Economic Theology

How modern economics became a secular theology of progress

The only ethical judgment an economist is supposed to be able to make is a wholly uncontroversial one. If every person is made better off by some change, the change—which is then called “Pareto optimal,” after the Italian economist who formalized the notion—should take place. Even philosophers like John Rawls and Robert Nozick have adopted this bland criterion. They have tried and tried to pull a decently detailed ethical theory out of the Paretian hat.

So-called “welfare economics” has recently shown some faint stirrings of complexity in ethical thought, as in the works by the economist and philosopher Amartya Sen, and more in the works of younger economists and philosophers inspired by his forays. But most academic economists continue working the magician’s hat. The hat does not contain a living theory of moral sentiments. Sen complained of the “lack of interest that welfare economics has had in any kind of complex ethical theory,” and added: “It is arguable that [utilitarianism and]. . . Pareto efficiency have appealed particularly because they have not especially taxed the ethical imagination of the conventional economist.”[1] Truth be known, this “welfare economics” and what passes for “ethical” theorizing among economists and economics-loving philosophers is a Victorian, utilitarian parrot, stuffed and mounted and fitted with marble eyes.

An economist named Robert Nelson has tried in two amazing books to give the stuffed parrot back to the pet store. The books have puzzling titles: Reaching for Heaven on Earth: The Theological Meaning of Economics (1991) and Economics as Religion: From Samuelson to Chicago and Beyond (2001). The theological meaning of . . . economics? Economics as . . . religion?

Nelson, who now teaches at the University of Maryland, was for a long time a “policy analyst” working on zoning and property rights, Federal coal policy, and the case for abolishing the U. S. Forest service.[2] Though trained in the arcania of academic economics, he uses economics for practicalities. He therefore knows a dead parrot when he sees one. He is not, as many economists are, devoted to finding out what can be drawn out of a hat if you assume you have stuffed it backstage with parrots.

Economics and theology are usually believed to be opposites. According to Nelson, who leans against a presumption since Goethe and Coleridge, they are not. Economics is the doppelganger of theology. Like Veblen, though with a different politics, Nelson takes seriously the newspaper cliché that economics is “mere” religion, voodoo economics. But he drops the “mere.” Theology is serious business, the discussion of ordering principles.

Economics, he argues, has become the theology of a new religion of abundance. “Almost all the leading schools of economics have had more impact on the world by virtue of their religious authority” “than by the specific technical knowledge . . . they have provided.”[3] Joseph Schumpeter and Robert Heilbroner called it “vision.” Economics is the vision thing of the ordinary.

Nelson detects two theological traditions, which he calls the Roman and the Protestant. His “Roman” means ancient Roman but also Roman Catholic; and his “Protestant” means Lutheran/Calvinist but also rebellious and cantankerous. The issue between the two schools, the optimistic Romans and the pessimistic Protestants, has always been the perfectibility of humankind. The Romans emphasize the four cardinal virtues, courage, temperance, justice, and prudence, and think they are attainable in the works of this world. By their works shall ye know them. The Protestants emphasize the three “theological” virtues, faith, hope, and love, and count on amazing grace to save a wretch like me.

The United States is famously a Protestant country, given to gathering under tents in which sinners declare for Christ. On Sundays even Catholic Americans nowadays partake of the Protestant spirit. But during the rest of the week, says Nelson, Protestant Americans are Romans. “Of all nations, the United States exhibits a characteristic national outlook that matches most closely the Roman tradition. American typically believe that reason guides the world, showing a deep faith in progress.”[4] Contrast French people. An American soldier was asked if he “hated” his Iraqi enemy. “No, of course not. I reckon I’m here to do a job, and so is he.” A centurion standing uneasily between Jesus and the Pharisees could not have better expressed the Roman view.

Rome, especially under its Republic, had a civic religion, depending on the reading of entrails and the interpretation of the flights of birds among other sensible precautions. The civic religion of the modern world is social engineering, which depends on a similar divination, called “time series econometrics.” The new religion promises material salvation, yielding, as Nelson points out, spiritual salvation as well. For better or worse, economics is the theology of the new religion of this-worldly Progress and Problem Solving.

But it doesn’t work very well, partly because it’s not recognized as religious. Religion, I’ve said, is not something that can be dispensed with. We need religion just as much as our ancestors did, which is to say that we need an account of the transcendent, the meaning, the faith, the hope, the love. Nelson believes that the American civic religion needs renewal. His own suggestion is a merger of two of the churches, the environmentalist and the libertarian, the tree-worshippers and the market-worshippers. Save the earth, by all means—by getting our engineering off of it. Take the tools away from the Army Corps of Engineers. Prevent the ranchers from using government land at a subsidized price. Abolish the U. S. Forest Service. Get Washington out of the business of running the country from a nice office on K Street. Nelson’s new theology is anti-Roman, that is, anti-imperial and anti-social-engineering. It is Protestant in Nelson’s wide sense—wary of bishops and centralization, unpersuaded by time-series econometrics.

The Political Economy Research Center in Bozeman, Montana is an example of the new faith, showing how the wilderness can be protected by capitalism rather than by a capitalist-influenced government. PERC’s manifesto is: “Private property rights encourage stewardship of resources. Government subsidies often degrade the environment. Market incentives spur individuals to conserve resources and protect environmental quality. Polluters should be liable for the harm they cause others.”[5] The magic word there is “stewardship,” a theological term of long standing. Nelson, PERC, and I are suggesting that a true stewardship comes from ownership, not collectivism.

The contrasting, Roman faith shows in the views of Robert Reich, the famously short professor of government at Brandeis. Reich appears to be a charming, intelligent man: how can you dislike a short man who writes a book called I’ll be Short: Essentials for a Decent Working Society (2003)? But in 1991 he sounded the alarm against what he called the “succession” of the educated classes. He worried that taxable income would move out from under the taxing authority—precisely the program, at least in words, of Bush II. According to Reich, why does it matter? Because without taxes the lobbyists on K Street cannot spend your money to make a community.

The economist Albert Hirschman speaks of the three social options of exit, voice, and loyalty. If you don’t like the environmental policies of your town, you can either love it or leave it, exercising loyalty or exit; or else you can go down to City Hall and complain, exercising voice.[6] The Roman tradition in social thinking, represented on the left by Reich and on the right by George Will, wants to create fresh reasons for loyalty. It wants to block the exits. Nelson by contrast views exit as just the ticket, the most basic of political and religious rights. The Protestants—or the ecumenical Rome of John XXIII—regard exit as making for a freer world. Only an established church, says Nelson, views the splintering of religious power as bad.

Though he has his opinions, Nelson preaches “tolerance of diverse economic theologies.” This is not the present situation in economics, which is dominated by a theology “from Samuelson to Chicago and beyond.” Nelson is unimpressed by the claims of the Samuelsonian Chicagoans to a monopoly of scientific method. He doubts in fact, as many students of the matter since Thomas Kuhn have, that there is really such a thing as “scientific method.” “To abandon the [so-called] scientific method . . . is to undermine a basic faith of the American welfare state, a faith as deeply embedded in Western civilization as the Roman tradition of thought.” He proposes instead a “postmodern economic theology,” as I do here, and Don Lavoie did, and Arjo Klamer does.

“Postmodernism” does not mean what you may have gathered from the outrage of conservative cultural journalists. It means merely dropping the artificialities of high modernism, and in particular dropping the fact-value split in its cruder forms and the established church of social engineering. “The new world of the welfare state and of economic pursuits would have to be placed within the context of a broader understanding of the meaning a purpose of human existence.” Nelson’s hero, Frank Knight, would have detested the word, but of course Nelson is calling exactly for an economic theology.

The text above is an excerpt from The Bourgeois Virtues: Ethics for an Age of Commerce, the first volume of Deirdre McCloskey’s trilogy on the ethical and historical origins of modern prosperity.

[1] Sen, Ethics and Economics, 1987, p. 50.

[2] These are the titles of three of his other books, of 1977, 1983, and 2000.

[3] Nelson, Economics as Religion, 2001, p. 267.

[4] Nelson, Reaching for Heaven on Earth, 1991

[5] http://www.perc.org/aboutperc/index.php.

[6] Hirchman, Exit, Voice, and Loyalty, 1970.