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The Faith of Economists

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12/13/2001Robert Nelson

Economics as Religion: From Samuelson to Chicago and Beyond. By Robert H. Nelson, Max L. Stackhouse. (Penn State Press, June 2001) $24.50.

There is a growing interest among economists in the connections between religion and the economy, as I attempt to document in my new book Economics as Religion: From Samuelson to Chicago and Beyond.

American economists in the decades after World War II treated the economic system as a technical machine that could be manipulated by expert knowledge.  They are now coming increasingly to recognize that there are large cultural elements that significantly influence economic behavior and outcomes.  It is important, for example, that the participants in a market should trust one another. The existence of such trust often depends on shared religious values.  

The market involves a basic paradox.  In the areas of ordinary production and consumption, individuals should act to maximize their own advantage.  However, the pursuit of self-interest can go too far.  The market requires a satisfactory institutional framework but this framework may never come into existence, or may be undermined, in a world where too many actions are motivated solely by individual gain.

In contemporary Russia, much of Africa, and many other nations around the world, the full benefits of markets have not been realized because the necessary cultural infrastructure--the "social capital"--is missing.  Instead of the pursuit of profits in business, too many people engage in "rent seeking" in politics.  The judicial system is an unreliable mechanism for contract enforcement because of corruption and the absence of a strong tradition of law.  

It may thus be necessary to encourage self-interest in some areas of society but to find ways to restrain self-interest in other important areas.  It is a difficult combination to sustain.  Economically, it may require the special characteristics of an "efficient" religion.  The failures of many past and current national economies may result from the presence of religious values that fail to define the proper scope of self-interest in society in an economically satisfactory way.  They may provide either too little or too much scope for the pursuit of self-interest.   

If theologians are unable to provide the requisite religion, it could even fall to the members of the economics profession.   Indeed, Economics as Religion argues that, their own self-image much to the contrary, modern economists have sought not only to achieve a technical understanding but also to provide the (secular) religious foundations for an efficient economic system.  The members of the economics profession have served as the leading priesthood of the modern age.  They have been proselytizers for a social value system--ultimately an economic religion--that can defeat opportunistic motives in inappropriate areas of society and yet sustain the motive of private profit seeking in the domain of the market.

The American nation state has effectively served as the church of this religion in the United States.  The American "Vatican" is Washington, D.C., also a unique governing jurisdiction within the boundaries of a nation-state, like its Roman counterpart.  Led by its economic priesthood, the American government administers the affairs of the nation to achieve a secular salvation for all its citizens--the attainment of a new heaven on earth.   This prophetic vision provided the ethical underpinnings for the development of the American welfare and regulatory state of the twentieth century.

Ultimately, the tenets of scientific economic religion should extend to all the earth, as the Peace Corps, World Bank and other modern economic "missionaries" seek to spread the word.   It is a newer and now secular version of the old Puritan idea that America should be a "city on the hill" to provide a religious model for all the world to follow.

During the cold war, America's chief competitor in the Soviet Union sought to spread yet another gospel of  economic salvation.  The cold war was a new version of the old wars of religion fought among different branches of Christianity.  If economic salvation  is to be achieved gradually in the United States through the scientific application  of professional economics, Marxism offered a more apocalyptic--one might  say "fundamentalist"--version of the saving of the world.  

In Marxism the laws of economics have taken the place of God in determining all that happens in history.  The immutable workings of the class struggle then predestine a terrible final clash between the capitalist class and the working class.  The inevitable triumph of the proletariat brings the economic stage of history to an end.  Mankind no longer is "alienated" from its true nature--original sin is abolished--and heaven arrives on earth, as both government and property are abolished.  It is a world of perfect material abundance and true harmony among all human beings.  In short, the grand illusions of Marxism are best seen in retrospect as a great Christian heresy, a Marxist retelling of the Book of Revelation.  It had special appeal for many former Christians who could now find in "science" a message that was in fact already very familiar to them. 

In the United States Paul Samuelson is the author of the most popular and influential textbook in introductory economics of the twentieth century.  Economics  was first published in 1948 and more than 3.5 million copies have been sold. Samuelson regards his book as an introduction to the "scientific" study of economics.  In truth, Economics is more like a bible of a modern kind.  

Samuelson's religion, like that of most economists, is economic progress.  In this "economic theology," there is a new conception of  the source of "sin" in the world.  The cause of stealing, fighting, lying and other evils in the world lies in the existence of material scarcity.  People have behaved so badly in the past because they simply were driven to it by the physical struggle to survive.  Wars among nations were the products of economic conflicts over natural resources.  The social malaise of the inner city today is the economic result of the poverty in which the people there live.

If material scarcity thus is the real source of evil actions, the abolition of sin in the world becomes possible.  It requires only the achievement of a new condition of full economic abundance in society.  Human beings through the application of scientific knowledge now hold it in their power to bring about a new heaven on earth.  

Economists become the leading priesthood of the modern age precisely because they hold the keys--or so they are widely seen among true believers--to a proper understanding of the workings of economic progress, the modern route of salvation.  The differences among  Marxist, socialist, progressive, fascist and other true believers have concerned the best means of perfecting the economic system, of abolishing scarcity in the world and attaining to the requisite true state of abundance.  They have all accepted that, if this goal could be achieved, the arrival of a new heaven on earth would be at hand.

In the Samuelson interpretation of economic religion, it was necessary to achieve a reconciliation of the neo-classical view of the private market with the progressive-era vision of the scientific management of American society (achieving in Samuelson's terms a "mixed economy").  Economic professionals could sustain economic progress--could eventually abolish scarcity, and lead the way to heaven on earth--through their appropriate scientific manipulation of the market mechanism.  The market is thus religiously blessed, even as a priesthood of economists motivated by higher values oversees its operation.  The great success of Samuelson's new "economic religion" reflected his ability to provide a satisfactory synthesis of the free-market and the progressive traditions in American political and economic thought.  It became the guiding economic religion of the American welfare and regulatory state in the decades of the 1950s  and 1960s.

By the late 1960s, however, a new school of economic thought was challenging Samuelson and his fellow economists in Cambridge, Massachusetts.  The school of economics at the University of Chicago was hostile to the progressive aspirations to the scientific management of society.  If economists and other expert professionals were to be the new priests of society, the Chicago school suggested that even priests were likely to be living under the influence of original sin.  The participants in government, just like the actors in a market, would be motivated by their own self-interest.  In this regard Chicago preached an economic theology that harked back to the Protestant Reformation and its vision of a "priesthood of all believers," abolishing the distinctions between the higher ideals of the Roman Catholic priesthood and the behavior of the ordinary people.

A government in which all participants pursued their self-interest would in many respects be a dysfunctional government.  The "Protestant" theology of Chicago--including its understanding of the pervasive place of "sin" in the world--thus led in a libertarian direction, towards a minimization of the role for government.  Any larger role would simply provide a wider arena for the coercive exploitation of some men and women by other sinful men and women.  In the modern era, the private manipulation of the administrative instruments of the welfare state in Washington, D.C. had replaced the old corruption of Rome.

Led by Gary Becker, the Chicago school further extended the pursuit of individual advantage into areas of marriage, child rearing, crime and many other "sociological" subjects.  The Chicago school altogether abolished the former common distinction between the pursuit of self-interest in the market and the pursuit of more altruistic motives in other "non-market" domains in society such as the family.  It thus raised--but did not effectively answer--the question of how a market system might work without the support of social institutions that depended on the existence of less individualistic values that would operate in those areas outside the market.

Economics as Religion finds that the moral authority of the economics profession--its priestly role--is being eroded today by a declining faith in the redemptive powers of economic progress. Other new (or old but newly influential) religions may well become more powerful in the public arena than economic religion.  The future of the market will depend significantly on the way in which those religions resolve--or fail to resolve--the social ethics of the place of self-interest in society.  Economists will have to pay much more attention to the economic role of religion--and the moral implications for all of society--in the future than they have in the past.

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