I had some spare time yesterday and spent it reading Adam Smith. I was motivated to do this because the phrase "market fundamentalism" has been rattling around in my brain for the last six days. It was prompted by this article by Brad DeLong, Making Religion of Economics, in which DeLong reports on pointless conversations with the "pointless pain caucus"
a group that believes fervently that Americans must be punished with low wages, high unemployment, and reduced government services if the economic outlook is ever to brighten. The rationale for this belief — which requires cutting government spending at a time of consumer retrenchment, ensuring that demand remains low and joblessness high — is akin to those for donning hair shirts on religious holidays: If it hurts it must be good.
After reviewing all the ways in which the PPC's beliefs are refuted by facts, DeLong concludes that
...it is ideological — nay, religious: The Market is good; the Market giveth; the Market taketh away; blessed be the name of the Market. Knowing that the market is good, their task is to figure out why a good market has decreed that employment in America needs to fall by 8 million relative to trend. (It's not unlike grappling with a just and all-powerful God who doesn't mind a tsunami every so often.)
It turns out that Smith sheds some light on pointless pain in his discussion in Wealth of Nations of the effects of religious control of the curricula in European universities on philosophy and philosophical thought prior to and during his time.
Wherein consisted the happiness and perfection of a man, considered not only as an individual, but as the member of a family, of a state, and of the great society of mankind, was the object which the ancient moral philosophy proposed to investigate. In that philosophy the duties of human life were treated as subservient to the happiness and perfection of human life. But when moral, as well as natural philosophy, came to be taught only as subservient to theology, the duties of human life were treated of as chiefly subservient to the happiness of a life to come. In the ancient philosophy the perfection of virtue was represented as necessarily productive, to the person who possessed it, of the most perfect happiness in this life. In the modern philosophy it was frequently represented as generally, or rather as almost always, inconsistent with any degree of happiness in this life; and heaven was to be earned only by penance and mortification, by the austerities and abasement of a monk; not by the liberal, generous, and spirited conduct of a man. [Emphasis added]
"Hmmm," I thought to myself, "I wonder what other similarities between economics and religion there might be? A priestly language, perhaps? One that only the high priests, I mean, economists, understand?" Here's Smith:
When christianity was first established by law, a corrupted Latin had become the common language of all the western parts of Europe. The service of the church accordingly, and the translation of the Bible which was read in churches, were both in that corrupted Latin; that is, in the common language of the country. After the irruption of the barbarous nations who overturned the Roman empire, Latin gradually ceased to be the language of any part of Europe. But the reverence of the people naturally preserves the established forms and ceremonies of religion long after the circumstances which first introduced and rendered them reasonable are no more. Though Latin, therefore, was no longer understood anywhere by the great body of the people, the whole service of the church still continued to be performed in that language. Two different languages were thus established in Europe, in the same manner as in ancient Egypt; a language of the priests, and a language of the people; a sacred and a profane; a learned and an unlearned language.
Smith describes how religious reformers had to overcome the Church's strong preference for Latin translations of scripture, translations that tended to favor Catholic doctrine. To do this, reformers had to seek the authority of the original Greek and Hebrew scriptures, to be able to read and understand the original (or close to original) documents. (Not unlike those of us who occasionally venture back to the 18th century to read Smith and others.) It was the demand for knowledge of Greek to read scripture that produced new interest in ancient Greek philosophy and philosophers and eventually countered some of the Church's dominance of philosophy.
Smith was not a fan of concentrated power, religious or otherwise, viewing the Church as
the most formidable combination that ever was formed against the authority and security of civil government, as well as against the liberty, reason, and happiness of mankind, which can flourish only where civil government is able to protect them. In that constitution the grossest delusions of superstition were supported in such a manner by the private interests of so great a number of people as put them out of all danger from any assault of human reason: because though human reason might perhaps have been able to unveil, even to the eyes of the common people, some of the delusions of superstition, it could never have dissolved the ties of private interest. Had this constitution been attacked by no other enemies but the feeble efforts of human reason, it must have endured for ever. But that immense and well-built fabric, which all the wisdom and virtue of man could never have shaken, much less have overturned, was by the natural course of things, first weakened, and afterwards in part destroyed, and is now likely, in the course of a few centuries more, perhaps, to crumble into ruins altogether. [Emphasis Added]
"...the liberty, reason, and happiness of mankind, which can flourish only where civil government is able to protect them." Write that down, put it in your pocket and take it out three times a day and contemplate what it might mean, particularly that last part about civil government protecting the liberty, reason, and happiness of mankind. Then ask yourself, what might be the optimal size of such a government in a large and complex capitalist society? I doubt the answer is "small enough to drown in a bathtub."
Just as the division of labor and growth of commercial exchange eroded feudal power, so also did they erode the power of the Church; as they reduced dependence on feudal barons, so also did they reduce tenancy and dependence on Church lands. Reduced dependence on the Catholic church and clergy and new (Protestant) religious sects gave rise to clergy, some of whom, like Catholic clergy before them, were seen as connected to the sovereign, court, and nobility and therefore seen as out of touch with common people. However, at least in a few countries, a new kind of priest emerged:
In all the presbyterian churches, where the rights of patronage are thoroughly established, it is by nobler and better arts that the established clergy in general endeavour to gain the favour of their superiors; by their learning, by the irreproachable regularity of their life, and by the faithful and diligent discharge of their duty. There is scarce perhaps to be found anywhere in Europe a more learned, decent, independent, and respectable set of men than the greater part of the presbyterian clergy of Holland, Geneva, Switzerland, and Scotland...Where the church benefices are all nearly equal, none of them can be very great, and this mediocrity of benefice, though it may no doubt be carried, too far, has, however, some very agreeable effects. Nothing but the most exemplary morals can give dignity to a man of small fortune.
So concentrated wealth and power, even of a religious organization, or incentives that encouraged competition for the favor of the rich and powerful, yielded a clergy that was well-connected to the sovereign, the courts, the nobility and gentry of the country and out of touch with the common person. But according to Smith, some religions avoided this by removing incentives for clergy to court the wealthy and powerful. Moreover, by eliminating paths to wealth and power, they were able to create incentives where clergy could only compete on morals! Let's read it again:
"Nothing but the most exemplary morals can give dignity to a man of small fortune."
Now there's an argument for taxing the rich at a higher rate.
And, finally, we learn from Smith that just as Wall Street may have siphoned our best and brightest away from that which is "most useful to the publick," so did the liberal reward of clergy tend to siphon the best minds away from European higher education and into the Church.
In countries where church benefices are the greater part of them very moderate, a chair in a university is generally a better establishment than a church benefice. The universities have, in this case, the picking and choosing of their members from all the churchmen of the country, who, in every country, constitute by far the most numerous class of men of letters. Where church benefices, on the contrary, are many of them very considerable, the church naturally draws from the universities the greater part of their eminent men of letters, who generally find some patron who does himself honour by procuring them church preferment. In the former situation we are likely to find the universities filled with the most eminent men of letters that are to be found in the country. In the latter we are likely to find few eminent men among them, and those few among the youngest members of the society, who are likely, too, to be drained away from it before they can have acquired experience and knowledge enough to be of much use to it.
Like the authors of the US Constitution, Smith viewed established and especially state-established religions as politically dangerous, a source of concentrated wealth and political power.
Ironically, it appears that economics, or at least the dominant "pain caucus" part of economics that forms the substrate of current finance and economic policy, is more like religion than science in some respects.
A superstitious belief in penance, mortification, and austerity.
A priestly language understood by only a few.
"The grossest delusions of superstition... supported in such a manner by the private interests of so great a number of people as put them out of all danger from any assault of human reason."
A distorted labor market that has siphoned human capital and human capacity away from where it would have served the public, the economy, and the country better.
I have to think that Adam Smith would have viewed Wall Street and the misallocated wealth and political power with which it is endowed in much the same way that he viewed religion wedded to political power:
the most formidable combination that ever was formed against the authority and security of civil government, as well as against the liberty, reason, and happiness of mankind, which can flourish only where civil government is able to protect them.
I wonder how the "father of economics" would feel about misguided economic thought providing the liturgy for a religion of pointless pain and economists (not all, but some) serving as the high priests of that "religion?"