The Enduring Influence of Religion on Economic Thought and Policy

This podcast episode features Ben Friedman, a professor at Harvard University, discussing the profound and often overlooked influence of religious thinking on modern economics, particularly in the United States. Friedman begins by reiterating the core argument of his 2005 book, "The Moral Consequences of Economic Growth," which posits that sustained material progress for the broad population fosters societal advancement in non-material aspects like opportunity, tolerance, generosity, and democratic institutions. Conversely, a loss of this sense of material progress leads to stagnation or retrogression in these moral dimensions. He notes with regret that since writing the book, despite some GDP growth, unequal distribution has meant the majority haven't felt this progress, leading to a period of retrogression in the U.S. and other Western democracies.

Friedman then delves into the subject of his 2021 book, "Religion and the Rise of Capitalism," explaining how he repeatedly encountered religious influences while researching his earlier work. He argues that from the time of Adam Smith and David Hume, the origins of modern Western economics have been deeply shaped by religious thought. Specifically, he highlights the movement away from predestinarian Calvinism in the English-speaking Protestant world as a crucial catalyst. This shift, he contends, opened the way for a more benign view of human character and agency, enabling Smith to conceive of self-interest, when channeled through competitive markets, as a force for broader societal benefit.

The discussion further clarifies Adam Smith's actual views, contrasting them with common misinterpretations. Friedman emphasizes that Smith viewed self-interest as an innate part of human nature, neither inherently good nor bad, but rather a force whose societal consequences needed to be understood. Crucially, Smith did not see competitive markets as a fragile, untouchable system. He was, in fact, open to various market interferences for public good, advocating for progressive income taxes, special taxes on luxury goods, and much tighter bank regulation. Friedman laments that Smith has been "badly served" by both the public and the economics profession, often being misrepresented as an advocate for unfettered markets.

Finally, Friedman traces the continued influence of religion through the professionalization of economics in the United States, noting that many founders of the American Economic Association had religious backgrounds. He identifies the mid-20th century perceived threat of world communism as a key catalyst, uniting conservatives who sought to preserve free markets with those who aimed to protect Western religion, thereby shifting evangelical Protestants' stance on economic policy. He concludes by applying Thomas Kuhn's theory of disciplinary maturity, suggesting that while theoretical economics may have become immune to external religious influence, its application to public policy remains heavily swayed by religious thinking, particularly evident in U.S. opinion polling. He also draws a parallel between the current distrust of expertise in the U.S. and the Second Great Awakening, arguing that economists' self-flagellation over public distrust is often unnecessary, as it's a broader historical phenomenon affecting all scientific disciplines.

"The main argument of my 2005 book was and is that when the broad bulk of society's population has the sense of moving ahead in its material standard of living... That is a condition under which the society is likely to move forward also in a variety of non-material efforts of its non-material aspects of its existence."

"I argued in the 2021 book called religion and the rise of capitalism that not just at the time of Smith and Hume but ever since economics has been influenced by uh what was going on in religious thinking of the time."

"I argue that it was this movement away from predestinarian Calvinism that opened the way for a more benign and expansive understanding of the human character and a more optimistic view of the possibilities for human agency."

"What Smith showed is that when humans interact with one another under conditions of competitive markets, this innate from the womb, as he described it, desire to better their economic condition on the part of humans leads to outcomes that are beneficial not just for themselves but for other people as well."

"Smith was in favor of progressive income taxes on the straightforward grounds that distributing money from the rich to the poor was a good idea."

"I think Smith has been very badly served over time by the public in general and by the economics profession."

"Adam Smith is alive but not doing very well because he's being held prisoner in Chicago."

"I think the origin of all this is the perceived threat of world communism."

"Thomas Kuhn, the great historian of science, argued that when a discipline is in its infancy, it's most subject to external influence at its most basic fundamental theoretical level."

"Today expertise especially in the United States is not in good odor."

"We have the crown jewel of the American scientific establishment, the National Institutes of Health uh in effect being shut down in its research operation."

"I think we still find lots of influence of uh economics of of religion on economic thinking. And I think we see it especially in the United States."