New Data Analysis Demonstrates Religious Liberty is Catalyst for Economic Freedom
Social and political scientists, as well as economists and faith community scholars have discussed ever since Adam Smith which comes first, religious liberty or economic freedom and which factor is the more important one in encouraging human flourishing.
This is a fundamental issue for congressional aides working for senators and representatives with interest in economic policy and civil liberties issues, as well as for those toiling away on key committees of the Senate and House of Representatives shaping national economic and civil liberties policy and statutes.
Christos Makridis, Stanford Digital Lab Digital Fellow
*A comprehensive new data-driven analysis of the relative state and influence of religious liberty and economic freedom in 145 countries from 1996 to 2018 by Professor Christos Makridis offers compelling evidence that the former is the necessary precursor for growth of the latter.
Which Comes First, Religious or Economic Liberty?
Makridies, a digital fellow with the Stanford Digital Lab who “is a computational social scientist, policy adviser, and entrepreneur with doctorates from Stanford University in Economics and Management Science & Engineering,” according to his bio, observes in the introduction to his study that:
“Religious liberty is an even more quantitatively important determinant of human flourishing than economic freedom. One possible explanation behind this result is that religious liberty is a precursor to economic freedom, so changes in economic freedom may reflect earlier changes in policies that effectively expanded religious freedoms.
“The primary purpose of this paper is to explore whether religious freedom is the driver of economic freedom—or whether it is the other way around—and to quantify the mechanisms through which religious liberty impacts institutions and human flourishing.”
Religious Liberty and Human Flourishing
Makridis continues, observing that “the first part of the paper provides theory and background for why religious liberty may matter for economic freedom and human flourishing. In brief, since religion is ultimately a worldview, it serves as a lens by which individuals process all information and act upon it. Historically, religious liberty has been the foundation for many economic freedoms.”
As for the second part of his study, Makridis “introduces three new stylized facts about religious liberty across countries. First, I show that there has been a substantial decline in religious liberty, particularly since 2010. This decline is present in both the unweighted and population-weighted sample.
“Moreover, the decline is driven by countries that slipped from fully guaranteeing religious liberty protections to mostly guaranteeing them. Second, the decline is concentrated among countries that traditionally rank higher in economic freedom, particularly property rights.
Recent Decline in Religious Liberty?
“Third, changes in religious liberty are also associated with robust changes in the allocation of time towards religious activities. These effects are not driven by changes in the overall level of civil liberties.”
Finally, Makridies tells us that the third part of his study “examines which of the two — religious or economic freedom — precede one another on a sample of 145 countries between 1996 and 2018.
“Although there is no silver bullet evidence, two diagnostics provide strong evidence that religious liberty is the catalyst. First, regressions of religious liberty and economic freedom on each other with up two three one-year lags, conditional on controls, suggests that religious liberty is the primary driver:
Why No Silver Bullet?
“It explains more of the variation in economic freedom, it has a stronger conditional correlation with economic freedom, and the three-year lag has a statistically significant association with economic freedom.
“Second, vector auto-regressions that allow for dynamic interactions between religious liberty, economic freedom, and real Gross Domestic Product (GDP) also show greater effects of religious liberty on economic freedom than the other way around.”
Be forewarned that Makridis’ study is highly technical and requires a solid understanding of statistical analysis. Even so, as his introduction makes clear, normal folks who lack such knowledge and skills may still benefit from reading this study because the conclusions are clear and the analysis is straightforward.
The Makridis paper was presented as part of the “Exploring the Role of Freedom in Human Progress” Project of the Cato Institute and was made possible through the support of a grant from the John Templeton Foundation. The opinions expressed in the paper are those of the author and do not necessarily reflect the views of the John Templeton Foundation or any affiliated institutions.
H/T: Professor Tyler Cowen, Marginal Revolution, for recommending the Makridis study.