While some complain about a lack of faith in the world today, they ignore the largest faith based system of them all: the economy. While this might seem to be an odd claim, the case for it is absurdly easy to make.
First, consider money. While money was once either made from valued metals or grounded in something like gold, today it is entirely based on faith. A dollar or pound has worth because people have faith in them (or, rather, what is believed to lie behind them) and, as this faith diminishes, their value declines. Naturally enough, if all faith was lost in a currency, it would be valueless and have use only in terms of what someone could do with bits of paper or metal (or numbers on a computer screen). Interestingly, this is the same thing that is said to happen to the gods (at least in old movies based on Greek mythology) when mortals lose faith in them-they fade away.
Second, consider the stock markets. As the recent financial crisis showed, the perceived worth of stocks goes up and down based on how people feel about the stocks and the economy. When faith is strong, the market goes up. When faith is weak and people are afraid, the market declines. Not surprisingly, the stock market is very much like currency in this regard.
Third, there is the fact that many economists take a patently false model of human behavior on their faith in such classic models. The standard economic models are, in general, based on the assumption that people act in rational ways when engaged in economic activity. This is true of some people some of the time. However, even a casual examination of how people behave shows that they behave in the economic arena the same way they do elsewhere: mostly in ways that are not very rational. The current economic situation makes that abundantly clear. Even without empirical investigation, reason should indicate the obvious: there is little reason to believe that people would miraculously become rational agents when it comes to economic matters. Since belief in the classic models cannot be based on reason, they seem to be an article of faith among the priests…I mean, economists.
Fourth, there is the general faith in seemingly metaphysical forces such as market forces and the ever popular invisible hand. Crudely put, much of Western economic practice has been based on the belief that such forces will make things work out fine and hence there is little (or no) need for actual human supervision (such as government regulation). The parallels to faith in a divine being making the world run right are far too obvious to even need discussion.
Interestingly, many of the same people who believe in laissez faire economics tend to endorse fairly rigorous social control in other aspects of life. For example, American Republicans are well known for being against the regulation of business but very much for strong law and order. They are also inclined to push for the imposition of their moral views via laws (such as outlawing same sex marriage). In the case of business, they claim that the market forces will ensure that everything works out for the best without regulation and that the power of the market forces will make it all right. However, they harbor no such delusions of faith when it comes to life outside of business: people need to be subject to harsh laws and penalties (including the death penalty) or they will act badly. Perhaps the best explanation for this inconsistent view is pure faith. As Hume might say, reason cannot reconcile their two views of human behavior so they must owe their belief to the power of faith.
There is something other than ‘pure faith’ involved here. It is more Hume’s radical empirism coupled with religious belief of the literal kind. Radical empirism leads to hunger because the psyche is cleansed of anything considered to be non-rational. The non-rational is what is mythological, metaphysical, or ceremonial. All of which nurtures both the non-rational and rational dimensions of our psyches. The outcome of this psychic starvation is unmitigated greed. How can greed be satisfied? By absence of regulation.
Radical empirism dovetails with religions that have similarly taken a scalpel to the human psyche by eschewing anything that does not adhere to a literal interpretation of scripture. What is mythological, truly metaphysical, or ceremonial is abhorred. Metaphor is incomprehensible to people who have been raised and educated in belief systems that are one-dimensional.
That these two world views have found each other is not surprising. One is empirical, Darwinian, and libertarian. The other is fundamentalist, literal, and power hungry - another form of greed.
What both groups need is psychic nourishment. Otherwise they will eat up the world. The recent downturn provides a correction. However, it will not solve the problem. The cycle will repeat until the fundamental cause is addressed.
I think that you are using the word “faith” very broadly.
1. Money seems a form of trust. Without trust, no society functions. Without trust, I wouldn’t dare to cross the street.
2. People who play stock markets work with probabilities, not faith. I invest in stock X because I think that it is probable that its price will go up, not because I have faith.
3. When you look at macroeconomic issues, you can posit that people are rational agents and you can obtain fairly accurate results, not in predicting the next day’s stock market results, but yes in seeing long-term trends.
4. The idea that markets always work perfectly is an ideology or perhaps a faith. When you examine it, it basically says nothing: since whatever happens, even a crash that throws half the population out of work, is an example of how perfectly markets work.
This article is just too limited and too cartoonish for me to address in full. Its misunderstanding of the difference between faith and good faith (i.e. a promise), its failure to acknowledge what free market advocates have said about “irrational” behavior, its characterization of the market as some kind of “metaphysical” force, its focus on Republicans, all of it strikes me as misunderstandings and straw man attacks.
I’d be perfectly happy to see a discussion of when regulation is appropriate or talk about how faith might pertain to stock markets (it’s usually measured as “consumer confidence”), but this article appears to aim at attacking free markets altogether based on the assumption that (a) religion and markets are predicated on faith and (b) religion is bad ergo (c) free markets are bad too.
Personally, I’ve seen too much religious zeal among the socialists to see this as a worthwhile argument.
To be honest, I wish that my article was based on misunderstanding and straw man attacks. We’d be better off if I was just making all this up and people with power and influence didn’t actually have such views.
While there are people who take into account irrational behavior and recognize that the market forces are not metaphysical, there is a significant number of people who fit well within the scope of my assessment. It could be said that their positions are straw men-but they are straw men of their own making. See, for example, Jacob Weisberg’s article “The Libertarian’s Lament” (Newsweek, October 27, 2008 page 45).
I’m not attacking free markets. As with other areas of life, freedom has proven to be generally good. However, as Mill argues in On Liberty, it is also essential to have legitimate limits on all freedoms-even free market freedoms.
I do not assume that religion is bad. Rather, I just draw a parallel between faith in a divine being that orders and runs the world and faith in market forces that order and run the market. While some do recognize that the market forces are entirely human in origin (plus the obvious impact of natural events), there is a significant number of people who treat the invisible hand and market forces in ways that makes them seem to be metaphysical forces. Perhaps they supervene on the components that make up the market, but the faith in them often seems to be a faith in metaphysical powers.
I just used the Republicans as an example because their economic views seem to have been a major contributing factor to the current economic crisis. If the Democrats had occupied such a role, I’d have used them. The Democrats don’t have the same faith in the free market ad the Republicans. Their faith lies elsewhere.
Yes, faith and good faith can be distinguished. And I do admit I played a bit loose with “faith.”
Some socialists, as you indicate, have their own faith. Typically it is a faith in the power of the state to make things right. Not surprisingly, the state is often reified by some socialist thinkers. This becomes especially common when socialism slides into fascism (see, for example, what Mussolini had to say about the fascist state).
Bill Clinton laid a lot of the ground work for the crisis we are in today. The Democrats worship at the alter of the Corporation as much as the Republicans do, it’s just that the Democrats would spend the money they reap from this in different ways.
I’m surprised no one has brought up the fact that Alan Greenspan was called “The Oracle.”
Yeah I think you’re being too loose with faith, when it comes to your first point. Its more of a trust, and even that trust is rationally justifiable. If I went to a store and they simply wouldn’t accept my dollar, I could appeal to the government, and they would enforce the value of the dollar.
That said… I’m sure there is a lot of faith involved in the market…. But whereas one person has faith, another person can have good reason, and still be in agreement. I can hold on faith that the store will take my dollar, or I can hold on reason that the store will take my dollar.
I find the argument here awfully similar to the argument that science is based on faith too. Only in the most wildly stretched notion of faith, is science fundamentally faith. Similarly, here, I’m sure there are alot of people who have faith in the economy, and clearly people don’t think rationally about the markets all the time. Recent news of the stock market point to irrational fears within the stock market making things worse. Right now is really a great time to buy stock, not sell stock, for a long-term investor anyway.
And anyways, Alan Greenspan practically admitted that he was the cause of the financial crisis, for not regulating the subprime securities. This was a democratic problem, or a republican problem. Honestly there is nobody to blame besides Greenspan, or the bankers. To pin it on Bush which Obama loves doing, is simply unfair to Bush. This coming from a tree-hugging baby killing unabashedly liberal person.
If the problem with the “self-correcting marketplace” is that people don’t act in their own rational self-interest, then wouldn’t the best solution be to promote education of economic and marketplace dynamics instead of placing the power of marketplace regulation in the hands of a relatively few potentially irrational subset of the population?
Mr. LaBossiere’s thesis is more insightful than you might imagine. I am a Canadian financial planner who loves to make clients aware of why most banks don’t expect a run on deposits: faith. With reserve ratios of 1:10 (at least for Canadian banks), this means for every $1000 dollars you deposit, the bank creates (from thin air) $10,000, which they then proceed to put out in the form of loans. And as George Bailey explained in It’s a Wonderful Life, the bank could never sustain a run on its deposits because the money is all “out there”. It is by faith, or trust alone that “runs” do not happen more often.
A more esoteric example of faith demonstrated in a market economy: Lawrence Weschler wrote a smart little book about artist J.S.G. Boggs, also the subject of a Public Television (PBS) profile in America. Boggs, an artist, would draw remarkable “bank notes”, not real currency but well-drafted and fanciful notes. These whimsical “works of art” would then be bartered, or used in place of real currency in exchange for real goods or services. The idea being that these “works of art” were by faith accepted (by some at least) as more “valuable” than the real thing. To compound that notion, collectors would offer even higher prices to those taking this as payment, along with the receipt and change, for added provenance. The whole thing blurs the idea of “value” and is a fascinating look at what constitutes value. It is also a reminder that value is indeed something backed more by faith and trust than by a gold standard.
The origin of the present crisis in loans given out by FMA on the basis of no particular ability to repay under pressure from the Democratic Party has been dismissed as a Republican talking point. Any sensible outsider would admit that it had a role. Add to that you have the creation of dubious instruments that could spin this straw into gold and regulators that would attest that this straw was indeed 22 carat and there was a catastrophe which was so well signalled that only utter fraud and corruption can explain its extent. But it’s o.k. no bonuses were lost.
I’m surprised by a professional using ‘metaphysical’ in the Halloween sense. The slightest acquaintance with the dismal science of economics will reveal that compared to it metaphysics is as earthly as carpentry.
I quite agree with Michael’s last sentence. I think the use of “faith” in a pejorative sense is at the base of this article (part of the secular humanist bias of this site, to my mind). What is at stake in financial decisions is reasonable belief. In the case of a currency, this is underwritten in the last resort by a government, which is legally empowered to insist its currency is legal tender for discharge of debt. The reasonable belief that this is so underwrites commercial arrangements that are settled in a national currency.
Mike,
OK. Some people are either ignorant or unethical. What is interesting about this?
OK. I’m glad to get that out of the way, but I’m not sure that this article is particularly interesting if you’re not making that kind of argument. The fact that some people blindly believe the market will function without good information is certainly a problem, but I don’t see how ascribing the problem to faith is philosophically helpful. Its value seems, at best, to be literary in nature.
That depends entirely on what you mean by “limits.” Preventing fraud and corruption is quite different from the kind of central planning that is being advocated as a response to our current economic crisis. People ought to be going to jail, not getting subsidized to create bank mergers. This issue seems to be the one with legitimately interesting philosophical implications.
OK. I believe that evolution orders the balance of nature without intelligent management. Does this mean that I’m taking this as an act of faith? There is after all quite a lot of empirical evidence to go on.
Most Republicans certainly did their part in creating the crisis, but then most Republicans do not believe in competition or a free market. While deregulation certainly made the crisis possible, it was other government policies that caused it to happen.
Some argue, I believe convincingly, that Democrats’ policies in the past have quite a lot to do with out current crisis, but then this is, after all, a place for discussing philosophy, not economics as such.
In any case, I’m not a fan of either political party, and I’d be more than happy to join in on an attack of the Republicans. Their failures and outright misbehavior, however, should not be seen as an argument for socialism.
Also, props to Sam, Michael, and Stephen for excellent points.
I would rather have a system that punishes stupidity and rewards wisdom for it allows more freedom than one which hinders my freedom, rewards stupidity, and punishes patient wisdom.
Republicans are hardly the party of free marketers. Ronnie talked a good story, but his actions said differently.
See here or here for a rebuttal of Jacob Weisberg’s article “The Libertarian’s Lament” .
Michael, Perhaps you’d like to guess who said this in 2004.
Jean,
So far as I could discover, Bush said that in support of tax cuts. I don’t think he was referring to the same program where Democrats were pushing for banks to loan to those who could not pay. Am I mistaken?
Bush made more than one speech stating he wanted to eliminate home down payments and open up home ownership to minorities, the poor, etc. He was all for changing the rules. So was Clinton.
Exactly, Bush said it. He said it in many speeches, in support of many policies. Both parties are gung-ho for home ownership. Govt could have stopped banks from making risky loans, and obviously should have–because now everyone’s being forced to bail them out. The party of deregulation and free market economics thought that was a bad idea. See Alan Greenspan: “I was wrong.”
Jean,
Bush. Argh. Greenspan. Arrrgh. OK, I wouldn’t put it past a Neo-con like Bush to support such a proposal any more than I would McCain. Governments could have stopped banks from making risky loans, but somehow I doubt they’d have needed to if CEOs had thought they’d be looking at bankruptcy or jail time instead of retirement bonuses and bailouts (Congress was forced?). For all their rhetoric, the GOP is certainly not the party of free market economics even when it was under Reagan; socialism for the rich, after all, does not count. Greenspan may support deregulation, but that does not make him a free market man. He is near universally reviled among the Austrian economists and quite a few besides. Hearing him blame his mistakes on the Market would be a joke if it weren’t such a travesty.
Greenspan was first nominated by Reagan, then by George the Elder then by Clinton twice then by George the Younger once. So the idea that the Democrats were not aware of the intent of his policies is disingenuous.