of ethical and
meditative guidelines, all with the common aim
of alleviating individual suffering (sounds good).
The alleviation of suffering is achieved through
Buddhism
16
Taken literally, by promoting a non-materialistic
way of life, Buddhism seen to be inimical to
economic growth, i.e. the accumulation of stuff.
At the same time, this case points out a big flaw
of the religion/growth approach, the tendency to
massage the “theory” to conform to data.
Buddhism
17
To wrap things up on a slightly stupid note…
What are the actual economic outcomes
associated with each of the major religions under
consideration?
Following cottage industry in cross-country
growth regressions, you could run something
like this:
ln(GDP per cap) 2010      i  religion i   i
i
Terrible regression
18
Linear regression
Number of obs
F( 3,
108)
Prob > F
R-squared
Root MSE
lngdpcap
Coef.
christian
muslim
hindu
buddhist
_cons
.8944427
.1658978
-.4332132
.4556752
7.988072
Robust
Std. Err.
.7198263
.7247013
.711681
.7924338
.711681
t
1.24
0.23
-0.61
0.58
11.22
P>|t|
0.217
0.819
0.544
0.566
0.000
Linear regression
Coef.
christian
muslim
hindu
buddhist
socialist
_cons
1.078868
.2889383
-.4332132
.4556752
-.5448936
7.988072
Terrible regressions
Robust
Std. Err.
.7272164
.7293096
.7149988
.7961282
.1490571
.7149988
t
1.48
0.40
-0.61
0.57
-3.66
11.17
P>|t|
0.141
0.693
0.546
0.568
0.000
0.000
113
.
.
0.1360
.90389
[95% Conf. Interval]
-.5323779
-1.270586
-1.843888
-1.115066
6.577397
Number of obs
F( 4,
107)
Prob > F
R-squared
Root MSE
lngdpcap
=
=
=
=
=
2.321263
1.602381
.9774619
2.026417
9.398747
=
=
=
=
=
113
.
.
0.1941
.87705
[95% Conf. Interval]
-.3627535
-1.156833
-1.850615
-1.122556
-.840382
6.57067
2.52049
1.73471
.9841886
2.033906
-.2494052
9.405474
19
Linear regression
Number of obs
F( 6,
105)
Prob > F
R-squared
Root MSE
lngdpcap
Coef.
protestant
catholic
orthodox
socialist
muslim
hindu
buddhist
_cons
1.376067
.2649841
.0899143
-.1317085
-.2553407
-.8841924
.004696
8.439051
Robust
Std. Err.
.3648638
.3375636
.2992759
.2039904
.3321669
.342653
.4922835
.342653
t
3.77
0.78
0.30
-0.65
-0.77
-2.58
0.01
24.63
P>|t|
0.000
0.434
0.764
0.520
0.444
0.011
0.992
0.000
=
=
=
=
=
113
.
.
0.3052
.82204
[95% Conf. Interval]
.6526093
-.4043421
-.5034946
-.5361837
-.9139664
-1.56361
-.9714112
7.759633
2.099524
.9343103
.6833232
.2727667
.403285
-.2047747
.9808033
9.118469
So, old association between Protestantism and
capitalist development remains
Terrible regressions
20