The Optimal Size of a Religious Congregation: An Economic Theory of Clubs Analysis

I Introduction Religious congregations, in addition to their spiritual impact, are an important economic force in the United States. The Independent Sector (1988) has estimated that there are over 300,000 religious congregations in this country, and their combined annual revenue exceeds $50 billion. Almost all of their income comes from charitable contributions from congregation members. Much of their revenue is used to provide goods and services to the membership. Biddle (1992) has estimated that American congregations spend 71% of their income on activities that only benefit their membership. These congregations can be regarded as mutual benefit organizations, not unlike country clubs or other social clubs. They are quite appropriately analyzed by an economic theory of clubs model. As clubs, religious congregations have an optimal size in terms of their number of members. The purpose of this study is to determine the optimal size of congregations for four different denominations. The optimal size of a congregation will be defined as the number of members that maximizes total contributions. While most religious congregations would surely argue that their goals have little or nothing to do with maximizing contributions, economists recognize that people's willingness to pay for a good (even through philanthropy) serves as a valuable measure of their satisfaction with that good. This is especially true since religious congregations exhibit a rare combination in the nonprofit sector: mutual benefit activities supported by voluntary contributions. Moreover, religious congregations must compete for members, since participation is voluntary. Therefore, the market test of people's willingness to pay for the services of their congregation through voluntary contributions is an appropriate one. This study considers the optimal size in terms of maximizing contributions, rather than minimizing costs. There is an historical justification for this. During the early and mid 20th century, the concept of an optimal-sized congregation was a key concern among Protestant church leaders in the United States. Madison (1986) describes the movement among church reformers at the turn of the century to reduce costs by combining small rural congregations into fewer, larger congregations. Finke and Stark (1992) indicate that the same debate took place at mid-century concerning small suburban churches. In both cases, the reform movement was unsuccessful. It was rejected by churchgoers who derived utility from a sense of commitment that would be greatly diminished if they were forced to become members of larger congregations. Churchgoers' objections exhibited a belief in an optimal size based upon maximizing individual utility rather than minimizing average cost. The approach taken in this paper is consistent with that viewpoint. In the following sections, religious congregations will be analyzed as clubs. A club-theoretic model will be described. A mathematical model of a congregation's contributions and optimal size is then developed and tested. The empirical results will be analyzed to determine the optimal congregation size for the following denominations: Roman Catholic, United Methodist, Lutheran, and Episcopalian. As described below, differences in denominational attitudes toward church attendance, policies regarding the creation of new congregations, the relative surplus or shortage of clergy, and other denominational polity issues could all result in different congregational optimal sizes for these denominations. II Religious Congregations as Clubs The economic theory of clubs literature is well developed and will only be briefly summarized here (see Cornes and Sandler, 1986 and Sandler 1992). It suffices to say that the three most important characteristics of clubs are that they must be voluntary, involve sharing, and have the ability to exclude "free riders." By this description, U. …