Economic Development, Religious Competition, and the Rise and Fall of Muslim Science

Is Islam compatible with modern economic development? The poor development record of predominantly Muslim countries during the past century has led to claims that only a return to medieval Islamic institutions will produce economic growth in a manner that is compatible with Islamic culture. Using data from the thirteenth century Islamic Levant, this paper examines how one medieval Islamic institution encouraged economic growth by promoting scienti…c and technological innovation. The dhimm¬̄ institution, which guaranteed non-Muslims a relatively large degree of religious freedom, created “religious competition”for converts and societal standing. Institutionalized tolerance, coupled with Islam’s initial disadvantages in number of adherents and in the sophistication of theological scholarship, gave Muslim religious and political elites incentives to encourage the study of logic. The study of logic for religious debates led, in turn, to the cultivation of the rational sciences. Results suggest that as the societies under Muslim rule became increasingly religiously homogeneous, religious competition decreased, leading to a sharp decline in non-religious intellectual enterprise. The results highlight how the positive economic e¤ects of one medieval Islamic institution critically depended on historical circumstance. I especially thank Barry Eichengreen, without whose encouragement this paper would not have been written. Robert Anderson, Bryan Graham, Avner Greif, Edward Miguel, Gérard Roland and seminar participants have also provided helpful comments. The usual disclaimer applies.