An Economic Theory of Salvation Religions

Abstract

This paper constructs a unified model that micro-founds the three types from Max Weber’s typology of world religions, “mystic religions,” “activist religions,” and “religions of world adjustment.” We then employ the model to study the interaction between world religions and secular institutions. Among others, the model offers a novel, religion-based explanation for the great “reversal of fortune” between the East and the West. Precisely because China and India were the economic powerhouses in the Middle Ages, they failed to sustain religious activism that facilitated modern economic growth and constitutional government in Western Europe. The model further interprets competition over socioeconomic status as a partial substitution of salvation religions, explaining why status competition is fierce where the influence of salvation religions have declined.