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Religion, Ethic, and Economic Growth: Focusing on Max Weber

Religion, Ethic, and Economic Growth: Focusing on Max Weber. J.D. Han with Max Sties. Author. What roles does Religion play in Economic Growth and Development? What roles does Ethic play in Economic Growth and Development?. The protestant Ethic and the spirit of Capitalism (1906).

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Religion, Ethic, and Economic Growth: Focusing on Max Weber

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  1. Religion, Ethic, and Economic Growth:Focusing on Max Weber J.D. Han with Max Sties

  2. Author • What roles does Religion play in Economic Growth and Development? • What roles does Ethic play in Economic Growth and Development?

  3. The protestantEthicandthespiritofCapitalism (1906)

  4. What he said: „Modern Capitalism arose only in Europe Most succesful businessmen were protestants „ The Lesson is: „The ethic was crucial for the development of modern capitalism“

  5. Why interest in Weber? • Y=AkαL(1- α) • What explains A ??? • Knowledge/Human Capital New Growth Theory • Government Political Economy • Social Capital Religion; Ethic

  6. Contents • Historical Background • The ‚Spirit‘ of Capitalism • ‚Protestant Work Ethic‘ • Critique and the broader Framework • Emprirics and Discussion

  7. Historical Background • AD380 - Roman Empire becomes Christian • AD 395 - Partition of the Roman Empire

  8. Historical Background (2) • AD 400 – 700 – The dark ages

  9. Historical Background (3) • AD 500 – 1500 - The Middle Ages

  10. Historical Background (4) • AD 1515 - Martin Luther‘s Reformation

  11. Structure of Christiandom (6)

  12. Contents • Historical Background • The ‚Spirit‘ of Capitalism • ‚Protestant Work Ethic‘ • Critique and the broader Framework • Emprirics and Discussion

  13. Catholics • Material Prosperity is ‘blessing’ • Any means of Acquisition are tolerated <- Regular ‘Indulgence’ from the church cleans sins • Commercialism is prevalent • Unlimted Greed

  14. In a word, this type of Commercialism or Capitalism has no ‘Sprit of Ethics’. It is called ‘Paria(h)-Capitalism’ (贱民的资本主义): ->The wealthy people are ‘looked down upon’ as they are with bigger sins.

  15. The ‚Spirit‘ of modern Capitalism (1) • Unlimited greed ≠ (modern) Capitalism • Paria-capitalism  ‚Social market economy‘ • Modern capitalism: Utilization of voluntary exchange oportunities with expectation of profit • „Capitalism existed in China, India, Babylon, in the classic world, and in the middle ages. But in all this cases… this particular ethos was missing.“

  16. Protestants Through the Reformation by Martin Luther • Church is for fellowship, not for salvation • Individuals have direct relation to god, not through church • No church indulgence: Your Action and Life are the proof of salvation -> Job as „Berufung“ (calling) -> Ethical Life

  17. Individuals try to show their living proof of salvation by living an ethical life like “Christ”. Hard Working Ascetic and Thrifty Seasoned Charity

  18. Calvinism as the extremeProtestants • “The new religions (in particular, Calvinism and other more austere Protestant sects) effectively forbade wastefully using hard earned money and identified the purchase of luxuries a sin. Donations to an individual's church or congregation was limited due to the rejection by certain Protestant sects of icons. Finally, donation of money to the poor or to charity was generally frowned on as it was seen as furthering beggary. This social condition was perceived as laziness, burdening their fellow man, and an affront to God; by not working, one failed to glorify God.”

  19. This is good for savings, investment, and development • The result is “Modern Capitalism”

  20. Protestant Work Ethik (4) • Led to Protestants… • Developing enterprises • Engaging in trade • Accumulating wealth for investment • Modern Capitalism

  21. Critiques • Other factors more relevant? • Advances in Science (H↑) • Introduction of democracy (Pol. Econ) • How can the growth of „non-protestant“ countries be explained? • Chile • Korea, China, India

  22. It is NOT religion by itself, BUT ethic that influences economic growth. -> A society without religion but with ethic will have sustainable and equitable economic prosperity -> “What is a ‘ethical’ society?

  23. In concrete, by drawing the broader framework, we can say that Ethic is Respect for Others (Humanity): • Respect for Property Rights • Hernando de Soto • Respect for Contracts • Blum & Dudley • Intolerance for Corruption • Attitude towards government (the welfare state)

  24. The Major Lesson from Max Weber • Despite all short-comings, it has a lesson: “The ‘Sustainability’ of Economic Growth depends on ‘Humanity’ of the society” “ A society with a strong Ethical foundation can have a sustainable economic growth”

  25. ‘Capitalism and Ethic’ should be paraphrased into the positive correlation of ‘Sustainable Economic Growth and Humanity’

  26. Empirics and Discussion (1) • Jonassen (1947) • Case of Norway 19th century • Capitalism has not developed for centuries under Lutheranism and Catholicism • Economic development in only two generations of Calvinist influence

  27. Empirics and Discussion (2) • Blum & Dudley (2001) • European cities between 1500 and 1750 • Wages rose in Protestant Cities while they fell in Catholic Cities • A non-cooperative game decreases with ascetic protestantism -> Less Transactions Cost • Empirical rejection of the Human Capital hypothesis • Strong support for the Weber thesis at that period of time

  28. Empirics and Discussion (3) • Barro (1997) • Modified Solow model • “rule of law index” associated with more rapid economic growth • Supports the general case • Granato, Inglehart and Leblang (1996) • Growth model with ‘cultural values’ • “achievement motivation” highly relevant for economic growth • Support for general case

  29. References • The Weber Theses • - Robert W. Green. Protestantism and Capitalism: The Weber Thesis and Its Critis, Boston, D.C. Heath and Compan (1967) • - Niles M. Hansen. The protestant Ehtic as a General Precondition for Economic Development, The Canadian Journal of Economics and Political Sience (1963). • - http://eh.net/encyclopedia/article/frey.protestant.ethic • Empirics: • - Jonassen, Christen. "The Protestant Ethic and the Spirit of Capitalism in Norway." American Sociological Review (Dec. 1947). • Blum, Ulrich; Leonard Dudley. "Religion and Economic Growth: Was Weber right?" http://www.contra-mundum.org/essays/blum/Weber.pdf • The "General Case" • - Barro, Robert. Determinants of Economic Growth: A Cross-country Empirical Study. Cambridge, MA: MIT Press, 1997. • - Granato, Jim, R. Inglehart and D. Leblang. "The Effect of Cultural Values on Economic Development: Theory, Hypotheses and Some Empirical Tests." American Journal of Political Science (1996). • Also very interesting: • - Sabatini, Fabio. The Empirics of Social Capital and Economic Development: A Critical Perspective. Nota di Lavoro, 2006 http://129.3.20.41/eps/dev/papers/0512/0512008.pdf

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