Morality and Economics: Bridging the Divide

Here are some extractions from a very fine piece on economic theory by an Austrian economist, Dr. Thomas Woods entitled, Morality and Economic Law: Toward a Reconciliation. His insights on defining price, the consequences of the productivity of labor and the Spanish scholastics are especially noteworthy. Woods is to be commended for eviscerating widespread misconceptions about the free market economy on the part of Catholics. It was related to me a while back by my former economics professor that an otherwise traditional Catholic confessed to him that, were it not for the life issues (abortion, euthanasia, etc.) he would have, quite astonishingly, cast his lot for the Democrat in the last presidential election. Flabbergasted, my professor attempted to ascertain the reason for this individual's Democratic sympathies. "Social justice" issues, he believed, were better handled by the Democrats than the Republicans. Woods himself has been on the receiving end of not a little criticism from voices on the Catholic fringe. One dyspeptic Catholic who fancies himself an incarnation of the true "Catholic economist" even went so far as to suggest that Woods and his ilk are flirting with formal "dissent" from official Catholic teaching with their embrace of the free market and as a consequence warrant excommunication. To avoid ending up like this fellow, we should immerse ourselves in the wisdom of the Austrian School as we enjoy the unparalleled benefits brought about by the industrial revolution and the free market.

Pope Pius XI made a significant concession in his encyclical Quadragesimo Anno (1931), which marked the fortieth anniversary of the issuance of Leo XIII’s seminal Rerum Novarum. He acknowledged that limits must exist to what the moral theologian may legitimately say within the economic sphere, since "economics and moral science employs each its own principles in its own sphere." To be sure, the Pope then went on to deny that "the economic and moral orders are so distinct from and alien to each other that the former depends in no way on the latter." But once it has been conceded that economics is a bona fide science possessing an internal coherence of its own, problems immediately arise for those who would claim that Catholic social teaching definitively settles all major economic matters in an absolute and binding way. As A.M.C. Waterman points out, this concession by Pius XI "throws doubt on the authoritative character of that very substantial part of Catholic (or at least papal) social teaching which consists not of theological and ethical pronouncements, but of empirical judgments about the economy."

Strangely, little or no acknowledgment is made in papal economic writings since 1891 of the enormous increase in living standards that became evident among the great mass of the population from the Industrial Revolution to the present, or the substantial increase in the purchasing power of wages that occurred throughout the nineteenth century, the century of laissez-faire. This is surely one of the most outstanding features of modern European economic history, yet for some reason it features not at all in the social encyclicals. To the contrary, the social encyclicals routinely speak as if the workers’ condition had actually stagnated or even deteriorated (as indeed popular opinion continues to believe). Professor Luckey writes that it is "hard to excuse Leo XIII" for his statements to this effect. "Using life expectancy figures, which ought to have been available to Leo, it is clear that at the dawn of the nineteenth century life expectancy in England was about 37 years, but after 1871-5, about 20 years prior to Rerum Novarum, there is an acceleration in life expectancy with no setbacks, so that by 1900 English life expectancy is about 50. Real per capita income begins to soar immediately after 1800 in all of Europe."

"What was wrong with Catholic social thought in the nineteenth century," writes Fr. James Sadowsky, "was not so much its ethics as its lack of understanding of how the free market can work. The concern for the worker was entirely legitimate, but concern can accomplish little unless we know the causes and the cures for the disease."

http://www.mises.org/story/1481