The economics of religion is a field that applies the insights and methods of modern economics to the human side of religion, and is explicitly not about money, church financing, or evaluating the truth of theology.

Anytime people hear the word economics they tend to think of money.

The economic approach is distinguished from sociology, psychology, and anthropology by its unflinching assumption of maximizing/rational-choice behavior, stable preferences, and the concept of markets and market equilibrium, which leads economists to ask why an apparently strange behavior (like joining a cult) is rational rather than attributing it to brainwashing or inexplicable tastes.

Religions should be analyzed as a market in which each denomination is a competing firm, and where there is religious freedom normal economic processes operate: unresponsive religions decline while creative, entrepreneurial ones thrive, and more freedom yields more innovation and in a fundamental sense more and better religion.

Cross-country data from the 1960s-70s show a striking inverse relationship between religious regulation and religiosity: the most religiously free/competitive countries (like the US) have the highest church attendance and belief, while state-monopoly countries (like Sweden, where ministers were civil servants) have extremely low attendance—roughly 3% weekly versus 30-40% in the US.

After the US Constitution's First Amendment disestablished state churches, intellectuals predicted religion would collapse, but the opposite occurred: church membership grew from about 13% around the Revolution to 30-40% by 1850 and 60-70% today, as established churches declined while entrepreneurial upstarts (Baptists, Methodists) grew and made converts.

Abstract debates about whether rationality assumptions are useful are themselves useless; the pragmatic track record—Nobel-winning extensions of economics into family, addiction, crime, and public choice—shows that applying rational-choice principles to traditionally non-economic domains yields powerful new insights.

For nearly a century sociologists predicted that an open religious environment would produce pluralism that undermines faith and causes people to walk away, but the economic religious-market theory predicts and the evidence confirms the opposite, so the economic theory has 'the mild advantage of being right.'

Careful sociological and psychological research from the 1970s-80s found that the vast majority of so-called cult members were normal—reasonably well-educated, healthy, young, with normal backgrounds—contradicting media stereotypes of brainwashed, ignorant, drug-controlled deviants, and most left after a short time none the worse for wear.

The rare cases of cult violence (Jonestown, Waco) are largely caused by heavy-handed, sudden government intervention that throws a cohesive group into disarray, and absent that outside force such violence is rarely observed.

Many valuable things—both abstract (love, concern) and concrete (mutual aid)—can only be produced in highly committed, cohesive groups, but such groups are vulnerable to free-rider problems where members take resources without contributing.

Costly, visible 'sacrifice and stigma'—prohibitions on dress, grooming, diet, and behavior (e.g., the Hare Krishnas' shaved heads, pink robes, and chanting)—function as efficient screening and monitoring devices: they exclude half-hearted free riders and signal genuine commitment, because such costs make it impossible to hold a normal secular job, so members forgo outside benefits to gain group benefits.

It would be irrational for an individual to burn up resources alone, but in a group context collective sacrifice can be efficient because it separates members from the outside world and suppresses temptations that would undermine the group, while producing non-contractible goods like open-ended mutual aid (e.g., Mormons or Jewish communities providing meals after a birth).

Successful religions bind material and spiritual/social goods together so they reinforce each other—communal meals are primarily about relationship and presence rather than calories—and these goods (like real affection) cannot be bought, only given and received, which is what makes religion distinctive.

The more dysfunctional a society's economy and government, the more cult-like groups arise, because where civil society, markets, and the state fail to provide collective resources, religious groups step in to supply them.

Religions excel at providing resources for those with the greatest needs (the young and the elderly) through institutions like rest homes, orphanages, and childhood education, and through norms that obligate care, which provides an indirect empirical test of the theory since these groups are needier but no less rational than others.

Religions help people by both providing direct group support (e.g., the congregation helping raise children) and indirect support helping people keep themselves in line against short-term temptation, recognizing that people are not always perfectly rational—self-help groups like Alcoholics Anonymous, though nominally secular, are imbued with transcendent/spiritual principles that bind the group and help people achieve concrete goals like sobriety.

There is a small but statistically significant positive association between religiosity and education—religiosity rises with education through college—and it only tails off at the PhD level, where the evidence suggests relatively irreligious people are drawn into PhD training rather than the training making people irreligious.

Religiosity varies by profession even among the equally educated and wealthy: business people, doctors, and physical scientists (physicists, biologists) tend to be more religious, while academics, lawyers, economists, and especially anthropologists and psychologists tend to be less religious—reflecting selection into fields rather than effects of the work itself.

Contrary to the stereotype of the sophisticated, highly educated atheist, the demographic group most likely to be atheist is relatively young, single, low-education males who are socially and economically alienated; on average atheists are less educated and less well off than the general public because a large fraction are marginalized people 'not very anything else.'

Highly educated 'staunch' atheists—particularly the Objectivist followers of Ayn Rand—exhibit social attributes closely matching those of cults: a devout in-group bound by a sense of superiority and a negative attitude toward outsiders (believers), conviction they alone possess the truth, distinctive speech, and self-isolating ways of confronting others.

The same group-cohesion mechanisms that explain religion—the human need to belong to something larger and to feel one's group is superior, sustained by costly commitment devices—generalize to sports teams, political parties and movements, and especially the military, which deliberately uses cult-like methods (shaving heads, uniforms, songs, extraordinary costs) not all of which improve combat ability, to forge devotion to the small unit.

Group devotion is a morally neutral tool that, like the military, can be harnessed for sublime or heinous ends—to defend what is good or to attack it.

Football fandom produces an emotional high that, unlike religion, is empty and non-transcendent because it is part of a zero-sum game that inevitably involves suffering on the other side.

The economic approach to religion assumes the same people who are treated as rational in standard models of consumption are the religious majority, so it is statistically and methodologically inconsistent for economists to treat religious behavior as irrational.