Acton Commentary

Jewish Theology and Economic Theory


The late Milton Himmelfarb, a social commentator and longtime student of the American Jewish community, definitively summed up the Jewish political paradox with his famous aphorism: “Jews earn like Episcopalians and vote like Puerto Ricans.” American Jews, it seems, tenaciously refuse to link their higher income levels with more conservative, or economically liberal (in the European sense), political positions. Recent data indicate that American Jews earn per capita almost twice as much as non-Jews. Yet, they are between 33 percent and 50 percent less likely than American Catholics and Protestants to identify themselves as supporters of the free market.

Why is it that American Jews suffer from (or perhaps enjoy) a particularly acute case of champagne socialism? The most popular answer to this difficult question involves the impact of Judaism on the belief system of American Jews, as well as Judaism's emphasis on aggressively pursuing social justice.

The conventional wisdom is that Judaism motivates Jews to be highly educated and to succeed professionally but to fervently support relatively collectivist social policies and other forms of aggressive government intervention for shaping an ideal society. In our view, however, the fundamental problem with the so-called standard answer is that it is not at all true that Judaism is a set of principles that endorses income redistribution and other progressive social programs. In fact, our research shows the opposite: Judaism is a system of thought that more naturally aligns itself with the basic principles of economic liberalism. Jewish economic theory does not explain the widespread distaste amongst Jews for a free market political agenda.

A simple analysis of the political preferences of American and Israeli Jews suggests that there is a statistical basis for claiming that Jews have a strong distaste for economic liberalism. This is quite a paradox because it is also well-known that Jews have benefited a great deal over the centuries from the operation of free markets and competitive capitalism.

In his 1972 address to the Mont Pèlerin Society, Milton Friedman appealed to basic economic theory to explain why Jews, as well as other minorities, generally derive great benefits from free-market systems. According to Friedman:

Wherever there is a monopoly, whether it be private or governmental, there is room for the application of arbitrary criteria in the selection of the beneficiaries of the monopoly — whether these criteria be the color of skin, religion, national origin or what not. Where there is free competition only performance counts. 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.

Friedman also observed that Jews can be disproportionately found working in industries and professions that are characterized by free entry, as opposed to industries and professions that require government licensing or franchise. Examples range from Jewish representation in international banking during the time that the Christian church restricted these activities amongst Christians, to more recent Jewish representation in retail trade, law, medicine, and accounting. When government permission is required to enter into a particular industry or profession, Jews will be discriminated against and suffer the consequences of anti-Semitism. When there is free entry, well functioning capital markets, and the potential for entrepreneurship, the rules of the color-blind market will benefit all.

Perhaps the key to understanding why Jews have a political aversion to free-market policies, despite the great personal benefit derived from free markets, lies in the cognitive dissonance produced by the support for socialism inherent in Judaism. Concerning those thinkers that tried to link Judaism and socialism in the past, Rabbi Meir Tamari, a prominent Jewish scholar and former economist with the Bank of Israel writes, “the widespread identification of Jewish social thinking with that of socialism is ... the product of either ignorance of the source material, or willful distortion.” In his book, The Challenge of Wealth, Tamari further states, “Socialism that denies private property and wealth creation is irreconcilable with Jewish theology.” Tamari believes that private property and wealth accumulation are the cornerstones of Jewish economic theory.

The time is surely ripe for the Jewish people, wherever they live and regardless of their degree of religiosity, to reflect seriously upon the apparent disjuncture between the left-wing economic thinking that prevails in much of the Jewish community, the lessons about economic freedom and liberty conveyed by the richness of the Jewish tradition, as well as their remarkable success throughout history in creating wealth and employment for themselves and others, including countless Gentiles.

The world as we know it today, it has been remarked, would be incomprehensible without the insights and genius contained within the Hebrew Scriptures and the story of the remarkable journey of the Jewish people throughout history. Reconnecting their political ideas about work, wealth, and poverty with the wisdom of Jewish tradition would likely be of benefit not only to the Jewish communities but also to those other communities whose own inheritance has been so profoundly shaped and influenced by their encounter with the Jewish people.

This article was adapted from Corinne Sauer and Robert M. Sauer's Judaism, Markets, and Capitalism , a new monograph available from the Acton Institute .