Knowledge that Transforms

The economics of religion is a relatively new field of research in economics. This survey serves two purposes—it is backward-looking in that it traces the historical and sociological origins of this field, and it is forward-looking in that it examines the insights and research themes that are offered by economists to investigate religion globally in the modern world. Several factors have influenced the economics of religion: (1) new developments in theoretical models including spatial models of religious markets and evolutionary models of religious traits; (2) empirical work that addresses innovatively econometric identification in examining causal influences on religious behavior; (3) new research in the economic history of religion that considers religion as an independent, rather than a dependent, variable; and (4) more studies of religion outside the Western world. Based on these developments, this paper discusses four themes— first, secularization, pluralism, regulation, and economic growth; second, religious markets, club goods, differentiated products, and networks; third, identification including secular competition and charitable giving; and fourth, conflict and cooperation in developing societies. In reviewing this paradoxically ancient yet burgeoning field, this paper puts forward unanswered questions for scholars of the economics of religion to reflect upon in years to come. (JEL D64, D72, L31, O43, Z12, Z13)

During the last third of the twentieth century, political philosophers actively debated about the content of distributive justice; the ruling ethical view of utilitarianism was challenged by various versions of equality of opportunities. Economists formulated several ways of modeling these ideas, focusing upon how individuals are placed with respect to opportunities for achieving various outcomes, and what compensation is due to individuals with truncated opportunities. After presenting a review of the main philosophical ideas (section 2), we turn to economic models (sections 3 and 4). We propose a reformulation of the definition of economic development, replacing the utilitarian measure of GDP per capita with a measure of the degree to which opportunities for income acquisition in a nation have been equalized. Finally, we discuss issues that the econometrician faces in measuring inequality of opportunity, briefly review the empirical literature (section 6), and conclude (section 7). (JEL C43, D63, D70, I24)

In nursing this essay through several drafts, I have benefited greatly from suggestions by Edward Denison, Robert Evenson, Zvi Griliches, Richard Levin, John Kendrick, Edwin Mansfield, and Richard Murnane. Moses Abramovitz has been a source ofencouragement and good, substantive editorial advice, for which I am most grateful. The heterodox views are my own, although I share many of them with Sidney Winter.

ECONOMICS, we all recite, deals with allocation of limited resources towards satisfaction of unlimited wants. Resources are typically identified as land, labor, and capital plus a technology that determines their transformation into consumer goods. Disparity between the available goods and services and the desired gives rise to scarcity and the question of what, how, and for whom to produce. The focus then shifts to description and evaluation of alternative resource allocation mechanisms for making the choices. The Pareto criterion, by which an allocation of resources is deemed efficient if any reallocation improving the position of some individual worsens the position of others, is a commonly employed gauge of a mechanism's performance. In the absence of externalities, increasing returns to scale, and uncertainty, a perfectly competitive market system yields a Pareto optimal allocation of resources; this underlies the view that individual self-interest is compatible with society's interest. The further conclusion that Pareto optimality may not be achieved via the market system in the presence of monopoly elements provides an economic rationale for antitrust laws. The objective of a resource allocation mechanism appears to be, according to the analysis described above, to make the best of available resources. The alternative objective of relaxing constraints through expanding the resource base or developing new technology seems to be beyond its scope. Thus, until rather recently, technical advance had been regarded, in the mainstream of economic theory, as unmotivated by the quest for profits and substantially unaffected by resource allocation. Instead, as J. Schmookler observed, technology had been viewed as a parameter like the weather, affecting the outcome of resource allocations but itself unaffected by them [84, 1965]. Evidence that technological progress has significantly contributed to growth in productivity, together with a substantial increase in research and development activity, largely financed by government and carried out by industry (see F. Machlup [51, 1962]), may have spurred reconsideration of this view. Once technical advance is regarded as an economic variable, it is natural to in-

ECONOMISTS generally take tastes as given and work out consequences of changes in prices, incomes, and other variables under assumption that tastes do not change. When pressed, either they engage in ad hoc theorizing or they explicitly delegate discussion of tastes to sociologist, psychologist, or anthropologist. Unfortunately, these disciplines have not developed much in way of systematic usable knowledge about tastes. Although economists have been reluctant to discuss systematically changes in structure of tastes, they have long relied on assumptions about basic and enduring properties of tastes. Self-interest is assumed to dominate all other motives,' with a prominent place also assigned to benevolence toward children2 (and occasionally others), and with self-interest partly dependent on distinction and other aspects of one's position in society.3 The dominance of self-interest and persistence of some benevolence have usually been explained by nature, or an equivalent evasion of problem. The development of modern biology since mid-nineteenth century and of population genetics in twentieth century made clear that is only beginning, not end of answer. The enduring traits of human (and animal) nature presumably were genetically selected under very different physical environments and social arrangements as life on earth evolved during millions of years. It is not difficult to understand why self-interest has high survival value under very different circumstances,4 but why should altruistic behavior, sometimes observed among animals as well as human beings, also survive? This kind of question has been asked by some geneticists and other biologists especially during last two decades. Their work has recently been christened sociI For example, Adam Smith said, We are not ready to suspect any person of being defective in selfishness [9, 1969, p. 446], and it is not from benevolence of butcher, brewer, or baker, that we expect our dinner, but from their regard to their own interest [10, 1937, p. 14]. 2According to Alfred Marshall, . . men labor and save chiefly for sake of their families and not for themselves [6, 1920, p. 228]. 3Nassau Senior said, the desire for distinction . . . may be pronounced to be most powerful of human passions [8, 1938, p. 12]. 4Ronald Coase argues convincingly that Adam Smith, especially in his Moral Sentiments, was groping toward an explanation of importance of selfinterest in terms of its contribution to viable social and economic arrangements (see Coase [5, 1976]).

This study was begun while the author was on a Brookings Economic Policy Fellowship in the Office of Economic Research of the Economic Development Administration. Acknowledgements are due Paul L. Burgess, Richardj Cebula, James A. Chalmers, Herbert M. Kaufman, Todd Sandler, WalterJ Wadycki, and the referees for this journal, all of whom have made helpful comments on earlier drafts of the paper and none of whom bears any responsibility for remaining shortcomings.

This article summarizes and draws connections among diverse streams of theoretical and empirical research on the economics of privacy. We focus on the economic value and consequences of protecting and disclosing personal information, and on consumers' understanding and decisions regarding the trade-offs associated with the privacy and the sharing of personal data. We highlight how the economic analysis of privacy evolved over time, as advancements in information technology raised increasingly nuanced and complex issues. We find and highlight three themes that connect diverse insights from the literature. First, characterizing a single unifying economic theory of privacy is hard, because privacy issues of economic relevance arise in widely diverse contexts. Second, there are theoretical and empirical situations where the protection of privacy can both enhance and detract from individual and societal welfare. Third, in digital economies, consumers' ability to make informed decisions about their privacy is severely hindered because consumers are often in a position of imperfect or asymmetric information regarding when their data is collected, for what purposes, and with what consequences. We conclude the article by highlighting some of the ongoing issues in the privacy debate of interest to economists. (JEL D82, D83, G20, I10, L13, M31, M37)

Drawing on experimental economics, anthropology, social psychology, sociology, history, the theory of cultural evolution as well as more conventional economic sources, I review models and evidence concerning the impact of economic institutions on preferences, broadly construed. I identify a number of ways in which the form of economic organization of a society appears to influence the process of human development by shaping tastes, the framing of choice situations, psychological dispositions, values, and other determinants of individual behavior. I conclude by commenting on some implications for economic theory and policy analysis.