The modern study of the economics of religion is grounded in two intellectual strands of thought, each of which appears in Adam Smith's Wealth of Nations. First, Smith analyzed religious competition and church–state relations as market phenomena. He argued that the absence of state religion allows for competition, thereby creating an environment for a plurality of religious faiths in society. Second, he viewed religious beliefs and activities as rational choices. As in commercial activity, people respond to religious costs and benefits in a predictable, observable manner. People choose a...

The modern study of the economics of religion is grounded in two intellectual strands of thought, each of which appears in Adam Smith's Wealth of Nations. First, Smith analyzed religious competition and church–state relations as market phenomena. He argued that the absence of state religion allows for competition, thereby creating an environment for a plurality of religious faiths in society. Second, he viewed religious beliefs and activities as rational choices. As in commercial activity, people respond to religious costs and benefits in a predictable, observable manner. People choose a religion (the theory of sects) and the degree to which they participate and believe (if at all). This article seeks to place within a historical perspective the evolution of the economics of religion as a field of inquiry. It focuses on Max Weber and the sociological study of religion, rational choice and market theory, human capital and religion, religious monopoly with or without the state, state regulation and the religion market, and religious pluralism and competition.