Wednesday, January 9, 2013

How to "Redeem" Economics

Last week someone commented on one of our postings asking for a review of John Mueller's book, Redeeming Economics: Rediscovering the Missing Element (2010). According to the commentator, the book "exposes the deficiencies of Classical and Neoclassical economics which stem from the deterministic Stoic philosophy of Adam Smith." Again according to the commentator, Mueller "points out that the Scholastic philosophy of Aquinas's works, whereas the 'Father' of economics produced unworkable economic theory."

According to information gleaned from the internet, Mueller is the Lehrman Institute Fellow in Economics and Director of the Economics and Ethics Program at the Ethics and Public Policy Center in Washington, DC. His writings have appeared in the Wall Street Journal, the Weekly Standard, the Washington Post, and the Harvard Business Review.

We have not read Mueller's book — but then, he evidently hasn't read any of ours, either. Everything in this posting is based on the very brief assessment of the commentator. Mueller, however, appears to be a "Chesterton scholar" (he is a founder of the G. K. Chesterton Institute, now located at Seton Hall University in New Jersey), and the commentator's assessment of Mueller's book appears to be consistent with neo-distributist thought.

Astonishingly for someone familiar with the thought of Chesterton and (presumably) Hilaire Belloc, Mueller embodies a fatal flaw in his argument — still assuming that the commentator reported it accurately. Mueller avoids the issue of whether what Adam Smith said is true, and focuses instead on Smith's reasons for saying it. This falls into the trap against which Chesterton warned in Saint Thomas Aquinas: The "Dumb Ox," his biographical sketch of the Angelic Doctor:

"At the top of his fury, Thomas Aquinas understands, what so many defenders of orthodoxy will not understand. It is no good to tell an atheist that he is an atheist; or to charge a denier of immortality with the infamy of denying it; or to imagine that one can force an opponent to admit he is wrong, by proving that he is wrong on somebody else's principles, but not on his own. After the great example of St. Thomas, the principle stands, or ought to have stood established; that we must either not argue with a man at all, or we must argue on his grounds and not ours. We may do other things instead of arguing, according to our views of what actions are morally permissible; but if we argue we must argue 'on the reasons and statements of the philosophers themselves'." (G. K. Chesterton, Saint Thomas Aquinas: The "Dumb Ox." New York: Image Books, 1956, 95-96.)

Frankly, whether Smith was a deterministic Stoic, Christian, or Satan worshiper is irrelevant. If we base our acceptance or rejection of classical economics — or anything else — on something other than its objective truth or falsity, then we have violated the fundamental precept of reason embodied in the natural law. That is, good (truth) is to be done, evil avoided.

By basing our science upon anything other than what we can prove by reason to be true, we have committed the "ultimate crime" against both faith and reason.  We did this by shifting the basis of the natural law from what we can discern about human nature (in Catholic thought, a reflection of God's unchanging and unchangeable Nature, self-realized in His Intellect), and therefore discernible by the natural force of human reason alone, to something we accept as God's Will.  This "Will" usually turns out to be our personal opinion, or our opinion of something that someone else with a bigger club says is God's Will.

Consequently, far too many people today, especially economists, base their science on religion, and their religion on science. They thereby corrupt both science and religion. This may be one reason why so many physical scientists claim that economics is not a science. Economists themselves feed into this when they base their thought on something they accept on faith, not reason, e.g., disproved Keynesian dogma, particularly the false idea that it is impossible to finance new capital without first cutting consumption.

The misapplication of faith to reason, and of reason to faith is (at least according to Pope Pius XII) the greatest danger to Catholic doctrine today:

"Disagreement and error among men on moral and religious matters have always been a cause of profound sorrow to all good men, but above all to the true and loyal sons of the Church, especially today, when we see the principles of Christian culture being attacked on all sides.

"It is not surprising that such discord and error should always have existed outside the fold of Christ. For though, absolutely speaking, human reason by its own natural force and light can arrive at a true and certain knowledge of the one personal God, Who by His providence watches over and governs the world, and also of the natural law, which the Creator has written in our hearts, still there are not a few obstacles to prevent reason from making efficient and fruitful use of its natural ability. The truths that have to do with God and the relations between God and men, completely surpass the sensible order and demand self-surrender and self-abnegation in order to be put into practice and to influence practical life. Now the human intellect, in gaining the knowledge of such truths is hampered both by the activity of the senses and the imagination, and by evil passions arising from original sin. Hence men easily persuade themselves in such matters that what they do not wish to believe is false or at least doubtful." (Pius XII, Humani Generis ("Concerning Some False Opinions Threatening to Undermine the Foundations of Catholic Doctrine"), 1950, §§ 1-2.)

Naturally, this also goes in the other direction. As Dr. Leo Alexander pointed out in his article "Medical Science Under Dictatorship" in the July 1949 New England Journal of Medicine, forcing your science to be based on faith doesn't do too much for science, either — or the people who do not accept the State religion, but who are forced to accept the programs based on such "science" that comes into direct conflict with their faith.

It comes as no surprise that, in order to make a faith-based economics work, there is always — always — a resort to coercion in one form or another.  This is almost invariably by the State, or something (or someone) that takes the place of the State. This is consistent with the observations of both Mortimer Adler (Mortimer Adler, "The Nature of Natural Law") and the solidarist Heinrich Rommen (Heinrich Rommen, The Natural Law.  Indianapolis, Indiana: Liberty Fund, Inc., 1998, 134-138) that turning away from reason and basing your science on faith leads directly to totalitarianism.  This is an observation borne out by Harold Moulton in his analysis of the fantasy that government debt can continue to grow without bounds without any danger to the economy or political stability (below).  Thus we should not be surprised when a public, bureaucrat-controlled "dictatorship of money" replaces the despotic private dictatorship of money controlled by private interests (Pius XI, Quadragesimo Anno ("On the Restructuring of the Social Order"), 1930, §§ 105-106).

We see the results of this "one twist to the mind" (i.e., the shift from reason to faith as the basis of the natural law) in the political ideas of Walter Bagehot (The English Constitution), who sneered at Magna Charta and complained that the U.S. Constitution is flawed because it doesn't allow for a dictator, and, especially, the economics of John Maynard Keynes, Bagehot's disciple, who advocated government control of the economy (General Theory of Employment, Interest, and Money, VI.24.iii.), and claimed, in the opening passages of the first volume of his Treatise on Money (1930) that the State has the power to "re-edit the dictionary" (!). The Keynesian New Deal economist John M. Clark headed a chapter in The Social Control of Business (1939), his "unique textbook," "If I Were Dictator" (520-525), while Adolph Berle agitated for years for effective government takeover and the abolition of private property in capital. More recently, one so-called "Catholic economist" published an article declaring how he could straighten everything out . . . if he were just given absolute power . . . (Rupert J. Ederer, "If I Were King of Poland," Fidelity magazine, May 1990.) Faith-based economics cannot work otherwise, and usually not even then, as recent events have demonstrated.

As Dr. Harold G. Moulton pointed out in The New Philosophy of Public Debt (1943), his short analysis of the effect of Keynesian monetary and fiscal policy on the American economy, that as long as we absolutely insist on maintaining the Keynesian system,

"It will be necessary to make a choice. With unlimited debt expansion we cannot prevent inflation without the use of totalitarian methods of control. No compromise or half-way measures can adjust the difficulties. The choice is between regimentation and inflation." (Harold G. Moulton, The New Philosophy of Public Debt. Washington, DC: The Brookings Institution, 1943, 88.)

As Moulton concluded his pamphlet after pointing out the fatal flaws in Keynes's faith-based system (faith in Keynes and His Inner Light, that is), "Unless a stable system of public finance is maintained in the United States, and also in other countries, the foundation stone for international reconstruction will rest on quicksand." (Ibid., 93.)

The neo-distributists seem to be among the worst offenders with respect to basing their model economic system on faith, i.e., subjective opinion instead of objective knowledge. (Cf. Mortimer Adler, "Knowledge and Opinion," Ten Philosophical Mistakes: Basic Errors in Modern Thought. New York: Macmillan Publishing Company, 1985, 83-107.) Neo-distributists
tend to insist that the system they advocate — usually bearing little, if any, resemblance to what Chesterton and Belloc were talking about as a result of the neo-distributists "fudging" the natural law — is a (or, more offensively, the) only true "Catholic" economic system. This gives neo-distributists the essential crutch they need to support their model and justify forcing their system on others.  It also provides their inevitable fallback position when they find their system cannot work due to being based on past savings and a fundamental redefinition of the natural law: it's because the faith of those others isn't strong enough, the others are dissenters, heretics, and probably pinch babies and kick dogs.

The fact that the Catholic Church explicitly repudiates the idea that there can be a "Catholic" system of economics is utterly ignored. (John Paul II, Centesimus Annus ("On the Hundredth Anniversary of Rerum Novarum"), 1991, § 43.) As the solidarist economist Franz Mueller stated, "[S]trictly speaking, it would be as incorrect to speak of Catholic sociology as to speak of Catholic economics." (Franz Mueller, "Preface" to Dr. Wilhelm Schwer, S.T.D., Catholic Social Theory. St. Louis, Missouri: B. Herder Book Company, 1940, vii.)

It is not, however, due to a lack of faith that the economy isn't working, or because Adam Smith was a "Deterministic Stoic," or any of the "reasons" adduced so readily by people who never learned how to reason. These are all excuses — and, no matter how you slice them, bologna.

The real reason neither the present system nor any of the faith-based systems demanded by the intellectually flabby don't work is because the principles of the system are inherently flawed, i.e., not true. As St. Thomas Aquinas explained in his closing of his treatise on the Unity of the Intellect, don't come prating to him that you are proving matters of science based on "documents of faith." Instead, prove your case "using the arguments and teachings of the philosophers themselves":

"This then is what we have written to destroy the error mentioned, using the arguments and teachings of the philosophers themselves, not the documents of faith. If anyone glorying in the name of false science wishes to say anything in reply to what we have written, let him not speak in corners nor to boys who cannot judge of such arduous matters, but reply to this in writing, if he dares. He will find that not only I, who am the least of men, but many others zealous for the truth, will resist his error and correct his ignorance." (St. Thomas Aquinas, De Unitate Intellectus Contra Averroistas, § 124.)

In other words, present your evidence and give a sound argument. Vest your case with logical consistency and empirical validity. Don't rely on delivering some tirade against people with whom you disagree and about whom you can invent "facts" and insinuate unspecified crimes, but cannot give any rational basis for your hatred. "Non amo te, Sabidi" is not a reason, but a cop out, and intellectually dishonest. Calling someone a bad Catholic, Jew, Muslim or anything else because his or her economics doesn't suit you or your religious beliefs, or because his or her religion doesn't agree with your economics, is utter nonsense, and is against the principles of the Catholic Church and good science in any event.



Baseball Billy said...

Michael, I have a couple of problems with your post about John Mueller's book. First, as you admit, you have taken the commentator's words and put them in the mouth of Mr. Mueller. I've read ABOUT Mr. Mueller's book and it would very much surprise me if the author misapplies the natural law. (See It sounds like a great intro to economic theory as the author, in promoting the book, talks about the importance of studying economic history, and how, as an econometrician, he compared the logical and mathematical structures of scholastic, classical, and neoclassical economics. Here is a little excerpt from the ISI book description: "Since the great Adam Smith tore down this pillar of economic thought, economic theory has had no way to account for a fundamental aspect of human experience: the social relationships that define us, the loves (and hates) that motivate and distinguish us as persons. In trying to reduce human behavior to mere exchanges, modern economists have lost sight of how these essential motivations are expressed: as gifts (or their opposite, crimes). Mueller makes economics whole again, masterfully reapplying economic thought as articulated by Aristotle, Augustine, and Aquinas." Bill

Michael D. Greaney said...

Assuming that the ISI description of Mueller's book is accurate, I am more convinced than ever it is not worth reading. Mueller evidently attempts to redefine the basis of civil society from justice to charity, or from contract to status.

He thereby makes the mistake of applying the principles that govern domestic society to civil society. This is what Thomas Hobbes did in Leviathan by asserting that the sovereign is divinely instituted by God as the literal (if not biological) father of the nation, thereby empowered to govern under the principles of paternal justice. This is, in fact, why Sir Robert Filmer's defense of divine right (ably refuted by St. Robert Bellarmine) is called "Patriarcha."

By shifting the basis of civil society from the justice that governs the behavior of independent others to that which governs the behavior of parents to children (or masters to slaves), Mueller commits the error against which Pius XII warned in Humani Generis.

The end result of attempting to mix apples and oranges, so to speak, that is, attempting to apply the standards that govern relationships between principal (parent/master) and dependent (child/slave) under domestic (paternal) justice based on status, to relationships between presumably independent others of equal status, and thus necessarily governed by contract, is to undermine the whole of the natural law.

Mueller does by redefinition of fundamental rights that define us as persons, twisting them out of context and misapplying them. As both Heinrich Rommen and Mortimer Adler point out (and as history has shown) this leads straight to totalitarianism.

You cannot — repeat, CANNOT — redefine a basic postulate of natural law and the fundamental building block of civil society, viz. the natural rights of life, liberty (freedom of association/contract), access to the means of acquiring and possessing private property, and the pursuit of happiness (acquiring and developing virtue), and expect to end up with anything other than the Servile State, with those in control of distributions the masters, and everyone else their slaves.

This is one of the primary reasons why Pius XII identified what Mueller and others have attempted to do as the greatest threat to Catholic doctrine in the world today.

By making some people dependent on others for what they receive on a permanent basis, you institute effective slavery. Slaves by definition have no virtue and thus no rights — yet the only reason we have life itself is to acquire and develop virtue through the exercise of our natural rights, thereby fitting us for our final end.

In short, Mueller — consciously or not — takes the Keynesian "shortcut" and "re-edits the dictionary" with respect to the fundamental precepts of the natural law as they apply to civil society.

Baseball Billy said...

I'm going to try to get back to this subject later today; wish I had more time now. But, it seems to me you have created a straw man. If you get a chance, can you give me a quote or two from the ISI book description that has caused you to be more convinced in your opinion on the book?

Michael D. Greaney said...

"In trying to reduce human behavior to mere exchanges."

Human relationships in civil society are governed by the natural rights of life, liberty (freedom of association/contract), property, and the "pursuit of happiness," i.e., the acquisition and development of virtue primarily through the exercise of our natural rights.

By disparaging "exchanges" as "mere," Mueller implicitly dismisses the important of freedom of association — the right to enter into contractual relationships freely — that, e.g., Pius XI insisted is essential to the establishment and maintenance of a just social order. It also renders private property — and charity itself — meaningless, for how can you be said to own something to which another has a claim, or give away something you don't really own?

By subordinating participation in economic life on the basis of contract (proportional or direct equality of exchange) to participation on the basis of status (need/charity), Mueller forces a condition of dependency on most human beings.

This makes their personality conditional, and undermines the natural law by asserting a change in essential human nature, considered by Catholics to be a reflection of God's unchanging and unchangeable Nature ("Image and Likeness").

A "person" is that which has rights. A "natural person" has rights by nature. Denying the importance of these natural rights of life, liberty (freedom of association/contract), property and pursuit of happiness, Mueller creates a society of masters and slaves — a slave is defined as a human being without rights, and thus without the capacity to acquire and develop virtue.

Doug Chappell said...

I came across this post a bit by accident, looking for more information about "neo-scholastic" economics as Mueller calls it. Unlike you, I have read Mueller's book. I am astounded at you intellectual arrogance. You repeatedly attack Mueller based on what others have said, putting words in his mouth and accusing him of errors you have no evidence for.

For the record, Mueller points out Aquinas developed a complete theory of economics consisting of production, exchange, distribution, and utility. Smith's reduction economics to production and exchange signaled the beginning of Classical economics. The 1870's saw the reintroduction of utility to try and fix Smith's (by then) obviously flawed theory. But without a theory of distribution, how we choose the ends of our economic theory, Mueller argues our theory of economics is still incomplete. He offers numerous examples in the book how a "neo-scholastic" theory of economics can explain what classical and neo-classical economics cannot.

His arguments are based on reason and facts, not hearsay. You should read the book. After doing so, if you still wanted to criticize him, at least you would be on solid ground.

Michael D. Greaney said...

Dear Mr. Chappell:

I HAVE read Dr. Mueller's "Redeeming Economics." I found it worse than I ever could have imagined. On the second page of text he redefines human nature.

This is bad enough, and can only be characterized as what Aquinas called "Intellectual self-destruction," and Fulton Sheen called "Mental suicide." Chesterton called it "the assassination of Thomism." You can't go around changing the substantial definition of things. Only God can do that — and Mueller is not God.

Even that isn't the worst part. Mueller defines human nature in terms that make some people more, and others less human than others. This is what the Nazis did. Sorry — the analogy of being is that everyone is as fully human, and is human in the same way, as all other humans.

By violating the first principle of reason — that a thing cannot both "be" and "not be" at the same time and under the same conditions, and that what is true is as true, and is true in the same way as everything else that is true, Mueller invalidates everything he says after the first page of his book.

His redefinition of human nature is merely the most egregious crime against reason he commits. He also redefines private property, and puts words in Adam Smith's mouth. He then confuses domestic, civil, and religious society in his analysis of "the Mother's Problem."

Frankly, what Mueller accomplishes is not the redemption of economics, but its damnation.

Michael D. Greaney said...

Interesting. I see that in my haste to reply to Mr. Chappell, I made a partial error that should have been obvious — and that gave leverage to Dr. Mueller's use of a false premise. Mr. Chappell or any one of Dr. Mueller's many defenders should instantly have leaped on this error — but they did not.

I said that only God can change the substantial nature of things. True — with one exception: human nature.

Human nature, in Jewish, Christian, and Islamic belief, is a reflection of God's Nature, self-realized in His Intellect — which is why the Intellect has primacy over the Will, and why truth (right and wrong, the natural law) can be known by the force of natural reason alone. Faith helps, but is not (strictly speaking) necessary to know that God exists, or the natural law based on His Nature.

The question, however, is whether even God can change substantial human nature. The answer? Absolutely not.

God is a perfect being. Change implies movement toward or away from perfection. Human nature being a "reflection" of God's unchanging and unchangeable Nature, a change in substantial human perfectible nature necessarily implies a change in God's perfect Nature — an impossibility.

Can God do anything? Yes — except be "not-God," i.e., be imperfect, or embody change. Not even God can contradict Himself or violate the principle of contradiction/identity in any degree.

Thus, Dr. Mueller's reliance on a change in substantial human nature invalidates his entire argument. It is relegated to the status of opinion, which may be true, not knowledge, which is necessarily true.