Charles North on Religion, Economic Development, and Rule of Law
Date: April 20th, 2014

Max Weber is famous for linking religion to economic outcomes in his monumental book The Protestant Ethic and the Spirit of Capitalism.  Since that time we have seen social scientific interest in linking religion to economic growth wane and then be resurrected.  Charles North, associate professor of economics at Baylor University, discusses his own work exploring the nexus between faith and economics.

Our conversation begins with a general survey of the literature that sees religion as a potential causal factor in economic development.  Chuck presents the basic Weberian model and then fast forwards to the present where there has been a renewed interest in including religious variables (whether belief or practice) into econometric models for explaining growth.  He covers the likes of Robert Barro & Rachel McCleary, Joseph Daniels & Marc van der Ruhr, Sacha Becker & Ludger Woessman, and sociologists such as Rodney Stark.  Most of these scholars are interested in explaining GDP growth and we cover what GDP is and what it doesn’t necessarily measure.

Prof. North then turns to his research, which focuses on the rule of law and the related concept of corruption.  He reasons that since a number of economists have pointed out the strong relationship between the rule of law (or absence of corruption) and long-term economic growth, it might be worthwhile to investigate whether or not religious variables help to explain these two things.  He lays out his reasoning noting that rule of law helps to lower transaction costs and reduce uncertainty when it comes to investing, and that religious individuals (or the norms they follow) may have an impact in promoting and living by the rule of law (and, conversely, mitigating corruption).  We then go over the measurements he used, talking about the database provided by the World Christian Encyclopedia and how he worked with that.  Chuck’s research (with Wafa Orman and Carl Gwin) indicates that nations that had Protestant, Catholic, and Hindu majorities a century ago have higher levels of rule of law than nations with other major faith traditions (e.g., Islam, Eastern Orthodoxy).

Our conversation closes out with some of the more micro-foundational reasons for these research findings, as well as thinking about possible confounding factors.  Interestingly, this conversation leads us back to the medieval era and Chuck’s work on the development of canon law around the time of the 11th century.  Arguing that the Catholic Church needed to develop rules to protect its “stuff and junk” from various princes and kings, Europe benefited from the rise of a system of rule of law that lasted for centuries.  Recorded: April 1, 2014 (no fooling).

RELATED LINKS

 Prof. Charles North’s bio at Baylor University’s Department of Economics (Hankamer School of Business).

Good Intentions: Nine Hot-Button Issues Viewed through the Eyes of Faith, by Charles North and Bob Smietana.

Religion, Corruption, and the Rule of Law,” by Charles M. North, Wafa Hakim Orman, and Carl Gwin in Journal of Money, Credit, and Banking.

The Victory of Reason, by Rodney Stark (mentioned in podcast).

The Long Divergence, by Timur Kuran (mentioned in podcast).

RELATED PODCASTS

 Rodney Stark on the Triumph of Christianity, Part II.

Timur Kuran on Islamic Law and Economic Development.

Timur Kuran on Islamic Economics.

Joseph Daniels on Religion and Trust.

Jared Rubin on Christian and Islamic Economic History.

Religious Liberty & Economic Development: A Panel Discussion.

Robert Woodberry on Missionaries and Democracy.


3 Responses to “Charles North on Religion, Economic Development, and Rule of Law”

  1. Craig says:

    Thanks for this fascinating study and interview. I’m not an economist, so bear with my question: How does this thesis explain the fact that countries like Japan, South Korea, and Singapore are experiencing economic growth and prosperity, but have tiny or minority Christian and Hindu populations? Acemoglu and Robinson’s popular book “Why Nations Fail” rules out religion and values as explanatory variables for economic growth and prosperity. I intuitively sense that beliefs and values factor into the rule of law, and that institutions alone are not enough to explain prosperity (contra Acemooglu and Robinson). But the data doesn’t seem to quite line up. Help me out!

  2. Charles North says:

    Hi Craig,

    All that the paper in the JMCB says is that there is a correlation between religious tradition and rule of law (and absence of corruption). I don’t think that having a Protestant or Catholic heritage is the key to rule of law; rather, it is for some reason correlated with rule of law. In another paper, I have proposed the link Tony describes above: the medieval Catholic Church as a source of law in Western Europe.

    However, once a place understands the notion of rule of law and has the ability to implement it, there need not be a religious origin to it. This can explain the Asian nations you mention. In short, they adopted a legal technology that works without adopting the institutions from which it originated a millennium earlier.

    Most research on economic growth uses contemporary measures of religious affiliation and practice when it concludes there is little effect of religion on growth. (I’d have to look back at Acemoglu and Johnson’s work to see if they do this also.) We had similar non-findings on rule of law and corruption when using contemporary measures of religious affiliation. Our findings were strongest when using the countries’ religious affiliations in the year 1900, which reflects several centuries of religious culture and institutions prior to the massive conversions in the 20th century from ethnic and tribal religions to Protestantism, Catholicism, and Islam. Our paper raises the question of whether older measures of religion would be more relevant in explaining modern economic growth.

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