Protestant Work Ethic - Criticism

Criticism

The economist Joseph Schumpeter argues that capitalism began in Italy in the 14th century, not in the Protestant areas of Europe. Other factors that further developed the European market economy included the strengthening of property rights and lowering of transaction costs with the decline and monetization of feudalism, and the increase in real wages following the epidemics of bubonic plague.

Becker and Wossmann at the University of Munich have written a discussion paper describing an alternate theory. The abstract to this states that the literacy gap between Protestants (as a result of the Reformation) and Catholics sufficiently explains the economic gaps, and that the: "Results hold when we exploit the initial concentric dispersion of the Reformation to use distance to Wittenberg as an instrument for Protestantism". However, they also note that, between Luther (1500) and 1871 Prussia, the limited data available has meant that the period in question is regarded as a "black box" and that only "some cursory discussion and analysis" is possible.