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| Foreword | ix | ||||
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| Preface | xv | ||||
| Introduction: The Market Paradox | 1 | (22) | |||
| part ONE THE LAWS OF ECONOMICS AS THE NEW WORD OF GOD | |||||
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23 | (12) | |||
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35 | (17) | |||
| part TWO THEOLOGICAL MESSAGES OF SAMUELSON'S ECONOMICS | |||||
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52 | (37) | |||
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89 | (30) | |||
| part THREE THE GODS OF CHICAGO | |||||
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119 | (20) | |||
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139 | (27) | |||
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166 | (42) | |||
| part FOUR RELIGION AND THE NEW INSTITUTIONAL ECONOMICS | |||||
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208 | (22) | |||
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230 | (38) | |||
| part FIVE ECONOMICS AS RELIGION | |||||
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268 | (35) | |||
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303 | (26) | |||
| Conclusion | 329 | (10) | |||
| Notes | 339 | (32) | |||
| Index | 371 |
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Chapter One
TENETS OF ECONOMIC FAITH
To the extent that any system of economic ideas offers an alternative vision of the "ultimate values" or "ultimate reality" that actually shapes the workings of history, economics is offering yet another grand prophesy in the biblical tradition. The Jewish and Christian bibles foretell one outcome of history. If economics foresees another, it is in effect offering a competing religious vision. The prophesies of economics would then be a substitute for the traditional messages of the Bible. Perhaps the biblical God has reconsidered. Perhaps, instead of Jesus, he has now chosen economists to be a new bearer of his message, replacing the word of the Old and New Testaments that has now become outdated for the modern age--as Islam advertised the Koran as a later and more accurate statement of God's real plans for the world. Perhaps God has decided that the underlying ordering forces of the world, the ultimate reality that will shape the future outcome of history, will truly be economic.
To be sure, for many thinkers, such a message of economic prophesy has not depended on the necessary existence of any god in the hereafter. In this case their belief system results not in a Judeo-Christian heresy, but in an entirely new and secular religion--although one that draws many of its themes from the biblical tradition, now typically reworking them in a less direct and mostly implicit fashion.
THE MARXIST EXAMPLE
No economic thinker, for example, was more outwardly antagonistic to religion than Karl Marx. Religion was for him the "opiate" of the masses. Yet, in retrospect, no social scientist better illustrates the power of underlying religious influences than Marx. Beneath his confused economic analysis and grand pronouncements on the economic laws of history lies a simple biblical eschatology. Humankind has fallen into evil ways, corrupted by the workings of the forces of the class struggle. The resulting "alienation" for Marx has virtually the same meaning for the human situation as "original sin" in the biblical message. Human beings are today still living in a state of darkness, depravity, and corruption.
The prospect of escape from this terrible condition, however, is close at hand. God (now replaced in Marx by the economic laws of history) has promised to deliver the world from sin (alienation). There will be a fierce struggle and a great cataclysm (a final war in history between the capitalist and the working classes), followed by the arrival of the kingdom of God on earth (the triumph of the proletariat and the arrival of pure communism). In Christian theology the twin coercive instruments of government and property are both products of the fallen condition of mankind in this world since the Garden of Eden, and in heaven neither will exist. In Marxist theology as well, the end of the class struggle, the end of alienation (sin), will bring about the abolition of government and property alike. Secular religion, as this example shows, can follow remarkably closely in the path of Judeo-Christian religion.
Marx thus is best understood not fundamentally as an economist at all, but as another Jewish messiah--like Jesus--with another message of salvation for the world. If the message of Jesus had conquered the Mediterranean and European world, the Marxist gospel in the twentieth century would spread over Russia, China, and many other nations--to billions of people throughout the globe. As Paul Tillich said in his history of Christian religion, and however distorted the Marxist gospel, Marx was one of the most influential "theologians" who ever lived. To be sure, as D. McCloskey has said is true for of the value systems embodied in the work of many current economists as well, this value system of Marx with its roots in Judeo-Christian eschatology is never made explicit; instead, the religion is left buried under a large body of ostensibly "scientific" arguments.
Thus, the libertarian and Austrian economist Murray Rothbard considered Marxism to be an "atheized variant of a venerable Christian heresy" that offered a "messianic goal" to be realized by the "apocalyptic creation" of a new world order. Joachim of Fiore and other Christian visionaries had preached messages of a communist "final state of mankind as one of perfect harmony and equality," inspiring among others the later Anabaptist revolutionaries of the Protestant Reformation. The greatest new element introduced by Marx and his followers in the modern age was that these ancient themes now assumed a "secular context." Aside from this, Rothbard saw Marxism as the application of an ancient formula:
[For Marx] history is the history of suffering, of class struggle, of the exploitation of man by man. In the same way as the return of the Messiah, in Christian theology, would put an end to history and establish a new Heaven and new Earth, so the establishment of communism would put an end to human history. And just as for ... Christians, man, led by God's prophets and saints, would establish a Kingdom of God on Earth, ... so for Marx and other schools of communists, mankind, led by a vanguard of secular saints, would establish a secularized kingdom of heaven on earth.
The success of Marxism in Russia, according to one leading interpreter, was attributable to its ability to draw on a long-standing "'religious conception of the czar's authority' and a deep belief that land belonged to God." The powerful religious faith of the Russian people was capable of "switching over and directing itself to purposes which are not merely religious, for example, to social objects," part of a process in which Russians "could very readily pass from one integrated faith to another" as found in the Marxist gospel. Indeed, as perceived by many Russians, "the world mission of the [Communist Party] Third International echoed Orthodox Christian messianism, which saw Moscow as the Third Rome." Under Stalin, the members of the communist party functioned "less as members of a political party than as clergy under an infallible pope."
Marxist economics clearly met Tillich's requirement that a genuine religion must offer a vision of "ultimate reality." For Marx everything that happened in the history of the world was controlled by economic laws. Altogether blind to the obvious religious character of his own economic system, Marx said that every form of religious belief is merely a product of a particular economic stage of the class struggle. Echoing this tenet of Marxist faith, for example, in the bible of Chinese communism, the "red book," Mao Tse-Tung would say that "in the general development of history the material determines the mental and social being determines social consciousness."
Religion for Marxism thus can have no objective content; it merely provides a convenient rationalization for the relations of economic power of the moment. If capitalists are the dominant economic class today, then the current religion of society will be determined by the objective needs of capitalism at this particular time. If capitalists actually believe in the truth of their religion, this grand self-delusion merely shows the warped and distorted quality of human thought in the current state of deep human alienation (a secular restatement of the sinfulness of fallen men and women).
Marx regards everything else in society in the same perspective. Political organizations, social theories, the legal system, the role of universities, all the institutional features of society are designed to serve the existing relationships of economic power, as manifested in and determined by the current stage of the class struggle. As a new "ultimate reality," the laws of economics have literally taken the very place of the laws of God in ordering the world. The economic god of Marx is, moreover, a harsh god in the biblical tradition; he has condemned the present world to constant fighting and destruction and most human beings to lives of deception and depravity.
To be sure, Marx may have offered an exaggerated version, but he was hardly alone in thinking in this religious way. Just as the biblical message was recorded by Matthew, Mark, Luke, and John in different versions, the god who works through economic history has also had multiple interpreters. Jean-Jacques Rousseau, according to one authority, believed that "it was property alone which induced crime and wars" corrupting the original happy state of nature by conflicts over material possessions. Also in the eighteenth century, David Hume had said: "Let us suppose that nature has bestowed on the human race such profuse abundance of all external conveniences, that ... every individual finds himself fully provided with whatever his most voracious appetite can want, or luxurious imagination wish or desire." If this state of affairs should ever be reached, Hume suggested, "it seems evident that, in such a happy state, every other social virtue would flourish, and receive tenfold increase." Property and the divisions in society it fosters would cease to have relevance in a world of perfect abundance; issues of social justice would no longer be a concern, because there would be little or no crime or conflict. It would be a world of "unlimited abundance" where "justice, in that case, being totally useless, would be an idle ceremonial."
By the late nineteenth century and well into the twentieth, social scientists of all kinds and stripes were occupying themselves in showing how economic forces in the long run determine almost everything important that happens in history. A few have been grand synthesizers on the order of Marx, such as Herbert Spencer with his message of social Darwinism. Many others have focused on the illustration of one or another specific case of the controlling power of economic forces in history. In American history, for example, Charles Beard claimed to show that the American Constitution was not really the outcome of a battle of ideas about freedom but was the result of a clash of economic interests in the late eighteenth century. Others would argue that the Civil War was not about the morality of slavery or about preserving one union grounded in a common American civil religion but was actually the product of a conflict between powerful economic interests of the North and the South.
Thorstein Veblen would contend that the entire economic system and the relationships of property ownership in this system were being driven by the exigencies of technological change in the newly industrializing United States, that the economic realities of modern industrial society entirely "shapes their habits of thought" for those directly involved in its workings. John Kenneth Galbraith would echo Veblen's vision when he claimed in the 1960s that the technological imperatives of modern government and industry had displaced the formal owners of capital and empowered a new "technostructure" of scientific and administrative experts to run the affairs of the nation.
Outside the United States, the French Revolution was recast by leading intellectuals as an economic power struggle, the means by which the rising middle class finally displaced the old feudal order. Max Weber, while he found many of the economic details of Marxism inaccurate, nevertheless often looked at noneconomic aspects of society in terms of the workings of economic forces. The important thing about Calvinism for Weber was not the objective reality of its truth claims about the human condition. Rather, the more significant element was that Calvinism provided a powerful economic motive for and rationalized the existence of a new economic class--the emerging new commercial and other business groups in Europe, the very groups among whom Calvinism had first found favor. Much in the manner of Marx, Weber was seeming to agree that the form and character of religion was shaped by necessities to be found in the underlying workings of economic forces.
A COMING AGE OF ABUNDANCE
The Marxist assumption that the working of the laws of economics will yield a new species of human being, the "new man" of the communist utopia, has often been derided as an example of the folly of Marx's overall scheme. However, the hope for a new human condition as a result of economic progress is not unique to Marxism; indeed, the same kind of thinking was manifested in western European socialism, American Progressivism, and other leading economic belief systems of the twentieth century. As Kate Soper has commented, the great attraction of socialism derives from the "satisfaction it permits to the ethical demand for justice and equity in the distribution of goods, as [much as] it has to do with the material gratification afforded by those goods."
In the economic gospels, the existence of evil behavior in the world has reflected the severity of the competition for physical survival of the past. Human beings have often lied and cheated, murdered, and stolen, were filled with hatreds and prejudices, because they were driven to this condition by the material pressures of their existence. If the choice was to live or die in the struggle for control over resources, few people were likely to choose to sacrifice themselves in order to save others. Thus, the state of material deprivation is the original sin of economic theology. Then, if this diagnosis is correct, the cure for evil in the world follows directly enough. If sin results from destructive forces brought into existence by material scarcity, a world without scarcity, a world of complete material abundance, will be a world without sin.
The contemporary philosopher Will Kymlicka thus comments that in Marxism "it is material abundance which allows communist society to over come the need for justice." It is not because "individuals cease to have conflicting goals in life, or when a `more developed form of altruism' arises." Rather, evil currently exists in the world because the economic relations of production create a material circumstance in which "the social creations of an individual take on an alien independence, `enslaving him instead of being controlled by him.' These include the imperatives of capitalist competition, role requirements of the division of labor, rigours of the labour market, and what Marx calls the `fetishism' of money, capital and commodities." Thus, "material scarcity" is the "crucial circumstance," but it also creates the possibility that the present state of alienation "can be eliminated." The perfection of the world for Marx "is impossible without abundance" but following the triumph of the proletariat "is guaranteed by abundance." As Marx himself stated:
In a higher phase of communist society, after the enslaving subordination of the individual to the division of labor ... has vanished; after labour has become not only a means to life but life's prime want; after the productive forces have also increased with the all-round development of the individual, and all the springs of co-operative wealth flow more abundantly--only then can the narrow horizon of bourgeois right be crossed in its entirety and society inscribe on its banners: From each according to his ability, to each according to his needs!
Engels had written as early as 1847 that "private property can be abolished only when the economy is capable of producing the volume of goods needed to satisfy everyone's requirements.... The new rate of industrial growth will produce enough goods to satisfy all the demands of society.... Society will achieve an output sufficient for the needs of all members." Marxism thus has an ambivalence that some might find surprising with respect to the existence of the capitalist economic system based on competition in the marketplace. Although the workings of this system may degrade the laboring classes today, without the marvelous advances in economic productivity due to the profit incentive and other elements of the market system, the future salvation of the world would not be possible. Capitalism is thus a necessary economic stage on the road to heaven on earth. If the date of its arrival could not be precisely fixed, Marx would "hail each important new invention as the magical `material productive force' that would inevitably bring about the socialist revolution." The scientific development of electricity with its amazing and transformative economic capabilities, Marx was sure, had significantly advanced the timetable for the arrival of his new heaven on earth.
THE KEYNESIAN GOD
It would be hard to imagine a temperament more the opposite of Marx's than that of John Maynard Keynes. If Marx was prophetic and bombastic, Keynes had the manner of the worldly wise. If Marx was a social misfit and bohemian, the urbane Keynes designed economic blueprints for the British Treasury, and yet at the next moment might be consorting with the artistic elite of Bloomsbury. Keynes also differed sharply from Marx in his prescription for solving unemployment and other economic problems. Yet in terms of ultimate values, Keynesianism was only a modest variation on Marx--on the recent revelation of God's actual plan for the world, that the Christian Bible is apparently mistaken, that God actually works in history through economic forces and is planning a glorious ending to the world based on the workings of rapidly advancing material productivity.
In his 1930 essay "Economic Possibilities for our Grandchildren," Keynes agreed with Marx (and Jesus) that capitalism--necessarily grounded in the desire for money and the competitive workings of self-interest in the market--is a "disgusting" system, characterized by motives unworthy of human beings. Christianity, and later Marxism, were right to believe that "avarice is a vice, that the exaction of usury is a misdemeanor, and the love of money is detestable." Keynes also agreed that it was the force of economic pressures--the result of material scarcity in the world and the resulting fierce struggle for mere physical survival--that had separated human beings from their inner better selves. Marx was right to say that the economic workings of capitalism (and feudalism and other economic systems before that) had alienated human beings from their true natures (as the Fall in the Garden had previously been thought to be the true cause of this separation). As Keynes himself put it, the economic individual had been required to suppress a natural instinct to "pluck the hour and the day virtuously and well," to be able to take spontaneous and "direct enjoyment in things," as was possible for the "lilies of the field who toil not, neither do they spin."
The modern god of Keynes who spoke to humankind through the workings of economic forces in history had the same basic plan for a secular salvation as had the god of Marx. Both relied on the marvelous productive powers of capitalism to bring on a final stage of history. It will be an era of abundance, ending the corrosive and corrupting influence of economic scarcity, thus bringing on a time of great human virtue, equality, and contentment. Keynes, like Marx, sees a new man and woman being born: "All kinds of social customs and economic practices, affecting the distribution of wealth and of economic rewards and penalties, which we now maintain at all costs, however distasteful and unjust they may be in themselves, because they are tremendously useful in promoting the accumulation of capital, we shall then be free, at last, to discard." It will all come about, Keynes writes, as a result of "the greatest change that has ever occurred in the material environment of life for human beings in the aggregate." After this happens, we will finally be "able to rid ourselves of many of the pseudo-moral principles which have hag-ridden us" for centuries.
Keynes's timetable was hardly less optimistic than that of Marx. Like the early followers of Jesus in biblical times, Keynes thought that the arrival of the kingdom of heaven on earth was near at hand, to occur in perhaps one hundred years or so. The continued rapid advance of economic progress in the world would soon "lead us out of the tunnel of economic necessity into daylight."
In terms of the path to heaven on earth, there was one key difference between Keynes and Marx. Marx was what in Christianity is called a "premillennial" prophet; Keynes was instead a "postmillennial." The premillennials, like Marx, see humankind as mired today in such fundamental depravity that the only hope--which God (or the economic forces of history) fortunately has predestined--is an apocalyptic transformation of the human condition. This transformation will often be prefigured by catastrophes of the worst kind. For postmillennials, in contrast, the millennium has already begun; human progress toward heaven on earth is already taking place at this very moment; humankind has an important continuing role to play within the divine plan for bringing about the salvation of the world.
As Keynes said, being careful to distinguishing himself from Marx in this regard, the coming era of economic abundance would not be experienced initially "as a catastrophe." Instead, like a good Christian postmillennial, Keynes writes that "I look forward, therefore, in the days not so very remote" to great changes in the human condition for the better. "But, of course, it will all happen gradually.... Indeed, it has already begun."
Keynes included his essay "Economic Possibilities for Our Grandchildren" as the closing chapter in Essays in Persuasion . This was not the only time that Keynes chose to wrap up on important book in this manner--to indicate that the details of his prior economic theorizing were designed in the end to serve a grand moral purpose. In the concluding chapter of The General Theory , Keynes repeats similar themes, if in a somewhat more subdued and cautious language, also reflecting the different conventions of the academic audience to which this work was directed. Moreover, by the mid-1930s Hitler was already becoming a threat to the world, and Keynes's assessment of the human condition was shifting accordingly.
Thus, Keynes writes at the end of The General Theory that there are "dangerous human proclivities" at work in a sinful world that pose the prospect of "cruelty, the reckless pursuit of personal power and authority, and other forms of self-aggrandizement." Capitalism could serve an important short-run function because "it is better that a man should tyrannise over his bank balance than his fellow citizens." Moreover, there were "valuable human activities" that depended on the "motive of money-making and the environment of private wealth-ownership for their full fruition."
Yet, in the longer run, if society would heed the prescriptions of The General Theory , the resulting steady economic growth would mean--much as Marx had prophesied--"the euthanasia of the cumulative oppressive power of the capitalist class to exploit the scarcity value of capital." The current capitalist system was merely a "transitional phase" after which the world would experience a "sea-change." If Keynes did not give many details concerning the consequences of this change in The General Theory , one can assume that he meant something of the kind that he had already described in Essays in Persuasion .
Keynes of course did not advertise The General Theory as a work of theology. Instead, as the title reflected, he seemed to suggest that readers should see his efforts more as following in the footsteps of Albert Einstein. Einstein had discovered a general theory of time and space; Keynes had now discovered a general theory of economic interactions. Einstein's theory of relativity had shown that dynamic factors could fundamentally alter the conclusions of Newtonian physics; Keynesian economics would now show that dynamic factors could yield new and unexpected laws fundamentally altering the behavior of a market economy. Thus, like Marx, Keynes presented himself in the role of a true scientist of society--an essential element in the enormous influence both would have on the history of the twentieth century.
D. McCloskey may be right, however. Despite the scientific aspirations of The General Theory (which have not held up well over time), the more important content may have been an implicit theological message. Contrary to Marx, Keynes was saying, the salvation of the world would take time, it would require patience. Both agreed that capitalism was a debased form of existence, yet Marx no less than Keynes now thought that capitalism at present was indispensable to the economic growth that would end economic scarcity and bring on a new stage of abundance in history. However, as Keynes now thought, attempts to accelerate the schedule for the end of capitalism, acted out under the duress of the economic conditions of the depression years, would be disastrous in the long run. The millennium had already begun; the human condition was steadily improving already. With patience and trust in the economic forces in history, the underlying moral theology of The General Theory was that the capitalist stage of economic history would soon enough be ended (in one hundred years or so), and no great economic cataclysm or other great disaster would be necessary to fulfill the looming material and spiritual perfection of the world. No dictatorship of the proletariat was necessary or desirable; it was necessary only to use the instrument of existing democratic government to make further incremental adjustments in the workings of the current market system.
This secular Keynesian theology would become "the new gospel" for the economics profession in the years following World War II. As Milton Friedman has commented, it was "tremendously effective" in the United States in influencing the direction of public policy. Friedman recalled how a whole generation of "economists, myself included, have sought to discover how to manipulate the levers of power effectively, and to persuade--or educate--government officials regarded as seeking to serve the public interest." The most important form of manipulation would be that of the "market mechanism." Keynes sought especially to ward off the ideas of Marxists, doctrinaire socialists, and other potentially harmful influences on public opinion, the kinds of people whom Keynes himself characterized as most likely in practice actually "to serve not God but the devil."
If false religions were at work in the land, Keynes found it necessary to fight fire with fire. As Joseph Schumpeter would relate, Keynes's own efforts inspired a band of followers who exhibited a new religious fervor:
A Keynesian school formed itself, not a school in that loose sense in which some historians of economics speak of a French, German, Italian school, but a genuine one which is a sociological entity, namely, a group that professes allegiance to One Master and One Doctrine, and has its inner circle, its propagandists, its watchwords, its esoteric and its popular doctrine. Nor is this all. Beyond the pale of orthodox Keynesianism there is a broad fringe of sympathizers and beyond this again are the many who have absorbed, in one form or another, readily or grudgingly, some of the spirit or some individual items of Keynesian analysis. There are but two analogous cases in the whole history of economics--the Physiocrats and the Marxists.
Samuelson's Economics would be the means by which the Keynesian gospel was communicated to millions of American college students in the postwar years. Samuelson was an unabashed admirer not only of the Keynesian economic theories but also of Keynes himself, whom he declared to be a true "many-sided genius" of our time who was eminent not only in economics but also in "the field of mathematics and philosophy." Samuelson's mission in Economics was to communicate persuasively not only the technical details but also the moral philosophy--the implicit secular religion--of Keynesianism. Samuelson's great accomplishment was to devise a way of accomplishing this task ideally suited to his specific time and place in American history.
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