The Purpose of Economics is Flourishing

Sir John Templeton wrote that “freedom fosters the kind of constructive competition that makes progress possible. When the creativity, ingenuity, and competitive efforts of individuals are set free, the results can be progress and prosperity beyond anything ever before imagined.” Sir John was a firm adherent to the philosophy of the “classical liberal” tradition, which emphasizes individual freedom of choice, voluntary association, entrepreneurship, and markets in the ordering of social life. Indeed, over the past several centuries capitalism and free markets, coupled with the rule of law and basic government protections have generated huge advancements in society, lifting countless millions out of poverty, growing the global middle-class, and contributing to the creation and adoption of new technologies.

These beliefs and observations are at the core of the foundation’s new Economics and Human Flourishing priority area. We are supporting conceptual and empirical research to examine how markets, innovations, and entrepreneurship can help secure ever greater levels of human flourishing for all people. Importantly, we are also interested in understanding how and when the ideals of classical liberalism and free markets fail to live up to their promise. 

It is an understatement to say that we are living in a time of change. In the past several years we have seen a once-in-a-century pandemic, the most violent land war in Europe in fifty years, and the highest atmospheric C02 levels since humans diverged from neanderthals 800,000 years ago. Against this background of rapid change, economics must also answer new questions. Free markets and entrepreneurship have been powerful economic engines in the modern era, but the new challenges we see technologically, politically, and socially today call for a reexamination and update of economics and its theories.

Simply put, we can no longer rely solely on economic research and policy generated decades if not centuries ago to solve the urgent issues of the contemporary world. Developments in technology, demographics, and social systems require asking new questions. Does the gig economy change the “theory of the firm” as the storehouse of know-how and entrepreneurial activity? What does the rise of bitcoin portend for state-backed currency systems? And what do all these technological and political changes mean for people living in low- and middle-income countries?

Yet even as we are faced with these urgent questions, economic research more often than not becomes mired in contemporary political battles, or worse a kind of backward-looking score-settling, rather than seeking to understand and improve theory. We aim to change this. While the study of economics at times focuses on abstractions and high-level policy interventions, when it engages with the concrete functioning and needs of local markets and communities, it can be a force for good.

“Freedom fosters the kind of constructive competition that makes progress possible.” - Sir John Templeton

How Does Our Approach Work?

The core of this priority is a unique, “champions-based” grantmaking model. Rather than simply supporting the same economic research that has been failing in recent decades, we began this process by interviewing the leading thinkers in the field of economics and assembling a team of champions from around the world, not just elite research universities. We have assembled and empowered a global group of champions who individually identify the most promising teams of researchers. With this recommendation, we plan to award grants to about twelve teams each year. 

This champions-based approach is beneficial in a number of ways. It helps ensure that we are identifying and supporting researchers who otherwise wouldn’t get a chance. Geographic and cultural diversity means that the economic research and interventions themselves will be centered in many cases around people, communities, and societies where capitalism is not functioning as it should. Empirical economic studies on issues such as these will lead to better-informed policies and creative, community-centric solutions to seemingly endemic problems.

Decentralized Finance In Emerging Economies

A December 2021 grant seeking to answer whether “decentralized finance can make poverty history” is a prime example of our approach to funding research in Individual Freedom and Free Markets. This project investigates how financial products based on open-source blockchain technology can help developing nations. While much contemporary hype around blockchain technology is focused on the speculative potential of cryptocurrency, this research aims at understanding how decentralized financial technologies can diminish poverty in emerging economies by helping households and communities access financial infrastructure and use savings in ways that they have not previously been able to. In practical terms, the team’s study will encompass everything from financial literacy to access to the financial system to the wealth dynamics present in the economies they are studying.

Anti-Competitive Practices And Affordable Housing

In Sri Lanka, India, Nepal and Pakistan, recipients of another grant will study anti-competitive practices in the construction industry and how these sorts of practices impact the poor. Rather than stopping with simply understanding the impact, the researchers from Sri Lanka’s Advocata Institute will study how market-based solutions and competition policy legislation can be used to make the construction industry more competitive and housing more affordable. By comparing construction industry practices and competition policies across multiple nations, the researchers hope to be able to provide practical policy recommendations.

The Socio-Economic Impact of Land Ownership

We are particularly interested in research on foundational aspects of markets and economies. In Nepal, for instance, researchers with the Samriddhi Foundation are studying the socio-economic impact of land ownership. Land ownership is a gateway to greater prosperity for the rural poor globally, and it provides an asset to support intergenerational mobility and education for future generations. Yet, very often, the poorest members of society risk losing their land to eminent domain or other forms of expropriation. Understanding the full spectrum of economic, social and geographic impacts of land ownership and how group and indiginous identity supports resistance to state-led expropriation is a first step in creating policy recommendations to support property rights. 

India’s Education Economy In The Pandemic

Very often, these research efforts will not only generate insights but may lead to concrete policy recommendations. In India, researchers from the Centre for Civil Society are studying the education economy in the wake of the government’s decision to close schools for nearly 500 days in its bid to combat the spread of the coronavirus. All schools changed how they were delivering education during this period, yet many private schools struggled when their tuition bases collapsed. At the same time, digital educational tools and online tutoring thrived. Understanding the fallout of school closures and which solutions proved effective during the pandemic will help governments, entrepreneurs and educators prepare for the next pandemic and innovate for the changing post-covid world.

At its core, the Foundation’s Individual Freedom and Free Markets initiative is about understanding and reinforcing the foundational mechanisms of democratic capitalism. Sir John Templeton, whose thinking was greatly shaped by the likes of Adam Smith, Friedrich Hayek, Milton Friedman and Ludwig von Mises, wrote that “one of the greatest developments in human history has been the increasing possibility for each person to have the freedom to learn, to grow and to design his or her own life.” We believe that this process of development is incomplete while poverty still exists and that better empirical economic research can further human flourishing around the world for centuries to come.

Andrew Serazin, D.Phil is Templeton World Charity Foundation's president. Tracey Farquharson, Ed. D., is a Program Officer at Templeton World Charity Foundation. Michael Bloom is the Principal Advisor for Individual Freedom and Free Markets, one of the foundation’s core funding areas.