Making Economic Sense of Religion – A Special Interview with Dr. Sriya Iyer

As a discipline, Economics is sometimes presented as a hard science with though values. But if economics is about people, then it’s got to be about collective wisdom, our beliefs and value systems as much as it is about the figures, statistics, and mathematical curves. That is how we came across the work of Dr. Sriya Iyer, a Professor who teaches what is called the ‘Economics of Religion.’

Dr. Sriya Iyer is a University Reader in the Faculty of Economics and a Fellow of St Catharine’s College. She read for a BA (Hons) in Economics in Delhi University and then a BA, MA, MPhil and PhD in Economics at the University of Cambridge. Her research is in the fields of development economics, economics of religion, health and education. For the past decade, Sriya has been contributing to developing a new field of research called the economics of religion, in which she uses economic methods to study religion. She has published three books as well as numerous articles in leading journals. She also serves on the editorial boards of numerous journals; she was Deputy Chair of the Royal Economic Society Annual Conference 2020; and she organised an International Economic Association Roundtable on The Economics of Religion in Cambridge in 2017. In 2014, Sriya was awarded a University of Cambridge Pilkington Prize for Teaching Excellence.

The Review of Religions interviewed her to ask about this area of research, why she thinks religion matters to economics, and more broadly, if religion and happiness are correlated. Below is the transcript of a conversation between Sriya Iyer and Ahmed Danyal Arif, Editor of the Economics Section for The Review of Religions.

ADA: I’d like to start by asking you Professor Iyer, what does ‘Economics of Religion’ entail and what inspired you to pursue research in this field?

SI: The economics of religion is a sub-field of economics which explores how economic theories and statistical tools can be used to investigate the role of religion in society. It may examine how religious groups evolve over time, or the economic and social characteristics of individual members of different religions. Today it encompasses a wide range of areas such as education, demographic or employment differences by religious groups, how religions provide insurance mechanisms in developing contexts, the likelihood of religious competition and religious conflict, as well more general effects of religion on physical and mental health, as well as well being.

I became interested in this field of research early on in my academic life when I was interested to explore diversity in economic outcomes, specifically with respect to demography, education and health. I was keen to find out more about the causes and consequences of religious diversity in India, and first studied the economics of religion in this society. Subsequently, my work has moved on to study other countries as well, both in the developed and developing world. I find the economics of religion a truly fascinating field, and one which inspires both academic interest and has great policy relevance.

ADA: It could be argued that the idea of combining the subjects ‘Economics’ and ‘Religion’ sounds like an aporia. Why is this so? Why does this link appear ostensibly doubtful?

SI: It is quite true that at first blush economics and religion may not seem like subjects which sit together naturally. Economic models after all involve making assumptions about how individuals might be rational and engage in rational decision-making based on their incentives and constraints in the real world; while religion is very much about the metaphysical, the spiritual, the other-worldly, and certain religious beliefs or faiths may even appear irrational to some. So it can be difficult to conceive of religion and economics being studied together, or indeed to think about how one can apply economic ideas to study religious life.

Yet, as I have studied this discipline more closely, I have come to understand and appreciate that economics, with its emphasis on trade-offs between unlimited wants and limited resources, incentives or competition effects, does have relevance for the study of religion. Fundamentally, all religions encourage faith, altruism, and service, but as they are practiced within working economies and societies, religions too interact with the institutions and policies, economic or otherwise, which they encounter. Studying these deeper interactions then brings into focus the importance of economic concepts and ideas to study broader social phenomena such as religion, and this seems a worthwhile endeavour to me.

ADA: What light can Economics shed on Religion? Is it not, generally speaking, the contrary?

SI: I think Economics has tools which can be useful to examine either the socio-economic characteristics of individual members of different religions; or it can offer theories which elucidate how religious organisations evolve, or how religious beliefs might change over time. At the same time, economics also teaches us a lot about incentives and competition, so it can also cast light on competition between religious groups, religious or other kinds of conflict more generally.

Some of the recent research on the economics of religion has been discussing how religions may foster co-operation, how this might influence the evolution of markets, how knowing about sub-groups of religious populations informs us about ‘what works and what doesn’t’ in policy-making, how public goods provision might reduce the incidence of religious conflict, and many more areas of research. To my mind, this research is increasingly important and persuasive, as we collect more data on religious sub-populations right across the world. Economics is a broad subject that interacts with many other social science and other disciplines, and the economics of religion demonstrates very clearly that broader engagement with other subjects and with society that we might think is vital to understand and to solve today’s problems.

ADA: In your work, you talk about the religious as well as nonreligious services on the real economy. Can you please elaborate on some examples? Generally, is the impact of religion positive or negative?

SI: I think if you look at the evolution of societies over time, either historically, or more contemporaneously, the role of religion has been quite important in influencing some economic aspects of development – for example, by encouraging literacy to read the scriptures, which then also exposes people to scientific and other thought. Subsequently this had an impact on factors such as attitudes to savings, risk or entrepreneurial activity. For example, Adam Smith both recognized and discussed the role of religion and religious competition in the context of economic activity. Religion is also an important form of network formation, which means that social groups organised on the basis of religion can have an impact through that network which can then influence economic decisions made by individuals or by communities. Moreover, the reason these groups organised on the basis of religion are sometimes effective, is because they can have legitimacy both in the eyes of the masses and the state. This makes it possible for religion to affect economic activity, but equally it makes it very important that this role is undertaken responsibly.

On services, all religious organisations provide faith-based services of course which are important for the practice of religion or the well-being of devotees, but they also provide welfare services in terms of education, health, food distribution, childcare, employment opportunities and other services. This is important in societies in which state provision of these basic services might not reach all segments of the population; or the quality of services needs enhancement. In my own research on India for example, which I describe in my book The Economics of Religion in India (Harvard University Press 2018), I provide an account of these services in the Indian context, as well as touching on religious competition in this space. Overall, I think the impact of religion can be positive, although if this leads to excessive competition or conflicts over public goods, this can also be less good for the economy or for the people.

ADA: I understand that research, with some few exceptions, shows that wealthy countries tend to be less religious whereas poorer countries tend to be more religious. As the coronavirus pandemic started, some studies have shown that a greater number of people started turning to religion to cope with feelings of anxiety and hopelessness. Do you agree with this finding? And do you think that the tremendous economic losses around the world, the rise of inequality and the economic recession that has followed have played a role in that interest?

SI: I think it is correct to say that while the developed world has become more secular over time, the world overall has become more religious. It is also true I feel that once the coronavirus started, as the uncertainty around this disease increased initially and there was an absence of effective treatment, many across the world will have turned to religion for solace, comfort in times of distress, or indeed if they have lost dear relatives or others to the disease. We have observed an increase in religiosity as a result of this, perhaps also because lockdowns and so forth have made in-person attendance at religious services not viable, or replaced them with online services. Over time, as the lockdown restrictions have eased and places of worship have been opened up, this too will have influenced religiosity. Now that effective treatments for coronavirus have been found, the public health anxiety and uncertainty may decrease. Of course the rise in economic uncertainty caused by the virus and its effects on consumption, labour supply, human capital and other macroeconomic factors will all have affected religiosity trends as well, I suspect. All this of course needs to be studied in much more depth over the next few years. Currently, I am doing a study, with co-authors, of the effect of Covid-19 on religion in the USA, focusing especially on the effect on people’s mental health, and it will be interesting for us to see what the results of that study tell us when it is completed. 

ADA: While preparing this interview, I remembered a book I read some years ago. It was a book written by the economist Bruno Frey on the ‘Economics of Happiness’ (Happiness: A Revolution in Economics, MIT Press, 2008). In this book, Bruno Frey lists the essential elements to a happy life, identified by a survey of the ‘New Scientist’. Among these, there was one that says: ‘‘Be religious, or believe in some other system.’ Belief in God and an afterlife gives people meaning and purpose, and reduces the feeling of being alone. Religion therefore serves as a powerful way to cope with adversity.” Would you agree with this? Do you think it aligns with your observations or the findings from your own research?

SI: This is an interesting question. I think it is important for people to have some beliefs – for some these may be religious; for others these may be a more general interest in spirituality, or something entirely non-religious. It depends a lot on the individual, how they were raised, the institutions around them, and what they seek in terms of attaining happiness. I think we all need to find some way of coping with adversity, stressors of various kinds, or economic uncertainty. For some, that path may involve deep religious belief and practice; for others it may involve something else such as community service that may or may not be linked to a specific faith. In my research on both developing and developed countries, I do see a positive link between religion, mental health and well-being. But I do also feel that a lot more research needs to be done on this important subject to understand what drives humans in their search for ultimate happiness and contentment.