Economics and the Rise of Secularism:
why religion is the worst idea ever invented.

Talk presented to the Atheist Society, Melbourne, 13 April 2010, by John L Perkins.

We often hear the triumphal claim by Christian advocates that Christian values are responsible for the success of modern civilisation. Yet while Christianity has been around for about two thousand years, most human progress has been achieved only over the last 200 years, since the Enlightenment. What then, would seem the more likely cause of this historic phenomenon, Christianity or the Enlightenment?

Of course most of the bounty of human progress, higher living standards and greater longevity, is due to technical progress that could only be achieved with the application of scientific method. In the Dark Ages the power of the church was formidable. Real progress only became possible when the power of the church to stifle scientific research and inquiry was ended, and when civil law gained ascendancy over the arbitrary rule of priests and kings.

Thus it is certainly true that the Enlightenment values of secularism, not Christianity, provided the basis for modern civilisation. Not only is the popular Christian claim of providing a beneficial heritage incorrect, but the opposite is the case. In fact, from an economic welfare viewpoint, at least, the concept of a monotheistic god is the worst idea that the human mind has ever invented.

This is a big claim. It is not made lightly. Some justification of it, from an economic perspective, is warranted. The following formula for a production function, seeming innocuous, and in some ways seemingly ludicrous, is commonly used in economics as a teaching device:

Y = A e r t La Kb

The formula describes the relationship between the inputs and output in production. Y is output and there are two inputs, labour L, and capital K, which refers to physical equipment. A, a and b are constants and er t is an exponential time trend. The purpose of separating the time factor in this way is so that L and K can be described as "constant quality", and so the formula measures only the effect of quantity changes on K and L.

The main purpose of this formula in economic textbooks is to enable various aspects of a production process to be described and dissected. In particular, if a+ b = 1, there are constant returns to scale, otherwise returns to scale are either increasing or decreasing. If there are constant returns, then doubling inputs simply doubles output, whereas if there are increasing returns, output more than doubles.

The seemingly absurd thing about the formula is that output increases exponentially over time, as if by magic, with the same level of inputs, due to technical progress. In reality of course, technical progress is embodied both in the capital equipment used and in the training of the labour force. Other inputs, such as land and material inputs could be separately identified, but are included here in the constant A.

The formula, as a description of reality, is highly deficient, and any attempt to identify the parameters empirically will fail due to the difficulty, if not impossibility, of properly measuring the variables. And yet, as with many conceptual devices used in economics, the theory behind the formula contain grains of truth that can greatly assist in understanding the course of human interactions.

Such is the case here. In fact, all of human history, past, present and future, can be explained in terms of the above formula. This includes the rise of secularism. Such a claim requires some elaboration.

When the only form of human capital consisted of stone tools, then human production was basically limited to that which could be produced by labour alone. As capital increased, so did the output potential. Throughout history, gains have been made as investment in the quality and quantity of capital has increased, particularly since the Industrial Revolution.

The formula identifies capital and labour as joint requirements, as the two factors of production. Capital is the "means of production" in Marxist terms, and the traditional use of the letter K for capital is reminiscent of Karl Marx’s Das Kapital. The historic battle between capital and labour over their respective shares of the output can also be inferred.

A key aspect of the formula, that is of value in a historical context, is that it identifies technical progress so explicitly. It is technical progress that defines the transformation of civilisation. Adam Smith was aware of this, as was Karl Marx. After the Industrial Revolution, capital became ever more important in the production process. Marx foresaw that the benefits of progress would accrue only to the owners of capital, the capitalists, and that this would inevitably lead to revolution and the demise of capitalism. His forecast was incorrect because the first premise was incorrect: the benefits of capitalism were eventually shared with the workers, although not completely, and not without a struggle.

Real wages now generally rise in line with per-capita GDP. That is, wage rises exceed price rises, on average, and this is reflected in rising living standards. This has been the case over a long period of time, and hence is a conclusive refutation of the Marxist hypothesis. Data on this is provided below.

Another interesting aspect of the formula in a historical context is that when there are increasing returns to scale (a + b > 1), the competitive industry model breaks downn and there is a tendency to monopoly. This is generally the case for public utilities (e.g. electricity and water supply), which work most efficiently as natural monopolies. Historically this has justified the case for public ownership of these industries. More recently, a free market ideology has emerged, somewhat akin to 19th century laissez-faire capitalism. In this case, many public utilities have been privatised, and a contrived form of competition has been constructed, which has seen many of the adverse consequences of a monopolistic industrial structure re-emerge.

Those familiar with differential calculus will see that dY/dt = r Y or dY/Y = r dt so that if dY is the change of Y in one year then r is the annual rate of change, which is constant, a characteristic of exponential growth. What is the value of r, the average long run rate of technical progress? How does this change, over time, and between countries?

If we take the production function as an economy-wide characterisation of income generation, then we still have great difficulty in providing empirical data to represent the value of K. However, we are more able to provide estimates of Y and L. In the National Accounts, Gross Domestic Product is calculated in three different ways, all of which ideally produce the same result. It is the total expenditure on goods and services, the total output produced and the total income earned. Thus we have a measure of Y. Assuming participation rates have not changed dramatically, population can be assumed to be proportional to labour force, L.

Proper National Accounts in most countries have only been kept since the 1940s, at best, so there is no easily accessible measure of income or output that can be used to estimate long-term growth rates. However in Britain economic historians have pieced together historical information on production statistics, going back to medieval times, in order to link to an index consistent with current day measures of GDP. A price index was also constructed in order to discount nominal currency figures to real terms. A similar exercise has been conducted in the United States.

Roughly, over the last 200 years, the results can be characterised as follows:
Increase factor
Average annual growth

Thus real national incomes have increased by a factor of about 360, and population has increased by a factor of 6. Indicative of this, world population rose from 1 billion in 1800 to 6 billion in 2000. These increases represent average annual rates of about 3% and 1% respectively. Discounting for population gives a per capita increase factor of about 50, a 2% average annual increase.

This does not quite identify a value for r in the production function formula, because it includes the effect of both quality and quantity changes in the factors of production. However what this means is that while population has increased at an exponential rate, economic output has increased at a greater exponential rate, so that real per capita incomes have risen by an average of 2% over 200 years. This is an effective measure of technical progress over the period.

In Australia during the post war years we are roughly familiar with this situation. Real GDP typically rises about 4% per annum, with population increasing about 2%, leaving a 2% gain in real per capita incomes. The population typically rises about 1% through natural increase, and 1% through immigration. Incidentally, while the gross immigration numbers have been relatively higher in recent years, in percentage terms, in relation to population, they are not high.

This 2% compound growth in living standards is the bounty of technical progress. It is the most important but often overlooked aspect of economic development. What it derives from is innovation in knowledge and technique. It is increased productivity. It is the ability to produce more, with less input of time, labour and materials. What has been done with this bounty may be problematic. But technical progress, of itself, is unambiguously good for human welfare.

It is technical progress that has thwarted the predictions of Malthus over the last 200 years and Erlich over the last 40. There will be limits, and we will reach them in coming decades. Fossil fuels will be in short supply and prices will rise dramatically. The easy days of economic growth will end. The 2% bounty will be hard to maintain. In these circumstances we will need technical progress more than ever.

What throughout history, has mainly served to stifle, inhibit and prevent technical progress? Religion. This then, is the basis for the claim that the concept of a monotheistic god is the worst idea that the human mind has ever invented. Polytheistic religions are not blameless either, but they do not typically make arrogant claims of their superiority, as monotheistic ones are wont to do.

Historical sources reveal that prior to 1800, both economic output and population growth were far smaller. When theocracy ruled the world the rate of technical progress was perhaps 0.3% at best. The association with religion is causal, not coincidental. Only when the shackles of religion were thrown off could progress flourish.

The achievements of the Roman Empire were lost when Christianity came to power in Rome. The Greek schools of learning were then closed down. Edward Gibbons was correct in blaming Christianity for the decline and fall of the Roman Empire, but for greater reasons than he imagined. The anti-knowledge, anti-progress nature of the religion had far reaching consequences. The legacy of religion is the perpetuation of poverty.

The effects of religion in generating poorer outcomes in human welfare can be seen not just through time, but across countries as well. It took the Christian world a long time to accept that increased knowledge came not from studying scripture, but from studying the natural world, through the process of scientific method. Tragically, in much of the Muslim world, this is still not accepted. The Koran is still regarded as the main source of knowledge, which cannot be contradicted. Innovation is inhibited, if not prohibited. The consequences of this are far worse social and economic outcomes than in comparable countries.

The effects of this are masked by oil wealth for some countries, but not all. The United Nations Arab Human Development Reports, produced by Arab scholars, provide a searing indictment of Arab societies in terms of a range of social and economic measures. They stop short of identifying Islam as the cause, but Islam is the cause. The situation is actually worse than stated, since many Muslim countries are prone to repression as a result of conflict between political and Islamic elites, which often leads to violence and insurgency. The problems date from the establishment of Islam, via a military insurgency, by the Prophet Muhammad himself.

The divergent growth paths of India and Pakistan can be largely attributed to the effects of Islam. National disintegration, following in the path of Somalia, is an ominous prospect for many Muslim countries. In much of the developing world religion is resurgent, either because of, or in response to, militant Islam. These are dangerous portents, which can only be averted by an awareness of the disastrous historical consequences of pervasive religion.

The excessively religious nature of US society has fortunately only had a limited effect on technical progress there. While recently, for example, religious strictures inhibiting stem cell research have had some negative consequences, generally secularism, the constitutional requirement for "separation of church and state" in the US, has served America well.

Secularism, not Christianity, is the source of advances in human welfare, for the success of modern civilisation. This is confirmed, not just by theoretical analysis, but by hard data.

What benefits humanity is respect for both individual rights and the common good, and a quest for knowledge based on reason and evidence, using scientific method. These are not "Western" values or characteristics inherent in any particular culture. They are universal values. Ethics and morality are likewise best derived from the universal principles of freedom, justice, honesty and compassion. These secular values, not religion, are now needed more than ever, to ensure that human progress continues.

Dr John L Perkins is an economist at the National Institute of Economic and Industry Research. His PhD was in econometrics.
He is a founding member and president of the Secular Party of Australia.
Back to the Atheist Society               Back to John Perkins home page