INCENTIVES, PREDESTINATION AND FREE WILL

I. INTRODUCTION Max Weber's [1930] "The Protestant Ethic and the Spirit of Capitalism" argues that the Protestant reformation set the stage for post-Medieval economic growth. Using an occupational study of Germans from 1895, Weber shows that Protestants dominate the mercantile or capitalist occupations in that country at that time period. Weber also argues that between 1600 and 1900, Protestant countries advanced faster than their Catholic neighbors and that this was the result of Calvin's urging acceptance of material success and the dogma of predestination.(1) An ocean of work beginning with Rachfahl [1909] and Sombart [1913] has since attacked Weber's theological generalizations (see Giddens, [1992], for a review). Tawney [1926] and Robertson [1933] argue Weber's causal interpretation is wrong and that economic growth laid the framework for Protestantism, not Protestantism for economic growth. Samuelsson [1961] disputes the very correlation between Protestantism and economic success which is the basis of the Weberian hypothesis. The correlation between Protestantism and economic success is certainly weaker than Weber suggests, even in the German data that Weber himself uses. Furthermore, more modem data tends to find only a modest link between Protestantism and economic success, as in Winter [1974] and Tomes [1994].(2) However, for centuries there were gaps in economic success between Protestant and Catholic nations, and new findings on early modem data tend to confirm differences between Protestants and Catholics at least within the U.S. As Weber's arch-critic Samuelsson himself writes "there is some truth in the contention that the Protestant countries, and especially those adhering to the Reformed church, were particularly vigorous economically." Given that there was some correlation between Protestantism and economic success before the mid to late 20th century, the question then becomes why this correlation existed. Some elements of Protestant theology clearly encourage capitalism. Usury doctrines became less rigid under Calvinism (Nelson [1972]); avarice was de-emphasized as a sin. Weber claims that Luther's concept of a "calling" includes worldly success and that this is a prominent difference with Catholic doctrine. Although this theological claim has been subject to much debate, e.g. Sombart [1915], there still appears to be some basic truth to this point. One of the largest theological gaps between the denominations is that Calvinism accepts the dogma of predestination while Catholicism argues for a dogma of free will.(3) For the purposes of this paper we will follow Weber and accept broad brush definitions of doctrine rather than getting mired in the more subtle features of the two doctrines. Under predestination, a spiritual elite is preordained before the beginning of time and will receive eternal life.(4) Under free will, it is only through a lifetime of good actions that individuals are accepted into Heaven.(5) Weber argues that predestination creates a more lasting basis for economic growth than the dogma of free will. In this paper, we present a model that formally treats Weber's claim under particular circumstances and show how predestination could create the correlation between Protestantism and growth that existed in the pre-modern era. Our model also suggests conditions under which a more successful society would favor the doctrine of predestination, which can be seen as a formalization of Tawney's and Robertson's view that economic growth created the reformation. In this essay, both free will and predestination create incentives which spur good behavior.(6) Under the doctrine of free will, good behavior is motivated by an increased probability of getting into heaven. Under the doctrine of predestination, this incentive is irrelevant because individual actions do not determine spiritual outcomes. Instead an individual's actions are motivated by a desire to receive positive behavior from others by convincing them that he is part of the spiritual elite. …