Micro Economics

Case study

Religion and Firm Behaviour

Dhruv Kumar
PGCIM-11-014

Religion & Firm Behaviour
The word religion is often substituted for faith or belief. But religion is very different from them as it is not just a person’s own point of view but concerns a larger population or group. Religion can be seen as set of beliefs, rules, ideologies usually relating to the existence, nature, and worship of a deity or deities and divine involvement in the universe and human life and also help mortals connect to the higher power or simply ‘God’. It may also relate to values and practices transmitted by a spiritual leader.
Religious Trends:
There are numerous religions across the globe but only a few have number of followers worth measuring from an economic point of view. 1. Christianity: 2.1 billion 2. Islam: 1.5 billion 3. Secular/Nonreligious/Agnostic/Atheist: 1.1 billion 4. Hinduism: 900 million 5. Chinese traditional religion: 394 million 6. Buddhism: 376 million 7. primal-indigenous: 300 million 8. African Traditional & Diasporic: 100 million 9. Sikhism: 23 million 10. Juche: 19 million 11. Spiritism: 15 million 12. Judaism: 14 million 13. Baha'i: 7 million 14. Jainism: 4.2 million 15. Shinto: 4 million 16. Cao Dai: 4 million 17. Zoroastrianism: 2.6 million 18. Tenrikyo: 2 million 19. Neo-Paganism: 1 million 20. Unitarian-Universalism: 800 thousand 21. Rastafarianism: 600 thousand 22. Scientology: 500 thousand

Religions have spread across the world and it is evident that they all have structure and hierarchy along with a set ideology which is followed. This helps create a cohesive group with a common objective. As we can see this is very similar to an organization or a firm which produces products and services for profit.
We can correlate various components of religion with properties of economics:
• religious services can be seen as consumer goods
• religious organizations are similar to firms
• religious benefits are similar to utility of the goods.
The Religious market can be seen as a collection of religions or more precisely religious institutions operating in a given geographical area. The adherents are consumers which become part of the religion by birth, conversion or by matrimony. The consumers want to pay a price and use the services of religious institutions for the attainment of the eternal truth, wisdom, peace and heaven. The price can be seen as in monetary terms and also as time and physical and mental effort put in by the adherent.
The religions offering these services not only want dedicated followers but also want to increase the adherents so that they can capture the largest share in the market and prove their dominance. Therefore there is a constant demand and supply of religious services in this market which might control the firm and consumer behaviour.
Nations & Religions
The religions around the world are very much affected by the state they are situated in. The laws and ideology of the state plays a very important role in determining the type of market a particular religion or a set of religions enjoy.
Secular Nations
If we see completely secular and democratic nations then the religions and adherents in those countries have more freedom to choose their belief systems. Like USA which is dominated by Christianity but it is open to all the religions and the people are free to choose. Therefore it is a highly competitive market in terms of religious space.
India is a secular country and everyone is free to choose their religion, but we have a dominant Hindu religion which takes up 80% of the market. The others are Islam with 12%, Christianity and Sikh hold minor share. Therefore in Indian religious market behaves more like a Monopolistic competition.
Properties of monopolistic competition: * There are many producers and many consumers in the market, and no business has total control over the market price. * Consumers perceive that there are non-price differences among the competitors' products. * There are few barriers to entry and exit. * Producers have a degree of control over price.
Corollary with Religion:
If each religion is considered as Firm then we can say that all religions show some kind of behaviour which is similar of firms in the market. We have several religions in India, and being a secular country, government does not support any particular religion and also supports minority religions. Therefore no one has a control over the market.
Consumers (followers) perceive these products as different therefore the demand curve is downward sloping.
In India there are no barriers to entry and exit of religion as a whole or as religious bodies like temples, mosques, gurudwaras etc. Within a small locality there can be many temples and if a new temple is built then it takes away consumers from other close by temples. Hence this creates a competition for the local religious institutions.
Producers or Religious bodies do have a control over price as they have managed to differentiate their product from others and hence real value of the good or service is unknown. For example a pandit in Mumbai and one in Haridwar. The consumer(follower) might be ready to pay a higher price for the one in haridwar on grounds that he is more closer to the holy ganges river and hence better chances of fulfilling wishes of the follower.
Hence, we can say that in india this market lies somewhere between monopolistic competition and perfect competition being more towards the former. This gives the producers the opportunity to earn the markup over marginal costs therefore make an unfair profit over the normal operating condition. This can be explained by looking at total commercialization of religious services offered like satsangs & prayers on television channels, spiritual gurus, medicine in name of religion, donations for building temples, gurudwaras etc. This has become a huge business opportunity in India and individual entrepreneurs as well as religious institutions are cashing in on it. This also has a very positive side as it generates huge employment for people employed in providing these services. Also, some amount of money is diverted towards social welfare therefore it reduces the burden of government to provide social security to many under privileged people.

One Religion Nations
We have seen that the effect of state policies plays a very high impact on religion. This is most evident in case of state sponsored single religion nations like Pakistan which is an Islamic state. Here the state has decided that one religion will be strictly followed and all the laws are formed keeping this fact in mind. The people are not free to choose or convert from one religion to another hence it is possible that the dissatisfaction levels are very high. People follow rules and regulations even if they do not wish to. This can be seen as a state run monopoly where the firm is free to choose its price. The prices here might not only be in terms of money only, then will mostly be the time and physical and mental efforts out towards the religious practice. As the monopolist charges unfair prices and also the people do not have option of moving from one religion to another, hence the dissatisfaction levels among people will be very high. This dead weight loss has to be absorbed by the consumer in terms of excessive time and effort spent for the services. This might seem like a very comfortable position for the religion but as we know the monopolies operate inefficiently and here the inefficiency can be seen as the government needs to enforce rules which require efforts and money. Like government needs to make strict rules for non conversion between religions, high tax for non state religions etc

What will happen if India becomes a one religion state?
As we know religion in India is somewhere between Monopolistic competition and perfect competition therefore we are in a very consumer friendly climate where more and more freedom is being given to the consumer. Religions are often fighting to grab a new consumer( conversion) and hence feeling the pressure. But they are also making huge profits due to markup on marginal costs. In case India adopts a single religion then this would mean moving to a monopoly. The transition period will be painful as people will be moving from a comfort zone to a more restricted condition where the freedom is lesser for everyone. Followers of abandoned religion will feel cheated and betrayed and the followers of state religion will feel constrained. This means a huge economic loss as there will be a fall in services demanded because of a shift in demand curve to the left. The huge booming market of commercialization will also be affected as now the people will not have an incentive to gain more by paying more for the services. The religious system will move towards inefficiency and increase the burden on the government.
On the contrary, if the government relaxes the rules for conversion of religion like removing legal barricades, then this means the people will move to a more better suited religion for themselves. So the people dissatisfied from their present religion will become happier hence more religious. Another way of making people more religious is by educating more and more people. This will lead to a rational approach towards religion which will not only increase religiousness but also help spread it to others and hence increase the number of followers.

Appendix:

Religions followed in various regions around the world

References : * http://www.adherents.com/Religions_By_Adherents.html * http://en.wikipedia.org/wiki/Theory_of_religious_economy * http://en.wikipedia.org/wiki/Economics_of_religion * http://en.wikipedia.org/wiki/Theory_of_religion * http://www.religionomics.com/old/erel/S2-Archives/Iannaccone%20-%20Introduction%20to%20the%20Economics%20of%20Religion.pdf * http://www.religionomics.com/asrec/ASREC09_Papers/Ergener%20-%20Stark-Bainbridge%20Theory%20-%20ASREC09.pdf