A Religious Market Theory Explained

Nadeem F Paracha in The Dawn

In 1987, the American sociologists Rodney Stark and William S. Bainbridge formulated a ‘Religious Market Theory.’ The theory is a critique of the ‘Secularisation Thesis.’ The secularisation thesis was initially developed by the German sociologist Max Weber in the early 20th century. In the next five decades, it was further evolved by numerous scholars.

To Weber, due to modernisation, especially from the late 18th century onwards, societies entered a process of ‘spiritual disenchantment.’ Space for ‘pre-modern’ beliefs in magic, faith and superstition shrank and people began to adopt more rational modes of thinking.

Even non-Western societies started to adopt models of modernisation and, indeed, here as well, the traditional variants of religion began to decline. They were replaced by secularised formations of traditional faiths, framed and monopolised by the state.

But the secularisation thesis came into question when, from the mid-1970s onwards, the exhibition of religiosity, especially in modernised Muslim-majority nation-states, began to grow.

In the 1980s, when religiosity saw an increase in the US as well, Stark and Bainbridge formulated their religious market theory, challenging the secularisation thesis. The religious market theory suggests that when religiosity declines, it eventually revives itself, because the decline opens up spaces for new faiths and modified versions of the old faiths to emerge.

Stark and Bainbridge saw the rise and decline of religiosity as a cycle, which moves like markets do in capitalist settings. Religions which fail to adjust to the needs of changing conditions, fall by the wayside and lose followers. Readjusted religions and new faiths begin to emerge in a scenario where religiosity seems to be receding.

Gradually, though, new and readjusted variants are able to revive interest in faith, by providing services and products that are better suited to meet the needs of changing conditions.

According to Stark and Bainbridge, this cycle produces a diverse collection of faiths, cults, sects and subsects, which compete against each other in the ‘marketplace of faiths’ and improve to attract followers. The religious market theory posits that this renews an interest in faith and religiosity.

In 19th century India, during the complete fall of the Mughal Empire and the mushrooming of British colonialism, the established variants of Islam began to struggle to keep pace with the changing conditions. It seemed that the modernity introduced by the British was rapidly secularising the polity. But as the old religious ethos dwindled, new variants emerged to address the changing needs of India’s Muslims.

On the one hand, new Sunni sects such as Deobandi, Barelvi and Ahl-i-Hadith sprang up and, on the other, the Ahmadiyya, the Ahl-i-Quran and Muslim Modernism emerged. They competed against each other, promising the most suitable narratives to India’s ‘depressed’ Muslims and, in the process, gathering followers — more importantly, followers who had political and economic clout.

From the mid-19th century till the 1920s, the marketplace of faiths in South Asia flourished with new variations of Islam and Hinduism. The variants were products/brands, and their followers were consumers. This indeed witnessed a renewed interest in religion and religiosity.

However, from the late 1940s, when India split into two nation-states, Bharat and Pakistan, the state in both countries decided to monopolise the marketplace of faiths, through an overarching meta-narrative.

India formulated a nationalist secularism that sought to build a socialist democracy. It was to provide economic services that religious organisations had been offering to attract followers. The state in Pakistan began to shape a nationalist-modernist variant of Islam and it regulated the marketplace of faiths by bringing its shops and products under the state’s control.

According to some contemporary proponents of the religious market theory, the presence of a centralised and ‘official’ faith eschews religious diversity. It nationalises the marketplace of faiths. This causes a decline in religiosity, as has been the case in various Scandinavian countries and in Britain.

The state in India (through nationalist-secularism) and Pakistan (through modernist-nationalist Islam) attempted to do this. Religion did not decline as such, but religiosity did.

In the 1970s, new economic and political challenges emerged in Pakistan and India. These also challenged the nationalisation of the marketplace of faiths. In Pakistan, political elites tried to absorb the alternatives offered by Sunni and Shia sects and subsects. They privatised the marketplace and began to gather fresh followers, who could not find remedies anymore in the centralised state-approved variant.

By the 1980s, the marketplace of faiths was once again booming. In Pakistan, the state continued to try absorbing the new variants by discarding the old modernist variant. But, as the middle class and the lower-middle class segments expanded, they became the most active consumers of new variants, thereby re-energising the marketplace of faiths.

These variants ranged from renewed and modified versions of evangelical Islam, to the more radical versions of Sunni and Shia sects and subsects. Religiosity revived itself.

In India, economic liberalisation weakened the monopoly of the nationalist-secular narrative in the marketplace of faiths. The Indian historian Meera Nanda, in her book The God Market, has closely tracked the trajectory of the expanding elite and middle-income groups in India, from being consumers of the nationalist-secular narrative, to becoming the most prominent consumers of Hindu nationalism — especially after benefitting from the post-1980s ‘neo-liberal’ economic policies.

According to Nanda, these segments, who now exercise increasing economic influence, “re-ritualised and re-enchanted Hinduism.” They now view Hinduism as being inherently compatible with modern economic ideas that guarantee profitability and prosperity. This, too, is how the renewed evangelical variants of Islam peddled their narrative to the elite and middle-income groups in Pakistan.

Consequently, exhibitions of religiosity have witnessed a manifold increase in both the countries. However, within the marketplace of faiths are also variants that are problematic. These include the more reactionary manifestations of faiths. For example, those looking to undermine Muslims in India in a violent manner will shop for variants that aid the consumer to theologically justify acts of violence.

This is also true in Pakistan. There are sectarian and sub-sectarian variants in the marketplace of faiths, which ‘theologically’ validate actions of those who want to use or instigate violence against an opponent in the name of faith.

More worrying is the fact that many urban, ‘educated’ folk, too, buy these variants, especially products (in the shape of narratives) that justify or instigate violence. These are often used to demonise perceived enemies as ‘Ahmadiyya sympathisers,’ or ‘anti-Islam’.

The marketplace of faiths is now almost entirely unregulated. And the state and governments whose job it was to regulate it, too, have become consumers in the marketplace of faiths to justify their own existence.

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The world’s richest countries in 2023

From The Economist

Comparing the wealth of nations is harder than you might think. Countries with lots of people tend to have bigger economies, but that does not mean that individual incomes are high. Dollar income per person is the most common metric for sorting countries into rich and poor, but it does not account for international differences in prices. Nor does it account for how many hours people have to work to earn their wage. To provide a fuller picture, The Economist has created a global rich list using the latest available data on three measures: dollar income per person, adjusted income for local prices (known as purchasing-power parity, or ppp), and income per hour worked. See where each country ranks below.

The findings show how fickle economics can be. Take America. Its gdp is by far the largest at market exchange rates. But its income per person is only the seventh highest in the world, and eighth when adjusting for local prices. When accounting for the long workdays and limited holiday, it drops to 11th. China—the world’s second-largest economy in nominal terms—comes 65th by gdp per person and 96th by hours worked. Other countries with gruesome work cultures also see big shifts: South Korea ranks 31st on our first measure and 30th on our second, but 47th on our third.

In much of western Europe the trend goes in the opposite direction: places such as Belgium, Germany and Sweden fly up the rankings when their lower prices or enviable work-life balance are taken into account. Wages in Luxembourg go the furthest in local prices. And Norway has the world’s highest average income per hour worked. (See the top 20 countries in the chart above.)

These calculations will be imprecise. ppp conversions, for example, struggle to capture differences in the quality of goods and services. Methods for calculating hours worked may differ; it is especially hard to estimate them for poor countries with large informal sectors (read our full methodology here). And the data from some countries cannot be trusted. Some countries (notably China) have very high savings rates, so even their ppp-adjusted gdp per hour will not reflect their living standards. The ranking also captures people’s average incomes (what they earn), not their assets (what they already have). But the comparison offers a more complete assessment of the world’s richest countries than a focus on any single measure—it shows where your money goes furthest, and where long hours may not always pay off.

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A level Economics 66: Government Intervention and Market Distortions

Government intervention in markets, while often implemented with good intentions, can lead to unintended consequences and create distortions. Here are some examples of how government intervention can cause distortions in agriculture, housing, and labor markets:

1. Agriculture Market:

Price Floors: Government-imposed price floors in agriculture, such as guaranteed minimum prices, can create surpluses of agricultural products. If the minimum price set by the government is above the market equilibrium price, farmers may produce more than the market demands. This surplus can lead to overproduction and the accumulation of unsold goods.

Example: In the case of wheat, if the government sets a minimum price above the equilibrium price, farmers may produce more wheat than consumers need, resulting in a surplus that requires storage or export at subsidized prices.

2. Housing Market:

Rent Controls: Government-imposed rent controls limit the amount landlords can charge for rental properties. While this measure aims to protect tenants from excessive rent increases, it can create shortages of rental housing and reduce landlords' incentives to maintain and invest in their properties.

Example: In a city with rent controls, landlords may choose to convert their rental properties into condominiums for sale, reducing the supply of available rental units and potentially leading to higher overall housing costs for residents.

3. Labor Market:

Minimum Wage: While minimum wage laws aim to improve workers' earnings, they can create distortions in the labor market. Setting a minimum wage above the equilibrium wage can result in higher unemployment, as employers may be unable or unwilling to hire additional workers at the mandated wage rate.

Example: If the government raises the minimum wage significantly, some small businesses may reduce hiring or cut back on employee hours to manage increased labor costs.

Conclusion:

While government intervention can be necessary to correct market failures and protect vulnerable populations, it is essential to consider the potential distortions that such interventions may create. Policymakers need to carefully assess the impact of their actions on markets and be aware of unintended consequences that could arise. Striking a balance between intervention and market efficiency is crucial for achieving policy objectives without causing unnecessary distortions. It requires thoughtful analysis, ongoing evaluation, and flexibility in adapting policies to changing market conditions.

A Level Economics 63: Tradable Pollution Permits

Tradable pollution permits, also known as cap-and-trade systems, are a market-based approach to environmental regulation that aims to reduce pollution levels efficiently and cost-effectively. The rationale behind tradable pollution permits is to create incentives for firms to reduce their pollution emissions while allowing them the flexibility to achieve these reductions in the most economically efficient manner.

The main objectives of tradable pollution permits are as follows:

1. Environmental Efficiency: Tradable permits aim to achieve a predetermined level of pollution reduction, which is set by the government or regulatory authority. By capping the total allowable emissions at this level, the system ensures a reduction in pollution over time.

2. Cost-Effectiveness: Tradable permits allow firms with lower pollution abatement costs to reduce emissions further than required and then sell their excess permits to firms facing higher abatement costs. This creates a market for permits and ensures that pollution reductions are achieved at the least cost to society.

3. Flexibility and Innovation: Tradable permits provide flexibility to firms in meeting their emission reduction targets. Firms have the freedom to choose the most efficient pollution abatement technologies or strategies, which can lead to innovation in pollution control.

4. Certainty and Transparency: With a fixed number of permits issued, the total level of pollution is known in advance. This certainty allows for better planning and investment decisions by firms.

Methodology of Tradable Pollution Permits:

The process of implementing tradable pollution permits involves several key steps:

1. Setting the Cap: The government or regulatory authority determines the total level of allowable emissions (the cap) for a specific pollutant for a given period, such as a year. This cap is based on environmental goals and scientific assessments.

2. Issuing Permits: The government allocates or auctions tradable permits to firms, with each permit allowing the holder to emit a specific amount of the pollutant. The total number of permits corresponds to the predetermined emissions cap.

3. Compliance and Reporting: Firms are required to monitor and report their actual emissions regularly. They must hold enough permits to cover their emissions; otherwise, they face penalties or fines.

4. Trading and Market Mechanism: Firms can buy or sell permits on a secondary market, allowing them to adjust their emissions to match their production levels. Firms with excess permits can sell them to those facing higher emissions, creating a market-based mechanism for achieving the overall emissions reduction target.

5. Periodic Reviews and Adjustments: The cap and the number of permits may be adjusted periodically to align with changing environmental goals and industrial developments.

Examples of Tradable Pollution Permits:

• European Union Emission Trading System (EU ETS): The EU ETS is one of the world's largest and most prominent tradable permit systems. It covers various industries, including power generation, aviation, and manufacturing, and aims to reduce greenhouse gas emissions across the European Union.

• Regional Greenhouse Gas Initiative (RGGI) - United States: RGGI is a cap-and-trade program in the northeastern United States that focuses on reducing carbon dioxide emissions from power plants.

• California's Cap-and-Trade Program: California has implemented a cap-and-trade system to reduce greenhouse gas emissions across multiple sectors, including energy, transportation, and industry.

In conclusion, tradable pollution permits offer a market-driven approach to environmental regulation, allowing for cost-effective pollution reduction while providing flexibility and incentives for innovation. By capping total emissions and allowing firms to trade permits, these systems strive to achieve environmental efficiency and contribute to global efforts in combatting pollution and climate change. 

A Level Economics 34: Understanding Market Structures

The structure of a market depends on the number of firms operating within it and their ability to enter and exit the market freely, which is known as contestability. Here's an explanation with definitions and examples:

Number of Firms: The number of firms in a market refers to the total count of independent businesses competing with each other to sell similar or substitute goods or services. The number of firms influences the level of competition and market concentration, which, in turn, affects market structure. Market structures can range from a monopoly (one firm) to perfect competition (many firms).

Example: A market with only one telecommunications company providing phone services would be a monopoly. In contrast, a market with multiple telecommunications companies competing with each other would reflect a more competitive market structure, such as oligopoly or perfect competition.

Contestability (Ability to Enter and Exit Markets Freely):Contestability refers to the ease with which new firms can enter a market and compete with existing firms, as well as the freedom for existing firms to exit the market without significant barriers or impediments. The degree of contestability affects the potential for new entry and the level of competition within a market.

Example: In a market with low barriers to entry and exit, such as the smartphone app development industry, new firms can easily enter the market and offer their apps. If these firms can compete effectively with existing app developers, it indicates high contestability and a more competitive market structure.

The Relationship:The number of firms and contestability are interrelated and jointly determine the structure of a market. When there are a large number of firms and low barriers to entry and exit, it promotes competition and leads to more competitive market structures, such as perfect competition or monopolistic competition.

In contrast, when there are a small number of firms and high barriers to entry and exit, it restricts competition and can result in more concentrated market structures, such as oligopoly or monopoly.

Example: Consider the market for coffee shops in a particular city. If there are numerous coffee shops, and new coffee shops can enter the market easily and compete with existing ones, it indicates a highly contestable market with many firms. This scenario would align with a competitive market structure, such as perfect competition or monopolistic competition.

However, if there are only a few dominant coffee shop chains and significant barriers to entry, such as high startup costs or exclusive lease agreements, the market would have low contestability. This would result in a less competitive market structure, such as an oligopoly or even a monopoly if one chain has a dominant market position.

In summary, the structure of a market depends on the number of firms operating within it and their ability to enter and exit the market freely. The presence of many firms and high contestability leads to more competitive market structures, while fewer firms and low contestability can result in concentrated market structures with less competition.

--- Structural and Behavioural Barriers to Entry

Key Terms:

1. Barriers to Entry: Barriers to entry are obstacles or restrictions that prevent new firms from entering a market and competing with existing firms. These barriers can be both structural and behavioral in nature.

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3. Structural Barriers to Entry: Structural barriers to entry refer to inherent characteristics of a market that make it difficult or costly for new firms to enter and establish themselves. These barriers are typically long-term and relate to the market's fundamental structure.

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5. Behavioral Barriers to Entry: Behavioral barriers to entry arise from the actions of existing firms in a market to discourage or limit new entrants. These barriers are often strategic and can be influenced by the actions of dominant players in the market.

Examples and Distinction:

1. Structural Barriers to Entry:

a. Economies of Scale: When existing firms in a market benefit from economies of scale, new entrants may find it challenging to match the cost efficiency of established firms. As production increases, the average cost per unit decreases, providing a competitive advantage to larger companies. This discourages new firms from entering and competing with economies of scale.

Example: In the automobile manufacturing industry, large carmakers enjoy economies of scale due to their established production facilities, distribution networks, and purchasing power. New entrants face difficulty achieving similar cost efficiencies, making it a structural barrier to entry.

b. High Capital Requirements: Some markets require substantial upfront investments in machinery, technology, or infrastructure to compete effectively. High capital requirements act as a deterrent for new entrants, limiting their ability to enter the market.

Example: The airline industry demands significant capital investment to purchase aircraft and establish routes. This high capital requirement makes it difficult for new airlines to enter the market and compete with established carriers.

c. Access to Distribution Channels: In certain markets, established firms may control critical distribution channels, making it difficult for new entrants to reach customers effectively. Without access to established distribution networks, new firms may struggle to gain market share.

Example: In the retail industry, large supermarket chains control established distribution networks, making it challenging for new grocery stores to enter the market and compete for shelf space and customer visibility.

2. Behavioral Barriers to Entry:

a. Predatory Pricing: Dominant firms may engage in predatory pricing, intentionally setting prices below cost to drive out new entrants. Once competitors are forced out, the dominant firm can then raise prices and regain its market power.

Example: A large software company offering its products at unprofitably low prices to deter new software startups from entering the market is an example of predatory pricing.

b. Brand Loyalty: Established firms often build strong brand loyalty and customer trust over time. This creates a barrier for new entrants as customers may be hesitant to switch to an unknown brand.

Example: Tech-savvy consumers' strong brand loyalty to smartphones may deter new smartphone manufacturers from entering the market, even if they offer innovative features.

c. Exclusive Contracts: Existing firms may enter into exclusive contracts with suppliers or distributors, preventing new entrants from accessing essential resources or distribution channels.

Example: A dominant beverage company entering into exclusive contracts with popular restaurants and convenience stores may limit the ability of new beverage companies to access these sales channels.

In summary, barriers to entry can be both structural and behavioral. Structural barriers stem from inherent market characteristics, such as economies of scale and high capital requirements. Behavioral barriers, on the other hand, result from strategic actions taken by existing firms to discourage or limit new entrants, such as predatory pricing and brand loyalty. Understanding these distinctions helps identify the challenges new firms face in entering competitive markets.

---Regulators and Contestability

Regulators play a crucial role in influencing the degree of contestability in a market by implementing policies and regulations that either promote or hinder competition. Here are several ways regulators can affect contestability in a market, along with examples:

1. Barriers to Entry and Exit:

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   • Regulators can influence the ease with which new firms can enter a market by setting entry requirements, licensing, or imposing restrictions on potential entrants.
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   • They can also impact the ability of firms to exit the market by imposing exit fees, liquidation costs, or other legal barriers.
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   Example: In the telecommunications industry, regulators can grant or deny licenses to new companies seeking to provide services. If regulators make it easy for new firms to obtain licenses and enter the market, it encourages greater contestability and competition among telecommunications providers.

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3. Anti-Competitive Practices:

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   • Regulators can enforce antitrust laws to prevent anti-competitive practices, such as price-fixing, collusion, or predatory pricing, which can restrict competition and limit contestability in a market.
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   Example: In the airline industry, regulators can investigate and take action against airlines engaging in collusion to fix ticket prices. By curbing such anti-competitive practices, regulators ensure a more competitive market that benefits consumers with lower fares and increased choices.

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5. Merger and Acquisition Approval:

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   • Regulators can assess and approve or reject mergers and acquisitions based on their potential impact on competition and contestability in the market.
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   • They may require divestitures or impose conditions to ensure that the merged entity does not gain undue market power that could harm competition.
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   Example: When two pharmaceutical companies propose a merger, regulators may scrutinize the deal to assess its potential effects on competition in the pharmaceutical industry. If the merger is deemed to reduce competition and contestability, regulators may impose conditions or reject the merger to maintain a competitive market.

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8. Price Regulation:

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   • Regulators can set price caps or price floors to prevent firms from exploiting their market power and to promote a competitive environment.
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   • Price regulation can prevent monopolistic practices and ensure that consumers have access to reasonably priced goods and services.

   Example: In the electricity market, regulators can impose price ceilings to limit the prices charged by power generation companies. This prevents firms from exploiting their dominant position and promotes contestability in the electricity market, allowing new entrants to compete.

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10. Access to Essential Facilities:

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    • Regulators can ensure that essential facilities or infrastructure, such as transportation networks or communication networks, are accessible to all firms on fair and non-discriminatory terms.
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    • This prevents the dominant control of essential facilities by a single firm, allowing competitors to enter the market and increase contestability.
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    Example: In the railroad industry, regulators can mandate that rail network operators provide access to their tracks for other freight companies at fair rates. This promotes competition in the freight transportation market and enhances contestability.

In summary, regulators can significantly influence the degree of contestability in a market through various policies, regulations, and enforcement actions. By promoting fair competition, preventing anti-competitive practices, and ensuring access to essential facilities, regulators contribute to creating more competitive and contestable markets that benefit consumers and promote innovation.