393. Markets, trust and religion

Markets that originally emerged spontaneously depended on trust between buyers and sellers. In some parts of the world, religion played a role in enhancing the trustworthiness of people, and thereby fostering the development and success of markets.

In PD392, on the factors needed for markets to emerge spontaneously, I described the importance of buyers having reliable, good-quality information about the goods they are considering buying. If good information is not available or expensive to obtain, trades are much less likely to occur.

By coincidence, I’ve been reading a fascinating book that relates to this in ways that I found surprising and thought-provoking.

The book is “The Weirdest People in the World: How the West Became Psychologically Peculiar and Particularly Prosperous” by Joseph Henrich. Here’s part of the blurb about it:

“Do you identify yourself by your profession or achievements, rather than your family network? Do you cultivate your unique attributes and personal goals? If so, perhaps you are WEIRD- raised in a society that is Western, Educated, Industrialized, Rich and Democratic. Unlike most who have ever lived, WEIRD people are highly individualistic, nonconformist, analytical and control-oriented.”

I’m only at the 22% mark in my Kindle, but I’ve just read a section that included a description of the cultural evolution of religions. It is believed that the early religions that preceded the world’s current main religions did not operate as upholders of public morality. Instead, they tended to reinforce the power of local leaders. The gods that were worshipped were not seen as all-knowing and concerned with the morality of our thoughts and behaviour. Instead, those gods were fallible, and had foibles. “Their gods were a lot like us, but with superpowers”. I’m reminded of modern crappy superhero movies.

Eventually, though, competition between groups led to cultural evolution, with some cultures dominating others as a result of their particular characteristics. The successful cultures increasingly involved people having beliefs about their gods’ role in trade.

For example, “Mesopotamian gods … promoted commerce and suppressed perjury. For example, the sun god …, Shamash, emerged as the patron of truth and justice, presiding over the oaths taken during business transactions”.

In ancient Greece, “divine punishment arose from the violation of sacred oaths taken in the name of particular gods while signing commercial contracts, making sales or assuming public offices. In Athens, as in many parts of the Greek world, the marketplace was filled with altars to various gods. Merchants were required to swear sacred oaths before these altars to affirm the authenticity and quality of their goods.”

Tying this back to my points in PD392 about the importance of information and transaction costs, if a buyer really believes that she can trust a seller to provide accurate information about the quality of the goods being traded, this could provide a huge saving in transaction costs that would otherwise have to be incurred to inspect, test and measure the goods. It makes trade more feasible and more beneficial. And the trade makes everyone better off, so cultures that had this religion-generated trust in trade became more successful than competing cultures.

I find that really interesting. Although I am not at all religious myself, I can appreciate this positive spinoff from religion. Here are some more extracts from the book that explore this point.

“On the Aegean island of Delos, an epicenter for Roman maritime trade during the second century BCE … the ancient market-place was filled with altars and idols for various gods … merchants swore oaths to these deities to establish trading fraternities and solidify contractual bonds that effectively networked the Mediterranean. Pausanias, a famous Greek traveller, observed that ‘the presence of the god made it safe to do business there.’”

By roughly 200 BCE, the main religions had adopted a belief in contingent afterlives: the idea that you could end up in heaven or hell depending on your morality in this life. This seems to have further contributed to people behaving well, with spinoff benefits for trade and markets, and the benefits continue to this day.

“Across countries, the belief in a contingent afterlife is associated with greater economic productivity [and presumably, more trade] … Based on global data from 1965 to 1995, statistical analyses indicate that the higher the percentage of people in a country who believe in hell and heaven (not just heaven), the faster the rate of economic growth in the subsequent decade. The effect is big”.

If you’d like further information to decide whether to read the whole book, a review in the New York Times is here. There is a good outline of the book on Wikipedia.

Further reading

Henrich, J. (2021). The Weirdest People in the World: How the West Became Psychologically Peculiar and Particularly Prosperous, Penguin Press.