A few years ago I participated in a two day dialogue between Catholic social thought and Henry George (the followers of Henry George). Among the many issues the Georgist could not come to terms with was the assertion that Catholic social thought is not an alternative economic model or policy. In many ways CST is the exact opposite of Henry George in that George had a policy (single tax) and then developed an economics to explain and justify it, and his followers seemed to be developing further the philosophical foundations upon which this economic theory is based, whereas CST is a philosophical foundation for social analysis, but by its very nature, it does not and cannot provide the Catholic model or policy that is good at all times and places. Remember, CST is part of a 2000 year tradition of commenting on economic and social issues. While it asserts values and principles that are universal, it would be insane to think that a policy or model would work for every economy and every society (although this is the claim of neoclassical economics).
A good starting point for understanding the role of CST is Leo XIII statement in Rerum novarum:
“There is nothing more useful than to look at the world as it really is—and at the same time look elsewhere for a remedy to its troubles” (RN 14).
The first part of the sentence is the aspect of CST that is most surprising for what one would expect from a theologically based understanding of the economy; CST calls for an empirical understanding of the economy as an essential first step for understanding economic issues. This is the opposite of the neoclassical/Austrian approach. CST calls for evidence based economic policy making, which seems to be completely lacking in Washington DC now, especially if one has been following the federal deficit/debt debate (see Randy Wray (New Economic Prospects) and John Harvey (Forbes) blogs) where the main theme is to avoid the US governments running out of money and not being able to pay meet its financial obligations, which is an impossibility for a sovereign state that pays its bills with its own currency. Almost as bad is the fear of inflation with 16 million plus looking for work. There are enough real problems to worry about; we don’t need to make any up (unless that is the purpose of these hysterics).
It is a sorry state of affairs when theologians have to remind economists that they need to study the actual economy. CST has always been dialogical in that it has to be in dialogue with the social sciences to analyze social problems, yet for neoclassical economics understanding the actual economy is not seen as being important (see David Colander’s article “the making of an economist” (1987, Journal of Economic Perspectives) and the poll which showed that only 3% of graduate students felt that understanding the actual economy was important for success as an economist).
CST contribution comes in the second part of the above quoted sentence—‘look elsewhere for a remedy”. Looking elsewhere means many things: the most obvious is to look to the Gospels for the values that will guide how we address social problems, especially its understanding of the human person which is the main contribution CST has to social analysis (I am sure that will be a main theme for this site); yet for economists it is also a call to look beyond “markets” as the sole policy remedy, as if all problems are merely inefficient price signals. This is comparable to saying that governments need to look beyond military force as the means to provide peace and security. This is not to say that improving markets is not an important goal and that getting prices right (equate all social costs and benefits) will not help (just as having a competent military is important to protecting a nation).
One of the important insights of Institutional Economics is that markets are social institutions, and thus the rules of the game can be adjusted to improve outcomes. But most economic problems are more than just people making inefficient decisions because they face the wrong prices. Most often, a change in preferences/attitudes is needed. Here we are on the home turf for Catholics, for the Church is in the changing of hearts business. Using the budget battle as an example, while we need evidence based analysis of the effects of fiscal policy on the economy (and the reverse), we also need a populace who value social protection for the poor and the marginalized, supports the just treatment of workers and who want to protect the environment (God’s creation). This changing of hearts will filter into the production and consumption of goods and services, and it will also produce more reasonable and mature legislators. The main mission of the Church in politics is to get voters and legislators to see everyone was a person with dignity, a child of God, and to call for justice and charity from the system and from individuals. While the Church is not going to offer what would be the Christian budget and tax policy, we can safely say that the balancing of the budget by cutting programs that help the poor is clearly unchristian, as is any policy that raises the share of income going to the rich. St. John Chrysostom noted that the only safe place to store our treasure is “in the stomachs of the poor”. This is true for us as individuals and it is true for us acting collectively as citizens. (Remember, God’s covenants are with “peoples” and not with individuals. Mathew 25 applies to us individually and collectively).
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