The economics of the Protestant Reformation

by on July 20, 2017 at 2:34 am in Economics, History, Political Science, Religion | Permalink

Here is the abstract of a new paper by Davide Cantoni, Jeremiah Dittmar, and Noam Yuchtman:

The Protestant Reformation, beginning in 1517, was both a shock to the market for religion and a first-order economic shock. We study its impact on the allocation of resources between the religious and secular sectors in Germany, collecting data on the allocation of human and physical capital. While Protestant reformers aimed to elevate the role of religion, we find that the Reformation produced rapid economic secularization. The interaction between religious competition and political economy explains the shift in investments in human and fixed capital away from the religious sector. Large numbers of monasteries were expropriated during the Reformation, particularly in Protestant regions. This transfer of resources shifted the demand for labor between religious and secular sectors: graduates from Protestant universities increasingly entered secular occupations. Consistent with forward-looking behavior, students at Protestant universities shifted from the study of theology toward secular degrees. The appropriation of resources by secular rulers is also reflected in construction: during the Reformation, religious construction declined, particularly in Protestant regions, while secular construction increased,especially for administrative purposes. Reallocation was not driven by pre-existing economic or cultural differences.

For the pointer I thank the excellent Kevin Lewis.

1 Merijn Knibbe July 20, 2017 at 4:02 am

Shorter: just like the USA civil war this was a revolutionary (in the Marxist sense) redistribution of capital, from the Church to cities and (proto-)nations, who redistributed it partly to orphanages and comparable institutions or sold it too farmers when they needed money to finance wars. In 1516, people bequested land to the Church (albeit not as liberal as, say, in 1450), some decades after 1517 they increasingly expropriated the church. This led to a different distribution of (rent)income. less to the church and monks, more to orphans, cities and states. In my are (Friesland) as well as in the rest of the Netherlands, the government also increased land taxes, which meant that an even larger part of the Ricardian surplus went to the government. The point: people like smith, Ricardo and Marx were well aware of this. it is good that the revolutionary nature of the distribution of capital and the distribution of the Ricardian surplus is getting more attention again. marx of course drew attention to the fact that land was a diminishing part of total capital which changed the nature of the surplus. Commodified labour was becoming a kind of ‘land’ and (in his view) capitalists took the ‘Ricardian’ surplus.

Ironically, at least for Friesland my series indicate that farmers did not care. They just kept milking the cows and paying the rent. And do not just look at univeristy graduates (though some land based grants established in the sixteenth century to finance the study of sons of certain families still exist). Look at orphans, too. It was all a question of a changing distribution enabled by a ‘Marxist’ revolution which aimed to redistribute ownership of fixed capital. Just like in the USA, after 1865. As in Europe after 1517, the redistribution of capital in the USA did not affect production too much: cotton production quickly rebounded…

2 Jeff R July 20, 2017 at 9:44 am

The church spent a lot of its income on fancy cathedrals which were pretty to look at but were not, in most senses of the term, very productive assets. With that in mind, the redistribution of capital was probably utility-enhancing. Just throwin’ that out there.

3 Thor July 20, 2017 at 11:42 am

Orphans orphans orphans. Sorry Marxists, I am sticking with Weber.

4 Philip George July 20, 2017 at 5:31 am

Protestantism was the ideology of the resurgent bourgeoisie.

Unlike the feudal lord the bourgeois made his fortune with his own abilities. Extending this experience to other spheres he saw no reason why his entry into heaven had to be mediated by others. Hence no prayers for the dead. No mediation by priests.

5 chuck martel July 20, 2017 at 6:31 am

It’s a complex transformation with many aspects but a salient feature of Protestantism has been, and continues to be, the commodification of time, linear time as money, which is extremely obvious and more important now than ever. This was an essential building block of corporate capitalism.

Of course, in the Anglophone world, the Reformation led to the English Civil War, followed by its offspring, the American Revolution, and later by its continuation in the War Between the States. Even today, the effects of the Reformation are felt throughout Western culture, even among professed atheists and agnostics.

6 Scott Mauldin July 20, 2017 at 5:56 pm

You can stretch that as far as you want, but what does it mean? You could say the same for the agricultural revolution or the crusades or Genghis Khan.

7 Alistair July 21, 2017 at 7:10 am

Not sure about the long-term effects of Crusades or Khan; the former hasn’t notably shaped our modern world, and the latter has had effects mainly in the east.

8 Scott Mauldin July 20, 2017 at 5:57 pm

The second paragraph I mean.

9 rayward July 20, 2017 at 7:03 am

I assume Cowen’s motivation (for this post) is the comparison of Martin Luther and Donald Trump, the disruption of the Reformation similar to the disruption of the 2016 election. Of course, Cowen likes disruption and abhors complacency. The 21st century analogue to the Church would be, what? The “elites” (the analogue to the Church hierarchy) and the welfare state (the analogue to the Church). The finding in this study (increased secularization after the Reformation) presumably means a reduced role of today’s Church (i.e., the state) and an increase in secularization (i.e., the private sector). Trump is Luther!

10 prior_test3 July 20, 2017 at 7:14 am

Trump is like Luther?

What an unflattering comparison. Trump has nowhere near (and hopefully never will) the cultural legacy of Martin Luther – ‘Luther was the most widely read author of his generation, and within Germany he acquired the status of a prophet. According to the prevailing view among historians, his anti-Jewish rhetoric contributed significantly to the development of antisemitism in Germany, and in the 1930s and 1940s provided an “ideal underpinning” for the Nazis’ attacks on Jews. Reinhold Lewin writes that anybody who “wrote against the Jews for whatever reason believed he had the right to justify himself by triumphantly referring to Luther.” According to Michael, just about every anti-Jewish book printed in the Third Reich contained references to and quotations from Luther. Heinrich Himmler wrote admiringly of his writings and sermons on the Jews in 1940. The city of Nuremberg presented a first edition of On the Jews and their Lies to Julius Streicher, editor of the Nazi newspaper Der Stürmer, on his birthday in 1937; the newspaper described it as the most radically anti-Semitic tract ever published. It was publicly exhibited in a glass case at the Nuremberg rallies and quoted in a 54-page explanation of the Aryan Law by Dr. E.H. Schulz and Dr. R. Frercks.

On 17 December 1941, seven Protestant regional church confederations issued a statement agreeing with the policy of forcing Jews to wear the yellow badge, “since after his bitter experience Luther had already suggested preventive measures against the Jews and their expulsion from German territory.” According to Daniel Goldhagen, Bishop Martin Sasse, a leading Protestant churchman, published a compendium of Luther’s writings shortly after Kristallnacht, for which Diarmaid MacCulloch, Professor of the History of the Church in the University of Oxford argued that Luther’s writing was a “blueprint.” Sasse applauded the burning of the synagogues and the coincidence of the day, writing in the introduction, “On 10 November 1938, on Luther’s birthday, the synagogues are burning in Germany.” The German people, he urged, ought to heed these words “of the greatest antisemite of his time, the warner of his people against the Jews.”‘

11 russell1200 July 20, 2017 at 8:36 am

You could just as well state it as “disruption leads to the confiscation of elite (rent seeker?) property” Something I doubt he is interested in promoting.

12 Thor July 20, 2017 at 12:04 pm

I thought his motivation was to compare the fanaticism of SJWs to the goons of the Counter-Reformation? (Broad wink.)

13 Alan Goldhammer July 20, 2017 at 7:54 am

Just took a quick look at the paper and while it is interesting, one cannot forget the tragedy that resulted, e.g., The Thirty Years War which devastated central Europe.

14 Barkley Rosser July 20, 2017 at 8:34 am

While the emphasis appears to be more on capital allocation rather than “ethics” or “capitalism” this looks sort of like Max Weber revived.

15 Bill July 20, 2017 at 9:45 am


Now if we could just have Saudi Arabia cut back on religious training and focus on engineering we would both be better off.

Meanwhile, back in the US, Betsy DeVos is trying to funnel money to church schools.

When will they ever learn. When will they ever learn.

16 Butler T. Reynolds July 20, 2017 at 9:52 am

“Betsy DeVos is trying to funnel money to church schools.”

*eye roll*

17 Bill July 20, 2017 at 12:14 pm

Do you disagree? Or are you a denialist?

18 Alistair July 21, 2017 at 7:06 am

I think the eye-roll is a matter of equivocating a small evil to a great evil that suggests a lack of proportion in ethical judgement and inability to prioritise censure and action.

“The Collectivisation famines killed 10M, but in the United States there were hungry people too!”

19 Aretino July 20, 2017 at 9:51 am

“Consistent with forward-looking behavior, students at Protestant universities shifted from the study of theology toward secular degrees.”

But wasn’t law by far the most popular degree in medieval universities from the 1200s?

20 Samsonite July 20, 2017 at 11:18 am

“While Protestant reformers aimed to elevate the role of religion”


21 Intensive purposes July 20, 2017 at 11:36 am

Do you disagree?

Read Luther, Calvin, Zwingli, the Puritans, Pilgrim’s Progress, etc. The complaint of the Protestant reformer was not that society was too religious, but the opposite: that it had been corrupted by worldly pursuits and debauchery allowed by a corrupt hierarchical human organization (the Catholic Church).

Do you think the role of religion was not elevated in Puritan England and New England, Calvinist Scotland, etc.? Because that was certainly the goal.

22 Rhabyt July 20, 2017 at 12:30 pm

The key point is that for the Protestants, corrupt worldly pursuits (eg. entertainment, art, fashion, gambling, promiscuity, etc) did not include trading and manufacturing, where for the pious Catholics it did. So Catholics who wanted to elevate religion contributed to or joined the Church, while Protestants just prayed more and then went to work trading wool, or making shoes. Thus the secular economy (less a few painters, actors, and whores) grew under Protestants even church attendance increased.

23 Alistair July 21, 2017 at 7:03 am

Sole Fide, but works (and work) were a sign of such faith.

24 rayward July 20, 2017 at 11:43 am

Luther was a disciple of Paul, so blame Paul not Luther. On the other hand, Luther’s dissatisfaction with the Church resulted from the Church not accepting Luther as part of the Church elite (as Paul’s dissatisfaction with Jesus’s followers in Jerusalem, resulted from their not accepting Paul as part of the Jerusalem elite). The Reformation’s disruption continues to be felt, in ways large and small. In particular, the Church has become many churches, with conflicting theology: from the Church, to the Protestant church, to many denominations of the Protestant church, to independent (from denominations) churches, ultimately resulting an the “church of I”: one church for everyone, who can make up her own theology and orthodoxy. Disruption is often the result of rejection, from Paul to today’s political disruptors.

25 Ricardo July 21, 2017 at 2:48 am

There have always been many churches with conflicting theology. The Roman Catholic Church merely established theological hegemony for a time over the territories that once made up the Western Roman Empire. The Ethiopians, Egyptians, Greeks, Syrians, South Indians, etc. went their separate ways much further back in time.

26 Thor July 20, 2017 at 11:57 am

The Reformation was one of the greatest spurs to democratization, the liberation/”creation” of the individual, and the unshackling of productive talent, in human history.

Most of us here are the kind of bourgeois individuals (if not actual individualists) we are, only because of the liberation to think, judge, choose for oneself inspired by Luther.

27 JonFraz July 20, 2017 at 1:23 pm

Far more massive in their economic effects at the time were:

1. The beginning of the Columbian Exchange (including direct trade with between Europe and east Asia)
2. The related shift of the center of European commercial gravity from the Mediterranean to the Atlantic coast
3. The disruption in Italy (linchpin of the Mediterranean trading network) caused by the long-running Italian Wars between France and Spain. (This also enabled the Reformation by distracting the two great Catholic powers.)

28 Shaun Marsh July 20, 2017 at 7:24 pm

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29 Mark July 20, 2017 at 10:02 pm

If you look at the survey of the least corrupt nations, according to their respective citizens, I think every one, save Japan, either underwent the Protestant Reformstion or was a colony of a nation that underwent the Protestant Reformation.

30 Alistair July 21, 2017 at 6:58 am

Here in the UK there was also a strong supply-side increase in the number of wives available to serial executors, I mean senior executives.

Data shows up to 600% improvement in wife-supply levels allowing for much more dynamic matching of partnerships and a reallocation of widower capital to more productive uses.

31 jorod July 22, 2017 at 9:52 pm

Correlation is not causation. What about taxes? The Pope could no longer tax people.

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