Economic Analysis of the Legal Regulation of Religion in the US and Germany

Reading time 3 min.
Religion (illustrative)
Religion (illustrative)

In this paper, I analyze the legal regulation of religion in the US and Germany from rational choice perspective and the perspective of new institutional economics and constitutional political economy.

Focus is on the constitutional framework, legal status and funding of religious institutions and the establishment and free exercise jurisprudence of the US Supreme Court and German Federal Constitutional Court.

The legal regulation of religion in the US proves itself to be more economically efficient in a sense that it motivates religious vitality, however, this vitality benefits mostly strict churches and sects.

On the other hand, legal regulation of religion in Germany, while establishing the de facto monopoly of the traditional religions and lowering religious vitality, achieves another goal that is also economically efficient : it reduces overgrazing of moral goods and stabilizes social norms, which in turn reduces state transaction costs.

As to the US Supreme Court and German Constitutional Court free exercise jurisprudence (accommodations and exemptions), I argue that both may be analyzed within a framework of a restricted cost-benefit analysis with three prongs.

First, the religious exemption or accommodation must not provide high incentives for third parties to claim adherence to religion in order to rip off benefits by means of free-riding or, alternatively, it must not provide incentives to third parties to relinquish religious beliefs.

Secondly, the costs of exemption must be to a large extent internalized by those claiming it, as no high burdens can be imposed on the rest of the society. Thirdly, aggregate social consequences of the exemption need to be kept very low.

In addition to this, I analyze consequences of the recent decisions of both courts , Supreme Court’s Employment Division v. Smith and German Constitutional Court Headscarf decision, as examples of what seems to be a new trend of judicial decision making under conditions of increased religious plurality.

These decisions are similar in a sense that the previous inclination of both courts to protect minority and non-traditional religions is lesser ; instead, they tend to transfer the responsibility for to political branch. However, given the different nature of the religious market in both countries, consequences differ in degree but they are equally negative.

In the US, lesser judicial protection affects political alignment and leads to an increased efforts of conservative churches and sects to influence politics, which may result in ’cultural wars’ ; the likelihood of this outcome is even greater given that ’moral decisions’ (i.e. abortion) of the US Supreme Court hurts liberal churches more and increases the cohesion and efficiency of the more conservative ones.

In Germany, on the other hand, the result is a further entrenchment of ’parallel societies’ and the widening of the gulf between the majority and minority communities.

By Ejan MacKay

Observatory of Religions  The 21st century will be or not be religious. This Malraux prophecy is being fufilled: the impact of religion on political, economic, financial and social spheres is making front page news. Observatory of Religions’ (L’Observatoire des religions) perspective, that is; the observation, analysis and commentary of religious issues in a current affairs framework, is purely unreligious. L'Observatoir des Religions was created by Philippe Simonnot, economist and author of numerous works on history and economics.
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