Claiming to be scientists, economists are uncomfortable with the idea of a supernatural being the existence of which can’t be proven.
Some may be believers, but almost none let this influence the theories they propound and the policies they recommend.
Economics in the main says religion is a matter of personal opinion. It falls within the category of human tastes about which conventional economics has no view.
This may be seen as a deficiency at a time when religion appears to be affecting the political discourse in many countries and the course of human history.
This hasn’t always been the case.
Early Christian philosophers invariably had something to say about economics and it was about the difference between price and value
Price was a fact of life, perhaps tolerable like slavery, but a moral issue nevertheless.
Drawing on the arguments made by Greek polymath Aristotle, they said the righteous were obliged to take into account ethics and morality when deciding whether to ask for or pay a particular price.
So a shopper might justifiably pay more or less if he or she thought that’s what its true value merited. The seller, likewise, was instructed not take advantage of a situation where prices were artificially or wrongly inflated by shortages or hoarding.
Some have argued that St Thomas Aquinas, the Italian Christian philosopher who has shaped Catholic thinking for more than 700 years, suggested that every good and service had an intrinsic or objective value. But that’s inaccurate. Aquinas said people should pay or ask for what they thought was right based on an ethical assessment of the effort made to create it. If that was the prevailing price, that was OK.
In Islam and Judaism, ethically-governed reasonableness needed to be at the core of every commercial or financial transaction. Like Christians, Muslims rejected interest on loans as wrong because it involved making money from money rather than from effort.
The debate about the relationship between transient prices and value continued for centuries. Even atheist writers like Karl Marx tended to treat economics as a branch of ethics.
It ended around the final decade of the 19th century when theoreticians developed a coherent theory of price. This showed that prices were both socially and technically optimal, provided certain conditions were in place, principally the absence of monopoly, monopolistic, oligopolistic and other forms of imperfect competition. Prices might not be morally justifiable, but they could be defended, not least because they allowed individual buyers and sellers the freedom to choose.
But ethics continued to condition the way economics justified itself.
The 1st World War and the Great Depression which started in 1929 prompted soul-searching. Most economists concluded that market failure was a permanent feature of the price system. The resulting waste of resources, seen as the principal cause of two global wars, was morally unacceptable and merited intervention by government.
This perspective was undercut in the 1970s by fear that inflation, caused in part by government deficit spending, destroyed incentives to save and invest and undermined personal responsibility. It had ethical implications as well as economic ones.
Economics has for more than two decades been grappling with externalities, principally pollution caused by human activity. The ethical dimension is the impact this has on people and communities unable to afford to protect themselves against global warming and other by-products of market-driven economic activity.
Technical and systematic market failure, inflation and externalities have nevertheless been addressed, with varying degrees of effectiveness, by conventional economics. Every economist knows the mitigating measures that governments and business can now take.
But what does economics have to say about the influence of Evangelical Christianity on US government policy and the impact on dozens of countries of Islamist radicalism?
The answer is: practically nothing.
This is hardly surprising. In his Essay on the Nature and Significance of Economic Science published in 1932, LSE Professor Lionel Robbins said economics was “the science which studies human behavior as a relationship between ends and scarce means which have alternative uses”. In other words, it was about the relationship between people and things.
Religion, in contrast, is essentially about the relationship among people with things as a mediating and secondary factor.
For Judaism, Islam and Christianity, the divinely selected will enjoy eternal life in a place with no material shortages. The life of the world is both a test for admission to — and a preparation for — a life after death. But this is essentially about the way an individual interacts with others.
This is clearly expressed by the golden rule defined by Judaism which demands that “One should treat others as one would like others to treat oneself.”
Some forms of religious belief imply that material wealth can be interpreted as evidence of God’s approval of individuals and individual acts. But acquiring it for its own sake or for worldly pleasure has no place in the life of those seeking God’s favour.
In contrast, no economics text book says those that win in the market aren’t clever or lucky, but divinely-ordained.
Religion would therefore seem to have an unhappy relationship with conventional economics’ depiction of a system governed by individuals satisfying personal needs and whims.
The concept of value developed by Economics2030, in contrast, provides a way of bridging the gap between economic theory and the ethical arguments made by the three great Abrahamic religions and not just them.
It views value as being exclusively the product of constructive interaction among individuals. Some of these interactions are paid for. Some are not. The scale of value creation is influenced by the contribution made by those participants. The amount paid is shaped by a subjective evaluation of the significance of the value created in each interaction by the participants in it. Profiteering and exploitation in individual transactions destroy relationships and undermine the capacity to create value over time.
The ethical dimension of value-creation conceptualised in this way is obvious: the more an individual contributes to an interaction the larger the resulting value and the more there is to share.
A committed teacher educating an attentive student will create more value than a disinterested teacher working with an alienated one.
The ethical argument the Abrahamic religions make is that both are obliged to inject as much energy and imagination into each interaction as possible.
The economic conclusion that the theory of value presented by Economics2030 encourages is that this approach creates more value which in turn can be converted into more tangible and intangible wealth. Ethics is good economics.
Of course, you don’t have to be a believer to create value. And many believers are value destroyers.
But faith can make a difference to the way economies work.
It’s time for economics to understand this fact — and absorb it.
A full account of the history of price can be found here.