Economics 101 & Public Square

The Spiritual Problems behind the United States’ Increasingly Lower Levels of Economic Freedom

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The United States is one of the most economically free countries in the world, but it might not stay that way for long.

The U.S. has dropped from the second most economically free country in the world to the eighteenth in the past twelve years alone. Just because a nation has economic freedom today doesn’t mean it will in the future.

Lower levels of economic freedom mean lower levels of human flourishing, and the poor suffer the most. Why are we so quick to forfeit our freedom?

There are at least two major reasons – one of which will be covered today, and the other next week.

They are both spiritual problems, inherent to our human nature.

We Hate Uncertainty

Our human nature despises uncertainty. We often do anything we can to minimize it, so we plan.

We plan our days, our meals, where to go to school, where to live, where to work, and how many kids to have. We predict elections, the weather, and the future of the stock market. Humans, by nature, want to know as much as possible.

This natural human behavior spills over into policy-making, especially economic policy. Dr. Gregory M. A. Gronbacher says,

When faced with the uncertainty and complexity of modern economic reality – from banking to foreign aid, from employment issues to tax policy, from mortgage laws to money funds – the desire for control, safety, and predictability is strong. It is frequently the government that is called upon to enforce this so-called stability.

We don’t like uncertainty or unwanted surprises in life, or in the market, so we try to plan and control to avoid these circumstances.

When we do this through policy, it usually comes in the form of expanding government programs and increasing regulation, which reduce economic freedom.

Two examples of this are the Great Depression and the recent Great Recession, both of which were very unpleasant economic surprises followed by a political attempt to correct and control the economy by increasing government programs and regulation.

Trying to Control Uncertainty Can Make Things Worse

I’m getting married this summer. I can use all my knowledge and planning power to plan the perfect wedding, but I will never have control over the weather on that day. Likewise, history shows us that the market continues to cycle through periods of growth and periods of recession, despite an increase in government control over the economy.

There is a limit to the amount of certainty we can create, and when we don’t acknowledge this, our controlling behaviors can often times make things worse.

Many scholars, writers, and thought-leaders argue that the New Deal actually prolonged the Great Depression. Shortly after the Great Recession, Harold L. Cole and Lee E. Ohanian argued in the Wall Street Journal that government interventions that are meant to correct economic depression, like the New Deal, often don’t work out as planned:

The main lesson we have learned from the New Deal is that wholesale government intervention can — and does — deliver the most unintended of consequences. This was true in the 1930s when artificially high wages and prices kept us depressed for more than a decade, it was true in the 1970s when price controls were used to combat inflation but just produced shortages. It is true today, when poorly designed regulation produced a banking system that took on too much risk.

I can think of many times in my life when I have tried to control a situation and actually ended up making matters worse. My desire to control was predicated on a sense of pride, that I knew how to run the show better than someone else (most notably, God).

How We Handle Uncertainty Is a Spiritual Problem

The control felt good in the moment, but overtime I came to realize how little control I actually had over certain situations. I saw many of my plans foil, and those things that I tried so desperately to control had spun out of control. I quickly learned that I wasn’t always the one with the best knowledge, and I had to quit acting like it.

A certain amount of planning is absolutely good and necessary, but since we are not omniscient, we have to be okay with uncertainty in our personal lives and in the economy. God calls us to plan and prepare, but at the same time, he calls us to surrender control to him during both certain and uncertain times.

When the government tries to control the economy, it might make us feel more secure or stable temporarily, but it limits our freedom and flourishing in the long run. Ben Franklin said,

Those who surrender freedom for security will not have, nor do they deserve, either one.

We lose economic freedom not primarily because we don’t understand the way economic policy works, but because of our natural human tendencies. Uncertainty is scary to us because it means we can’t know everything. Fearing uncertainty and trying to mitigate it through our own control is a spiritual problem that can become a policy problem, and ultimately a problem of human flourishing.

Next week, I’ll share with you the second reason why I think we are losing economic freedom.

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  • JTapp

    I hear echoes of Taleb’s Antifragile in this post.

  • Theo Entrepreneur

    With the growth of rules, regulations, and laws there is a parallel growth of uncertainty for those desiring enterprise and innovation. The choice is stark. One can become a ward of the state or risk the disciplining hand of an ever increasing complex, bewildering bureaucracy.

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