Beginning at 11:25 minutes, Iannccone explained that intellectuals at the time that English colonies were established believed that religion was important for society, creating positive externalities which are benefits that society receives from individual membership in a church. They also believed that people would not attend religious services if membership was not mandated. To order society so that individuals and society as a whole received the benefits of religion, colonial rulers established state religions. The state mandated that citizens be members of the state church, and set up barriers to entry, making it difficult to impossible to participate in a non-state sponsored religion.
The Constitution of the United States began the first experiment with free market religion and strengthened the Great Awakening. As people could choose their religion freely, state churches declined, and upstart religions like the Methodists and Baptists grew rapidly. As competition among churches increased, the overall proportion of people that attended increased.
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