American Economic Review: Papers & Proceedings 2011, 101:3, 166–170 http://www.aeaweb.org/articles.php?doi 10.1257/aer.101.3.166 =

Economics: A Moral Inquiry with Religious Origins

By Benjamin M. Friedman*

Its secure foundation as an empirically based The commonplace view today is that the discipline notwithstanding, economics from its emergence of “economics” out of the European inception has also been a moral science. Adam Enlightenment of the eighteenth century was an Smith’s academic appointment was as profes- aspect of the more general movement toward sor of moral philosophy, and not only his earlier secular modernism in the sense of a historic turn Theory of Moral Sentiments but the Wealth of in thinking away from a God-centered universe, Nations, too, reflects it. Both books are replete toward what we broadly call humanism. To the with analyses of individuals’ motivations and contrary, I suggest that the all-important tran- psychological states, and the ways in which sition in thinking that we rightly identify with what we now call “economic” activity, carried Adam Smith and his contemporaries and follow- out in inherently social settings, enables them ers—the key transition that gave us economics as to lead satisfying lives or not. Even the divi- we now know it—was powerfully influenced by sion of labor, which Smith hailed from the then-controversial changes in religious belief in very first sentence of theWealth of Nations( as the English-speaking Protestant world in which the key to enhanced productivity, is subject) to they lived. Further, those at-the-outset influences explicitly moral reservations—because it erodes of religious thinking not only fostered the subse- individuals’ capacities for “conceiving any gen- quent spread of Smithian thinking, especially in erous, noble or tender sentiment” and for judg- America, but shaped the course of its reception. ing either “the ordinary duties of private life”or The ultimate result was a variety of fundamen- “the great and extensive interests” of the nation. tal resonances between economic thinking and The greatest concern throughout is to foster the religious thinking that continue to influence our well being of what Smith calls “the great body public discussion of economic issues, and our of the people.” Material living standards mat- public debate over economic policy, today. ter for themselves, but, more importantly, they The idea of a religious influence on Adam are essential for both individual happiness and Smith’s thinking, or on that of his contempo- public advancement: “No society can surely be raries and followers, will probably strike many flourishing and happy of which the far greater readers of the American Economic Review as part of the members are poor and miserable.”1 implausible. As far as one can tell from the As if in validation of Smith’s concerns about available biographical sources, Smith, like the division of labor, the moral aspect of our many Enlightenment figures, was at most what discipline is often ignored, and sometimes even American students of that time think of as a deliberately set aside, in today’s ever narrower Jeffersonian deist. There is little evidence of and more specialized forms of economic anal- Smith’s active religious participation, much less ysis; but it was there from the outset, and it is religious enthusiasm.2 widely recognized nonetheless. By contrast, But Smith and his contemporaries lived in what is not generally understood—indeed, what a time when religion was both more pervasive contradicts most current-day interpretations and more central than anything we know in of the origins of economics as an independent today’s Western world. In the Britain of Smith’s intellectual discipline—is the influence on the day, religion was coterminous with politics. work of Smith and other early “economists” The Moderates and the Evangelicals within the stemming from thinking about matters not just Church of Scotland were of course debating moral but religious in the traditional sense. matters of theology. But their debates were also about political matters: issues of liberty such

* Harvard University, Department of Economics, Littauer Center 127, Cambridge, MA 02138 e-mail: bfriedman@ harvard.edu . ( 2 A few scholars have taken different views; see, for 1 Quotations) are from Adam Smith 1776 . example, Jerry Evensky 1998 ( ) ( ). 166 VOL. 101 NO. 3 Economics: A Moral Inquiry With Religious Origins 167 as the allowable degree of toleration, issues of of religious thinking. To be clear, the suggestion church authority and therefore of political influ- here is most certainly not that Smith, or any of ence, and issues of patronage in the awarding the other “economic” thinkers of his day, self- of church livings, honors and other offices. In consciously sought to bring religious principles a far more dramatic way, in the prior century to bear on what they thought and wrote. Rather, the issues at stake in the English civil war, the the theological controversies to which they were Puritan Commonwealth under Cromwell, the exposed were an influence on the basic view of Stuart restoration, and the Glorious Revolution man and the world—their “pre-analytic vision,” of 1688 had all turned crucially on religious con- to use Joseph A. Schumpeter’s 1954 name for tention. But Smith witnessed the phenomenon it—that they brought to their new( thinking.) as well; he was 22 years old when the Highland And it was that new thinking that gave us rebellion of 1745 brought the same deadly mix economics as the intellectual discipline that we of religion and politics to Scotland. know today. The central theorem underlying Perhaps more important for purposes here, modern Western economics—the idea that we intellectual life was also far less segmented then. know as Adam Smith’s “invisible hand” even Not only were the sciences and the humanities though Smith’s use of the phrase, only once( in to use today’s language normally discussed the Theory of Moral Sentiments and once again in( the same circles and often) by the same indi- in the Wealth of Nations, was neither original viduals, but theology too was part of the ongo- nor so specific4 —is that behavior motivated ing discussion. Part of what Smith taught, as merely by individuals’) self-interest can, and Professor of Moral Philosophy at Glasgow, was under the right conditions will, lead to benefi- “natural theology.” In turn, one of the principal cial outcomes not merely for the individual s texts used for natural theology instruction in concerned but for others as well. Although there( ) Scotland in the eighteenth century was Newton’s were antecedents most obviously in the writ- Principia Mathematica. Likewise, when the ings of Pierre Nicole( 1696 , whose ideas also “literati” of the Scottish Enlightenment dined had a clearly identifiable( origin) in theological out, their regular interlocutors included profes- thinking, in his case Jansenist Augustinian ,5 sional divines. Of the 100 members of the the idea, especially in the form /in which Smith) Select Society, Edinburgh’s+ elite dining and advanced it, was new, and it proved powerful. debate club to which Smith, David Hume, Adam At the beginning of the eighteenth century, Ferguson and most of the distinguished Scottish people who thought about such matters some- figures of that day belonged, 14 were ministers times did and sometimes didn’t ascribe to indi- including Ferguson, who also held the chair viduals the ability to perceive what actions and of( moral philosophy in Edinburgh, as well as pursuits were in their own self-interest. But William Robertson, the leader of the Moderate there was no sense that their pursuing that self- party in the Scottish church and also principal of interest, even if they perceived it correctly, had Edinburgh University .3 any broader beneficial consequences. Indeed, Hence Smith and his) contemporaries would the standard adjective used to characterize indi- continually have been exposed to what were then vidual behavior motivated by self-interest was current debates, tensions and new ideas in theol- “vicious.” ogy, in the same way that economists in univer- The transition began in earnest with Bernard sity life today might be exposed to new thinking Mandeville’s publication of the Fable of the in physics, or biology, or demography. And in Bees, first in 1714 and then, in revised form, the same way that economists today often draw in 1723. As is well known, Mandeville had on ideas from those other lines of inquiry—think the basic insight that pursuit of individual self- of “gravity” models of trade, or “contagion” interest might lead to more generally favorable models of financial crises—these eighteenth outcomes. But he did not fully work out this century thinkers who created what became the idea, nor the conditions under which it would field of economics could easily have been influ- enced by what they heard, and read, and saw, 4 See Emma Rothschild 2001, ch. 5 for a discussion of Smith’s use of the phrase, and( references) to earlier analyses. 5 See Albert O. Hirschman 1977 for a concise summary 3 See Roger L. Emerson 1973 of some of the more important( antecedents.) ( ). 168 AEA PAPERS AND PROCEEDINGS MAY 2011 play out. As his subtitle emphasized—“Private Calvinists believed in predestination, with no Vices, Publick Benefits”—he therefore contin- role for human choice or action to affect who is ued to regard such behavior as “vicious.” But saved and who is not; their opponents believed Mandeville’s Fable led to widespread debate, not only that anyone can potentially be saved but and much of what Hume, Francis Hutcheson that individuals’ choices and actions—human and others wrote about such matters during the agency—play a role in this determination. As middle two quarters of the century was in reac- John Tillotson, the Latitudinarian Archbishop tion to Mandeville. of Canterbury appointed in the wake of the Smith’s Wealth of Nations, published in 1776, Glorious Revolution, put it, people can “co- achieved the full working out of the private- operate” in their own salvation, and “God can interest-leads-to-public-good idea as it has come not be properly said to aid and assist those down to us: individuals do correctly perceive who do nothing themselves” in the matter.7 their self-interest in their roles as producers, 3 Orthodox Calvinists believed that the sole although not necessarily( as consumers ; their reason( ) man exists is the glorification of God; desire to pursue their self-interest is a )funda- their opponents believed that human happiness mental aspect of human nature; their doing so is also a legitimate, divinely intended end. under the right conditions leads to outcomes that While the mapping from these changes in are optimal more broadly; and the key condition religious thinking to the subsequent transition that allows these more broadly optimal outcomes in economic thinking is hardly exact, there is to ensue is market competition. Not surprisingly, a striking coherence nonetheless. The belief with the Wealth of Nations the vocabulary of that men and women are born with an inherent “vice” and “vicious” is finally gone. By the end goodness is surely more suggestive that they of the century Smith’s idea was well known and can understand their self-interest and can be of broadly accepted. benefit to others, especially if human happiness What does all this have to do with religious is a divinely warranted end of man’s existence, thinking? than if they are utterly depraved in the religious The central thrust of the Latitudinarian moral sense. The further belief that all men and/ debate within the Church of England, which women are potentially eligible for salvation— was at its height in the half-century or so before and, further, that human agency is a part of what Mandeville’s Fable Mandeville was Dutch, but enables that salvation—is clearly more sugges- he lived in London and( wrote in English , as well tive that individuals’ acting in their perceived as of the Moderates-versus-Evangelicals) debate self-interest can improve not only their lives but in Scotland during much of Smith’s adult life- those of their fellow creatures too, compared to time, was a highly significant and contentious the predestinarian belief that only few are saved change in thinking that many religious histori- and human agency has no bearing on the matter. ans have called “the decline of Calvinism” 6— Yet a further change in religious thinking, although for most nonspecialists it may help to playing out at roughly the same time though call it the decline of orthodox Calvinism. Three not part of the Calvinist anti-Calvinist debate key elements in this transition were, at the very as such, concerned man’s/ future on earth. In least, strikingly congruent with aspects of the short, while those who came to be known as transition from dismissal of the “vicious” pursuit “premillennialists” exhibited an eschatologi- of self-interest which people may not have per- cal pessimism, believing that only the second ceived correctly( anyway to recognition that such coming and the resulting destruction of the behavior would, under the) right conditions, lead world as we know it could lead to any essen- to broadly beneficial outcomes: 1 Orthodox tial improvement, the newer “postmillennial- Calvinists believed in the “utter depravity”( ) of all ists” believed that the thousand years of blissful individuals; their opponents within the English- existence foretold in the Bible would be part of speaking Protestant world mostly believed in human history and, further, that human agency the inherent goodness and potential eligibility has a role in bringing it about. This belief, that for salvation of all individuals.( 2 Orthodox “progress” in living conditions brought about ) ( )

6 See, for example, Daniel Walker Howe 1972 . 7 Quotations are from John Tillotson 1748 . ( ) ( ) VOL. 101 NO. 3 Economics: A Moral Inquiry With Religious Origins 169 by human agency not only is possible but helps was highly conducive to the Smithian revolu- bring the millennium nearer in time, is likewise tion, and then to fostering its acceptance. far more consistent with the same idea about the The connection I am suggesting here between favorable consequences—for themselves as well the down-from-Calvinism theological transition as others—of individuals’ acting in their own and the up-to-Smith economic revolution bears self-interest in the economic sphere. Indeed, both parallels and contrasts to Max Weber’s as ­postmillennialism went on to gain strength,( 1905 classic “Protestant Ethic” hypothesis. As in the nineteenth century, salient economic with( Weber,) it identifies a line of causation run- scientific advances like the laying of the first/ ning from religious ideas to economics. And as trans-Atlantic telegraph cable were greeted in in Weber, what was initially the consequence of many Protestant circles as having millenarian a religious impulse survived the eventual atro- implications. phication of the religious impulse itself. Weber Again to be) clear, there is little or no evi- chose Benjamin Franklin again, at best a deist dence that Smith, or Mandeville, or any of the as his “ideal type” precisely( to show that the) key thinkers in between except Hutcheson, per- dedication to “Calvinist” virtues like industry sonally held to any of these religious beliefs. and thrift continued into a later, secularized age. The point, rather, is that they were continu- In the case of the Smithian revolution, in which ally exposed to arguments along these lines. the key individuals involved were not religious Moreover, the fact that these beliefs were not men in the personal sense to begin with, that yet fully accepted, either in England of the first lines of thinking initially spurred in part by new quarter of the eighteenth century or in Scotland religious ideas would survive the fading of those of the century’s third quarter, presumably made religious debates from popular attention follows their salience and visibility all the greater. even more naturally. Most people devote little attention to ideas that But there are differences, too. In Weber the everyone accepts and most take for granted posited effect of religious thinking is on eco- although, to be sure, Smith was a moral philos- nomic behavior; here it is on economic ideas. opher,( and a probing and insightful one at that . More important, the argument I am advanc- What attracts attention and debate are claims) ing here runs directly opposite to Weber in the that are disputed, and that bear implications content of the religious thinking on which it over which there is tension. Arguments that cut focuses. Weber famously argued that what pri- against the officially received doctrine normally marily drove the economic behavior he thought attract particular attention. Protestant theology he observed in Protestant countries, and in the was then undergoing a highly contested transi- predominantly Protestant areas within his own tion, and both Mandeville and Smith lived in the country, was a legacy of belief in predestina- midst of it. tion. Here the key driver is the disappearance It would also be difficult to argue that any of of believe in predestination. In this respect, the these movements in religious thinking, away argument here is “Weber on his head.” from orthodox Calvinism, was strictly neces- The role of religious thinking in shaping sary for the subsequent transition in economic the emergence of economics as a recognizable thinking; Smith’s ideas are powerful, and they intellectual discipline, with a field of inquiry stand on their own. Nor is there a case to be and analytical apparatus distinctly its own, has made that all four of these changes in religious also plausibly shaped the evolution of the field thinking together were sufficient for this pur- far beyond the foundational transition in the pose. Mandeville and Smith came along, but eighteenth century that culminated in Smith’s they were not inevitable, at least not in their Wealth of Nations. Religious thinking strongly specific time. But in light of the readily appar- influenced the reception of the Smithian revolu- ent resonances between these new and conten- tion, especially in America; the authors of the tious religious ideas and the key elements of the “political economy” textbooks that dominated eighteenth century transition in thinking about the pre-Civil War period—John McVickar what became economics, there is ample ground 1830 at Columbia, Francis Wayland 1837 to think, along Schumpeterian lines, that these at( Brown,) Francis Bowen 1856 at Harvard—( ) changes in theological thinking helped create a were all either ordained clergymen( ) or closely new view of individuals’ role in the world that aligned with the one or another Protestant 170 AEA PAPERS AND PROCEEDINGS MAY 2011 denomination.8 In the post-Civil War period, the on Voltaire and the Eighteenth Century, 114: movement that made economics into an amelio- 291–330. rative effort amelioration, which presumes wel- Evensky, Jerry. 1998. “Adam Smith’s Moral Phi- fare criteria,( is an inherently moral endeavor losophy: The Role of Religion and Its Relation- was even more self-consciously inspired by) ship to Philosophy and Ethics in the Evolution religious thinking; many of the key figures who of Society.” History of Political Economy, founded the American Economic Association, Spring: 17–42. including John Bates Clark and Richard T. Ely, Hirschman, Albert O. 1977. The Passions and the had their intellectual roots in the newly emer- Interests: Political Arguments for Capitalism gent Social Gospel movement of that time. Before Its Triumph. Princeton, NJ: Princeton Even today, many of the apparent puzzles sur- University Press. rounding our public debate over both economic Howe, Daniel Walker. 1972. “The Decline of fundamentals and economic policy—Why do Calvinism: An Approach to Its Study.” Com- most economists avoid models in which initial parative Studies in Society and History, 14: conditions are determinative of final outcomes? 306–27. Why is there an “Anglo-Saxon model” of how Mandeville, Bernard. 1723. The Fable of the Bees: to arrange a country’s economic affairs? Why Or Private Vices, Publick Benefits.F. B Kaye, do so many Americans who have no chance of ed. Oxford: Oxford University Press, 1924. inheriting money from a taxable estate pas- McVickar, John. 1830. Introductory Lecture to sionately support abolishing “death taxes”?— a Course on Political Economy. London: J. plausibly reflect these and other continuing Miller. resonances. Nicole, Pierre. 1696. “Of Charity and Self-Love.” Critics sometimes complain that belief in free In Moral Essayes. London: Samuel Manship. markets, not just by economists but among ordi- Rothschild, Emma. 2001. Economic Sentiments: nary citizens too, is a form of religion. It turns Adam Smith, Condorcet, and the Enlighten- out that there is something to the idea—not in the ment. Cambridge: Harvard University Press. way the critics mean, but in a deeper, more his- Schumpeter, Joseph A. 1954. History of Economic torically grounded sense. A better understanding Analysis. Elizabeth Boody Schumpeter, ed. of these lasting resonances, and their origin and New York: Oxford University Press, 78–112. subsequent implications as the economic con- Smith, Adam. 1776. An Inquiry into the Nature text has changed over time, would enhance our and Causes of the Wealth of Nations. Two vol- appreciation of economics as a moral science. umes. R. H. Campbell and A. S. Skinner, ed. Oxford: Oxford University Press, 1976. Smith, Adam. 1759. The Theory of Moral Sen- References timents. D. D. Raphael and A. L. Macfie, ed. Oxford: Oxford University Press, 1976. Bowen, Francis. 1856. Principles of Political Tillotson, John. 1748. “Of the Nature of Regen- Economy: Applied to the Condition, the eration, and Its Necessity, in Order to Justifica- Resources, and the Institutions of the American tion and Salvation.” In The Works of the Most People. Boston: Little, Brown. Reverend Dr. John Tillotson, Late Archbishop Davenport, Stewart. 2008. Friends of the Unrigh- of Canterbury. Vol. 5, sermon 106. Edinburgh: teous Mammon: Northern Christians & G. Hamilton. Market Capitalism, 1815-1860. Chicago: Uni- Wayland, Francis. 1837. The Elements of Politi- versity of Chicago Press. cal Economy. New York: Leavitt, Lord. Emerson, Roger L. 1973. “The Social Compo- Weber, Max. 1905 1930 : The Protestant Ethic sition of Enlightened Scotland: The Select and the Spirit of C(apitalism.) Trans., T. Parsons. Society of Edinburgh, 1754–1764.” Studies London: George Allen & Unwin.

8 Stewart Davenport 2008 provides a useful summary. ( )