Economists Don’t Talk About God–But They Should
Living Not Just in the Material World
❝ How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others…
— Adam Smith, The Theory of Moral Sentiments
The Moral Foundations of Economic Systems
Economists seldom frame their arguments in religious or moral terms. One exception is George DeMartino, my recent guest on The Hale Report, who has written eloquently about the ethics of economics and the need to hold economists accountable for the policy decisions they advocate.
Even more rarely do economists talk about God, or man’s place in the universe. Their domain is the material world rather than the spiritual realm. Yet economists often serve as secular priests of central banks, which in modern times have taken on a role not unlike that of ancient temples, continually refitted as their functions expanded. Similarly, central banks have their own arcane rules, rituals, and vocabulary, and demand an unshakable faith in the doctrine of monetary policy, even as they remain uncertain of its outcomes. Their regularly scheduled meetings and pronouncements are scrutinized with an intensity once reserved for oracles, as observed by their acolytes in the financial press. The appointment of successors is awaited with a degree of anticipation not unlike the white smoke of the Vatican.
In Bolt from the Blue, I argued that markets cannot price a nuclear attack. Here, the risk is different but no less profound: markets also struggle to price moral shocks that occur when the relationship between our values and our resources breaks down. Markets also cannot price moral misalignments.
The new pope, Leo XIV, has decided to venture into the geoeconomic realm. After all, for much of history, religious beliefs were not separate from economic life; they helped shape the moral frameworks that made trade and other means of exchange and settlement possible. Trust was grounded in shared beliefs about what individuals owe one another, and what a higher authority beyond the State requires of them. Those foundational beliefs, in turn, influenced how institutions were created and evolved over time.
Economists should be encouraged to cross over into this unfamiliar domain. They tend to focus more on prices and incentives, even though most would agree that individuals also make financial decisions based on their values and beliefs. There are notable exceptions: Adam Smith wrote The Theory of Moral Sentiments before The Wealth of Nations. Max Weber linked Protestant belief systems to economic behavior, and Douglass North brought culture and norms back into economic analysis.
❝ Not ideas, but material and ideal interests directly govern men’s conduct. Yet very frequently the ‘world images’ that have been created by ‘ideas’ have, like switchmen, determined the tracks along which action has been pushed by the dynamic of interest.
—Max Weber, The Social Psychology of the World Religions, 1946
But overwhelmingly, economics has moved toward models, quantification, and policy mechanics, and away from a more fundamental question: what ultimately sustains the human architecture of economic behavior? Moral expectations are not incidental. They determine whether contracts are honored, officials are trusted, taxes are paid, and whether individuals are willing to invest, hire, and take risks.
This matters because economic systems ultimately depend not just on incentives, but on how individuals perceive and act upon their obligations. Understanding motivation and core beliefs improves economic forecasting, pushing analysis beyond charts and graphs. What follows is not a single policy solution or market forecast, but a framework for understanding how decisions are made by individuals and government policymakers.
❝ The answers can be found not only in the warp and woof of supply and demand, but in the fabric of our moral framework.
Economic systems do not operate independently of moral frameworks. They are expressions of them.
Rights Endowed by their Creator, Not the State
As enshrined in our founding documents, in the American tradition rights are not granted by the State, but are natural endowments from a higher authority. As articulated in the Declaration of Independence, individuals are “endowed by their Creator with certain unalienable Rights,” a principle that places limits on what the state, and society, can demand of them.
Since these rights are derived from outside the State, they establish a boundary on political authority over individuals. However, the invocation of a higher authority is not meant to expand political claims, but to restrain them. As Pope Leo XIV recently warned during his African tour, “Woe to those who manipulate religion and the very name of God for their own military, economic, and political gain.”
Beyond the US, in a world of limited resources, the success of economic systems ultimately depends on how societies balance rights and obligations, and whether that balance can be sustained. A question that economists should answer is whether we can afford to operationalize, individually and through our institutions, values derived not from the State, but from our higher beliefs as a society. And if not, what ethical compromises we can tolerate. These tensions must be worked through collectively.
Allowing only one viewpoint is why it is so difficult for theocracies to create flourishing economies. When God and the State are the same, there are no restraining influences on policy choices. And it is no accident that the US system, which separates church and state, has continued to show strong economic dynamism. And it is no surprise, given their profound structural differences, that the US and Iran have so much trouble negotiating with each other.
Economists can contribute by using facts to suggest ways to balance these rights and obligations within real resource constraints. In practice, these obligations are layered and overlapping, with a hierarchy that is anchored in our systems of belief. It’s complicated, and governments often get it wrong.
Circles of Obligation
A useful way to understand this tension over capacity constraints is by envisioning circles of obligation. At the center is the family, where responsibilities are immediate and non-transferable. Beyond that lies the community and the nation, where obligation is mediated through institutions and shared identity. Only then does responsibility extend outward to humanity at large, where moral concerns remain real but are inherently more diffuse, shaped by distance, capacity, and accountability.
This structure is not unique to the West. In Japan, the distinction between on (恩)—an unrepayable debt—and giri (義理) the social duty to honor and respond to that debt—defines a layered system of obligation that mirrors these concentric circles—personal duties at the center, and broader, more diffuse responsibilities extending outward.
These circles can also be understood as plates—layers of obligation that shift over time in response to economic change. Like tectonic plates, they are not fixed. They move gradually over long periods, sometimes abruptly, often in ways that are not immediately visible. While they remain aligned, the system holds. When they begin to drift apart or collide, strain accumulates beneath the surface long before it is reflected in policy or detected by markets. However imagined, the strongest pull is at the center, based on our immediate duties.
However, when the outer circle expands faster than the inner circles, economic repercussions will be felt. This is not simply a political or cultural problem; it is a question of priorities. Resources—whether fiscal, institutional, or social—are not unlimited. Every new claim carries a cost, and each society must decide how those claims are prioritized. A system that ignores scarcity in the name of moral ambition risks undermining the very foundations that makes that ambition possible. The recent immigration crises in Europe and the US are an example of this push and pull.
We cannot ignore any of these circles. A person or a society that only tends their own garden shrinks from the broader system on which it depends. However, it is within the family and immediate community that individuals have the greatest autonomy and the most direct capacity to act. The challenge, therefore, is not to choose between these spheres, but to order them—to conserve not only physical resources, but the social and moral capacity required to sustain obligation across all three. Good economic policy rests on moral clarity.
Obligations vs Capacity
Economic performance depends on alignment between moral principles and institutional capacity. When moral precepts evolve in step with institutional capacity, trust is sustained and growth follows. When they step out of alignment, when resources lag behind expectations, either adjustments need to be made or conflict will build. What appears as a shift in policy or political discourse is often something deeper: a society-wide disagreement about what we owe others.
We can see clear evidence of this today in the United States. As debates over equality, migration, tolerance, and national identity intensify, the link between values and economic capacity is fraying. These are often discussed as legal, political, or cultural disagreements, but at their core they reflect a more fundamental question: how far do our responsibilities extend when resources are not unlimited? The answer influences not only domestic social cohesion, but the evolving nature of globalization.
Resource Limitations
The scope of modern fiscal imbalances can be understood in this light. Persistent deficits reflect a deeper mismatch between the scope of commitments a society has assumed and the resources it is willing or able to allocate. When expectations expand faster than the capacity to fund them, the gap is often bridged through borrowing, which has expanded rapidly worldwide since the recovery from WW2 in spite of our unprecedented peacetime prosperity. This peace dividend has allowed societies to defer the consequences of difficult trade-offs, but not to escape them. In this sense, the fiscal deficit is not just a financial metric; it is a measure of unresolved questions about how obligations are ordered and maintained.
❝ A system that ignores scarcity in the name of moral ambition risks undermining the very foundations that make that ambition possible.
Recent efforts to reduce government spending, including initiatives such as the Department of Government Efficiency (DOGE), are an attempt to bring state obligations back into alignment with fiscal realities. Whether these efforts succeed depends not only on identifying inefficiencies, but on confronting the more difficult question of which obligations can be sustained, and which must be reconsidered or eliminated. This has been painful; Washington DC now has the highest unemployment level in the country— 5.9%.
Efficiency can reduce costs, but it cannot resolve the underlying question of how competing claims are prioritized. This brings us back to values. Do we house homeless migrants, the urban poor, or military veterans? There is a clear divide in the United States, and so far this debate has been pushed forward by borrowing resources, not just at the federal level, but locally. My own city, Chicago, is renowned for putting off inevitable decisions that will one day be made for us.
Under President Clinton, we had a balanced budget. We also had a far more unified polity. Fiscal deficits are a form of institutional scar tissue that develops along ideological divides. Japan and China, it should be noted, both have large fiscal deficits but have remained relatively culturally cohesive. China has a closed capital account; Japan owns most of its own debt.
Next, I discuss how this tension of boundaries plays out across religions, and across three economies: The EU, China, and Australia.
Three Traditions, Three Structures
This layered structure of obligations is also embedded in the world’s major religious traditions. Christianity, Judaism, and Islam each attempt to balance universal moral concerns with individual obligations.
Christianity pushes outward: “I was a stranger and you welcomed me” (Matthew 25:35). Yet it also affirms the priority of the inner circle: “If anyone does not provide for his relatives… he has denied the faith” (1 Timothy 5:8). The familiar phrase “charity begins at home” is a later formulation, but it reflects a much older principle: that obligation is ordered, beginning with the family before extending outward. This idea is not simply cultural; it is embedded within religious frameworks that define both the expansion and the limits of moral responsibility.
Ordering and Expansion in Catholic Thought
The tension between expanding moral obligation and preserving social order is not new. It can be seen within the evolution of Catholic social teachings.
Pope Leo XIII (1878-1903), writing in Rerum Novarum (1891) confronted the upheavals of industrialization by affirming both social responsibility and moral order. As he wrote, “It is a most sacred law of nature that a father should provide… for those whom he has begotten.” The structure is explicit: obligation begins with the family and extends outward through society, with each level retaining its proper role. Interestingly, he also wrote about the rise of Americanism.
More recent papal statements, including those attributed to Pope Leo XIV, the first American pope, have emphasized the expansion of moral concern across borders, particularly in the context of migration and humanitarian responsibility. These appeals reflect a long-standing commitment within the Church to the dignity of the individual and the moral imperative to care for strangers.
At the same time, they raise difficult questions about capacity, responsibility, and the ordering of obligations within societies that must ultimately sustain them. These capacity constraints have been left unaddressed by the Church.
Judaism also prescribes care for the outsider: “You shall love the stranger as yourself” (Leviticus 19:34) while grounding obligation within a defined covenantal community.
Islam affirms universal human dignity—“We made you into nations and tribes so that you may know one another” (Qur’an 49:13)—while institutionalizing redistribution through zakat (Qur’an 9:60).
Zakat and the Structure of Moral Obligation
Zakat, one of the Five Pillars of Islam, is often described as charitable giving. In practice, it is better understood as a formal system of redistribution embedded within a moral framework, a tithe.
Muslims who meet a minimum wealth threshold are required to contribute a fixed portion—traditionally 2.5% of accumulated wealth—on an annual basis. But what distinguishes zakat is not the percentage. It is the structure. The Qur’an (9:60) specifies defined categories of recipients, including the poor, the indebted, and travelers in distress, creating a bounded system of obligation rather than an open-ended moral claim.
Zakat therefore represents a form of structured moral expansion. It extends responsibility beyond the family and immediate community, but does so within clear limits and with institutional grounding. Obligation is neither purely voluntary nor universal in scope; it is ordered, predictable, and enforceable within a broader social framework. Zakat illustrates an alternative approach: the expansion of moral concern combined with explicit rules governing its application.
Each tradition offers a different solution to the same problem: how to extend moral concern without dissolving the structures that sustain it, and how to balance immediate responsibilities with duties to a larger community and, ultimately, to humanity as a whole. What they share, however, is an implicit recognition that obligations must be ranked. The call to care for the stranger does not eliminate responsibility to the inner circle; it exists alongside it, creating a tension that must be managed rather than resolved.
Theology Meets Policy
In this sense, moral systems are not simply exhortations to generosity. They are frameworks for prioritization under conditions of scarcity. They define not only who we are responsible for, but when, and to what extent. Historically, this ordering was anchored in a broader relationship to God, which provided both a justification for charity and a boundary for its application. This is being actively debated within the traditions themselves and increasingly expressed in contemporary policy discussion.
In a recent exchange on his return from Africa, Pope Leo XIV said the following, when asked about his stance on migration: “I would change the question: what is the global North doing to help the global South in its situation that forces them to migrate?”
His point underscores a broader challenge: resource transfers alone are often insufficient when underlying governance structures remain weak. In many regions, including parts of Africa, economic underperformance reflects not only scarcity, but regulatory proliferation and institutional constraints that are difficult for any foreign power to address short of colonization.
National Policies
Modern Western societies have often pursued expansion of benefits without fully articulating expectations, resulting not only in political disagreement, but in deeper uncertainty about how obligations should be prioritized. Europe now faces a dilemma as geopolitics changes the rules of the game they have played since the end of WW2.
1. Europe’s Model Under Strain
Germany’s post-2015 experience offers a clear example of balancing wants and needs. Following the admission of roughly one million asylum seekers, fiscal costs were estimated at €20–30 billion annually.¹ Yet employment among refugees rose to approximately 50 percent within five to seven years.² Across Europe, non-EU migrants continue to exhibit employment rates roughly 10–15 percentage points lower than native populations.³ At the same time, the EU’s working-age population is projected to decline sharply by mid-century.⁴
For decades, Europe’s social model has also been shaped by an external factor: security provided by the United States, which has kept defense spending at 1–2% of GDP below US levels⁵. By relying on the US defense umbrella, European countries were able to allocate a greater share of national resources to social spending rather than military expenditure. This helped support the development of extensive welfare systems that, over time, became both a stabilizing force internally and a source of attraction for immigrants. In effect, some of the cost of that model was subsidized by US taxpayers, allowing European societies to extend social obligations more broadly than might otherwise have been possible. As geopolitical conditions shift and defense spending rises, that implicit subsidy may no longer hold, forcing a reassessment.
Europe’s experience illustrates the central dilemma of expanding moral obligation. In the face of demographic decline, the long-term case for migration remains compelling. But in the short term, fiscal, institutional, and social capacity constraints can grow quickly, particularly when expectations adjust faster than institutions can realistically absorb them.
2. Australia
A useful contrast can be found in Australia, which has, until recently, managed to align high levels of immigration with relatively strong social cohesion. Its points-based immigration system prioritizes skills, language proficiency, and labor market needs, allowing it to balance openness with structural needs. The results have been tangible: immigration has supported economic growth, offset demographic pressures, and contributed to relatively high levels of trust.⁹
Yet this alignment is not static. Net migration reached roughly 500,000 in 2023¹⁰, while housing vacancy rates in major cities such as Sydney and Melbourne have fallen below 1%.¹¹ Infrastructure and public services are under increasing pressure. These challenges are not ideological; they are structural. Australia illustrates that expansion and cohesion can coexist, but only when expectations remain clear and institutional capacity keeps pace.
3. China’s Path: Strong State, Weak Institutions
As Europe’s social benefits have ballooned, China’s have shrunk. Over the past four decades, China has achieved extraordinary economic growth, driven by state coordination, foreign investment, and long-term planning.¹² But the social safety net and income equality that were universal prior to the Deng era have disappeared. Economic actors operate within a framework where political priorities can reshape outcomes, sometimes abruptly.¹³ ¹⁴
In this system, the allocation of resources is concentrated centrally rather than distributed across society. This allows for coordination, but it also creates limits. The state can enforce behavior, but it cannot fully substitute for internalized moral obligations. Where trust is not embedded in shared expectations, it tends to remain contingent, making it harder to sustain cooperation across a complex economy.¹⁵ The result is not instability in the conventional sense, but a different form of fragility, one that depends on continuous oversight rather than broad societal trust. One measurable result of the current paradigm: China’s GDP, once thought to exceed the US, has fallen behind and given demographics, will likely never recover.
The Boundary Problem, AI, and Institutional Risk
These ideological differences define how systems respond to stress, and that stress is likely to intensify in the age of artificial intelligence before benefits are widely shared. AI systems depend on institutional frameworks and shared norms. In high-trust environments with clear rules, they can enhance productivity and decision-making. In systems where trust is weakening or institutional boundaries are unclear, they can amplify fragmentation, uncertainty, and the erosion of shared norms and expectations.¹⁶ ¹⁷
Systems that once degraded slowly may now fail more quickly, as the gap between moral expectations and institutional capacity becomes harder to manage at scale and speed. But there is a twist here too. AI could serve to increase abundance in the future, and potentially ease global tensions. Now however, we are at a transition point.
At its core, what we face is a boundary problem. Across different systems, the central issue is the alignment between moral frameworks and institutional capacity. When moral ambition extends too far, systems strain. When obligation is too concentrated, systems become rigid. When expectations are unclear, trust erodes. The challenge is not to eliminate these tensions, but to match compassion with capacity, openness with coherence, and flexibility with stability.
In the end, the question is not whether societies expand benefits, or enforce obligations, but whether they can be sustained under stress and over time. The fate of an economy ultimately turns on a shared understanding of who owes what to whom.
Conclusion
As the world navigates a new period of rising tension, including the possibility of escalation with Iran and confrontation with China, policy impacts can no longer be measured solely in budgets, but in lives, and in the quality of those lives. Despite our generous impulses, we must ask a fundamental question: what are our priorities, and what is truly existential? What must be risked at any cost? What can we afford, and what can we not afford to forgo? What are our national, community, and personal values, and limits?
The answers can be found not only in the warp and woof of supply and demand, but in the fabric of our moral framework, and in our beliefs about higher authority in both the political and spiritual realms.
Economists may not speak in the language of morality or faith, but those who bear the costs of government policies make decisions based on those precepts. In times of uncertainty and risk, the underlying structure of our values becomes visible again. The gravity of this moment, and the realistic paths to resolve it, cannot be understood through quantification alone.
In moments like this, the distance between the consequences of our policies and our beliefs narrows. I am reminded of a haunting lyric:
❝ No matter what they tell you, all soldiers talk to God.
— James Taylor, Far Afghanistan
At the limits of economic policy, what we believe ultimately determines what we are willing to risk.
Postscript
After yesterday’s events, may the better angels of our nature prevail, and may civil discourse replace violence.
Lyric Hughes Hale
Lyric Hughes Hale serves as Editor-in-Chief of Econvue, which publishes a newsletter, econVue+. She hosts The Hale Report, a podcast series on global economics. She is Director of Research at Hale Strategic
Footnotes
German Federal Ministry of Finance (Bundesministerium der Finanzen)
Official publications, fiscal policy statements, and budget data:
German Federal Ministry of FinanceInstitute for Employment Research (IAB), Germany
Labor market research, migration impacts, and employment trends:
IAB Research PortalOECD, International Migration Outlook
Annual report analyzing migration flows, policies, and labor market integration across OECD countries:
OECD International Migration OutlookEuropean Commission, Ageing Report
Long-term projections on demographics, pensions, healthcare, and fiscal sustainability in the EU:
European Commission Ageing ReportNATO, Defence Expenditure of NATO Countries
Annual data on defense spending as a share of GDP and contributions by member states:
NATO Defence Expenditure DataPublic statements attributed to Pope Leo XIV
(Clarify exact speech, encyclical, or address if cited; placeholder reference should be replaced with a specific Vatican source or transcript once identified.)City of New York, Official Budget and Financial Documents
Fiscal reports, budget proposals, and municipal financial data:
NYC Budget and Financial InformationOECD, Trust in Government and Public Institutions
Research and policy frameworks on institutional trust and governance:
OECD Trust in Public InstitutionsAustralian Treasury, 2023 Intergenerational Report
Long-term projections for population, productivity, and fiscal sustainability in Australia:
Australia Intergenerational Report 2023Australian Bureau of Statistics (ABS)
Official national statistics on demographics, labor markets, housing, and economic indicators:
Australian Bureau of StatisticsSQM Research (Australia)
Housing market data, vacancy rates, and property analytics:
SQM Research Housing DataWorld Bank, China Overview
Macroeconomic indicators, development trends, and policy context:
World Bank China OverviewInternational Monetary Fund (IMF), China Country Reports
Article IV consultations and macroeconomic assessments of China:
IMF China Country ReportsWorld Bank, Worldwide Governance Indicators (WGI)
Comparative metrics on institutional quality, rule of law, and governance effectiveness:
World Bank Governance IndicatorsBrookings Institution, China Analysis
Policy research and commentary on China’s economy, governance, and global role:
Brookings China ResearchOECD AI Policy Observatory
Data and analysis on artificial intelligence policy, adoption, and economic impact:
OECD AI ObservatoryStanford Institute for Human-Centered AI (HAI)
Research on AI development, governance, and global competitiveness (including the AI Index Report):
Stanford HAI