By now most readers of this journal are familiar with arguments that the charitable impulse is not well-served by institutions of the modern welfare state. Indeed, many are persuaded that the modern state feeds itself from the fount of charitable feelings that have been created by the Judeo-Christian tradition. The state, by exploiting this ethos, has created a situation in which people feel more like suckers than Samaritans. In this article, I will argue that the economic significance of the Western religious traditions extends far beyond the creation of an ethic of sharing or neighborly charity.

The first example is the economics of cooperation. The theoretical problem is, why should people cooperate for mutual benefit in a situation that presents possibilities of greater personal gain from ignoring other people. Game theorists from many disciplines have studied the problem of mutual cooperation in problems as trivial as whether to litter on the beach, and in problems as significant as whether to attempt to shoplift if you think you might get away with it. Theoretical economists have shown that a tit-for-tat strategy is stable. That is, I cooperate with you, if you cooperate with me. I follow the rules if you follow the rules. But tit-for-tat works only if someone gets the game started with a cooperative first move. Is there not, then, economic significance to an ethical system that insists on a generous first move, even to strangers?

The theorists have difficulty in answering this question, in part, because their theories do not tell them to look at basic cultural and religious values at the foundation of people’s behavior. One scholar, Don McCloskey put it rather colorfully: “Some [economists] go on trying to solve the Hobbes Problem, well into its fourth century of irresolution– namely: Can a mob of unsocialized brutes be proven on a blackboard to create in the end a civil society? The problem lacks point if people are already French or American.” Or, I would add, if they are already Christians or Jews.

Economists have also shown that it is almost impossible to construct a contract pletely covers every possible contingency. Thus, long term contracts almost always present opportunities for profitable reneging. The theoretical economist has difficulty explaining why people do not renege more often than they do. We now even have experimental evidence that people behave opportunistically less than predicted, that they contribute to public goods more than predicted, and that they generally cooperate more than predicted. In other words, we know that an ethos of promise-keeping is a valuable piece of social capital, but that the market does not fully reward promise-keeping. What then of the credibility of the early Christian Church?

People were asked whether they were Christians under the following cost-benefit calculus: If you say no, all you have to do is offer a sacrifice to the Roman Emperor. If you say yes, I am a Christian, then your body will be covered with pitch and set on fire. You may conclude that people who said yes to such a question could be counted on to mean what they said. The fact that this religious belief survived persecution of this magnitude over a period of three hundred years adds to its credibility.

And so, we are no longer surprised to learn that the medieval economy, a far-flung network of trading and entrepreneurship, was held together by oaths. People sealed their contracts by swearing oaths before God, and people took this seriously. We need not marvel at the lack of law produced by the state, and the richness of the merchant-law created by the merchants themselves, for their own use. Indeed, in the medieval world, we find layers and layers of cooperative ventures for business, charity and religion, and virtually none of it was provided by the state. The munes, confraternities, and sodalities were all created by the Christian ethos. In our time of idolatry of the state, it is difficult for us to prehend that there was once a real place and time in which the state played a peripheral role in people’s lives. The institutions of government were not always solidified and monopolized. Princes were absorbed peting with one another for territorial claims. The ability of these distracted Princes to tax and regulate their subjects was minuscule by modern standards.

In spite of the political fragmentation, people could travel anywhere within half of the known world and still be within the same basic culture. Standards of behavior would be familiar, religious observances would be familiar, even the Latin language would get a traveler a very long way. This real place was known as Christendom.

It is interesting for us as free market economists to reflect upon what destroyed this world: the rise of the modern state. petition between Church and state over the independence of the Church, and particularly for control of the clergy and Church lands, had gone on steadily since Pope Gregory VII in 1076.

Professor Harold Berman has argued that this tension between Church and state was one of the sources of Western liberty. By the end of the religious upheaval we now call the Reformation, the state had won that struggle decisively. For in every country, both Catholic and Protestant, the state controlled the Church lands, the monasteries, and the appointment of the clergy. With the strengthening of state power that these gains made possible, states could consolidate their territorial monopoly positions. Not only did they acquire monopolies over the use of force, as we so often point out, they attempted to acquire moral monopoly over allegiances, over values, and to make the state the ultimate arbiter and measure of the Good.

One of the benefits to be noted from this sorry affair is that the loss of papal states actually increased the true moral independence of the papacy, if not of the Church, more generally. The papal states had to be defended and this brought the papacy into the business of raising armies and monies, all regarded as necessary for the independence of the Church, and the physical protection of the pope himself. Now, the pope occupies a postage stamp in the midst of the most turbulent republic in Western Europe. The person of the pope is protected by a handful of unarmed men in colorful costumes. The moral authority and independence of the papacy has never been stronger.

It is fair to say that idolatry of the state is a powerful force in modern times. Many in our society assign to the state all the attributes of God: perfect goodness, perfect reason, perfect knowledge, and ultimately, omnipotence. The long term effect of this idolatry of the state has still not fully played itself out. I must say that I find this idolatry to be at the heart of the moral crisis of statism that so many of us deplore.

The person of religious sensibilities knows who the captain of the ship is; and he knows what he is expected to do, even though he may not always do it perfectly. The person whose soul is without a captain, is always subject to forcible boarding. This is a convenient arrangement for those who wish to have moral territorial monopoly, plement their more physical monopolies. It may be for this reason that we observe a new solidarity among religious persons of all persuasions. I have often noticed that observant Jews and practicing Christians have more mon with each other, than either has with the modern skeptic. Perhaps this is providential, for the segregation of the Jews was one of the black spots of the medieval world. Perhaps this new solidarity is a long overdue recognition that the worship of the One True God transcends every other difference. Perhaps we have been led to this recognition by the Original Invisible Hand, the one that led the Children of Israel out of captivity, and promised to be with us until the end of time.

Many formerly skeptical academics have begun to recognize the usefulness, if not the truthfulness, of many traditional religious values. Indeed, Don McCloskey ended his American Scholar article with a plea to intellectuals to stop scoffing at bourgeois Judeo-Christian virtues. I second his plea and add to it that we ought to stop scoffing at bourgeois religion as well. For the ordinary American continues to hold religious beliefs that inform his actions. These are the virtues that he brings with him, both to the market and to politics. The skeptical posture that most of modern academia assumes is not only out of tune with the reality of our society, but also undermines those who are trying their best, against all odds, to keep their promises, to behave decently, and to meet their familial obligations. We are all living on the moral capital accumulated through centuries of Judeo-Christian teaching and practice.