Thursday, January 28, 2021

Interview with Benjamin Friedman on Religion, Economic Growth, and Much Else

Tyler Cowen has one of his "Conversations" with "Benjamin Friedman on the Origins of Economic Belief" (January 27, 2021, audio, video, and transcript at the link). It starts from Friedman's recent book, Religion and the Rise of Capitalism, but then expands to touch on many other topics.  Here are some snippets: 

On American belief in religion and markets
[C]ompared to other high-income countries, Americans are more inclined to say they believe in religious doctrines, and the Americans are much more likely to participate in religious activities — going to church, for example.

I think this is not at all unrelated to the fact that Americans have a deeper and more active commitment to the ideas of market competition. It goes back to the question that I was raising a minute ago of where do our ideas of market competition come from in the first place? What I suggest in my book is that we got those ideas 200, 300 years ago from what were then new and hotly contended ideas about religion, theology within the English-speaking Protestant world, in which people like Adam Smith and David Hume lived. ...

[T]here’s a part of the story that you’re missing, and that has to do with the coming together at mid–20th century in America, of religious conservatism and economic conservatism. I think the catalyst that brought them together was the existential fear of world communism. ... Communism, at least as advocated at that time, had a unique feature of being simultaneously the existential enemy of lots of things that we hold dear. It was the enemy of Western-style political democracy, but it was also the enemy of Western-style market capitalism, and importantly for purposes of this line of argument, it was the enemy of Western-style religion.

I think the religious conservatives and the economic conservatives realized that they had an enemy in common, and they took the threat seriously, and this led them to come together. The person I think who played the greatest role in bringing them together was Bill Buckley. ... [U]nder the leadership of Buckley and also ministers — I think of Billy Graham as being very active in this process, but others too — religious conservatism and economic conservatism came together at mid–20th century America, and I think they’ve been together ever since.
On how economic growth nourishes democracy
The hypothesis that I offered in that book very importantly was about the rate-of-growth effect. It’s about people realizing that they are living better than their parents lived. It’s about people realizing that the opportunities for their children are better than the opportunities that they had. It’s very much a rate-of-growth effect. The reason I say that’s important ...  is twofold.

One, it was a warning against our being complacent. It’s a warning that no matter how rich our society is, if we get into a situation in which large numbers of people feel that they no longer have a sense of forward progress in their material lives, and they don’t see that turning around anytime soon, and they don’t have optimism either that their children will face a better economic future, that’s the circumstance under which people turn away from these small-l liberal, small-d democratic values, like tolerance and respect for diversity, generosity, openness of opportunity, even respect for democratic political institutions. ... 

Then, at the same time, the second implication of the fact that it’s a rate-of-growth argument is some optimism that countries around the world, where income levels are far below ours, don’t have to wait until they reach our level of income before they can develop into liberal democracies.

Why the US government should borrow at longer debt maturities
Now, if I can put in a plug for a policy idea, this is why I have been recommending to anybody who will listen that this is a great time for the United States Treasury to lengthen out the maturity of the US government’s outstanding debt. The average maturity of the outstanding debt is around six years, and we happened to have super-low interest rates, it would be lovely to think that they’re going to be here forever.

Some economists think they will be. I’m more cautious. I would use the current market environment as a way to lock in those interest rates because we know that we’re going to have a high government debt level for a very long period of time and much better it not be a burden.
Is it time to redesign the Federal Reserve? 
I don’t think anybody today would design the Federal Reserve in the way in which it was designed a hundred years ago, with a board of governors, and these 12 regional reserve banks, and these presidents of the regional reserve banks who are not confirmed by the Senate playing the key role in establishing monetary policy.

That said, I would leave it alone because my sense is that, with the current politics of our country, I am sorry to say, I think if we open that box, we are much more likely to come out with something that’s worse than what we have. So, while I don’t know anybody who would defend, in the abstract, the structure we’ve got, I wouldn’t change it, at least not now.