Spiritual Human Capital:
Types and Economic Interrelationships
Imran H. Nawaz
Syed Nisar Hussain Hamdani1
ABSTRACT
Spiritual capital is relatively an emerging field of economics. Recent developments in the subfields of economics such as
economics of religion (Iannaccone), divine economics (Hamdani), behavioral economics, brain scan economics and other social
sciences had helped in finding the economic effects of different religious behaviors. Yet exists a long-felt need for a better
understanding of spiritual capital (Iannoccone 1990, Iannoccone and Klick 2003, Hamdani 2006).
Studies are now available , for example, majority of Americans think themselves as more spiritual than religious but these
studies lack a clear distinction of spirituality and religiosity as most of them assume that being religious and being spiritual is
same [Zinnbauer (1997), Roof (2000), Scott (2001), and Marler and Hadaway (2002)]. While some economists like Finke (2003),
and Iannoccone and Klick (2003) attempted to define spiritual capital, however, their definitions still need more refinement for
achieving a clear distinction between the concept of religious capital and spiritual capital. The works of Zohar and Marshall
(2004), Rima (2005), and Liu (2007) have offered some advancement in this regard. But defining and analyzing spiritual human
capital as a further branch of social or human capital is still unexplored.
The present paper focuses on definitions of spiritual human capital and its different types [Berger and Hefner (2004], by
utilizing the teachings of three divine religions, Judaism, Christianity, and Islam which more than 3.5 billion people follow on
earth. A priori, on the basis of theoretical underpinning in Hamdani (2007), we hypothesize that different kinds of spiritual
capital exists in different religions and sects. It is further hypothesized that different kinds of spiritual capitals are likely to
systematically affect the economic decision making of the individuals and hence create different intensities, directions, and
magnitudes of spiritual human capital. The present study finds that spiritual human capital can be classified, accumulated,
earned, and used at later time just like other forms of human capital. However, the determination of exact dimension and
magnitude of spiritual human capital is only a partial objective of the present paper. For this purpose, cross section data
available by Divine Economics Survey 2000 shall be used for the analysis.
Keywords:
Divine Economics, spiritual capital, spiritual human capital, religiosity, foregone income.
JEL Codes: D01, D12, D24, D64, J17, J22, J24, J28, Z12
Appendix: The paper was written under the guidelines by Professor Richard B. Freeman (NBER) but the official acceptance of
co-authorship from him is yet awaited
1
Imran Nawaz is a PhD scholar at Pakistan Institute of Development Economics, Pakistan and Syed Nisar Husain Hamdani is a Professor of
Economics and Dean faculty of arts at University of Azad Jammu and Kashmir, Pakistan
Page | 1
Introduction
"If a great book such as Smith's Wealth of Nations is read repeatedly, on even a fifth or a tenth reading one
continues to learn new things. I doubt whether anyone will ever fully apprehend all the things that Smith
wished to express, and there is even more to learn from an interesting mind than its owner wished to teach
us." (George Stigler 1982, pp. 108).
The present paper attempts to define Spiritual Human Capital, and to identify the types and
economic inter relationships of Spiritual Human capital. It is also attempted to differentiate
between religious capital and spiritual capital using the available studies, individual interviews,
panel interviews, and focused group discussions with the religious scholars of the divine
religions (Judaism, Christianity, and Islam), and the data collected during the pilot testing of
Divine Economics Survey-2009 which includes observed behavior and the case studies.
A priori, on the basis of theoretical underpinning in Hamdani (2007), and the discussions with
the religious scholars of the divine religions, we hypothesize that different kinds of spiritual
capital exists in different religions and sects. It is further hypothesized that different kinds of
spiritual capitals are likely to systematically affect the economic decision making of the
individuals and hence create different intensities, directions, and magnitudes of spiritual human
capital. The present study finds that spiritual human capital can be classified, accumulated,
earned, and used at later time just like other forms of human capital. However, the determination
of exact dimension and magnitude of spiritual human capital is only a partial objective of the
present paper. For this purpose, cross section data available by Divine Economics Survey 2000
shall be used for the analysis.
The concept of human capital is not new to the economists and over the course of time,
economists presented different theories regarding human capital. Adam Smith (1776) in his
infamous book, Wealth of nations, stated that every individual keeps on seeking for better job for
whatever capacity he commands. Smith's theory of compensating wage differentials is the origin
of the modern Human Capital theory. Alfred Marshal (1920) in his book, Principles of
Economics, pointed out the notion of Human Capital which consists of knowledge and
organization. More work on human capital theory was carried out by twentieth century
economists like Solow (1957), Becker (1964), Ben-Porath (1967), Mincer (1974) Azzi and
Ehrenberg (1975), Tomes (1983), and others who worked on the human capital theory. Romer
(1986) extended Solow’s model by introducing increasing returns to scale. In later years
importance of human capital was recognized by several economists like Barro and Lee (2000),
Becker (1993), and Rauch (1993) etc who proved human capital as a critical determinant of
economic growth.
Spiritual Capital is a relatively emerging field of economics. Recent developments in the
subfields of economics such as economics of religion (Iannaccone), divine economics
(Hamdani), behavioral economics, brain scan economics and other social sciences had helped in
finding the economic effects of different religious and spiritual behaviors. Some studies like
Page | 2
Iannaccone (1990, 1998, and 2000), Finke and Stark (1992), Finke (2003), and Hamdani (2006)
have shown that the increased scope of multi-disciplinary research and increased religiosity level
across the world has convinced the social scientists to observe the affects of the religion and
spirituality on economic behavior.
Some studies like Marley and Hadaway (2002), Zinnbauer (1995), Roof (1995) and Scott (2001)
considered religious and spiritual capitals as same concepts while some others like Berger and
Hefner (2002), Dona and Marshall (2004), Rima (2006), and Liu (2007) explained Spiritual
Capital as an independent concept which is different from Religious Capital. Present study views
the debate and defines Spiritual capital which leads to the definition of Spiritual Human Capital,
its types and economic relationships.
Literature Review
Human Capital:
Concise encyclopedia of economics refers to the work by Adam Smith and Alfred Marshal
regarding human capital. The roots of the human capital theory go to the father of economics,
“Adam Smith (1776) in his book, “wealth of the nations” presented the idea of a continuous job
search on the basis of one's capacity which leads to the theory of the compensating wage
differentials and then to human capital theory. Alfred Marshal (1920) identified knowledge and
organization as components of the capital and described knowledge as the most powerful engine
of production.
The neo-classical Human Capital theory emerged from the Growth Theory by Solow (1956) who
took labor as an input and assumed constant return to scales in the production function. Solow’s
model was later criticized on the bases of the inequality between the rate of returns from human
capital and physical capital and Romer (1986) introduced the concept of increasing return to
scales in order to equate the returns from human capital and the physical capital. Lucas (1988)
found externalities from the human returns, Acemoglu (1996, 1997) identified the additive nature
of the different types of externalities in the returns on human capital and Moretti (1999) extended
his work with the conclusion that the number of college graduates and the national income in the
US are correlated.
Ben-Porath's (1967) work was limited to the sources of productive services and Mincer (1974)
introduced the life cycle earning function in which he used the years of schooling as a
determinant of the human capital. Rangasaz (2002) added the schooling of the children and
externalities within the human capital during the learning process. Rangasaz's work is important
due to the use to the addition of existing physical and human capital stock and the time spent to
gain educational experience which was not mentioned in Mincer's model (1974).
Many other economists like Shultz (1963) Barro and Salai Martin (1995 and 2004) Barro (1998
and 1999), also found the effect education on earnings. Krueger (2003) extended the work and
found that due to improved schooling, the students not only learn more which increases the
human capital in them but also they are aspired to get better job and the higher earnings. The
theory so far had the deficiency to explain the determinants of the human capital and Heckman
(2002) presented the idea of cognitive and non-cognitive skills which are developed in the
children due to, schooling and the mentoring. Despite all this work, conventional human capital
Page | 3
theory mostly used education, gender and experience as the determinants of the human capital
while the role of religion in determining the human capital was also introduced in 20th century
which is discussed in the next section.
Religious Human Capital
Religion is one of the biggest components of human lives and they consume the time and money
to perform the religious activities like rituals, prayers and supplications, donations and voluntary
works etc. Individuals allocate time and money to carry out religious activities (Hamdani and
Ahmed 2002). A number of economists like Becker (1965), Gockel (1969), Warren (1970) Azzy
and Ehernberg (1975), Pollak and Wachter (1975), Long and Settle (1977) and Iannaccone
(1986, 1988, 1990, 1992, 1993, 1998, 2000, and 2003) presented the idea of non conventional
activities in the economic decision making in the form of investments in and the returns from the
human capital by individuals and highlighted the importance of religion in economic activities.
“With two centuries separating first and second publications, there is no denying that the
economics of religion got off to a slow start. Yet despite this leisurely launch, dozens of
economists (and several sociologists) have now picked up where Adam Smith (I776) and Corry
Azzi and Ronald Ehrenberg (1975) left off. Armed with the tools of economic theory and a large
body of data, they have written nearly 200 papers concerning issues that were previously
confined to other social sciences, the determinants of religious belief and behavior, the nature of
religious institutions, and the social and economic impact of religion” (Iannaccone 1998).
Azzi and Ehrenberg (1975) explained that the individuals participate in church due to three
motives, future consumption (salvation), current consumption, and social benefits. Since these
religious activities require their time hence religious activities have an impact on economic
decision making.
Iannaccone (1990) defined Religious Human Capital as,” skills and experiences specific to one’s
religion, including religious knowledge, familiarity with church ritual and doctrine, and
friendships with fellow worshipers”
Stark and Finke (2000) provided definition of Religious Capital as, “Religious capital consists of
the degree of mastery of and attachment to a particular religious culture”
Shah and Hamdani (2006) define the religious human capital as. “A person’s technical,
professional and behavioral capability to organize inputs and produce outputs by employing own
time given a typical religiosity derived from one’s religion”.
In the studies about cognitive and non-cognitive skills by Heckman (2003) and Heckman et al
(2006), religiosity level along with some other factors, in the surroundings of the children by
their mentors explains the difference in the human capital acquired by the different children.
Iannaccone (1990) used the household production model to show the families as quasi-firms
engaged in the production of commodities and he concluded that the religious practice can be
viewed as production of commodities.
The investment in the human capital by different people differ as concluded by Becker (1981)
that the family members with high value of time continue to consume less time in the religious
Page | 4
activities and this difference in time allocation affects the returns from the human capital and as
a result the returns to human capital do vary.
A number of studies have shown the difference in the returns to human capital across different
religions like Iannaccone (2000) concluded that the Jews in America earn more wages as
compared to other religious groups. Ewing (2000) examined the relationship between wages and
being raised in the Catholic religion and found that Catholics earn more than their non-Catholic
counterparts while using Canadian data, Tomes (1983) found, “The returns to Jews from
schooling and experience are substantially higher than to other religious groups”.
Shah and Hamdani (2006) studied the effects of religion on the human capital at two stages that
is at the time of investment and at the time of returns but it may vary from person to person.
Spiritual Capital
It is generally considered that Religious capital and Spiritual Capital are the same and they can
be used as synonyms to each other. Marley and Hadaway (2002) conducted a study on being
spiritual or religious in America and found the same results. Many other economists like
Zinnbauer (1995), Roof (1995) and Scott (2001) also viewed spirituality and religion as
interchangeable terms.
Iannaccone and Klick (2003) admit that although there is a vast material on Spiritual Capital but
it is a catchy phrase and lacks a clear definition. Iannaccone and Klick (2003) and Finke (2003,
paper for the Spiritual Capital Planning meeting) redefined Religious Human Capital while
defining spiritual capital. Malloch (2003) found that Spiritual Capital is by far the least
developed emerging concept and stated “When you do a thorough web search not much comes
up on the topic spiritual capital. In Amazon.com an index search of all categories, books
included, yields much the same result. It turns up Seven Capital Sins by Bishop Fulton Sheen;
Witchcraft and Welfare in Puerto Rico; and an out of stock pamphlet on capital cities and urban
planning. So why bother? Is this a virgin field or a foolish endeavor? Can the development
literature fill in any of the gaps and provide an adequate framework on spiritual capital?”
Berger and Hefner (2004) defined Spiritual Capital as. “Spiritual Capital might be thought as a
sub-species of Social Capital, referring to the power, influence, knowledge, and dispositions
created by participation in a particular religious tradition.”
Zohar and Marshal (2004), Rima (2005), while Liu (2007) provided new definitions of spiritual
capital claiming that spiritual capital is different from Religious capital.
Zohar and Marshal (2004) presented the spiritual capital as a new paradigm which needs more
understanding with the change in the philosophical foundations of the business practices. Zohar
and Marshal (2004) also termed spiritual capital as a bed rock of an organization and insisted on
understanding spiritual capital in a broader way involving other social sciences.
Rima (2005) defined spiritual capital as a mean which brings vitality, life, and animation to the
wealth, profit, advantage, and power.
Liu (2007) defined Spiritual Capital as, “Spiritual capital refers to the power, influence and
dispositions created by a person or an organization’s spiritual belief, knowledge and practice”
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Metanexus institute organized a meeting (2003) for Spiritual Capital Research Program and the
working definition of spirituality was provided as, “The effects of spiritual and religious
practices, beliefs, networks and institutions that have a measurable impact on individuals,
communities and societies” (http://www.spiritualcapitalresearchprogram.com/award_release.asp)
This paper attempts to modify the above definitions using the following methodology.
Methodology
The total world population is around 6.76 billion while Jewish, Christians, and Muslims make
around 55% of the world population (www.adherents.com). All three of these divine religions
have common areas on the basis of a set of beliefs; monotheistic, God’s guidance, Children of
Abraham, Life after death, Divine Human Encounter, revealed books, teachings, and rituals and
practices (http://chinese-school.netfirms.com/Judaism-Christianity-Islam.html ).
Here we have a modified version of the table from Shah and Hamdani (2007) which explains the
similarities among all three divine religions.
Page | 6
Beliefs/Religion
God
Judaism
monotheistic
The Past
Abraham
The Present
Angels
Divine Human
encounter
God’s guidance
Islam
monotheistic
Adam, Eve, Abraham,
Lot, Ishmael, Isaac,
Jacob, Joseph, Moses
Children of Abraham
Christianity
Monotheistic (concept
of Holy Trinity)
Adam, Eve, Abraham,
Lot, Ishmael, Isaac,
Jacob, Joseph, Moses
Children of Abraham
Yes
Revelations
Yes
Revelations
Yes
Revelations
Torah
Bible (Torah plus new
testament)
Quran 16:89, 17: 9,
(Torah , Bible)
Quran 75: 1-4, 2:28, 4:
97, 56:60-61
Gog Magog, Wars,
God’s beloved people
will rule
Wars, Disasters
Adam, Eve, Abraham,
Lot, Ishmael, Isaac,
Jacob, Joseph, Moses
Children of Abraham
The Future
Day of judgment
Events preceding Day of
judgment
Gog Magog, Wars,
Kingdom of God
Gog Magog, Wars,
Kingdom of God
Destruction of the
present world
Coming of a Savior
Wars, Disasters
Wars, Disasters
Messiah (Zech 14:10
Zech 14:5, Isaiah 42:6,
Zech 14:9)
shofar will announce
beginning of messianic
era, gather the
scattered exiles, and
serve as a summons to
the heavenly court on
the Day of Judgment
All people will
experience physical
death
Jesus (Rev. 19:11-21
Matt. 19:28; Rev. 20:16)
Matthew 24:31
Thessalonians 4:16
Jesus and Mahdi
Quran 21:105, 28:5
All people will
experience physical
death except those
living when Christ
returns
1 Cor. 15:4-7, 12-23
All people will
experience physical
death
Not levels, but degrees
of reward
Matthew 5:29
Rev. 20:14
Seven levels
(Quran 17: 9)
Quran 4:556, 14:50,
17: 8, 74:21
Judgment announced
with the trumpet of an
archangel
Who must experience
death?
Resurrection of body
Dan. 12:2, Neh. 9:5
Levels of Reward
Three levels
Hell as an eternal
punishment
Bodies are sent to
Gehinnon where they
burn eternally in a fiery
pit
Quran 36:51-53
Quran 75:1-4
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Since this paper is written in Divine Economics framework which studies economics and
religion in the context of each other implying scientific methods and attempts to take the
economic and religious concepts directly from the source which includes revealed books (Bible,
Quran, and Torah), Jurisprudence by Religious scholars, and authentic books; so present study
uses the discussions with the religious scholars of all three divine religions (Christianity, and
Islam, and Judaism) in the form of the individual interviews, panel discussions, Focus group
discussions, observed behavior, and case studies as which is a part of the pilot testing of Divine
Economics Survey-2009.
Religion comprises of beliefs and the rituals while the spirituality is to identify the good from
bad and almost all followers believe that Human life has two components, body and soul (spirit)
which can’t be separated (Fr Barr 2008, Maududi 1948).
The functioning of the soul is also called as Spirit but these two are interchangeable terms. Soul
is the master while the body obeys it. The body has the material needs like hunger, thirst, and
sexual desires while the soul brings the spiritual reasons like identify the God, beauty, good, and
bad. At every point, the human faces the set of choices; the religion shows what is right or wrong
while the spirituality helps in deciding what to choose. The soul makes this decision while the
body acts on it [Fr Barr, individual Interview 2008].
Spirit is the functioning of the soul which is kept in the body or flesh. As spirit can be expanded
or diminished so the spirituality can be increased or decreased. Christianity shows different
paths, and exercises to increase the spirituality like Franciscan Spirituality and almost every
religion and culture is familiar with some sort of yoga or meditation exercise to have a spiritual
connection with Divine. Perfection of the humanity is to choose the best and it takes to the height
of spirituality which is closeness to God (Fr Borjas 2008, Rabbi Benjamin 2008, Maududi 1948).
Prayers are considered very important in all divine religions and they are highly encouraged
(Romans 8:26, Mark 12:28-31, Acts 14:23, John 3:16-17, Quran 112, 114) Father Barr (one on
one interview) refers from” Compendium of the social Doctrine of the church” and “Catechism
of the Catholic Church” that God created human beings to worship Him serve Him, and know
Him so he gave humans a tool that is spirituality so that human beings can live in heaven with
God forever while the joys and pleasures in this life also come from the origin when we act on
nature.
Dina, Shah, Maqsood, and Ali (Panel interview 2008) sate that religiosity and spirituality are
inseparable joined. Spirituality brings the human closer to GOD (Imam Rizvi 2008, Maududi
1948, Fr Barr 2008, Fr Borjas 2008) and Maududi (1948) has defined three stages of the spiritual
development which are “Faith, Piety, and Ehsaan” (exceeding the bare minimum). Faith includes
the beliefs while the acts according to faith (rituals) are the execution of obligatory prayers.
Quran also conveys this message stating that the one close to GOD is one who is more pious.
Ehsaan is the act of going above and beyond of the obligatory rituals. Hamdani (2000) took Piety
as a proxy for religiosity which leads to the proposition that Spirituality and Religiosity are two
different things but they have some common points. Sarwar (2008, individual interview and case
study) supported the same idea by referring to the “reality of the worship” from “Al-Kafi”.
Page | 8
The above discussion supports the idea that Religiosity and Spirituality are two different
concepts but they have some common points and the spirituality is like a diamond with different
facets so it emphasizes on different topics in each kind of spirituality (Fr Borjas, 2008, focused
group discussion)
So far the definition of the spiritual capital by Spiritual Capital Research Program (2003) seems
the most appropriate definition, “Spiritual Capital is the effects of spiritual and religious
practices, beliefs, networks and institutions that have a measurable impact on individuals,
communities and societies”.
The above definition and the discussion lead to three questions:
1. Is there a form of spirituality which is independent of religiosity?
2. Is there a form of spirituality which exists in conjunction with religiosity?
3. What are the measurable effects of spirituality and religiosity on each other and how do
they affect the economic behavior?
The discussion on the above questions is beyond the scope of the present paper and we will
define the spiritual Human Capital here:
Spiritual Human Capital
There hardly exists a definition of Spiritual Human Capital and Hamdani (2006) defined spiritual
Human Capital as “a person’s technical, professional and behavioral capability to organize
inputs and produce outputs by employing own time given a typical religiosity and accumulated
spiritual experience derived from a particular religion, sect, environment, perception, hardship,
else, or none of them.” The present paper will use Hamdani (2006) definition as a tentative
definition.
Hamdani defined spiritual human capital (2007) and compared it with other definitions like the
definition of Spiritual Capital e from Spiritual Capital Research Program (mentioned in the last
section). There hardly exists a definition of spiritual human capital and the definitions under
discussion are for spiritual capital not for spiritual human capital and at the same time, Hamdani
(2007) is a comprehensive definition in the sense that it covers and individual’s religion, sect,
Page | 9
environment, perception, spiritual experience and some other variables which are not defined
yet.
Now, we will discuss the types and level of Spiritual Human capital with reference to Divine
Religions:
The spiritual exercises referred to St. Ignatius are considered very helpful in increasing the
spirituality level and closeness to GOD. In this book St. Ignatius proposed 20 annotations to be
followed in order to have a better spiritual connection with GOD2.
Martin (2003) explained the traditions of Christian spirituality and highlighted the importance of
the practices and community based efforts to increase the spirituality.
Telushkin (2000) explains the Jewish values by identifying Yetzer-Hatov (the desire to do good)
and Yetzer-Harah (the desire to do bad). It is further explained that some people are more
spiritual than others and the more one acts good, the higher his spirituality level gets.
Nasr (1996) presents Islamic philosophy by Mulla Sadra which defines and explains four
different kinds of the spirit (Nafs) which are explained as:
Nafs-e-Amara is the type of spirit which creates the temptations for sins, Nafs-e-Lawama which
provides the self accountability before, during, or after committing the sin, Nafs-e-Mulhima is
the type of spirit which gives signals about the right and wrong deeds and the possible outcomes
associated with those deeds which are said to be almost true, while Nafs-e-Mutma’inna is the
type of spirit who always seeks for GOD’s happiness, Quran (89: 27-28) addresses this spirit as
the most satisfied spirit who is happy with GOD and GOD is happy with her.
Sarwar (2004)3 explains that the intelligence was the first creature in spiritual world and GOD
honored it above all other creatures while the contrary to intelligence is arrogance (which was
created from the salty dark ocean). Intelligence has 75 attributes including belief, hope, justice,
knowledge, happiness, generosity, and patience etc while arrogance also has 75 attributes which
are exact opposite to the attributes of intelligence. The more attributes a person acquires of
intelligence, the closer he gets to GOD and the more attributes one acquires of arrogance, the
farther he goes from GOD. This leads to the idea of different types of spirituality which are
positive spirituality, negative spirituality or neutral spirituality.
Hypothesis
On the basis of the definitions provided earlier for Religious Human Capital, Spiritual Human
Capital, and the above discussion, this study presents three different hypotheses which are:
for details, check “The spiritual exercises of the Ignatius of Loyala” or
http://books.google.com/books?id=8YWiWYUFBfIC&dq=st+ignatius+spirituality&printsec=frontcover&source=b
n&hl=en&ei=I3jGSdfIIYqstgfw3OzHCg&sa=X&oi=book_result&resnum=4&ct=result#PPP1,M1
2
3
For details, check Al-Kafi, Arabic text and English translation (Ch1:H14) by Mohammad Sarwar, INCNY
Page | 10
1. Since the spirit can be expanded or diminished so the spirituality can be increased or
decreased which leads to the hypothesis that, “Spiritual Human Capital can be increased
or decreased”
2. Going back to the definitions of Religious Human Capital from Iannaccone (1998), Stark
and Finke (2000), and Hamdani (2007), we find that the one’s religion is a determinant of
his Religious Human Capital and it means that people with different religion might have
different Religious Human Capital. Taking Hamdani (2007) definition mentioned in the
last section, “Spiritual Human Capital has different types depending on different spiritual
experiences, capabilities, environmental and religious factors”.
3. Due to possessing different levels and types of Spiritual Human Capital, the economic
agents are likely to have difference in perceiving and reacting to the economic problems
on their parts and hence, “The economic behaviors of people with different types and
levels of Spiritual Human Capital are likely to differ systematically”
The Model
The conventional neo classical model was introduced by Mincer (1974) and in his life cycle
earning function; Mincer took age, experience and returns to education as the determinants of the
earnings. Rauch (1993) studied the role of externalities in the determination of human capital
while Acemoglu and Angrist (2000) found the magnitude of the externalities. Heckman (2003)
and Heckman et al (2006) added cognitive and non cognitive skills to the determinants of human
capital but
Becker (1964, 1965, and 1981) introduced the idea of household production in which the
households are viewed as the quasi firms engaged in the production and consumption of the
goods. The problem is to maximize the utility from a number of commodities subject to time and
money constraint. After Azzi and Ehrenberg (1975) study on church attendance and the role of
religion in economic decision making, a group of economist started taking religion as an
important determinant of the human capital. Iannaccone (1990) proposed that Religious practice
could also be viewed as a productive process and used the household production model to
estimate the religious human capital. With the addition of religion into the determinants of
human capital, statistical models may interpret the economic behavior in a better way as
compared to the models excluding religious variables.
Divine economics model
Divine Economics (DE) was pioneered by Hamdani (2000) and this framework studies religion
and economics in context of each other. DE model takes the theory from Divine revelations,
existing literature regarding conventional economics and divine religions. DE relies on three
sources for the economic forecasting which are, divine revelations, wise man, and the statistical
data (Tashfeen, 2006) which may provide better forecasting (due to the events like rapture,
coming of savior and signs of day of judgment) but DE model is also subject to some limitations.
Hamdani (2001) states Divine Economics Model is subject to the limitations due to the different
interpretations of the divine revelations among different sects, time and space horizon of the wise
man, and statistical errors during data processing.
Page | 11
Divine Economics Model maximizes the utility which is a function of consumption, Donation,
Leisure (active and passive), Voluntary work, and Religious activities subject to time and money
constraints.
Spiritual Human Capital Model
There hardly exists an economic model for Spiritual Human Capital and this paper proposes the
following tentative model which is derived from Hamdani (2009)
SHC = f(X, E, R, S)
Where
M
L
V
Allowed and
liked (Mustahib)
Obligatory
(Wajib)
Allowed
(Mubah)
Allowed but not
liked (Makrooh)
Prohibited
(Haram)
C1
D1
LA1
LP1
C2
D2
LA2
LP2
C3
D3
LA3
LP3
C4
D4
LA4
LP4
C5
D5
LA5
LP5
VG1
VD1
VG2
VD2
VG3
VD3
VG3
VD4
VG4
VD5
SHC = Spiritual Human Capital
X = Vector of conventional variables like Age, Education, Experience etc
E =Vector of Environmental Variables like distance to worship place, and social friends etc
R = Vector of Religious Variables like obligatory prayers,
S = Vector of Spiritual variables
Page | 12
H
R
HG1
HD1
R1
S1
HG2
HD2
R2
S2
HG3
HD3
R3
S3
HG4
HD4
R4
S4
HG5
HD5
R5
S5
Table: 1 [Source: Hamdani (2009), “Towards Divine Economics”, Cambria Press, NY (Unpublished)]
The above table is drawn from Hamdani (2009) which explains the general form of the different
variables at different points of times. We have a vector of Commodity Series on the horizontal
side and the Time Allocation Options on the vertical side.
Where
M = Vector of Market Activities
L = Total Leisure = LA + LP = Active Leisure + Passive Leisure
V = Voluntary Work = VG (for God sake) + VD (for Demonstration)
H = Vector of Home Activities = HG (Home activities for God Sake) + HD (Home activities
otherwise)
R = Vector of Religious Activities, and
S = Vector of Spiritual Activities
According to Imam Ahmed bin Hambal (Sahih Bukhari, 2006), the same action can fall into
different categories (Obligatory, Favorite/liked, Allowed, Allowed but disliked, or Prohibited) if
performed in different time and space. For example, Earning is obligatory for one to take care of
one’s dependants, It is allowed to earn more than one’s needs, its liked if one earns more to
facilitate his family and performs charitable activities, but if there is a chance of harm to any one
due to one’s earning then it is allowed but disliked due to the associated risk for example if
working more than 8 hours a day may put some one’s health at risk then it is disliked. Lastly,
illegitimate earnings are prohibited which create corruption and injustice in the society.
Another example about “Patience” comes from Abi Zar Narat (2007) with the same idea,
Patience is permitted/allowed when one has a choice, it is obligatory when dealing with children,
parents, and disabled etc, it is liked when one controls himself and stays humble for the sake of
God, patience is allowed but not liked in repressible situation, and Patience is prohibited when it
encourages injustice and cruelty in the society.
Hamdani (2009) stated that the different types of human capital experiences in the past and
present may change the magnitude and direction of human capital in the future.
Past
Present
Future
Xi
X1
X2
X3
Ei
E1
E2
E3
Ri
R1
R2
R3
Si
S1
S2
S3
Page | 13
Table: 2 [Source: Hamdani (2009), “Towards Divine Economics”, Cambria Press, NY (Unpublished)]
Where,
Xi = Vector of Conventional Variables
Ei = Vector of Environmental Variables
Ri = Vector of Religious Variables, and
Si = Vector of Spiritual Variables
Above table explains the determinants of the SHC at different times which not only shows the
accumulation of the SHC but also shows the types, magnitude, and direction of the SHC.
For example, taking obligatory prayer as “R” variable:
In the past, one used to pray for demonstration, at present one starts reading and understanding
the meanings of the prayers while in the future, one’s prayers may become for the sake of only
God hence improving his religious human capital.
Empirical Analysis
Data:
In the US and some of the European countries, at one hand there is limited and unreliable data
regarding the religion at government level while on the other side there is lots of scattered data
produced by the religious institutions (Iannaccone, 1998). Hamdani and Ahmed (2002) are of
the view that people tend to over state their religious practices while they tend to understate their
earnings.
The present study will use the data from ‘Divine Economics Survey-2000’ which was conducted
by Hamdani (2000) that contains data on socioeconomic, demographic, psychology, health,
religiosity and other variables. The dataset was said to be the largest in the world on religion and
economics (Freeman, 20044). This dataset was subject to a number of constraints, yet it
generated a new trend in empirical economics and a resulted in subsequent surveys at least in
Pakistan.
Limitations:
The data set used for the study is very comprehensive and covers a wide range of socioeconomic
issues that may be analyzed with reference to faith in afterlife but like all other social sciences
data sets, it has certain limitations. For example, the dataset is not fully tailored to the exact
4
Unpublished official comments on dissertation Hamdani (2004).
Page | 14
needs of the present work and proxy variables are used in some cases. As already admitted by
Hamdani (2000), the religiosity scales developed for measurement of religiosity are tentative and
require scholarly debate of multi-disciplinary team of experts and religious scholars belonging to
different religions and sects. Some data generation and processing errors and other problems
common to social surveys have also constrained the data. We agree with the author that all or
some of the results from such datasets may be taken as tentative or not but still they are
successful in intriguing new ideas and insights for expanding the horizons of economic science.
Variables:
Since DES-2000 does not define the Spiritual Human Capital (SHC) however it includes a
Spirituality variable which is a composite variable covering six dimensions of spirituality
including the increased interest; in the working of on body and soul, thoughts about rise and fall
of nations, enhanced interest in solving the community problems, desire to work for greater
goals, general reading and thinking, and increased interest towards prayers.
As this paper proposes that spiritual human capital is determined by conventional variables,
environmental variables, religious variables, and spiritual variables so we take age, experience,
natural log of income, and education as conventional variables. Since this Divine Economics
Survey-2000 (DES-2000) was conducted in select areas of Pakistan which has over 95% of
Muslim population so some terminologies and variables are added in the model keeping in view
the available literature on Muslim Spirituality and the discussions with religious scholars.
We take; distance to the worship place, distance to the own sect worship place, and Social
friends as environmental variables keeping in mind that not only the physical but the human
environment also affects the accumulation of SHC. Obligatory Prayer, obligatory charity
(ZAKAT, if some conditions are met), and Salutation on Prophet Mohammad are taken as
Religious variables. We also take; Additional prayers (Nawafil), KALIMA (witnessing oneness
of God and prophecy of Mohammad PBUH), and SADQA (MEANS CHARITY which includes
the voluntary and obligatory GIVINGS in some cases) as spiritual variables.
A priori it is assumed that age will be having a positive relation with SHC because due to
increase in age, a person may get more knowledge, experience, and education etc which may
cause some statistical estimation issues like endogeneity and multicollinearity etc.
We took natural log of income to reduce the hetroskedasticity problem and it is assumed that it
will have a negative relation with SHC because when the income increases then the opportunity
cost of time spent at work also increases hence leaving less time for the accumulation of SHC.
Experience and education are assumed to have positive relation with SHC because more
education and experience tend to increase the thinking process which is a part of our composite
variable.
Some variables like Religious friends, Salutation on Prophet Mohammad, Distance to the
mosque and the distance to the mosque of own sect are dropped from the estimation due to
Page | 15
certain reasons. Although the DES-2000 attempted to record these variables but due to recording
and processing errors the data cannot be estimated for these variables.
As per asked in DES-2000 Social friends are the fiends who share the same taste and hobbies
and are different from the religious friends, co-worker friends, and relative friends. It is assumed
that Social friends tend to increase the SHC of a person, for example a person naturally inclined
towards positive spirituality would be having high SHC if his social friends have high SHC and
vice versa.
SADQA (Voluntary giving), NAWAFIL, Obligatory prayers and congregational prayers are
assumed to have positive impact on SHC because all of these actions bring one closer to GOD
and create actions which are community oriented. Although, congregational prayers may cause
some estimation issues like endogeneity and multicollinearity for example reciting of KALIMA
(Witnessing oneness of GOD and prophecy of Prophet Mohammad) between two obligatory
prayers (Shia Muslims) or after every congregational prayer (in Bralvi Sunni Muslims) and also
congregational prayer, SADQA, and NAWAFIL may be performed due to other motives like
social connections and demonstration but It is beyond the scope of this paper to identify the
difference between these motives and we will discuss the results of the estimation in the
following section
Results
We have estimated the above defined model using Ordinary Least Square and the results are
discussed as follows.
Table (in the appendix) shows that the R square and Adjusted R square are highly significant
which is plausible for cross section data.
SADQA, congregational prayer, NAWAFIL, and social friends are highly significant with
positive coefficients which show that there exists a positive relationship with all of these
variables to the SHC
Own education is significant with positive relation with SHC showing that the person
accumulates more SHC if he gets more education which could be due to the knowledge on about
diversity of the sects, religions, scientific studies, and learning about the universe and
understanding the global impacts of an individual’s decisions in different time and space.
Age has negative relation with SHC while experience has positive relation with SHC AND both
are insignificant.
Income has negative relationship with SHC as was assumed a priori because as the income rises
the opportunity cost of SHC accumulation also increases.
Page | 16
ZAKAT (Obligatory charity under certain conditions) is significant with negative relation to
SHC which is an interesting finding. Either its due to the fact that people tend to overstate their
religious activities (Hamdani and Ahmed 2002) or people paying ZAKAT perform this action for
demonstration or it creates arrogance and pride in them which are highly anti SHC traits
according to Intelligence and Arrogance criteria by Imam Musa Kadhim (AS) (Al-Kafi, 1; 14).
By taking the example of SADQA (voluntary giving) having other things constant, the increase
or decrease in SADQA can cause an increase or decrease in SHC due to the positive relation
between SHC and SADQA. This supports the hypothesis that SHC can be increased or
decreased.
With the same example of SADQA, since this paper does not identify the motive behind
SADQA which may be purely for GOD or for other reasons like developing social connections
or demonstration etc. so, the SHC accumulated in this case is caused by spirituality which may
be positive or negative depending on the motive behind SADQA.
Having other things constant, two consumers who have performed different level of voluntary
giving may have different satisfaction levels and the outcomes of utility maximization for them
may differ systematically supporting our hypothesis # 3 mentioned earlier.
Conclusion
This paper discussed different definitions of Spiritual Human Capital, its types and economic
interrelationships. Hamdani (2007) definition of Spiritual Human Capital (based on own spiritual
experiences due to religion, sect, perception, hardships and other factors or none of them) seems
better than the other available definitions. This is a general definition and satisfies all religious
groups even the atheists contrary to other available definitions which are subject to some
particular sect, religion, or group of people. This definition gives insights to include the variables
which are no yet discussed like scientific and technological discoveries which are potential
sources of spirituality.
Using Hamdani (2009) model of Spiritual Human Capital, this paper identified that Spiritual
Human Capital has different levels and types due to different developmental stages of the spirit
which are subject to many factors (religious, environmental, spiritual, social and other factors).
Furthermore, spiritual human capital can be accumulated, increased or decreased, and used at
later stage like other types of human capital. Finally, due to different level and types of spiritual
human capital accumulation, different individuals have different levels of satisfaction and hence
their economic behaviors like utility maximization and preference sets differ systematically from
each other. This paper also provides some empirical findings for further understanding of
interrelation ships of Spiritual Human Capital with Socio-Economic and other variables.
This paper proposes two ideas: a) the role of accumulated and expected Spiritual Human Capital
in the context of economics of the future may be further explored, b) there may be a possibility
to derive an economic model of Spiritual Human Capital with the theoretical foundations from
existing economic literature also takes into accounts the teachings of all three divine religions
(Christianity, Islam, and Judaism) and most of their sub-denominations.
Page | 17
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Appendix
R
R Square
Adjusted R Square
Std. Error of the
Estimate
.389
.152
.118
23.1317778286415
3
ANOVA
Model
Sum of Squares
df
Mean Square
F
Sig.
Regression
26277.309
11
2388.846
4.464
.000
Residual
147146.765
275
535.079
Total
173424.074
286
Coefficients
Unstandardized
Coefficients
Std. Error
(Constant)
37.604
16.345
AGE
-.167
.217
EXPER
.125
OEDUYRS
LNYM
Standardized
Coefficients
t
Sig.
2.301
.022
-.068
-.773
.440
.233
.046
.538
.591
.922
.595
.098
1.551
.122
-.769
2.072
-.026
-.371
.711
Page | 22
ZAKAT
-3.463E-04
.000
-.073
-1.230
.220
SADQA
9.145E-04
.000
.126
2.155
.032
PRAYER
1.146
.954
.075
1.201
.231
CONGRE
2.456
.905
.176
2.713
.007
NWAFIL
1.626E-02
.008
.112
1.917
.056
K_DAILY
1.194E-02
.011
.063
1.069
.286
FRENDSOC
1.107
.324
.194
3.417
.001
Page | 23