Benjamin Friedman on the Origins of Economic Belief | Podcast Summary

In a thought-provoking conversation with Tyler Cowen, Benjamin Friedman, a renowned macroeconomist, delves into the origins of Western economic ideas.

He challenges the common belief that these ideas are a secular product of the Enlightenment, arguing instead that they are deeply rooted in religious beliefs, particularly within the English-speaking Protestant world.

The shift of allegiance to markets from Catholicism to Protestantism is attributed to the development of a commercial, competitive, financial, and monetized economy in Northern Europe during the 16th to 18th centuries.

This shift sparked a great debate over the morals of a commercial economy, with figures like Adam Smith and David Hume providing a compelling narrative about why market economies work and are not inimical to our morals.

The mid-20th century in America saw the coming together of religious conservatism and economic conservatism, and I think the catalyst that brought them together was the existential fear of world communism. – Benjamin Friedman

Eastern Orthodox countries in Europe have not had truly stable liberal democratic capitalism, which Friedman attributes primarily to the dominance of Soviet communism.

However, he acknowledges that there may be deeper cultural factors at play, beyond just the experience under Soviet rule.

Medieval canonical laws set the Western world on a unique path.

The clergy’s discouragement of cousin marriage led to much weaker clan systems in Western Europe, which in turn influenced the development of Western economics.

While religious beliefs have significantly influenced economic ideas, they are not the only driving force behind the creation of Western economics.

Other factors, such as cultural features and historical experiences, also play a crucial role.

There is a distinction between the persistence of beliefs and the persistence of behavior.

While behavior changes when the environment and incentives change, beliefs are more persistent.

This is evident in the different ideas that Americans, Chinese, and Russians have about various things.

There is no persistence in rates of economic growth across countries, but there is persistence in who is rich and who is poor.

People’s realization that they are living better than their parents and that their children will have better opportunities is a significant factor in economic growth.

Complacency in societies that are already rich can be dangerous.

If large numbers of people feel that they no longer have a sense of forward progress in their material lives, they may turn away from democratic values like tolerance and respect for diversity.

All religions have a kind of militancy to them in their initial phases.

Christianity is not uniquely militaristic among Western religions.

If interest rates remain low, then government, business, and households can all afford higher levels of debts without it becoming unsustainable.

However, we don’t know if interest rates will remain low.