Nations, Taxes and Religion: Did Mohammad Have It Right?Author(s): Aleksandar TomicSource: Public Choice, Vol. 142, No. 3/4, Essays in Honor of Robert D. Tollison (Mar., 2010),pp. 461-464Published by: SpringerStable URL: http://www.jstor.org/stable/40541981 .

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Public Choice (2010) 142: 461-464 DOI 10.1007/S11127-009-9532-X

Nations, taxes and religion: Did Mohammad have it right?

Aleksandar Tomic

Received: 13 October 2009 / Accepted: 14 October 2009 / Published online: 23 October 2009 © Springer Science+Business Media, LLC 2009

Abstract Maloney, Civan and Maloney (Public Choice, 2009, this volume) extend the ex- isting literature on the economics of religion in several important ways. First, they define the religious good. They then distinguish a sectarian break from a schism, provide some analy- sis of schisms in the Christian world, and finally, and most interestingly, provide a summary of the religious practices and schisms in Islam. The two main strengths of the paper, and the most promising paths for future research, lie in the definition of the religious good and in the exploration of Islamic practices. Maloney, Civan and Maloney offer a novel perspective from which light might be reflected back upon Christian schisms.

Keywords Economics of religion · Schisms · Economics of Christianity · Economics of Islam · Public choice approach to religion

My interest in the economics of religion started with Dr. Tollison's presentation to a Clemson University seminar in economics. He was discussing his work on the Protestant Reforma- tion, I believe The Marketplace of Christianity (Ekelund et al. 2006) in particular, and as is the custom during Clemson's economics seminars, a lively discussion ensued. I still remem- ber that the question was posed as to why Protestantism took off in northern Europe and not in the South, and the discussion moved to differences in economic growth rates between Protestant and Catholic countries. If memory serves me, Dr. Tollison mentioned the idea that Protestant nations were free to use stone for building better walls around their cities rather than for building bigger cathedrals, thus freeing scarce resources for more productive uses. More efficient resource use, in turn, spurred economic growth. In the course of discussion, Weber's theory of the Protestant work ethic was mentioned, as was Guttenberg and many other related themes.

However, one idea came to my mind: Maybe northern Europeans did not work harder and save more because they were Protestants. Perhaps they instead became Protestants be-

A. Tomic (IS!) Department of Business and Economics, Wesleyan College, 4760 Forsyth Road, Maçon, GA 31201, USA e-mail: atomic@wesleyancollege.edu

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462 Public Choice (2010) 142: 461-464

cause they worked harder and saved more in consequence of the climatic differences be- tween northern and southern Europe. In other words, in the days of a strictly agrarian so- ciety, northern Europeans had to develop a habit of saving to endure long, harsh winters in which there was not much production. Once society moved away from agriculture, those innate savings habits did not disappear as they passed from generation to generation, mak- ing northern Europeans more likely to be wealth-generators than southern Europeans. If the Catholic Church did not adjust its tax structure to accommodate those differences, it would push northern Europeans into adopting a religion more favorable to their lifestyle. It follows that Protestantism could then spread more readily in that region. While this idea first came to mind during Dr. Tollison's presentation some years ago, it is fitting that it was reignited at the Festschrift held in his honor.

Maloney et al. (2009) set out to examine the nature of schisms in Islam, but in doing so it shed more light on schisms in Christianity. The authors also provide some evidence that Islam carried with it a more efficient tax structure to help explain why that religion has been marked by comparably fewer schisms.

First, Maloney et al. (2009) define religion as a good having three components:

(1) private satisfaction, which includes hope for an afterlife; (2) public camaraderie, which includes joint consumption of public goods, especially char-

itable works; and (3) reputation, respect and social networking.

The authors assert that sects and schisms develop when new entities introduce innovations in the delivery of the religious good as they define it and exclude previous providers on grounds either of dogma or practice. The difference between a schism and a sectarian break is in the severity of the split. Maloney et al. define a schism as a rift in which new groups each claim exclusivity in salvation, consider the members of other groups to be damned and refuse to worship together. Furthermore, the authors note that schisms often produce the potential for civil discord and violence between the groups. They do not differentiate between new religious movements and schisms, however, as they note that new religions rarely emerge de novo, but instead generally start as schisms within an established religion.1 Maloney et al. then proceed to provide some analysis of schisms in Christianity, and finally, and most interestingly, provide a summary of practices and schisms in Islam.

I find that the paper holds quite a bit of promise for a better understanding of religious schisms, the determinants of successful schismatic breaks, and political processes in general. Also, I believe, the authors' juxtaposition of Islamic practices and schisms with those of Christianity provide an interesting example of economics at work in religion.

Maloney et al.'s definition of the religious good provides a possible insight into the mo- tivations for religious splintering. If we as economists leave the first component (the hope of afterlife) to theologians, and put aside discussion of whether charity is a public good or not,2 1 believe that the third aspect ("reputation, respect, and social networking") provides a clear economic motive for religious splits. My assertion is that as a religion becomes more established and draws more affluent worshipers, the benefits of "reputation, respect, and so- cial networking" start depending, at least in part, on one's own wealth. The poorer members of the congregation at that point are open to innovation that will place more emphasis on devotion and strict adherence to the faith, even to the point of declaring the accumulation

1 For example, Christianity evolved from Judaism. 2 As in a good characterized by jointness in consumption.

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Public Choice (2010) 142: 461-464 463

of wealth undesirable. The emergent heterodoxy will, by the nature of the religious good, have to address at least the hope in afterlife and alter the distribution of charity in favor of the poor. The next question is why do some splits develop into schisms, and why are some schisms more "successful" (i.e., more enduring) than others?

At this point, I find Maloney et al. 's (2009) juxtaposition of Islamic and Christian prac- tices and the history of schisms to be tremendously helpful. As the authors point out, the majority of Muslims in the world are Sunni; only about 10% are Shiites. Also, while sec- tarian differences do exist among Sunnis - and some, such as Wahhabism, are categorized as schisms by the authors - their adherents nevertheless represent a relatively minor por- tion of the globe's Muslim population. This state of affairs contrasts starkly with Christian- ity, where the three major schisms (Orthodox, Catholic and Protestant) have each claimed a sizable share of the faithful. The reason, I believe, lies in the fundamentally economic, incentive-based organization of Islam.

Since the Orthodox-Catholic schism, the Orthodox church has remained much less cen- tralized and more closely aligned with particular nations (e.g., the Greek Orthodox church, the Russian Orthodox church, and so on) than the Catholic Church, which managed to tran- scend national boundaries, but remained highly centralized. The next major schism, the Protestant Reformation, was motivated largely by the financial policies of the Catholic Church (e.g., Ekelund et al. 2002); it also provided an excuse for the secular leaders of Protestant countries to lessen the Vatican's influence. Protestant churches also tend to tran- scend sovereign states, but do not seem nearly as centralized as the Catholic Church. Islam, interestingly enough, has from the beginning risen above nationhood. The concept of the umma provided a common platform for the Arabian tribes and, later, for Muslims world- wide; it, too, never really developed a strong central structure.

The other interesting feature of Islam is its tax structure. Ekelund et al. (2002) analyze the geographical diffusion of the Protestant Reformation and find that it took root in wealth- generating societies with more of an entrepreneurial streak and a less stable distribution of wealth. They also provide salient tabular information about the tax structure of the Catholic Church in England around the time of Reformation (Ekelund et al. 2002: 655). Taxes were higher on those who derived income from fixed assets and, as such, were detrimental to en- trepreneurial wealth-generators. That is, a person who created wealth and converted mobile assets into fixed assets could look forward only to a higher tax rate. In societies with more stable wealth distributions (i.e., where wealth was inherited), the affluent could engage in rent-seeking and strike deals with the Catholic Church, such as paying for "indulgences" that allowed them to buy their way into Heaven.3

The division between wealth-generators and wealth-dissipaters in Europe follows that of the continent's climates. In the harsher northern Europe zone, individuals engaging in agriculture are forced to develop a propensity to save in order to tide themselves over until the next harvest. On the other hand, the stockpiling of provisions makes it harder for them to hide income and consequently makes it easier for tax assessors to levy and collect taxes. Once agriculture declined in importance, the learned savings habit continued to contribute to the accumulation of wealth, but also brought with it higher effective taxes. In more temperate zones with less highly seasonal harvest schedules, by contrast, the savings rate will be lower and tax evasion easier, given equal effort on the part of the priest or the church tax collector.

3 "Again I tell you, it is easier for a camel to go through the eye of a needle than for a rich man to enter the kingdom of God." Matthew 19:24 (NIV). By the time of the Protestant Reformation, the Catholic Church was heavily involved in sale of indulgences that were supposed to allow sinners paying them to avoid damnation. That practice supplied a major impetus for the Reformation.

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464 Public Choice (2010) 142: 461^64

Hence, when a new religious good thattlislodged the priesthood from its role as mid- dleman on the path to salvation and reduced their tax burdens was on offer, it appealed to the emerging northern elite, supplying incentive to replace the Catholic Church as the estab- lished religion. As political actors of the time derived their legitimacy from religion, they were vulnerable to such special-interest influence. Protestantism also appealed to the poor in northern Europe by elevating virtue over ability to pay.

Islam provides an interesting counterexample that in the end supports the argument. Given the relatively concentrated geographic region in which Islam first emerged, climate likely did not play a significant role in determining the propensity to save. However, two dif- ferent lifestyles, those of city dwellers and nomads, provide the necessary distinction. City dwellers are stationary, likely to have a higher propensity to save and, hence, more likely to be wealth-generators and taxpayers than constantly relocating nomads. In Islam, according to Maloney et al. (2009), city dwellers nevertheless enjoyed differentially lower tax rates. In essence, Islam encouraged urban wealth-generation, thereby removing the incentive for its affluent elites to splinter. And for that reason, Islam was not as subject to schisms as was Christendom.

All in all, I find Maloney et al.' s definition of the religious good to be extremely helpful and believe that a closer look at the organizational structures, practices and schisms of Is- lam can provide insights into those of Christianity. What is more important, the analysis of religious schisms can aid tremendously in the understanding of modern political processes, especially so how it is that "schismatic" populist movements succeed in some countries but not others.

Acknowledgement Jahn K. Hakes and Bill Hervey provided invaluable help in improving earlier drafts of this comment. Any remaining errors are mine.

References

Ekelund, R. B. Jr., Hébert, R. F., & Tollison, R. D. (2002). An economic analysis of the Protestant Reforma- tion. Journal of Political Economy, 110, 646-671.

Ekelund, R. B. Jr., Hébert, R. F., & Tollison, R. D. (2006). The marketplace of Christianity. Cambridge: MIT Press.

Maloney, M. T., Civan, A. K., & Maloney, M. F. (2009). Model of religious schism with application to Islam. Public Choice (this volume).

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