Radical fundamentalism has been called a "new" problem. But to understand it today, we can draw on economic theories from a few centuries ago. The key to understanding Osama bin Laden, for example, could be the free-market economic ideas that Adam Smith elaborated in 1776.
Smith and bin Laden are an odd couple. The absent-minded founder of classical economics spent his gentle life teaching in the cold seaside city of Glasgow--a quiet corner of eighteenth-century Scotland far removed from Saudi deserts and Afghani caves. Even so, Smith's economic theories demystify modern religion and explain its extreme manifestations. Through economics, we can understand fundamentalism's enduring appeal and its many good consequences.
To look at the good and bad of fundamentalism--to compare the suicidal zealot and the self-sacrificing saint--is not moral equivalence, as some would declare. An environment that sustains commitment and produces collective action shapes both--economics explains why.
Economics today tries to explain just about everything: discrimination, drugs, education, crime, sports, politics, marriage, and fertility. When it comes to religion, the economist sees people as "rational religious consumers." Consumers think about costs and benefits. They choose how extensively to participate in religion and which religion (if any) they will embrace. Likewise, religious leaders act as "suppliers" of religious goods and services. Taken together, these consumers and producers form a "religious market."
The competitive process that leads to better material products also works in the religious marketplace. Successful religious "firms" must provide goods and services valued by their "customers." Fundamentalist groups are particularly adept at producing collective goods--both spiritual and material. They often are key suppliers of health care, education, housing, food, and financial aid. But how …