[Paleopsych] Gordon Bigelow: Let there be markets: the evangelical roots of economics

[Premise Checker]

Gordon Bigelow: Let there be markets: the evangelical roots of economics
Harper's Magazine, May 2005 v310 i1860 p33(6).

Economics, as channeled by its popular avatars in media and politics, is the 
cosmology and the theodicy of our contemporary culture. More than religion 
itself, more than literature, more than cable television, it is economics that 
offers the dominant creation narrative of our society, depicting the relation 
of each of us to the universe we inhabit, the relation of human beings to God. 
And the story it tells is a marvelous one. In it an enormous multitude of 
strangers, all individuals, all striving alone, are nevertheless all bound 
together in a beautiful and natural pattern of existence: the market. This 
understanding of markets--not as artifacts of human civilization but as 
phenomena of nature--now serves as the unquestioned foundation of nearly all 
political and social debate. As mergers among media companies began to create 
monopolies on public information, ownership limits for these companies were not 
tightened but relaxed, because "the market" would provide its own natural 
limits to growth. When corporate accounting standards needed adjustment in the 
1990s, such measures were cast aside because they would interfere with "market 
forces." Social Security may soon fall to the same inexorable argument.

The problem is that the story told by economics simply does not conform to 
reality. This can be seen clearly enough in the recent, high-profile examples 
of the failure of free-market thinking--how media giants have continued to 
grow, or how loose accounting regulations have destroyed countless millions in 
personal wealth. But mainstream economics also fails at a more fundamental 
level, in the way that it models basic human behavior. The core assumption of 
standard economics is that humans are fundamentally individual rather than 
social animals. The theory holds that all economic choices are acts of 
authentic, unmediated selfhood, rational statements reflecting who we are and 
what we want in life. But in reality even our purely "economic" choices are not 
made on the basis of pure autonomous selfhood; all of our choices are born out 
of layers of experience in contact with other people. What is entirely missing 
from the economic view of modern life is an understanding of the social world.

This was precisely the diagnosis made five years ago by a group of French 
graduate students in economics, who published their dissent in an open letter 
that soon made minor headlines around the world. In the letter the students 
declared that the economic theory taught in their courses was hopelessly out of 
touch, absorbed in its own private model of reality. They wrote:

    We wish to escape from imaginary worlds! Most of us have chosen to
    study economics so as to acquire a deep understanding of the economic
    phenomena with which the citizens of today are confronted. But the
    teaching that is offered ... does not generally answer this
    expectation.... [T]his gap in the teaching, this disregard for
    concrete realities, poses an enormous problem for those who would
    like to render themselves useful to economic and social actors.

The discipline of economics was ill, the letter claimed, pathologically distant 
from the problems of real markets and real people.

The students who offered this diagnosis in 2000 were from the most prestigious 
rank of the French university system, the Grandes Ecoles, and for this reason 
their argument could not be easily dismissed. Critics who accuse economists of 
embracing useless theory usually find themselves accused of stupidity: of being 
unable to understand the elegant mathematics that proves the theory works. But 
the mathematical credentials of these students were impeccable. The best of a 
rising generation were revolting against their training, and because of this 
the press and public paid attention. Orthodox economists counterattacked, first 
in France and then internationally. Rightwing globalist Robert Solow wrote a 
savage editorial in Le Monde defending standard economic theory. The debate 
became so protracted that the French minister of education launched an inquiry.

Economics departments around the world are overwhelmingly populated by 
economists of one particular stripe. Within the field they are called 
"neoclassical" economists, and their approach to the discipline was developed 
over the course of the nineteenth century. According to the neoclassical 
school, people make choices based on a rational calculation of what will serve 
them best. The terra for this is "utility maximization." The theory holds that 
every time a person buys something, sells something, quits a job, or invests, 
he is making a rational decision about what will be most useful to him, what 
will provide him "maximum utility." "Utility" can be pleasure (as in, "Which of 
these Disney cruises will make me happiest?") or security (as in, "Which 401(k) 
will let me retire before age eighty-five?") or self-satisfaction (as in, "How 
much will I put in the offering plate at church?"). If you bought a Ginsu knife 
at 3:00 A.M., a neoclassical economist will tell you that, at that time, you 
calculated that this purchase would optimize your resources. Neoclassical 
economics tends to downplay the importance of human institutions, seeing 
instead a system of flows and exchanges that are governed by an inherent 
equilibrium. Predicated on the belief that markets operate in a scientifically 
knowable fashion, it sees them as self-regulating mathematical miracles, as 
delicate ecosystems best left alone.

If there is a whiff of creationism around this idea, it is no accident. By the 
time the term "economics" first emerged, in the 1870s, it was evangelical 
Christianity that had done the most to spur the field on toward its present 
scientific self-certainty.

When evangelical Christianity first grew into a powerful movement, between 1800 
and 1850, studies of wealth and trade were called "political economy." The two 
books at the center of this new learning were Adam Smith's Wealth of Nations 
(1776) and David Ricardo's Principles of Political Economy and Taxation (1817). 
This was the period of the industrial transformation of Britain, a time of 
rapid urban growth and rapidly fluctuating markets. These books offered 
explanations of how societies become wealthy and how they can stay that way. 
They made the accelerated pace of urban life and industrial workshops seem 
understandable as part of a program that modern history would follow. But by 
the 1820s, a number of Smith's and Ricardo's ideas had become difficult for the 
growing merchant and investor class to accept. For Smith, the pursuit of wealth 
was a grotesque personal error, a misunderstanding of human happiness. In his 
first book, The Theory of Moral Sentiments (1759), Smith argued that the 
acquisition of money brings no good in itself; it seems attractive only because 
of the mistaken belief that fine possessions draw the admiration of others. 
Smith welcomed acquisitiveness only because he concluded--in a proposition 
carried through to Wealth of Nations--that this pursuit of "baubles and 
trinkets" would ultimately enrich society as a whole. As the wealthy bought 
gold pickle forks and paid servants to herd their pet peacocks, the servants 
and the goldsmiths would benefit. It was on this dubious foundation that Smith 
built his case for freedom of trade.

By the 1820s and '30s, this foundation had become increasingly troubling to 
free-trade advocates, who sought, in their study of political economy, not just 
an explanation of rapid change but a moral justification for their own wealth 
and for the outlandish sufferings endured by the new industrial poor. Smith, 
who scoffed at personal riches, offered no comfort here. In The Wealth of 
Nations, the shrewd man of business was not a hero but a hapless bystander. 
Ricardo's work offered different but similarly troubling problems. Working from 
a basic analysis of the profits of land ownership, Ricardo concluded that the 
interests of different groups within an economy--owners, investors, renters, 
laborers--would always be in conflict with one another. Ricardo's credibility 
with the capitalists was unquestionable: he was not a philosopher like Adam 
Smith but a successful stockbroker who had retired young on his earnings. But 
his view of capitalism made it seem that a harmonious society was a thing of 
the past: class conflict was part of the modern world, and the gentle old 
England of squire and farmer was over.

The group that bridled most against these pessimistic elements of Smith and 
Ricardo was the evangelicals. These were middle-class reformers who wanted to 
reshape Protestant doctrine. For them it was unthinkable that capitalism led to 
class conflict, for that would mean that God had created a world at war with 
itself. The evangelicals believed in a providential God, one who built a 
logical and orderly universe, and they saw the new industrial economy as a 
fulfillment of God's plan. The free market, they believed, was a perfectly 
designed instrument to reward good Christian behavior and to punish and 
humiliate the unrepentant.

At the center of this early evangelical doctrine was the idea of original sin: 
we were all born stained by corruption and fleshly desire, and the true purpose 
of earthly life was to redeem this. The trials of economic life--the sweat of 
hard labor, the fear of poverty, the self-denial involved in saving--were 
earthly tests of sinfulness and virtue. While evangelicals believed salvation 
was ultimately possible only through conversion and faith, they saw the pain of 
earthly life as means of atonement for original sin. * These were the people 
that writers like Dickens detested. The extreme among them urged mortification 
of the flesh and would scold anyone who took pleasure in food, drink, or good 
company. Moreover, they regarded poverty as part of a divine program. 
Evangelicals interpreted the mental anguish of poverty and debt, and the 
physical agony of hunger or cold, as natural spurs to prick the conscience of 
sinners. They believed that the suffering of the poor would provoke remorse, 
reflection, and ultimately the conversion that would change their fate. In 
other words, poor people were poor for a reason, and helping them out of 
poverty would endanger their mortal souls. It was the evangelicals who began to 
see the business mogul as an heroic figure, his wealth a triumph of righteous 
will. The stockbroker, who to Adam Smith had been a suspicious and somewhat 
twisted character, was for nineteenth-century evangelicals a spiritual victor.

By the 1820s evangelicals were a dominant force in British economic policy. As 
Peter Gray notes in his book Famine, Land, and Politics, evangelical Anglicans 
held significant positions in government, and they applied their understanding 
of earthly life as atonement for sin in direct ways. Their first major impact 
was in dismantling the old parish-based system of aiding the poor and aging, a 
policy battle that resulted in the Poor Law Amendment of 1834. Traditionally, 
people who could not work or support themselves, including orphans and the 
disabled, had been helped by local parish organizations. It had been a joint 
responsibility of church and state to prevent the starvation and avoidable 
suffering of people who had no way to earn a living.

The Poor Law nationalized and monopolized poverty administration. It forbade 
cash payments to any poor citizen and mandated that his only recourse be the 
local workhouse. Workhouses became orphanages, insane asylums, nursing homes, 
public hospitals, and factories for the able-bodied. Protests over the 
conditions in these prison-like facilities, particularly the conditions for 
children, mounted throughout the 1830s. But it did not surprise the 
evangelicals to learn that life in the workhouses was miserable. These early 
faith-based initiatives regarded poverty as a divinely sanctioned payment plan 
for a sinful life. This first anti-poverty program in the first industrial 
economy was not designed to alleviate suffering, nor to reduce the number of 
poor children in future generations. Poverty was not understood as a problem to 
be fixed. It was a spiritual condition. Workhouses weren't supposed to help 
children prepare for life; they were supposed to save their souls.

Looking back two centuries at these early debates, it is clear that a pure 
free-market ideology can be logically sustained only if it is based in a fiery 
religious conviction. The contradictions involved are otherwise simply too 
powerful. The premise of the unpleasant workhouse program was that it would 
create incentives to work. But the program also acknowledged that there were 
multitudes of people who were either unable to work or unable to find jobs. The 
founding assumption of the program was that the market would take care of 
itself and all of us in the process. But the program also had to embrace the 
very opposite assumption: that there were many people whom the market could not 
accommodate, and so some way must be found to warehouse them. The market is a 
complete solution, the market is a partial solution--both statements were 
affirmed at the same time. And the only way to hold together these 
incommensurable views is through a leap of faith.

Victorian evangelicals took a similar approach to the crisis in Ireland between 
1845 and 1850--the Great Hunger, what came to be known as the potato famine. In 
office at the time of the first reports of starvation, the Tory administration 
of Robert Peel responded with a program of food supports, importing yellow 
cornmeal from the United States and selling it cheaply to wholesalers. Corn was 
an unfamiliar grain in Ireland, but it provided a cheap food source. In 1846, 
however, a Whig government headed by Lord Russell succeeded Peel and quickly 
dismantled the relief program. Russell and most of his central staff were 
fervent evangelicals, and they regarded the cornmeal program as an artificial 
intervention into the free market. Charles Trevelyan, assistant secretary of 
the treasury, called the program a "monstrous centralization" and argued that 
it would simply perpetuate the problems of the Irish poor. Trevelyan viewed the 
potato-dependent economy as the result of Irish backwardness and 
self-indulgence. This crisis seemed to offer the opportunity for the Irish to 
atone. With Russell's backing, Trevelyan stopped the supply of food. He argued 
that the fear of starvation would ultimately be useful in modernizing Irish 
agriculture: it would force the poor off land that could no longer support 
them. The cheap labor they would provide in towns and cities would stimulate 
manufacturing, and the now depopulated countryside could be used for more 
profitable cattle farming. He wrote that his plan would "stimulate the industry 
of the people" and "augment the productive powers of the soil."

There was no manufacturing boom. Roughly a million people died; another million 
emigrated. The population of Ireland dropped by nearly one quarter in the space 
of a decade. It remains one of the most striking illustrations of the 
incapacity of markets to run themselves. When government corn supplements 
stopped, and food prices rose, private charities and workhouses were 
overwhelmed, and families starved by the sides of roads. When British 
leadership put its faith in the natural balance of an open market to create the 
best outcome, the result was disaster. Evangelicals like Trevelyan didn't look 
smart and pious after the famine; they looked blind to human reality and 
desperately cruel. Their brand of political economy, grounded in evangelical 
doctrine, went into retreat and lost influence.

The phrase "political economy" itself began to connote a cruel disregard for 
human suffering. And so a generation later, when the next phase of capitalist 
boosterism emerged, the term "political economy" was simply junked. The new 
field was called "economics." What had got the political economists into 
trouble a generation before was the perception, from a public dominated by 
Dickens readers, that "political economy" was mostly about politics--about 
imposing a zealous ideology of the market. Economics was devised, instead, as a 
science, a field of objective knowledge with iron mathematical laws. Remodeling 
economics along the lines of physics insulated the new discipline from any 
charges filed on moral or sentimental grounds. William Stanley Jevons made this 
case in 1871, comparing the "Theory of Economy" to "the science of Statical 
Mechanics" (i.e., physics) and arguing that "the Laws of Exchange" in the 
marketplace "resemble the Laws of Equilibrium."

The comparison with physics is particularly instructive. The laws of Newtonian 
mechanics, like any basic laws of science, depend on the assumption of ideal 
conditions--e.g., the frictionless plane. In conceiving their discipline as a 
search for mathematical laws, economists have abstracted to their own ideal 
conditions, which for the most part consist of an utterly denuded vision of man 
himself. What they consider "friction" is the better part of what makes us 
human: our interactions with one another, our irrational desires. Today we 
often think of science and religion as standing in opposition, but the 
"scientific" turn made by Jevons and his fellows only served to enshrine the 
faith of their evangelical predecessors. The evangelicals believed that the 
market was a divine system, guided by spiritual laws. The "scientific" 
economists saw the market as a natural system, a principle of equilibrium 
produced in the balance of individual souls.

When Tom DeLay or Michael Powell mentions "the market," he is referring to this 
imagined place, where equilibrium rules, consumers get what they want, and the 
fairest outcomes occur spontaneously. U.S. policy debate, both in Congress and 
in the press, proceeds today as if the neoclassical theory of the free market 
were incontrovertible, endorsed by science and ordained by God. But markets are 
not spontaneous features of nature; they are creations of human civilization, 
like, for example, skating rinks. A rightwing "complexity theorist" will tell 
you that the regular circulation of skaters around the rink, dodging small 
children, quietly adjusting speed and direction, is a spontaneous natural 
order, a glorious fractal image of human totality. But that orderly, 
pleasurable pattern on the ice comes from a series of human acts and 
interventions: the sign on the gate that says "stay to the right," the manager 
who kicks out the rowdy teenagers. Economies exist because human beings create 
them. The claim that markets are products of higher-order law, products of 
nature or of divine will, simply lends legitimacy to one particularly extreme 
view of politics and society.

Because the neoclassical theory emphasizes calculations made by individuals, it 
tends not to focus on the impact of external and social factors like 
advertising, education, research funding, or lobbying. Consumer behavior, for 
an orthodox economist, is a kind of perfect free expression. But as any 
twenty-three-year-old marketing intern, or any six-year-old child, can tell 
you, buying things is not just about the rational processing of information. 
The Happy Meal isn't about satisfying hunger; it's about the plastic toy. 
Houses aren't for shelter, they are for lifestyles. Automobiles aren't 
transport, they're image projectors. Diamonds aren't ornaments, they are 
forever. We buy things partly based on who we are, but at the same time we 
believe that buying things makes us who we are and might make us into someone 
different.

Critical voices within economics have been making this complaint at least as 
far back as Thorstein Veblen, the late nineteenth-century economist best known 
for his theory of "conspicuous consumption." In The Theory of the Leisure 
Class, and in a series of essays in the 1890s, Veblen showed that patterns of 
consumption and work broadly conform to the boundaries set by class and 
culture. Neoclassical economists acknowledge that the wealthy sometimes buy 
things just to show off, but they insist that regular people under normal 
circumstances buy only what they intrinsically desire. Veblen saw that it was 
impossible to understand individual economic choices without understanding the 
world in which those choices were made.

A helpful, if disquieting, example comes by way of the twentieth-century 
anthropologist Marshall Sahlins, who, in his book Culture and Practical Reason, 
points out that the entire structure of U.S. agriculture "would change 
overnight if we ate dogs." What Sahlins means is that the powerful social 
prohibition against using pets as protein will always condition consumer 
choices. American children and teens do not decide individually that they will 
for all their lives spare American dogs from the abattoir. This choice is made 
for them by the historical world into which they are born. They are no more 
free to eat dog than they are to wear buckskins to basketball practice. As 
economist Anne Mayhew recently observed, even consumers at the bottom of the 
wage scale, with absolutely no discretionary income, choose the necessities of 
life with a common-sense awareness of how their choices will be perceived by 
neighbors, family, and the wider social world.

"Post-autistic economics" (PAE) is the name now taken by those few economists 
who hope to rescue the discipline from the neoclassical model; the name is an 
homage to the dissident French students, whose manifesto called the standard 
model "autistic." It is a hilariously apt (albeit mildly offensive) diagnosis, 
and it could be just as well applied to Homo economicus himself, the economic 
actor envisioned by the neoclassical theory, who performs dazzling calculations 
of utility maximization despite being entirely unable to communicate with his 
fellow man. Not all PAE economists oppose the premises of the dominant 
neoclassical school, but they all agree that neoclassical theory cannot stand 
on its own. In other words, they agree that economics must begin to recognize 
the social--what the dissident economist Edward Fullbrook calls 
"intersubjectivity"--and, in the process, give up its pretense to scientific 
completeness.

Until it does, generations of college students will continue to have their 
worldviews irreparably distorted by basic economics courses, whose right-wing 
ideology hides behind a cloak of science. The first evangelicals fought for 
free trade because they thought it would encourage virtuous behavior, but two 
centuries of capitalism have taught a different lesson, many times over. The 
wages of sin are often, and notoriously, a private jet and a wicked 
stock-option package. The wages of hard moral choice are often $5.15 an hour. 
Free markets don't promote public virtue; they promote private interest. In 
this way they are neither "free" (that is, independent of human influence) nor 
uniformly helpful in promoting freedom. Market trends are not truly indicative 
of the kind of society that Americans wish to create for their children. 
Consumer demand--for gated homes, exurban sprawl, or fluorescent-dyed sugar 
titration kits called cereal--does not reflect democratic political choice. If 
indeed economics is this society's most authoritative version of its own story, 
ours is a notoriously unreliable narrator.

* The definitive source here is Boyd Hilton's masterful book The Age of 
Atonement: The Influence of Evangelicalism on Social and Economic Thought, 
1785-1865.

Gordon Bigelow teaches at Rhodes College in Memphis. He is the author of 
Fiction, Famine, and the Rise of Economics in Victorian Britain and Ireland 
(Cambridge University Press).