“So to make a complicated matter as simple as possible, an anarchist is somebody who regards the existing, post-Westphalian form of the state as illegitimate. This does not commit the anarchist to any particular course of political action. An anarchist need not be a revolutionary, for example. Nor does it mean the anarchist is opposed to all forms of rules and hierarchies. Anarchists frequently make a distinction between government and governance. All human societies need the latter, both as a means of checking the passions and inculcating virtuous habits. But the former is simply one way of achieving the latter, and historically considered, a relatively young and untested one at that.”
How should we think about religion in the public square? Many Americans believe religion is a private matter. We are free to worship as our conscience commands us. But we are not free to bring religious commitments to public debate over policy, because we are not free to impose our religious beliefs on others.
This view seems appropriate for a pluralistic society such as ours. But it contains a serious error.
The above view implicitly holds that secularism is a “neutral” worldview, one that apprehends reality without imposing any value judgments on third parties. A public commitment to secularism is grounded in the belief that religion obscures an objective understanding of the world. But secularism has its own (often implicit) answers to questions such as the meaning of life, the rights of man, and the proper ordering of politics. These answers are also value judgments, and they are every bit as contentious as those that are informed by religion.
When looking for a legal sanction for secularism, many turn to the First Amendment, especially the Establishment Clause. This clause does forbid Congress from establishing an official church. But it does not justify requiring citizens to check their faith at the door when they participate in public debate. We must remember that when the US ratified its Constitution, many states chose to retain their official churches that were established during the colonial period. Religion was woven into the very fabric of American political life from its earliest days. The Framers of the Constitution wanted to rule out a single national church to keep the peace between contentious denominations of Christianity. But there was no doubt in their minds that Christianity could and must influence how citizens behaved, both in private and in public.
It is neither reasonable nor just to require Americans to ignore their faith when participating in the public sphere. Politics is one of the ways we relate to each other, and any religion worthy of the name has something to say about how we ought to behave in such circumstances. As long as politics deals with what we should or should not do, no worldview that provides answers to these questions, including religion, can be excluded.
I am currently doing background research for some essays on distributism. I have written on distributism in the past; I am excited to delve into it further. Because distributism was developed explicitly against the backdrop of late 19th century and early 20th century Catholic social thought, I first needed to see what this tradition has to say about economics and politics. Below is an initial essay I wrote to organize my thoughts, which I also hope I can use as introductory material in future writing projects.
Disclaimer: While I have a very high regard for the intellectual and moral contributions of the Roman Catholic Church, I am not Catholic. I hope the readers of this blog, many of whom know much more about these topics than I do, will help me by correcting any errors of commission or omission!
Church, Property, Liberty
In some ways, the label “Catholic Social Teaching” is misleading. The Roman Church has always applied its moral teachings to social issues. But with the economic and political upheavals in the West caused by the Industrial Revolution, the Church recognized the need to provide more specific guidance. The resulting papal encyclicals whose principles are now expressed in the Church’s Compendium of Social Doctrine addressed important social questions of the day, including the relationship between labor and capital and the proper scale and scope of political institutions. While each encyclical contributes something new and invaluable to this collection of teachings, the first two—Pope Leo XIII’s Rerum novarum and Pope Piux XI’s Quadragesimo anno—are the foundational documents upon which the Church’s teachings rest regarding the moral dimension of economic and political modernity.
These encyclicals were motivated by the revolution in the production and distribution of goods and services stimulated by industrialization. The transformation of agricultural economies into industrial economies throughout the West entailed rapid economic growth. Large industrial concerns, which were able more efficiently to organize lines of production and capture economies of scale, began to replace smaller agricultural and craft enterprises. Contrary to popular perception, this was not an era of “robber barons” cartelizing industry and causing mass impoverishment. New employment opportunities in urban centers absorbed much of the labor force that was released from traditional modes of production. Many voluntarily left the countryside in pursuit of wage employment in cities, which was becoming increasingly more remunerative compared to work in rural areas, even for property owners. However, while economic growth through industrialization greatly increased living standards, it also entailed new and troubling social consequences. The conspicuousness of new capitalist fortunes caused many to overlook the accompanying enrichment of workers, focusing instead on inequality. For workers, mass wage employment was occasionally accompanied by mass unemployment, as the developing capitalist economic systems were subject to periodic but unpredictable recessions. Factory employment often entailed long hours, uncomfortable conditions, and physical danger. These unpleasantries were undoubtedly accounted for in workers’ wages. But the moral and aesthetic concerns with society-wide ‘creative destruction,’ which changed the representative citizen from a poor yet propertied yeoman to a wealthier but less secure laborer, still attracted widespread attention. Modern political movements, such as the Progressive movement, arose to combat these perceived ills. That the cures these movements offered were often worse than the disease does not invalidate ethical reservations about industrial society.
Rerum novarum was the first papal encyclical to address these economic and political circumstances. Addressing capital-labor relations specifically, Pope Leo councils that employees and employers each have rights and duties in service of social justice and the common good. Workers must faithfully execute the tasks to which they have contractually agreed and refrain from individual and collective acts of violence against their employers. Employers must pay workers a wage consistent with human dignity. More generally, the encyclical strongly affirmed the Church’s commitment to recognizing the right of private property, but also cautioned that this right was not absolute. The state has both the right and duty to regulate ownership and its attendant privileges in the interests of the common good. At the level of economic and political systems, the Church does not mandate any specific sociopolitical regime, but strongly condemns both the coerced collectivism of socialism and the unbridled individualism of industrial capitalism.
Quadragesimo anno, issued forty years after Rerum novarum, elaborates on many of the former’s themes while also covering new ground. Whereas Leo’s encyclical dealt primarily with capital-labor relations, with broader social conditions receiving relatively less emphasis, Pius brought moral evaluation of the political-economic order itself to the forefront. Perhaps the most important contribution of this document is the principle of subsidiarity: the duty of higher-order communities, such as national governments, not to interfere with the operation of lower-order communities, such as families and local governments, without just cause. In addition, Pius reaffirmed the importance of private property and condemned the totalitarian regimes that were developing in Europe at the time, and called for cooperation between social classes as a way to ameliorate conflict without infringing on man’s associational freedom.
The principles elucidated in these encyclicals continue to find expression in the Church’s teaching on the moral aspects of economics and politics. Many have been explicitly incorporated into the Catechism of the Catholic Church, which summarizes Church doctrine and lays out the beliefs of the faithful. The following exposition of Church teaching on political economy draws upon the relevant tenets specifically from the Catechism. I intend the survey to be representative, but not exhaustive. From this survey we will acquire a clear picture of the Church’s universal principles, which must be applied anew to the specific challenges confronting each society.
- Authority, Order, and the Common Good
Man is social by nature. He becomes most fully himself when living in community. “The human person needs to live in society. Society is not for him an extraneous addition but a requirement of his nature. Through the exchange with others, mutual service and dialogue with his brethren, man develops his potential; he thus responds to his vocation.” Importantly, society is not just an aggregate of individuals. Forms of society at various levels of social distance, from the family to the state, are real, and are not reducible to the sum of their members. “A society is a group of persons bound together organically by a principle of unity that goes beyond each one of them. As an assembly that is at once visible and spiritual, a society endures through time: it gathers up the past and prepares for the future.”
A healthy civilization will be characterized by multiple societies, frequently overlapping. In terms of helping persons to develop their potential and orienting them to their true good, these societies are complements, not substitutes. “Certain societies, such as the family and the state, correspond more directly to the nature of man; they are necessary to him. To promote the participation of the greatest number in the life of a society, the creation of voluntary associations and institutions must be encouraged…This ‘socialization’ also expresses the natural tendency for human beings to associate with one another for the sake of attaining objectives that exceed individual capacities. It develops the qualities of the person, especially the sense of initiative and responsibility, and helps guarantee his rights.”
Human communities bestow gifts on their members, but while these gifts are apparently gratuitous from the perspective of any one person, the communities that provide them require cultivation. Thus the rights and duties attendant upon persons in society exist at a deeper level than those requiring explicit consent. “By means of society, each man is established as an ‘heir’ and receives certain ‘talents’ that enrich his identity and whose fruits he must develop. He rightly owes loyalty to the communities of which he is part and respect to those in authority who have charge of the common good.” Loyalty to communities also requires loyalty to the authorities—those who give orders and expect obedience—duly constituted to sustain those communities and advance their interests. “Human society can be neither well-ordered nor prosperous unless it has some people invested with legitimate authority to preserve its institutions and to devote themselves as far as is necessary to work and care for the good of all.” Obviously, the Church herself is such an authority. As the continuing presence of Christ in the Holy Spirit, the Church has a unique mission to uphold the natural and Divinely Revealed moral law. Other sources of authority, with their own proper spheres, are the family and the state.
No authority is self-justifying. Its rights depend on it upholding some good that the authority cannot define nor alter. “Authority does not derive its moral legitimacy from itself. It must not behave in a despotic manner, but must act for the common good as a ‘moral force based on freedom and a sense of responsibility.’” Thus authority is only justified if it promotes the common good. “By common good is to be understood ‘the sum total of social conditions which allow people, either as groups or as individuals, to reach their fulfillment more fully and more easily.’ The common good concerns the life of all. It calls for prudence from each, and even more from those who exercise the office of authority.” Every human community possesses a common good. A community’s common good is the essential factor that constitutes the community qua community.
There are three chief elements of the common good. First, the common good requires authorities to respect the fundamental rights all persons possess in virtue of their bearing the imago Dei: the image of God, and the source of intrinsic dignity. Second, the common good requires authorities to steward the community, preserving its interests by arbitrating disputes among members, giving each member of the group that which is their due, and reconciling each to the good of all. Third, the common good requires authorities to maintain peace and order in society, both within and between communities.
Closely linked with authority and the common good is the concept of social justice. This idea often draws opprobrium from those who otherwise honor the Church’s principles of communitarian personalism. But this is due to the perversion of the concept resulting from decades of misuse, stemming ultimately from divorcing social justice from its theistic and ecclesiastic roots. “Society ensures social justice when it provides the conditions that allow associations or individuals to obtain what is their due, according to their nature and their vocation.” An important tenet of social justice is the promotion of solidarity, which can also be thought of as “social charity.” Solidarity is an implication of respecting persons’ rights qua persons. It also, in part, derives its importance from its necessary role in ameliorating social conflict. “Socio-economic problems can be resolved only with the help of all the forms of solidarity: solidarity of the poor among themselves, between rich and poor, of workers among themselves, between employers and employees in a business, solidarity among nations and peoples.” Respecting rights and pacifying social tension require, first and foremost, giving to each their due. Social justice is thus not a repudiation, but an extension, of the fundamental tenet of justice dating back to classical antiquity. This is why social justice inherently concerns “the distribution of goods and remuneration for work.” Social justice is the link between the Church’s teaching on authority, order, and the common good and her teaching on the proper organization of economic and political life.
- The Bounty of Creation: Order in Economy
The cornerstone of the Church’s teaching on economic matters is the universal destination of human goods. The earth and its bounty were created by God for the whole of humanity. Enjoyment of the fruits of creation is man’s right. However, the universal destination of human goods does not preclude private property. In fact, the Church has always affirmed that “the appropriation of property is legitimate for guaranteeing the freedom and dignity of persons and for helping each of them to meet his basic needs and the needs of those in his charge. It should allow for a natural solidarity to develop between men.” Ownership is both permitted and encouraged. But the rights of ownership are circumscribed by the natural and Revealed moral law. “Goods of production – material or immaterial – such as land, factories, practical or artistic skills, oblige their possessors to employ them in ways that will benefit the greatest number. Those who hold goods for use and consumption should use them with moderation, reserving the better part for guests, for the sick and the poor.” Economic rights are properly under the purview of political authorities, whose duty it is to regulate the legitimate use of these rights in the interests of social justice and the common good.
The Church is insistent that economic issues cannot be isolated from moral issues. The production and distribution of goods is ultimately a moral enterprise whose goal is human flourishing. Economic rights, including rights of property, are properly subordinated to this end. For example, the Church forbids theft, meaning the use of property against the reasonable will of the owner. However, “[t]here is no theft if…refusal [of the use of property] is contrary to reason and the universal destination of goods. This is the case in obvious and urgent necessity when the only way to provide for immediate, essential needs (food, shelter, clothing…) is to put at one’s disposal and use the property of others.” Property rights are similarly restricted in the interests of the common good by declaring the following illicit: paying unjust wages, taking advantage of another’s hardship or ignorance, attempting to manipulate the market, corrupting the judgment of those who make legal decisions, evading taxes, and spending wastefully.
As part of its teachings on private property, the Church recognizes the importance of respecting contracts. “Promises must be kept and contracts strictly observed to the extent that the commitments made in them are morally just. A significant part of economic and social life depends on the honoring of contracts between physical or moral persons – commercial contracts of purchase or sale, rental or labor contracts. All contracts must be agreed to and executed in good faith.” As with other property rights, contractual rights are viewed primarily through the lens of justice. “Contracts are subject to commutative justice which regulates exchanges between persons in accordance with a strict respect for their rights. Commutative justice obliges strictly; it requires safeguarding property rights, paying debts, and fulfilling obligations freely contracted. Without commutative justice, no other form of justice is possible…”
Respect for property and contracts thus derives from the rights due to all persons in virtue of their dignity. Because of this property rights or contractual arrangements that infringe on human dignity are not permissible. Forbidden are “acts or enterprises that for any reason – selfish or ideological, commercial, or totalitarian – lead to the enslavement of human beings, to their being bought, sold and exchanged like merchandise, in disregard for their personal dignity. It is a sin against the dignity of persons and their fundamental rights to reduce them by violence to their productive value or to a source of profit.” Likewise, economic rights must be constituted to recognize the integrity of creation itself. Man is a steward of the earth, not its master. “Animals, like plants and inanimate beings, are by nature destined for the common good of past, present, and future humanity. Use of the mineral, vegetable, and animal resources of the universe cannot be divorced from respect for moral imperatives. Man’s dominion over inanimate and other living beings granted by the Creator is not absolute; it is limited by concern for the quality of life of his neighbor, including generations to come; it requires a religious respect for the integrity of creation.”
The Church’s circumscription of economic rights has several implications for the purpose and limit of economic activity more generally. “The development of economic activity and growth in production are meant to provide for the needs of human beings. Economic life is not meant solely to multiply goods produced and increase profit or power; it is ordered first of all to the service of persons, of the whole man, and of the entire human community. Economic activity, conducted according to its own proper methods, is to be exercised within the limits of the moral order, in keeping with social justice so as to correspond to God’s plan for man.” This contributes to a unique perspective on the rights and duties of labor. Man has a duty to work—as St. Paul wrote, “The one who is unwilling to work shall not eat,”—but labor is neither curse nor drudgery. Through labor man cooperates with God in the continual unfolding of creation. It must be remembered that work is not just a duty, but a right. “Everyone has the right of economic initiative; everyone should make legitimate use of his talents to contribute to the abundance that will benefit all and to harvest the just fruits of his labor.” The spiritual dimension of work is at least as important as the economic. Ora et labora—prayer and work—have always been linked in the Church’s tradition.
Owning and operating a business is also a legitimate form of work. Just as employees have rights and duties, so do employers. While employers “have an obligation to consider the good of persons and not only the increase of profits,” the Church recognizes that profits are both essential and proper in economic life. “Profits are necessary…They make possible the investments that ensure the future of a business and they guarantee employment.” The rights of profit are tempered by the duty to pay just wages. “A just wage is the legitimate fruit of work. To refuse or withhold it can be a grave injustice. In determining fair pay both the needs and the contributions of each person must be taken into account. ‘Remuneration for work should guarantee man the opportunity to provide a dignified livelihood for himself and his family on the material, social, cultural and spiritual level, taking into account the role and the productivity of each, the state of the business, and the common good.’ Agreement between the parties is not sufficient to justify morally the amount to be received in wages.”
Another important principle of the Church is special concern for the poor. Efforts to ameliorate poverty are an ancient tradition of God’s people dating back to the Old Testament welfare laws: the jubilee for the forgiveness of debts, the ban on usury, the wages of day laborers, and the right to glean fields and vines. But the Church is concerned for more than material poverty. The preferential option for the poor “extends not only to material poverty but also to the many forms of cultural and religious poverty.” These other forms of oppression that afflict the poor are just as concerning as material poverty. “‘In its various forms – material deprivation, unjust oppression, physical and psychological illness and death – human misery is the obvious sign of the inherited condition of frailty and need for salvation in which man finds himself as a consequence of original sin. This misery elicited the compassion of Christ the Savior, who willingly took it upon himself and identified himself with the least of his brethren.” Providing for the poor is not only an act of mercy. It is an act of justice. As St. John Chrysostom argued, “Not to enable the poor to share in our goods is to steal from them and deprive them of life. [sic] the goods we possess are not ours, but theirs.” Love for the poor also requires an appropriate attitude towards created goods on the part of those who would give. However much one donates, one cannot love the poor while also immoderately partaking of wealth in one’s personal life.
- The Responsibilities of Authority: Order in Polity
How goods and services are produced and distributed depends on the institutions that govern economic life. Thus production and distribution are not autonomous, but under the direction of various authorities, including political authority. “‘Economic activity, especially the activity of a market economy, cannot be conducted in an institutional, juridical, or political vacuum. On the contrary, it presupposes sure guarantees of individual freedom and private property, as well as a stable currency and efficient public services. Hence the principal task of the state is to guarantee this security, so that those who work and produce can enjoy the fruits of their labors and thus feel encouraged to work efficiently and honestly…. Another task of the state is that of overseeing and directing the exercise of human rights in the economic sector.” Achieving moral order in the economy requires achieving moral order in the polity.
But this is easier said than done. The Church recognizes that those in authority often fall prey to the trappings of power. This has been particularly dangerous since early modernity and the rise of the centralized state. With the relative weakening of other sources of authority, additional duties to maintain the common good have fallen to the state. But excessive state intervention, a perpetual temptation by those who wield government power, can trespass on human dignity In response, “the teaching of the Church has elaborated the principle of subsidiarity, according to which ‘a community of a higher order should not interfere in the internal life of a community of a lower order, depriving the latter of its functions, but rather should support it in case of need and help to co-ordinate its activity with the activities of the rest of society, always with a view to the common good.’” When families and civic organizations can solve social problems, government ought not to interfere. If a public sector response is necessary, it ought to occur at the most feasible local level. National government should only intervene if lower-order communities are inadequate to the task, and if it can implement a solution that respects human dignity and upholds the common good.
Subsidiarity also places bounds on the range of permissible political orders. “The principle of subsidiarity is opposed to all forms of collectivism. It sets limits for state intervention.” Totalitarian states, with their forced socialization and regimentation, are irreconcilable with the Church’s teachings on authority and the common good. “‘The Church has rejected the totalitarian and atheistic ideologies associated in modem times with “communism” or “socialism.’” In addition, the Church does not approve regimes that implicitly substitute the moral order for whatever order happens to be generated by the market. “She has likewise refused to accept, in the practice of ‘capitalism,’ individualism and the absolute primacy of the law of the marketplace over human labor.” The Church can tolerate from political authorities neither tyranny nor passivity. “Regulating the economy solely by centralized planning perverts the basis of social bonds; regulating it solely by the law of the marketplace fails social justice…Reasonable regulation of the marketplace and economic initiatives, in keeping with a just hierarchy of values and a view to the common good, is to be commended.” But beyond this the Church pronounces no dogma; she does not make specific positive sociopolitical mandates. “‘If authority belongs to the order established by God, ‘the choice of the political regime and the appointment of rulers are left to the free decision of the citizens.’ The diversity of political regimes is morally acceptable, provided they serve the legitimate good of the communities that adopt them. Regimes whose nature is contrary to the natural law, to the public order, and to the fundamental rights of persons cannot achieve the common good of the nations on which they have been imposed.’”
“The Church receives from the Gospel the full revelation of the truth about man. When she fulfills her mission of proclaiming the Gospel, she bears witness to man, in the name of Christ, to his dignity and his vocation to the communion of persons. She teaches him the demands of justice and peace in conformity with divine wisdom.” The Church’s possession of the truth entitles her to make moral judgments about economic and political life. Whatever the physical and social sciences discover about human behavior as it pertains to these spheres, the Church retains its right to teach and guide. This does not obviate the need for political authority, however. “In the moral order she bears a mission distinct from that of political authorities: the Church is concerned with the temporal aspects of the common good because they are ordered to the sovereign Good, our ultimate end. She strives to inspire right attitudes with respect to earthly goods and in socio-economic relationships.” The Church’s social teaching “proposes principles for reflection; it provides criteria for judgment; it gives guidelines for action…” These doctrines are not ideologies. The Church commands neither a specific economic system for the production and distribution of goods, nor a political system for governing nations. In her capacity as teacher and guide, the Church actively promotes solidarity between society’s classes and interests, for the betterment of each and all. In these roles, the Church serves as the guardian of human dignity, on guard against economic or political forces that, if left unchecked, result in persons reducing others to means, instead of honoring them as ends in themselves.
 Pontifical Council for Justice and Peace, “Compendium of the Social Doctrine of the Church,” 2004. Available online: http://www.vatican.va/roman_curia/pontifical_councils/justpeace/documents/rc_pc_justpeace_doc_20060526_compendio-dott-soc_en.html#At%20the%20dawn%20of%20the%20Third%20Millennium
 Pope Leo XIII, “Rerum Novarum: Encyclical of Pope Leo XIII on Capital and Labor,” 1891. Available online: http://w2.vatican.va/content/leo-xiii/en/encyclicals/documents/hf_l-xiii_enc_15051891_rerum-novarum.html
 Pope Pius XI, “Quadragesimo Anno: Encyclical of Pope Pius XI on Reconstruction of Social Order,” 1931. Available online: http://w2.vatican.va/content/pius-xi/en/encyclicals/documents/hf_p-xi_enc_19310515_quadragesimo-anno.html
 “The social doctrine of the Church developed in the nineteenth century when the Gospel encountered modern industrial society with its new structures for the production of consumer goods, its new concept of society, the state and authority, and its new forms of labor and ownership. the [sic] development of the doctrine of the Church on economic and social matters attests the permanent value of the Church’s teaching at the same time as it attests the true meaning of her Tradition, always living and active.” Catechism of the Catholic Church, 2421.
 Catechism of the Catholic Church, 1879.
 Ibid, 1880.
 Ibid, 1882.
 Supra note 5.
 Ibid, 1897.
 Supra note 8.
 Ibid, 1902.
 Ibid, 1906.
 Ibid, 1910.
 Ibid, 1907.
 Ibid, 1908.
 Ibid, 1909.
 Ibid, 1928.
 Ibid, 1939.
 Ibid, 1941.
 Ibid, 1940.
 Ibid, 2401.
 Ibid, 2402.
 Ibid, 2405.
 Ibid, 2406.
 Ibid, 2408.
 Ibid, 2409.
 Ibid, 2410.
 Ibid, 2411. On the several classifications of justice, the Church adds the following: “One distinguishes commutative justice from legal justice which concerns what the citizen owes in fairness to the community, and from distributive justice which regulates what the community owes its citizens in proportion to their contributions and needs.”
 Ibid, 2414.
 Ibid, 2415.
 Ibid, 2426.
 2 Thessalonians 3:10.
 Catechism of the Catholic Church, 2427.
 Ibid, 2429.
 Ibid, 2432.
 Ibid, 2434.
 Ibid, 2449.
 Ibid, 2444.
 Ibid, 2448.
 Ibid, 2446.
 Cf. James 5:1-6; Matthew 6:24; Catechism of the Catholic Church 2445.
 Catechism of the Catholic Church, 2431.
 Ibid, 1883.
 Ibid, 1885.
 Ibid, 2425.
 Ibid, 1901.
 Ibid, 2419.
 Ibid, 2420.
 Ibid, 2423.
 Supra note 19.
Let’s briefly go over what we covered last time. When economists talk about ethical issues, they usually start with economic efficiency as a normative benchmark. Efficiency means you can’t make someone better off without making someone worse off. For any given distribution of income, if you reallocate resources from Al to Bob, you improve Bob’s welfare only by diminishing Al’s. In competitive markets, efficiency has the interesting property of maximizing the dollar value of society’s resources. If society’s resources did not command as high as a price as they could, it would mean there are unexploited gains from exchange. Those exchanges, once made, would make parties to the exchanges better off, and we could have additional winners without additional losers.
So far, so good. But there are many unexamined assumptions behind economic efficiency and its desirability. What are some of these assumptions? To start, it’s important to remember that efficiency is defined with respect to people’s preferences. Efficient situations entail people getting what they want. This is why many economists don’t think efficiency advocacy is controversial. After all, what could be wrong about people getting what they want? Actually, it turns out a great deal could be wrong with it! Imagine Al hates Bob and is willing to pay a million dollars to take out an assassination contract on him. Bob likes being alive but is only able to pay half a million to bribe the assassin not to kill him. While the assassination contract clearly fails the strict efficiency definition (nobody better off without somebody worse off), it fits the less stringent one (dollar maximization of goods/services). But I would hope that no economists would reason from this that we ought to make assassination contracts legal on efficiency grounds!
More generally, we should be cautious in approving the lofty place efficiency has in most economists’ public policy recommendations. Once we realize that there are plenty of situations where individuals ought not get what they want, efficiency becomes much less appealing as a policy goal. Furthermore, efficient situations often entail distributional changes in resource allocations that can further burden those who are already struggling. Economists tend to overlook this as long as the economic pie is getting bigger. But surely it is reasonable to worry not just about the size of the pie, but who gets how big a slice. This does not mean calls for distributive justice—many made by non-economists who do not have the training to recognize the disastrous probable consequences of their demands—ought to be acceded to unquestioningly. But it does mean that there are valid ethical concerns that economists tend to ignore, because of what their analytical window allows them to see.
There is an entire world of ethical discourse outside of economists’ relatively narrow brand of consequentialism. Economists are selling themselves short when they restrict themselves to the role of efficiency technocrats, rather than adapting their discipline’s invaluable tools towards the cultivation and preservation of a humane society.
How does the discipline of economics approach ethical issues? A standard answer goes something like this. We can separate economics into two categories. Positive economics concerns itself solely with explaining the social world. Normative economics deals with moral concerns in a way that may build upon, but cannot be reduced to, positive economics. In other words, positive economics deals in statements of is; normative economics, of ought.
An important concept that acts as a bridge from positive to normative economics is economic efficiency. In reality, economic efficiency can mean several things. The strictest definition of efficiency is that no individual can be made better off without making at least one individual worse off. An alternative way of phrasing this is that all potential gains from exchange have been exhausted. Another definition of efficiency, one not so strict, is that the dollar value of society’s scarce resources has been maximized. Frequently these criteria go together, but they do not have to.
But we are getting ahead of ourselves. We still need to explore how efficiency is operationalized. Positive economics can say whether a given situation is efficient or not. It cannot recommend efficiency as a value, of course, without losing its purely positive status. Normative economics frequently invokes efficiency as a standard against which economic outcomes are judged.
However, economists frequently get into trouble when they make statements about efficiency that contain both positive and normative elements without realizing it. Consider the following thought experiment. Allan is auctioning off an apple. Bob and Charlie both bid for the apple. Bob bids $1, and Charlie bids $2. Allan gives the apple to Charlie. Note that this is an efficient result, in both the strict and the loose sense. (Instead of letting the results of the auction stand, we could take the apple won by Charlie and give it to Bob. That would make Bob better off, but would make Charlie worse off.)
What if Allan knowingly gives the apple to Bob instead of Charlie, voluntarily accepting $1 instead of $2? This situation seems inefficient in the looser sense. But as long as secondary bargains are not forbidden, Bob can always sell the apple to Charlie. Since Bob bid only $1, whereas Charlie bid $2, at any price for the apple above $1 and below $2 there is room for a mutually beneficial exchange. Either way, the apple will end up with the person whose valuation of it is highest in dollar terms.
Why is this dangerous territory? Because economists themselves frequently forget the boundaries of each kind of efficiency. If Allan gives the apple to Bob, economists will often say something like, “That’s inefficient; the apple should go to Charlie.” Furthermore, they frequently would support something like a redistributive policy that reallocates the apple from Bob to Charlie. Even if they don’t support that particular policy, they would endorse efficiency as a valid metric for determining public policy, asserting that such policy “merely helps people get what they want.” And economists will do so thinking they are still doing purely positive economics. Clearly any issue pertaining to the distribution of goods and services beyond the purely descriptive is normative, in that it involves value judgments. The problem is the concepts economists work with, and the way they apply those concepts, makes it hard for even careful economists to know where descriptive economics ends and prescriptive economics begins.
You may have noticed two controversial statements in the above explanation. The first is that efficiency should be a criterion for crafting public policy. The second is that promoting efficiency, because it means giving people what they want, is not controversial. But both of those statements are in fact normatively loaded. I will explore further how and why economists overlook these issues in subsequent posts.
“Politics is downstream from culture.” We’ve heard this phrase countless times. But have we understood it? Are we willing to enter into the subtle and profound worldview it implies?
I am an economist by training. I received my Ph.D. in 2014 from George Mason University, a program known simultaneously for its commitment to the economic way of thinking and using this thinking in tandem with politics, philosophy, and the humanities. I am now a professor at Texas Tech University, and a fellow at TTU’s Free Market Institute.
In recent years I have slowly awakened to the importance of practicing economics as a part of the Great Tradition—the conversation reflecting Western man’s self-understanding for more than 2500 years. This includes recognizing that a society of free and responsible individuals cannot arise solely through clever institutional design. Political economy rightly emphasizes that societies only flourish when they get the “rules of the game” right. But there is so much more to that which orders our public life than statutes, court decisions, and even constitutions. Free and self-governing societies require a certain ethos, which itself shapes and is shaped by the humane disciplines—history, literature, philosophy, music, and art.