The field of economics encompasses the study of how natural resources are drawn from nature and processed by human activity to become value-added products for consumption or commodities for exchange; the study of how complex services are developed by coordinating human activities so that particular services can be rationally provided, bought, or sold; and the study of how the resulting resources are allocated, and how the costs and benefits of these processes are calculated.

Highly specialized subdisciplines of this vast field developed after the Industrial Revolution, the rise to social dominance of the modern business corporation, the sharp debates between capitalist and socialist theories during the nineteenth and twentieth centuries, and the increased globalization of the contemporary world. Econometrics seeks to measure actual processes and their consequences in a delimited institutional range—a family, firm, nation, industry, or segment of the population such as a race or a class. Regression analysis seeks to develop models that can interpret the relative effects of a variable or a set of variables. Other subdisciplines focus on policy-making and are intended to bring desired social results. Macro-economics, for example, focuses on tax or other governmental policies that aim to enhance development or public services, reduce poverty or inequality, or control behaviors that damage the common welfare (crime, environmental damage, drug abuse, child pornography, health or safety, etc.). Microeconomics seeks to enhance the efficiency, productivity, profitability, and viability of companies that operate in various markets. Labor economics, which often engages in advocacy, studies both political and business policies from the standpoint of their effects on employees and workers' unions. Despite their differences in focus, experts in all economic subdisciplines agree that without a sound economic infrastructure, societies falter and people suffer.

History

Economic activity has always been a part of human existence. Hunting, gathering, and cooking have taken place since humans first appeared. Production by craftsworkers to supply goods for trade and for merchants has been present in all of recorded history. Early theories of economic life date back to discussions about farmers and peddlers in the Arthashastra, an Indian treatise on governance from about the third century B.C.E. The concept of shangye (commercial occupation) in early Confucian texts sought to spell out the relationships of economic actors to political and social life. Economic theories also turn up in ancient Greek writings. Plato (c. 428–347 B.C.E.) saw the foundation of The Republic as rooted in economic life (Book 2), and in Politics Aristotle (384–322 B.C.E.) developed the idea of the "management of the household" (oikonomia) and applied it to the polis.

Moreover, economic issues were taken up by religious prophets and moral philosophers in all known cultures, and in the West the blend of biblical themes and Greek philosophy has decisively shaped the social and ethical perceptions of economic life and policy. That is so despite the fact that economics in its modern mode has sought to differentiate itself from these social, ethical, and spiritual philosophies. Indeed, it has become a truly autonomous science on the model of the natural sciences since, at least, the French physiocrats and the English post-mercantilist economists from Adam Smith (1723–1790) through the utilitarians to John Maynard Keynes (1883–1946) and the German socialists and the Austrian libertarians. It is these modern Western sets of perspectives and debates that have most shaped what is today understood as the discipline of economics.

Economics as a discipline, for all its achievements, is not identical to economic life. The heirs of Adam Smith, and those of Karl Marx (1818–1883) or Friedrich Hayek (1899–1992), have developed refined theories that describe how the "rational choices" of persons, families, classes, governments, businesses, or market mechanisms (such as a stock exchange, employment and wage rates, or a futures market) typically manifest themselves, although economists know that they are working with abstract models. The great advantage of such models is that they can be developed and applied in many concrete circumstances by ruling out idiosyncratic and extrinsic contingencies that may also influence decisions or policies but are not directly economic factors. The best economic theories not only have a mathematical and philosophical mark of elegance, they also have a high degree of reliability when applied to specific questions and adjusted to specific contexts.

These models work best in an environment that shares a common society, a common culture, and, since they deeply influence the perceptions and expectations of persons and communities, something of a common set of religious convictions. That is because the "conditionalities" of behavior, what strict economic theory considers to be idiosyncratic or extrinsic contingency, are different where divergent cultural, social, or religious convictions shape morality in distinctive ways. It is true that no one wants to be cheated and that stealing or exploitation is recognized as wrong in every culture, even if it occurs. And it is true that people seek the well-being of the persons or groups that are most important to them in all sorts of social, cultural, or religious conditions. But it is also the case that a polygamous tribal person, for example, or a Hindu caste member, a dedicated leader of an Islamic brotherhood, or a Buddhist nun will have different senses of what constitutes the well-being of persons and groups. It is, thus, not at all surprising that the banking systems in different parts of the world are operationally different, that corporations are formed in distinctive ways and led with diverse understandings of the proper role of leadership, and that workers variously evaluate their obligations to firm, family, nation, political ideology, and faith.

Basic disputes and issues

The attempts to account for these contextual differences are among the key subjects of cultural studies, the sociology of religion, and comparative religious ethics to the extent that these fields bear on economic matters; the issues are paralleled by political, legal, and aesthetic studies. In the West, John Locke (1632–1704) and Thomas Hobbes (1588–1679) can be considered exemplars of a primal disagreement about how economic life works in society. For Locke, persons have a right to their "proprium," that property that they appropriate from nature by honest labor and that is necessary both for their individual existence and for the support of their family. On these bases, people form a civil society with others and construct a political society for the protection of their own and others' well-being. They are aided in this effort by the fact that all persons can, in some measure, recognize the "self-evident truths" of a universal moral law, guaranteed both by reason and by Christian scripture. If the political society does not work, or violates the moral law, the people have a right to alter it to restore their economic and social well-being.

For Hobbes, perpetual conflict over scarce resources could not be resolved by either reason or religion, and thus a sovereign had to impose a collective order by force. Politics must control economics, and no rebellion was allowed. The obvious and brutal conflicts of interests, ideologies, and religions demanded state power so that economic well-being could be obtained beyond the natural state of war. In this paradigmatic dispute, one finds not only the question of the relationship of the bee to the hive in economic life, but the issue of the relative priority of civil society to political society as determinants of economic existence.

A second set of disputes can be seen in the controversies of those who follow Georg Wilhelm Friedrich Hegel (1770–1831) and those who follow his disputatious disciple, Marx. Hegel held that spiritual or mental (geistliche) realities fundamentally shape material realities in a decisive dialectic. Marx, famously turning Hegel on his head, argued that it was not "superstructural" factors that shaped "substructural" factors, but rather the material realities of life that determined human consciousness. Any correlation between religious orientation and economic life was an effect of economic forces that evoked the religious sighs of the people, while those who had control of the means of production perpetuated these dreams to control the workers.

These theories combine in mixed ways. A version of the materialist view can be found among various contemporary disciples of Charles Darwin (1809–1882). Some of them, including the Nobel Prize winning economist Gary Becker (1930–), hold to an "evolutionary psychology" in which individuals make "rational choices" about not only business matters but also about whom to marry and whether to have children on the basis of their calculation of material interests. A collectivist view of economic behavior is set forth by Edward O. Wilson (1929–) in his sociobiological theories; this view sees religion as an illusory cultural by-product of collective material and instinctual dynamics.

More influential in the understanding of the relationship of religion and economic life is the work of Max Weber (1864–1920). His five volumes on the Sociology of Religion and his three volumes on Economy and Society, written early in the twentieth century, argued that different religions have distinct effects on economic (and political) life and on various classes and occupational groups in society. Weber saw not only that the late medieval Roman Catholic faith had an economically positive influence in the emerging free cities of northern Europe in the very early stages of modernity, but that the Protestant ethic gave impetus to the formation of what is now known as the break with traditional, feudal economies and the development of modern capitalist industries. Weber's arguments were doubted during the harsh realities of the Great Depression (which saw greater use of Marxist theory and the rise of Fascism), and were often ignored after World War II when Keynes's economic theories came to ascendancy, but Weber's work regained attention after the collapse of the Soviet Union in the early 1990s and the resurgence of religion all over the world. Today, few economists think that Weber's treatments of India and China were fully adequate, and questions about aspects of his views of Catholicism, Protestantism, and Islam are manifold. Yet, it is widely held that the questions he raised and the methods of investigation he developed are among the most definitive for the ongoing discussions between religion and economic life.

In a postmodern age, the predicted certainties of inevitable secularization that seemed beyond dispute, of a purely scientific view of reality that could provide firm foundations for progressive public policy, clear-minded corporate decisionmaking and personal rational choices without illusion, and the end of both ideology and religious myth seem positively silly. Indeed, it turns out that a deep convergence of inter-contextual reasonability and moral conviction, not equally available in all religions, are critical for the economic wellbeing of persons and peoples. The body of contemporary literature that points in this direction is found in a host of Weber-influenced studies that document the interactions of religion and economic life, and point out that the basic assumptions behind contemporary secular economic theory are, in fact, echoes of religious convictions that are well, but not fully, masked.

See also CULTURE, ORIGINS OF; MATERIALISM; MORALITY

MAX L. STACKHOUSE