Archive for October 31st, 2011

Karl Marx vs Max Weber: Does religion affect politics and economy?

October 31, 2011

I haven’t read this paper  fully but found it really interesting.

Marx said economy influences culture but it is not the other way round. Weber said both influence each other.

Does culture, and in particular religion, exert an independent causal e ect on politics and the economy, or is it merely a re ection of the latter? This question is the subject of a long-standing debate in the social sciences, with Karl Marx and Max Weber among its most famous proponents. The former famously opined that while the economy did influence culture, the reverse was not true. The latter, on the other hand, rejectedthat view and insisted that causality runs both ways. In particular, in The Protestant ethic and the Spirit of Capitalism”, Weber claimed that Reformed Protestantism, by nurturing stronger preferences for hard work and thriftiness had led to greater economic prosperity.

This paper looks at a natural experiment in Swiss economy in 16th century to see Marx vs Weber:

Our paper provides new evidence on this fundamental question, exploiting a quasi-experiment in Switzerland. Switzerland is well suited to study how religion a ects politics and the economy as it is one of the few countries exhibiting genuine within-country variation in religion. Early in the 16th century, some cantons adopted the Reformation whereas others did not, which leaves us with both a treatment and a control group. But Switzerland is also a geographically and institutionally diverse country and the decision to adopt the Reformation was indeed correlated with geography and institutions. Most of the urban Confederates adopted the Reformation whereas the rural and mountainous center remained Catholic. To address this issue we focus on an institutionally and geographically homogeneous subset of the Confederation: the area in western Switzerland that is comprised of the present day cantons of Vaud and Fribourg.

What are the findings? It shows Weber’s viewpoint wins:

We have shown that in a 100% Reformed Protestant municipality, support for more leisure is predicted to be about 13 percentage points or more than 1.5 standard deviations 
lower than in a 100% Roman Catholic municipality. This lends empirical support to Max Weber’s famous hypothesis of a ”Protestant work ethic”, thus deviating from earlier work in this literature such as Becker and Woessmann (2009) or Cantoni (2009). A plausible explanation for these differences is that the latter two papers looked at Lutheran Protestantism, whereas we focus on Reformed Protestantism.

Looking beyond the “work ethic” literature, we have argued that the works of MaxWeber as well as the more recent literature in sociology can be seen to imply also predictions
whereby Reformed Protestantism nurtures preferences for smaller government, and our empirical results confirm such predictions. Correspondingly, we also find Protestantism
to lead to greater income inequality.

On a more general level, our results imply that religion is not just, as Karl Marx would have us believe, “People’s Opium”, but can, by its own force, significantly change people’s preferences, both self-regarding and social ones. To what extent such different preferences do then also translate into different economic outcomes will certainly depend
on the framework of political institutions.

Hmmm.. I am really clueless about all this religion, beliefs etc. Liked this deep dive into history and run a natural experiment to understand what leads to what…


Civil Service and Military Pensions in India

October 31, 2011

This blog is really interested in research work on pensions as it connects so many areas of economics – microeconomics, behavioral economics, macro, financial economics etc.

In this superb paper Ajay Shah and Renuka Sane, review the pensions in India’s civil and military sectors. The paper tells you the pension system in each of these two areas and how the system is being moved to New Pension System. The transition has been easier in civil services compared to military services.


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