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How Religion Influenced Modern Economics


“One of the fundamental elements of the spirit of modern capitalism,” German sociologist Max Weber wrote in his landmark 1905 book, The Protestant Ethic and the Spirit of Capitalism, “of rational conduct on the basis of the idea of the calling, was born from the spirit of Christian asceticism.”

Weber attributed the free-market success so prevalent amongst Protestant societies to its origins in Calvinist predestinarian theology: believers could never know for sure whether they had been saved, but material success portended well for their prospects of eternal salvation, so they might as well earn and save money.

Benjamin Friedman, a longtime Harvard economist, has absorbed the Weberian explanatory spirit and reshaped it for the modern age in Religion and the Rise of Capitalism, his new book exploring the interplay between economic and religious ideologies. Friedman’s central contention, that “our ideas about economics and economic policy have long-standing roots in religious thinking,” permeates his treatment of Adam Smith, the progenitor of modern economics, and his ideological descendants, especially in the United States.

While his analysis is detailed and compelling, his key arguments are susceptible to blind spots, including the contemporary, and possibly lasting, dissociation of American religious observance from enthusiasm for the free market.

Self-Interest as a Virtue

In the 17th and 18th centuries, self-interest was widely disdained as vicious, not virtuous. Acquisitiveness and luxury became associated with immorality, especially in the wake of the Glorious Revolution of 1688 and the bursting of the South Sea bubble in 1720. Mercantilism ruled the day, with its focus on preserving monopoly power and favoring producers over consumers. Even David Hume, who, alongside Smith, would eventually midwife capitalism, disparaged self-interest in his early work.

“This avidity alone,” Hume wrote in 1739, “of acquiring goods and possessions for ourselves and our nearest friends, is insatiable, perpetual, universal, and directly destructive of society.”

But this fierce opposition to self-interest slowly began to change. Friedman traces Smith’s groundbreaking insights—that “private initiative, undertaken for no reason other than to advance a person’s own economic interest, can nonetheless end up making other people better off too”; that “the setting in which such beneficial consequences would follow was the market economy”; and that “the mechanism that delivered this outcome was competition”—to the development of the Moderate faction of the Church of Scotland following the 1707 Act of Union and to 17th-century French Catholic theologians.

The Moderates’ “notions of divine benevolence and their benign view of human character” aligned with and arguably inspired Smith’s thinking. Although he never directly acknowledged the link, Smith shared cultural and intellectual space with these thinkers. Vigorously disputing the dour and forbidding Calvinist-Presbyterian-Puritan notion of predestination and original sin, the Moderates embraced a fundamentally positive view of human nature, and, Friedman argues, “Smith and his contemporaries were secularizing the essential substance of their clerical friends’ theological principles.”

Meanwhile, those like the 17th-century priest Pierre Nicole, influenced by the Jansenist school of French Catholicism, who believed that “there is nothing so resembling the effects of Charity, as those of self-love,” likewise softened the ground in which a beneficent variety of self-interest could take root. Again, while Smith never cites Nicole, the latter’s books were taught in English translation in Glasgow when the former studied there.

Smith’s development of his earlier philosophical advances in The Theory of Moral Sentiments, including a prototype of his “invisible hand” theory, emerged from this miasma of theological thought, according to Friedman. Deploying self-interest in a near-automatic way to benefit all of society reflected these earlier beliefs.

“The role of markets and competition became an ongoing way of setting one person’s economic interest against another’s,” Friedman contends, in order to “not only restrain them both, but at the same time harness the energy and initiative to which each person’s self-interest gives rise, in such a way as to achieve some common purpose” (emphasis in original).

Indeed, Smith synthesized his earlier thoughts into his 1776 masterpiece The Wealth of Nations, where he famously posited that “it is not from the benevolence of the butcher, or the brewer, or the baker, that we expect our dinner, but from their regard to their own interest.” This sensibility, Friedman posits reflects the religious concept of “humans as morally conscious agents, with free will and choice” who autonomously “determine whether they are saved or not.” As such, Smith’s economic thinking represented a rejection of the predestinarian theology of the Presbyterians, who were rapidly falling out of favor in Scotland and elsewhere.

Economics in America

Similarly, the American colonies in the 18th century slowly came to eschew the orthodox Puritan belief in original sin in favor of a philosophy of free choice. “This uncomfortable doctrine” of Calvinist determinism, the Methodist preacher John Wesley proclaimed following a 1736 missionary visit to the Georgia colony, “directly tends to destroy our Zeal for Good Works [and] our Love to the greater Part of Mankind.”

After Harvard College trended too heavily away from rigorous Puritanism, Cotton Mather and others famously founded Yale—only to see their New Haven enterprise adopt a softer Anglicanism some 20 years later. Even the intense revivalism of Jonathan Edwards and the Great Awakening eventually gave way to the kinder and gentler Unitarianism, Deism, and “natural theology,” all of which emphasized reason, morality, and the benevolent human desire for external validation.

This positive outlook found expression, among other places, in the Declaration of Independence’s affirmation of “life, liberty, and the pursuit of happiness.” Leading colonial political economists likewise espoused it. They also cottoned to the post-Millennial concept of a Kingdom of God on earth, the notion that humanity, endowed by its Creator with intellect and moral reasoning, could itself usher in economic and political perfection.

Friedman argues this faith in human progress writ large dovetailed with Smith’s philosophy, expressed in his Lectures on Jurisprudence, of steady advances in human development from prehistoric hunter-gatherers to commercial agents of the modern era. As Friedman puts it, “religious values and economic values were therefore in harmony, not opposed, in America of the early nineteenth century.”

This optimistic religious and economic outlook persisted after the devastation of the Civil War. Henry Ward Beecher, a widely respected clergyman who had been a prominent abolitionist in the 1850s, wrote in The Administration of Wealth in 1867 that Americans “need not be ashamed to be rich [or] to be thought to be seeking riches” because wealth could and should be harnessed to the greater good of society.  Russell Conwell, who led Philadelphia’s Baptist Temple and is considered the progenitor of the “Gospel of Wealth” (also known as the “Prosperity Gospel”), deemed it “your Christian and godly duty” to attain riches, and proclaimed that “to make money honestly is to preach the gospel.”

But other strands of religious thinking arose in the late 19th and early 20th centuries that countered this narrative. Friedman pits the Gospel of Wealth against the “Social Gospel” of Walter Rauschenbusch and Washington Gladden, who emphasized the Christian duty to eradicate poverty and combat inequality.

Rauschenbusch labeled “the great sin of modern humanity” the unfortunate truth that “men learned to make wealth much faster that they learned to distribute it justly.” The Social Gospel came to dominate mainline Protestant denominations, while the Prosperity Gospel held sway among evangelicals.

This division manifested in the newly developing field of economics, where pioneers like Wisconsin’s Richard Ely and Columbia University’s John Bates Clark founded the American Economics Association and embraced the Social Gospel. Clark declared in his 1894 The Philosophy of Wealth that “the security of the greatest quantity, the highest quality, and the most equitable distribution of wealth is the rational goal of economic society.” Franklin Roosevelt hailed from this tradition, as did many members of his cabinet, and the redistributionist thrust of the New Deal drew its force from it, in Friedman’s telling.

Meanwhile, both the Great Depression and especially the Cold War galvanized, on the right, an amalgam of traditional Christianity and libertarian economics. Conservative luminaries like Billy Graham and William F. Buckley unified evangelicals and business interests in opposing the spiritual and material evils of communism—a fusionist alliance that outlasted even the demise of the Soviet Union.

It is to this alliance that Friedman points in concluding that Americans remain moored to a subliminal, at times almost unconscious, faith in markets, even when capitalism supposedly runs against their interests. “It also helps explain,” Friedman reckons, “what we often view as the puzzling behavior of many of our fellow citizens whose attitudes toward questions of economic policy seem sharply at odds with what would be to their own economic benefit.”

He cites data indicating that evangelicals consistently support cutting taxes and spending despite earning less than the national average. “What is especially striking,” Friedman notes, “is that despite their typically lower incomes, evangelical Protestants are more likely than other Americans to believe that economic success in life is the result of individual effort.”

But here, and elsewhere, blind spots begin to emerge.

Correlation vs. Causality

First, Friedman spends an inordinate amount of time recounting the 16th- and 17th-century history of the split in the Catholic and Anglican churches, the progress of Calvinism’s advance on the continent and subsequent retreat in Britain, and the intricacies of intra-Protestant theological debates that could easily have been summarized in a few pages. He also delves too deeply into the nuances of competing strands within both the Federal Council of Churches and the National Association of Evangelicals.

Some of this effort would more profitably have been diverted to a comparative analysis of the development of modern economic and religious thinking in Britain, where Friedman’s story starts, and in continental Europe in order to help the reader understand why Americans are unique.

More fundamentally, Friedman proves far more capable of establishing correlation between religious and economic ideas than causation. Yes, Smith was exposed to, perhaps even immersed in, Moderate Christian thought, but his writing evinces few references to it and no proof of its impact, as Friedman recognizes, especially given Smith’s generally secular leanings and pro-Enlightenment orientation. “To be sure,” he concedes, “recognizing the logical connection between ideas … is not the same as establishing historical influence.

This lack of causality appears most striking in Friedman’s conclusion, where he attributes religious motives to evangelical views on economic issues. Here, he vastly underestimates the bearing of tribalism on voting patterns and the sorting that has characterized American politics over the last several decades. For instance, as the Dispatch’s David French, my American Enterprise Institute colleague Tim Carney, and others have shown, Donald Trump attracted his strongest evangelical support from voters who attended church less frequently, suggesting an inverse correlation between religiosity and support for conservative economic policies.

Then, too, certain leading religious conservatives have recently presented economic plans that openly challenge free-market orthodoxies. Sen. Josh Hawley, an evangelical Protestant, has sounded a distinctly populist note, introducing legislation that would impose a $15 per hour minimum wage on large companies and offer a “blue-collar bonus” to the working class. In a 2019 speech at the American Principles Project, Hawley decried “market worship” and “the rise of a new oligarchy of wealth and education,” promoting instead “our communities of home and worship and labor.”

Meanwhile Sen. Marco Rubio, a devout Catholic, has championed what he calls “Common Good Capitalism,” which focuses on Catholic social doctrine and the dignity of work. In a 2019 speech at Catholic University, Rubio argued that “the notion that, left unguided, the market will solve our problems will not restore a balance between the obligations and rights of the private sector and working Americans.” Religious fundamentalism and market fundamentalism appear to be diverging, perhaps enduringly so.

Yet even though a religion-only explanation, like all monocausal theories, cannot sufficiently explain the development of free-market capitalism by Adam Smith and his American exponents, Friedman’s thorough analysis nicely illuminates the issue. Whether or not he’s correct that this economic “worldview too rests on presumptions that originate in the religious thinking of either today or sometime in the past,” he raises and investigates an important and interesting phenomenon.