The Evangelical Roots of American Economics

As the discipline began to emerge, a group of passionately religious academics wanted it to become a tool for limiting child labor and fighting poverty.

Harvard's campus in the 1890s (Library of Congress)

From its earliest days, the American college was a Protestant enterprise. Harvard, Columbia, Yale, and Princeton were all founded to educate Protestant ministers and the men who would sit in the pews of their churches. It was common for public universities in the 19th century, too, to have an explicitly Protestant hue. As late as the early 20th century, elite colleges still discriminated against Catholics and Jews, both as students and faculty members. After 1920, even when Catholics and Jews started to be hired as faculty members, they still could not find work easily teaching American literature or American history because it was thought that only Protestants could properly carry on the lineage that defined the American character.

During the 20th century, as America’s universities became some of the world’s finest, the role of religion in shaping them was gradually forgotten. But it’s difficult to fully grasp American culture without understanding its Protestant underpinnings. After all, Protestantism has shaped the nation’s identity and ideals, from Americans’ sense of being the chosen people to the concept of Manifest Destiny to the content of Martin Luther King Jr.’s arguments and even the cadence of his speeches.

One unlikely example of the Protestant influence on American culture is the formation of economics as an academic discipline in the United States. Prior to the 1880s, before the introduction of elective courses, there were not academic disciplines in the same sense that there are today. Colleges still had fixed curricula that defined a classical liberal education: Greek and Latin, mathematics, composition, rhetoric, and grammar. Economics, however, had come into that curriculum largely through the back door. Almost all colleges had a required senior-year course taught by the president of the college. (Some colleges offered economics as a separate course within the fixed curriculum, but students were usually introduced to economics in this senior capstone course.)

Not surprisingly, several of the textbooks used for teaching economics were written by college presidents. But more surprisingly, most of them were written by ordained Protestant ministers, such as John MacVickar and Francis Wayland. These texts were not analytically sophisticated, and they favored the gospel of free trade and free markets. Their economic thinking was suffused with Protestant moralism: They preached, for instance, that strikes were a violation of laborers’ contracts with their employers.

The sorts of Protestants who were established enough to write textbooks were basing their theories on a conception of the economy that was becoming outmoded. The economy they were familiar with was the one that defined the early 19th century and consisted largely of farmers and small-town merchants. Before the Civil War, less than half the working male population had worked for wages, and a large percentage of those who did were young men who worked on someone else’s farm before they went on to homestead for themselves. Having come of age in this milieu, these older economists emphasized the Protestant values of personal freedom, dedicating oneself to one’s vocation, and being obedient to authority. They viewed the world as generally corrupt and were primarily concerned with saving individual souls—they were members of Protestantism’s “private party,” as described by the religious historian Martin Marty.

Meanwhile, a group of younger evangelicals were witnessing the birth of a postbellum economy that differed from this rural idyll. As railroads, oil fields, and steel plants were being knit together into a new kind of industrial economy, the young evangelical economists could not reconcile the nascent economic system with their belief that America was a Christian nation: What was undoubtedly the most dynamic moment in American economic history was also a time of terrible misery. Young children without the benefit of an education were often used as laborers in the new factories. Industrial accidents and deaths were frequent and compensation was rarely, if ever, paid to the families of the maimed or deceased. Workers typically labored 10-to-12-hour days, six or seven days a week, with no vacation or sick leave. Unionizing was illegal almost everywhere and efforts to strike could easily end in mayhem and murder.

These realities prompted younger Protestants to prize a different set of values. They drew on the idea that had emerged in the Second Great Awakening that Christians were called to collectively address social injustices such as slavery. Thus, they wanted to limit child labor and establish a 10-hour workday. They were members of Protestantism’s “public party,” meaning they felt society in general could be redeemed through collective social action.

While the views of the public party hadn’t caught on with the religious mainstream, Protestants in many professions, including law, theology, and journalism, felt compelled to take a new approach to their work in order to address the injustices they saw in the economy. For instance, the Danish immigrant Jacob Riis, a fervent evangelical, established himself as one of America’s first great photographers by documenting the lives of the urban poor. Together with Ida Tarbell, a journalist who also brought her Christian values to her work, he helped to create the journalistic tradition of muckraking.

Younger evangelical economists also took a stance on their work that differed from the previous generation’s. Richard T. Ely, the man who is most responsible for leading this younger Protestant cohort in the 1880s, saw the new industrial economy quite clearly. His own father had suffered a long bout of unemployment, and Ely had recently returned from Germany to live in New York City, where he’d witnessed the spread of urban poverty. Ely’s motto, drawn from his German training, was “Look and see”: Like Riis and Tarbell, he believed that people could be prodded out of holding their comfortable ideas about American society if they knew the truth.

Ely called for the older economists to stop arguing based on assumptions about how the economy worked and to join him in the hard work of understanding the institutions that enabled and encouraged poverty. As he did this, he was consciously calling on a different set of Christian values than his elders. Whereas they emphasized individual redemption and saving the souls of sinners, Ely and his peers focused on charity, concern for the poor, and social justice.

It was on these moral grounds that the American Economic Association was founded in 1885. Ely, today considered the founder of the AEA, shepherded his peers to create an organization that, he hoped, would shape the emerging discipline into a tool for making the economy fairer and more equitable. It was around this time that economics departments were starting to be formed as separate entities within America’s emerging research institutions, which meant that a lot of new jobs were up for grabs. Ely hoped that the AEA would help to define who was suitable for these positions.

While Ely was passionate about seeing his vision realized, the older generation still held a lot of power, so his colleagues insisted that the older generation must be made comfortable in the organization if it was to survive. To accomplish this end, many of his allies prevailed at the first meeting in Saratoga Springs, New York, and insured that members retained the right to reject any of the organization’s four founding principles, including a declaration that the government had an important role to play in economic development.

This move was highly effective in winning over the older cohort. Perhaps too effective: Seven years after the AEA’s founding, Ely did not even attend the annual meeting, asserting that the group had become toothless. The 1890s were a tough time for him and his followers. In a hearing at the University of Wisconsin, he was charged with entertaining a labor organizer in his home and for supporting socialism. Ely was cleared, but two of his students lost their teaching jobs elsewhere for their sympathies with laborers.

One of the big reasons Ely’s faction had trouble getting traction was that in the early days of the AEA, the ideas of the older Protestant ministers still held sway with most people in the pews. Despite the fact that Ely helped organize summer seminars for Protestant ministers in the 1890s to help them understand the emerging industrial reality, and despite the fact that he preached regularly around the country and that his books were used in church reading groups, most Protestants were unmoved. The Social Gospel theologian Walter Rauschenbusch called the 1890s a “dark time” for progressive Christianity.

But in the first decade of the 20th century, the public party suddenly swung into prominence. The momentum had been building, in the sense that people everywhere in the Western world were facing what came to be called “the labor question” by this time. The late 19th century had seen the rise in popularity of socialist and communist ideas in Europe, and Pope Leo’s encyclical on the relationship between capital and labor was issued in 1891. Eugene V. Debs, the first big-name American socialist, rose to prominence during the first decade of the 20th century. Soon, the old ideas were no longer seen as adequate.

Protestants’ newfound desire to address the new industrial reality was most evident in “The Social Creed of the Churches,” a document approved first by the Methodists in 1907, and then in 1908 by virtually every other mainline Protestant denomination. The Creed called for an end to child labor, a 10-hour work day, no work on Sundays, and compensation for the families of the victims of industrial accidents. These were exactly the kinds of government interventions that the evangelical economists had been calling for in the 1880s and 1890s, and in many ways the Creed is a testament to their influence and perseverance.

Although they experienced a “dark time” in the 1890s, these progressive Protestants would become a dominant force in American economics in the first two decades of the 20th century. Ely and his colleagues would eventually become well-known giants of the discipline, influencing important moments in the evolution of American economic policy: They authored many of the country’s early labor laws and welfare programs. Like all Progressives, they had blind spots and biases, but they found a way to help others while still encouraging the growth of the dynamic new economy that emerged after the Civil War. They liked wealth well enough, but they felt that America produced enough of it to take care of children and laborers, and this belief made its way into economics departments around the nation.

It is, of course, hard to recognize this earlier type of economist in today’s profession. Like the university, the discipline of economics was secularized after 1920. Around this time, the discipline of philosophy came to be dominated by logical positivism—essentially, the idea that the scientific method is the only way to arrive at true, factual knowledge—and this school of thought greatly influenced American economists as the landscape of their own discipline was changing. They developed the idea that their new analytical focus was value-free—a premise still taught in most introductory economic textbooks.

But just like the founders of the American Economic Association, today’s economists have strong values, and their theories are value-laden. This does not make them bad economists, nor their analysis invalid. But it does point to the limits of seeing the economy through only one lens.

Among the many things that would define the new economic mainstream that emerged in the early 20th century was a type of analysis that placed consumers, not laborers, at the center of the economist’s value system. Thus, when workers are displaced in large numbers, mainstream economists tend to focus on what has happened to the price of the goods that the laid-off workers used to make, not what has happened to the workers’ lives. As the percentage of Americans who work has fallen and income inequality has grown, the political importance of examining working people’s lives—looking and seeing—has become all too apparent.