Jewish Economic Theory and Practice: Why the Distaste for Economic Liberalism?

1. Jewish Economic Theory and Practice: Why the Distaste for Economic Liberalism? Corinne Sauer (Jerusalem Institute for Market Studies) and Robert M. Sauer (Jerusalem Institute for Market Studies, University of Bristol) May 2012

2. Purpose of the Paper • Is Judaism the “cause” of a general distaste for economic freedom? • Conventional wisdom: Judaism supports aggressive government intervention for shaping an ideal society (social justice) • Look at data on political/economic preferences to see if evidence for a general Jewish distaste over time • Compile a list of fundamental principles in the Torah related to Economics and see if conventional wisdom is correct • Bottom line: Jews are differentially skeptical of economic liberalism but one can safely reject the hypothesis that Judaism is the “culprit”

3. Structure of the Talk • Show data related to American Jewish political/economic preferences • Look at data on Israel • Enumerate basic economic principles in the Torah • Economic policy implications of those principles • Consider alternative explanations (Milton Friedman)

4. American Jewish Voting inPresidential Elections 1916-2008

5. Is there a Jewish Affiliation Effect?

6. Is it an American Phenomenon Only?Isolating an Israeli Effect – Economic Freedom Index 2009

7. Israel and EU15 Over Time

8. The Paradox • Empirical analysis suggests that there is a statistical basis for claiming Jews have a strong distaste for economic liberalism • Paradox because Jews have personally prospered from the operation of markets for centuries • “The market is color blind. No one who goes to the market to buy bread knows or cares whether the wheat was grown by a Jew, Catholic, Protestant, Muslim or atheist; by whites or blacks.” – Milton Friedman (Mont Pelerin Society 1972) • MF further noted that Jews are disproportionately found working in industries and professions that are characterized by free entry

9. Does an “Anti-market” Judaism Solve the Paradox? • Few Torah scholars sympathetic to classical liberalism have studied the anti/pro-market “bias” in Traditional Judaism • Rabbi Meir Tamari: “the widespread identification of Jewish social thinking with that of socialism is the product of either ignorance of the source material, or willful distortion.” • More recently, Rabbi Isaac Lifshitz has extracted several important areas of overlap between Judaism and Economic Liberalism

10. Basic Jewish Economic Principles Five “Axioms” of Jewish Economic Theory: • Participation in the Creative Process • Man is created in G-d’s image, work, innovate and complete • Protection of Private Property • Quite uncompromising, provides incentives to participate 3) Accumulation of Wealth is a Virtue • Symbolizes success in creative process, patriarchs were wealthy • Care for the Needy • A moral imperative for the giver, not because inequality is immoral • Government is Inefficient and Concentrated Power is Dangerous • Mentioned many places in Torah, especially Samuel (8: 7-18)

11. Policy Implications • A Flat Tax Policy is consistent with the Five Axioms • Set at 10% (maximum 20%) no exemptions • Welfare-to-Work policies consistent with the Five Axioms • Already alluded to in Rambam’s hierarchy of charitable giving • Suspect that many other market-liberal policies are consistent with a proper understanding of the Torah’s economic principles • Judaism is clearly not anti-capitalist - does not explain the lack of public support for economic freedom

12. Alternative Explanations Milton Friedman, in his address to the Mont Pelerin Society in 1972, raised two compelling alternative explanations: • European political spectrum became divided into a “Left” and a “Right”, and only the Left offered a place for Jews in public life • Anti-Semitism produced stereotypes of Jews that could be combatted only by attacking the market and its emphasis on monetary exchanges

13. Conclusion • Many aspects of Traditional Judaism support a “capitalist” world view – Judaism properly understood not the source of distaste • If Friedman is correct about the reasons, American Jewish support for free markets would increase if the American Right: • Better advertised openness to Jewish political participation • More clearly led the way in combatting anti-Semitism (including anti-Zionism) • In both America and Israel, Jewish spiritual leaders need to be educated in Judaism’s consistency with a free-market agenda • These steps might help turn the tide and eventually see the majority of Jews throughout the world joining the struggle for economic freedom