Wave of Megadeals Tests Antitrust Limits in U.S.

All of the talk about how the market model and free markets and orthodox economics always resulting in the best for society are based upon a very precise, detailed economic model of the economy. At its fundamental level, that model is based upon there being many, many producing firms, so many firms that the loss of one or the addition of one would have no impact upon the market. If that condition is not met, then it can be shown, by that very same model, that losses are generated to society. So what do we have? We now have a Justice Department that is raising the standard against which market concentration is measured; this move makes it possible for fewer and larger firms to be declared "safe for healthy competition". People need to realize that more market power, which firms gain when they are allowed to merge and control larger and larger segments of the market, always results in higher prices and diminished consumer surplus. What ends up happening is that shareholders get wealthier and consumers get less. Why does this happen? Let's ask Congress how much they get from lobbyists representing the merging companies and industries where lots of merger activity occur. Congress is no longer ruled by the electorate, they are owned by large corporate interests. Congress no longer cares about doing what is correct for the people because economists have given them the language to make everything appear ok and allow them to feel ok about accepting "advice" from large corporations that are looking out for shareholders and do not give a d___ about the customer.

Nelson Peltz's Trian Takes Big Stake in General Electric

Ok, what is wrong with this picture?  Nelson Peltz, through Trian Fund Management buys 98.5 million shares, or $2.5 billion worth, of General Electric.  That may seem like a lot, but it is not even a filing position, a mere one percent of the outstanding shares.  Unlike many that take such a stake in a publicly traded company, Trian has not asked for a seat on the board of directors (yet).
So, what is it that Trian would like?  Quite naturally, to enhance shareholder value.  How should that be done?
One of the proposals mentioned in a white paper issued by Trian involves GE borrowing money.  Taking on additional leverage is not always a bad thing and is frequently viewed in a positive way by the market.  However, one of the possible uses of GE borrowing $20.0 billion dollars suggested by Trian is to "return capital to shareholders", better known as stock buybacks.  Really???
General Electric in 2014 employed 305,000 employees in 175 different countries (2014 10-K).  Through 2012, 2013, and 2014, GE spend $17.46 billion buying back 754.8 million shares of stock.  The stock of GE closed at $18.65 per share on January 2, 2012, and closed at $25.06 on December 29, 2014, a 34.4% increase.  Seen another way, GE stock rose at about a 10.44% annual rate for those three years.  If you started out owning $1,000,000 worth of GE on 1/2/12 you would have ended 2014 with $1,347,053.97 worth of GE.  But if you started out 2012 with $1,000,000 in a savings account at your local bank, the one that pays 0.5% interest, you would end 2014 with $1,014,075.13.  Clearly, you'd be better off by $331,978.85 by having your money in GE than in a bank.
Nelson Peltz thinks that is not enough of a return for GE.  So he wants GE to borrow money and buy back stock so that returns will be higher.  Funny thing about this is that in the olden days, long, long ago, a company's stock price reflected its potential future earnings, where earnings were understood to have something to do with producing a good or service.  Stock buybacks divert money from being productive to being what we might call sterile.  Instead of using money to increase research and development (which requires hiring human beings to do the R&D) in search of new things that can "bring new things to life", instead of building new factories (which requires hiring human beings to do the building) that can produce new goods or old goods less expensively, instead of building new factories that are environmentally sustainable (which includes hiring human beings to design, build, and run), using money to buy back stock does absolutely nothing to help anyone except the shareholders.  Buying back stock removes money from the economy to benefit shareholders short-run.  Buying back stock instead of funding R&D, instead of producing new goods more efficiently, instead of trying to lead the industrial sector to a pathway of sustainable production merely robs the future in order to enhance shareholder value.
If the shareholders of GE really want to invest in the future, borrow the $20.0 billion as directed by Trian but use it to increase the wages of non-management employees and the lowest two levels of management.  Use that $20.0 billion to create an in-house university where workers can improve their stock of human capital.  Use that $20.0 billion to fund clean water delivery systems in less developed areas, after all the first step in economic growth is clean water which leads to less disease which leads to the opportunity to become a market economy where people can buy GE products.
Stock buybacks do nothing productive.  In an economy with lots of disguised unemployment, with increasing numbers of people dropping out of the labor force because they cannot find work, where we are experiencing one of the slowest growth rates of GDP in decades, we really need to rethink the ethics of stock buybacks.

What is wrong today? It is about more than the economy.

The current crisis is not only economic and financial but is rooted in an ethical and anthropological crisis. Concern with the idols of power, profit, and money, rather than with the value of the human person has become a basic norm for functioning and a crucial criterion for organization. We have forgotten and are still forgetting that over and above business, logic and the parameters of the market is the human being; and that something is men and women in as much as they are human beings by virtue of their profound dignity: to offer them the possibility of living a dignified life and of actively participating in the common good. Benedict XVI reminded us that precisely because it is human, all human activity, including economic activity, must be ethically structured and governed (cf. Encyclical Letter Caritas in Veritate, n. 36). We must return to the centrality of the human being, to a more ethical vision of activities and of human relationships without the fear of losing something.
Pope Francis, taken from address to the Centesimus Annus Pro Pontifice Foundation on 25 May 2013.
Full text at:  Address of Pope Francis to the Centesimus Annus Pro Pontifice Foundation

Redistribution of money to the poor does not restore dignity.

Meeting with workers, Largo Carlo Felice, Cagliari, 22 Septermber 2013


Note in the speech given by Pope Francis to workers in Largo Carlo Felice, Cagliari (Italian island), that the call is not for redistribution of income, rather it is a call for work, for jobs. People without jobs are people without hope, to do no more than give them money is an affront to their dignity as human beings. And note that the idea is not to force them to work rather than simply giving them money, the idea is that working for oneself and one's family brings a nobility of spirit, a measure of justifiable pride that simply receiving a welfare check cannot.
People were not made to work.
Work exists so that people may become complete, more fully human.

Of what may we be sure? 

Modern economics teaches us that the human person is best understood as homo oeconomicus, a rational, calculating, creature that always seeks to maximize their utility subject only to budget constraints.  

Might there be other ways to understand the human person, an anthropology of the person that would lead to a different way of conceptualizing economics and economic behavior? 

Offered for your consideration:

Possible foundations for an understanding of economic behavior (and human behavior in general)

I.       Original Sin

By yielding to the tempter, Adam and Eve committed a personal sin, but this sin affected the human nature that they would then transmit in a fallen state.  It is a sin which will be transmitted by propagation to all mankind, that is, by the transmission of a human nature deprived of original holiness and justice.  And that is why original sin is call “sin” only in an analogical sense: it is a sin “contracted” and not “committed” – a state and not an act.

Although it is proper to each individual, original sin does not have the character of a personal fault in any of Adam’s descendants.  It is a deprivation of original holiness and justice, but human nature has not been totally corrupted: it is wounded in the natural powers proper to it; subject to ignorance, suffering, and the dominion of death; and inclined to sin – an inclination to evil that is call “concupiscence.”[1]

II.    Bernard Lonergan’s Desire to Know

Deep within us all, emergent when the noise of other appetites is stilled, there is a drive to know, to understand, to see why, to discover the reason, to find the cause, to explain.  Just what is wanted, has many names.  In what precisely it consists, is a matter of dispute.  But the fact of inquiry is beyond all doubt.  It can absorb a man.  It can keep him for hours, day after day, year after year, in the narrow prison of his study or his laboratory.  It can send him on dangerous voyages of exploration.  It can withdraw him from other interests, other pursuits, other pleasures, other achievements.  It can fill his waking thoughts, hide from him the world of ordinary affairs, invade the very fabric of his dreams.  It can demand endless sacrifices that are made without regret though there is only the hope, never a certain promise, of success.  What better symbol could one find for this obscure, exigent, imperious drive, than a man, naked, running excitedly crying, “I’ve got it”?[2]

III. Saint John Paul II’s Work as Vocation

Through work man must earn his daily bread and contribute to the continual advance of science and technology and, above all, to elevating unceasingly the cultural and moral level of the society within which he lives in community with those who belong to the same family. And work means any activity by man, whether manual or intellectual, whatever its nature or circumstances; it means any human activity that can and must be recognized as work, in the midst of all the many activities of which man is capable and to which he is predisposed by his very nature, by virtue of humanity itself. Man is made to be in the visible universe an image and likeness of God himself, and he is placed in it in order to subdue the earth. From the beginning therefore he is called to work. Work is one of the characteristics that distinguish man from the rest of creatures, whose activity for sustaining their lives cannot be called work. Only man is capable of work, and only man works, at the same time by work occupying his existence on earth. Thus work bears a particular mark of man and of humanity, the mark of a person operating within a community of persons. And this mark decides its interior characteristics; in a sense it constitutes its very nature.[3]

IV. Thorstein Veblen’s Instinct

Like other animals, man is an agent that acts in response to stimuli afforded by the environment in which he lives. Like other species, he is a creature of habit and propensity. But in a higher degree than other species, man mentally digests the content of the habits under whose guidance he acts, and appreciates the trend of these habits and propensities. He is in an eminent sense an intelligent agent. By selective necessity he is endowed with a proclivity for purposeful action. He is possessed of a discriminating sense of purpose, by force of which all futility of life or of action is distasteful to him.[4]

V.    Adam Smith’s Propensity

This division of labour, from which so many advantages are derived, is not originally the effect of any human wisdom, which foresees and intends that general opulence to which it gives occasion.  It is the necessary, though very slow and gradual, consequence of a certain propensity in human nature which has in view no such extensive utility; the propensity to truck, barter, and exchange one thing for another.

Whether this propensity be one of those original principles in human nature, of which no further account can be given; or whether, as seems more probable, it be the necessary consequence of the faculties of reason and speech, it belongs not to our present subject to enquire.  It is common to all men, and to be found in no other race of animals, which seem to know neither this nor any species of contracts.[5]

VI. Abram Maslow’s Hierarchy

These basic goals are related to each other, being arranged in a hierarchy of prepotency. This means that the most prepotent goal will monopolize consciousness and will tend of itself to organize the recruitment of the various capacities of the organism. The less prepotent needs are minimized, even forgotten or denied. But when a need is fairly well satisfied, the next prepotent ('higher') need emerges, in turn to dominate the conscious life and to serve as the center of organization of behavior, since gratified needs are not active motivators.

Thus man is a perpetually wanting animal.[6]  (Maslow, 1943 394-5)

VII.    St. Augustine of Hippo

Our hearts are restless until they rest in you.

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[1] Catechism of the Catholic Church, Libreria Editrice Vaticana ed. (Mahwah, NJ: Paulist Press, 1994), 404-5.

[2] Insight: A Study of Human Understanding, Bernard Lonergan, (New York: Longmans, 1957), p. 4.

[3] John Paul II, "Laborenm Exercens: On Human Work," in Catholic Social Thought: The Documentary Heritage, ed. David J. O'Brien and Thomas A. Shannon (Maryknoll, NY: Orbis Books, 1992), 352, Apostolic Blessing.

[4] Thorstein Veblen, "The Instinct of Workmanship and the Irksomeness of Labor," American Journal of Sociology 4, no. 2 (1898): 188-9.

[5] Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, Cannan ed. (New York: The Modern Library, 1937), 13.

[6] Abram Maslow, “A Theory of Human Motivation”, Psychological Review, 50, no. 4, (1943). pp. 394-5.

What a difference fifty or sixty years makes

In the late 1950’s and through the 1960’s the focus was on Stewardship: 

v  Emphasis was on being a steward of what God had given to you, not what you had earned

Ø  everything one had was a gift from God

Ø  this included one’s job and one’s earnings

v  A tithe or offering was a return to God, an obligation to be fulfilled

Ø  The focus was not to “fund” anything, it was on an individual’s  responsibility

Ø  it was an offering of one’s first fruits to God, an act of thanksgiving

The focus of stewardship begins and ends looking at God

Noticeable from the 1990’s to present is a focus upon a Pledge: 

v  Consider the wording of a Diocesan Support Appeal as well as parish commitments–

Ø  we make a difference in the lives of thousands of our brothers and sisters in faith. . . By sharing our gifts. . .”

v  The understanding of “gifts” here is different than in the earlier time period

Ø  one sense is “haves versus the have-nots”

Ø  another and probably stronger understanding is as “income”

v  Therefore, the focus shifts away from stewardship of one’s gifts and becomes a redistribution to others.

v  Focus is not on a return to God, focus is on what your income can do, i.e. your income will not be wasted.

Ø   “The financial resources generated by the DSA provide current operational funding for our Church’s educational, vocational, multicultural, and housing ministries. . .”

v  From this a “consumerist” focus develops and the “Pledge” request is presented to show, in effect, what your money “buys”

The focus begins looking at you and ends looking at goods and services purchased!

Is it, in today's world, possible to think about one's responsibilities to God? Is the idea of an obligation to God a thing of the past?

Is change in the wind?

Chipotle Plans One-Day, 4,000-Worker Hiring Binge


Wall Street Journal, Monday, 24 October 2015, page B1


Part of the problem in the labor markets has always been that employers see workers simply as inputs to the production process.  As such, it is only the objective nature of work that is considered; from that perspective workers are paid as close to the marginal revenue product of labor that firms can estimate.  The employee's future is simply their own and no one in the firm really cares.


However, as we learn from the social doctrine of the Church, there is that subjective nature of work that must also be considered.  It is the subjective nature of work in which one sees that we are not made to work, that work was made for us.  The subjective nature of work teaches all that we are not simply inputs.  We become better off when we work.  Work involves creation of one sort or another and it is in creating that we more fully reflect being made in the image of God.  The subjective nature of work does not deal with output (that is the objective nature), it deals with the person and the development of the person.  The future of the person matters when we see the subjective nature of work.


Chipotle's increase in wages does partly reflects a new understanding of the objective nature of work.  The quantity supplied of workers at the current wage structure is below the quantity demanded for workers.


But note that the "war on talent" is causing these fast-food firms to address the person's development as a person; the future of the employee has become important to the firm.  Workers are seen as something more than mere inputs.  Tuition reimbursement makes the worker a more complete person with better opportunities in the future.  To be sure, these non-wage offerings are aimed to enable the worker to rise within the firm.  Yet, to the degree that something more than money is offered allows the employee to grow as a person and is a movement in the direction of being concerned with the subjective nature of work. 


That is encouraging. 


Of course, the increased wages are great, too!

Is Facebook doing rigt or overreaching?

Is Facebook doing right or overreaching?

Is anyone else out there conflicted about a publically traded company demanding social concessions from their vendors?

Solidarity

Where the dignity of the person is the first permanent principle of Catholic Social Doctrine and the one upon which the others are built, solidarity, the fourth permanent principle, is the one which binds the others together.  Solidarity is the recognition of the social nature of the human person, a person among many who are on a path to a common final end.  Solidarity is a “firm and persevering determination to commit oneself to the common good”. (CSDC 193)

Much more than seeing ourselves as members of the community of humanity, we think of ourselves as individuals.  Individualism has become the defining characteristic of the present day.  This individualism is perhaps best exemplified by the tale of the little red hen. 

Recall the childhood story: a little red hen is strolling through the barnyard one day and finds a grain of wheat.  Rather than eating it, she decides to plant it.  She asks the other barnyard animals for help and they all turn her down and she plants it by herself.  The wheat grows and harvest time arrives.  After the barnyard animals turn down the little red hen’s request for help, she alone fills a wheelbarrow with the grain she harvested.  Once again, she extends an offer for help to take the grain to the miller’s but everyone turns her down, leaving her to take the grain to the miller by herself.  Returning with flour, she extends an invitation to anyone who would like to help her use the flour to bake some bread; everyone turns a deaf ear to her request.  When the bread comes out of the oven, she asks if anyone would like a slice.  Of course everyone answers “YES!”  But now the little red hen turns to them and says “when I asked for help to plant, harvest, transport, and bake you all said no; so now I will eat this entire loaf by myself.”  And she does.

The sentiment of the little red hen is heard often sometimes from individuals who started in poverty but found developed a product or service which brought them great wealth: “I made this fortune myself, don’t come asking me for a handout.”  The little red hen is the archetypal self-made person, able to survive and thrive by determined individual effort alone.  Yet, we have to ask is that really the case?  After all, the little red hen did not act totally in isolation.  While she did act alone with respect to the other barnyard animals, she did interact with one other person in the story – the miller.  We are not told anything about what happened at the miller’s other than she went with grain and returned with flour.  Without the miller there would have been no bread, the little red hen ceases to be a self-made success.  The lesson of this is that, despite refusals to help that made the hen seem the lone individual, she nonetheless could not find fulfillment apart from being involved with another.  Solidarity is the recognition of the other as someone striving just as we do.

We are debtors to society.  Every business person who claims they did it on their own is forgetting the education they received growing up, the food which nourished   them that someone else grew, and much, much more.  Of course this successful person would argue “None of that was free, I had to pay for it, so I don’t owe nobody”.  Simply not true, there are multiple layers that brought that successful person to where they are beginning with the family who sustained them until they could feed and clothe themselves.  There was the school district that taught the successful person to read, write, and deal with numbers.  We fight against the idea of being in debt to society because debt requires repayment.  To accept that we are debtors to society means that there must be some repayment that society expects from us.  What is the repayment?  It is not sending money to the poor in a distant land to relieve a sense of compassion; it is actively working to end corruption, oppression, and exploitation at every level of society.  The repayment is active participation in society, it is not detracting from the common good, and it is caring about those around you. 

Economics for a long time could not explain why unions would go on strike; empirical research showed time and time again that any gains from an improved contract would not repay the losses incurred from the strike.  In the early history of the union movement many workers would not have disagreed with that because a part of the motivation for the strike was the hope that future workers would be better off.  This is a type of solidarity.

Another example of solidarity was evidenced following the economic collapse of 2008.  While not widespread, it happened often enough to be noticed; at some companies workers and management willingly accepted pay cuts rather than work force reductions.  Business had dropped off a great deal and rather than lay off twenty percent of the workforce, everyone took a twenty percent cut in pay and everyone kept their job. 

Solidarity is a commitment to interdependence and mutual responsibility.

CSDC refers to the Compendium of the Social Doctrine of the Church and the number refers to the paragraph in which the quote was found.

Subsidiarity

Subsidiarity is the recognition that when a problem exists at any level, the resolution of that problem ought to be dealt with at that level.  What is it to talk about levels and problems at these levels? 

Subsidiarity is built upon the idea that people interact with each other through various social strata, or layers.  The base of all, the foundational level is that the family.  The first interaction a person has with others is within the family into which they are born.  The father, mother, siblings, grandparents, aunts and uncles, and cousins, all interact with the newly born, they all are responsible for and contribute to the child’s growth and development.  As a result of increased mobility and opportunities, this level of society has been undergoing tremendous change as nuclear families, a set of parents and their children, move away from the grandparents, aunts, uncles, and cousins.  The concept of the extended family is disappearing and to now speak of family is to mean simply the nuclear family.  The influence of grandparents, along with the diversity brought by aunts, uncles, and cousins, is slowly disappearing.  Yet, even with the diminution of the extended, subsidiarity recognizes the first level of society as the family rather than the individual. 

The next level of society is the neighborhood, the grouping of families living in close proximity to each other.  It is in slightly wider setting or level that both individuals and families interact for support, development, and well-being.  This level, as well, is undergoing change.  There was a time when families communicated with each other much more than is the case today.  Air conditioning has moved people indoors to avoid the heat rather than sitting on the porch of an evening, lost is the contact neighbors once had seeing each other out and about.  Few people know much about their neighbors beyond their name.  It has become increasingly difficult to know whether or not you can trust your neighbors and homes have become secure fortresses with alarm systems.  Children do not play with other kids in the neighborhood, they are taken to playdates with people the parents know better from work or school than the family next door.

The levels continue to ascend: various neighborhoods close to each other form a town, towns form a county, counties are part of a state, states together form a nation, and the community of nations creates the global level.  There can be levels that form within levels, levels that address a specific area of concern.  For example, a school district is a level above a neighborhood yet different that a town.  Fire protection districts would be another example of a level within a level addressing a specific issue.

Subsidiarity deals with the ability to solve problems.  Subsidiarity is the idea that problems should always be solved at lowest social level possible.  Consider security; when families where more open to their neighbors, there was a sense of security in that everyone watched out for everyone else.  However, there were always threats that could not be addressed by neighbors watching over neighbors and towns stepped in to provide police protection.  Towns were able to provide streets among the neighborhoods of their borders, but linking itself to another town by roads was difficult and county road crews were established.  The Civil Rights Act is a good example of subsidiarity properly applied.  After the Civil War, there were (widely scattered and few in number) neighborhoods where racism disappeared, but the problem of discrimination was still widely practiced.  A few, very few, cities tried to make conditions better for blacks, but still the problem persisted.  Some states, but not many, also tried to improve the lives of black men and women yet the problem of discrimination persisted.  The evil of racism, which originates at the level of neighborhoods, could not be removed by actions at the neighborhood level. The problems were not adequately addressed at the community level or at the state level.  Attempts to solve this problem which was a local problem (at nearly all localities) could not be put in place until it reached the national level and even then it took one hundred years before it happened.  The passage of the Civil Rights Act in the Johnson Administration was a higher level of society addressing problems of much lower levels of society; this was a true act of subsidiarity. 

However, a higher level of society can overstep its bounds and violate the spirit of subsidiarity if it attempts to solve problems that could be solved at the lower level.  The current imbroglio over education is sometimes seen as an example of a higher level interfering with something a much lower level could solve.  Has the federal government, a part of the national level of society, overstepped its reach in establishing curriculum standards for local school districts?  St. John Paul, in discussing the development of the welfare state[1], wrote:

By intervening directly ad depriving society of its responsibility, the social assistance state leads to a loss of human energies and an inordinate increase of public agencies, which are dominated more by bureaucratic ways of thinking than by concern for serving their clients, and which are accompanied by an enormous increase in spending.  In fact, it would appear that needs are best understood and satisfied by people who are closet to them and who act as neighbors to those in need.  (CA, 48)

Of course this raises the question of whether or not it is really possible to address many welfare needs at a neighborhood level.  Before the Great Depression, much assistance for the poor came from churches and local communities; neighbors helped neighbors.  What happened to end that?  What was the failure that kicked the responsibility up to higher levels of society?  Families began to decrease their participation in communal efforts to aid others. 

Just as the permanent principle of the common good implied the principle of the universal destination of goods and which led to the development of the preferential option for the poor, the permanent principle of subsidiarity strongly implies the duty of participation.  Participation deals with the acts of individuals which contribute to the cultural, economic, political, and social life of the civil community to which they belong.  These acts can be individually performed or in cooperation with others.  Participation is a duty to be fulfilled with responsibility and with a view towards the common good.  Failure to vote, even when one feels their vote would not matter, is a failure to participate.  Failures to participate can lead to the establishment of groups with hidden privileges and creates conditions where some citizens could make deals with institutions to serve their own needs rather than the common good.  In short, failure to participate creates the conditions under which higher levels can overstep their boundaries and violate the principle of subsidiarity.

There are, then, two areas of concern: first, are problems being solved at the lowest possible social level; and second, are people responsibly participating for the common good?  With respect to the first, orthodox economics generally fails to recognize societal levels because everything is modeled upon the interaction of the representative agent, homo oeconomicus, and individual firms.  There are sub-disciplines within economics broadly defined such as Institutional Economics and Public Choice Theory that could recognize and address the ideas of societal levels.  However, the high school economics curriculum and the principles courses most college students take are based upon the models and contain policy ideas which ignore societal levels.  Regarding the second, orthodox economics generally assumes that everyone participates in market activity and that nothing else matters.  The decision to vote or not is a response to a optimization problem rather than a responsibility to participate.  The idea that large segments of people are excluded from participation is not logically possible in economics because discrimination is not considered rational behavior and since homo oeconomicus always acts rationally, discrimination simply cannot occur. 

CA refers to St. John Paul II's encyclical, Centesimus Annus, and the number is the paragraph in which the quote was found. 

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[1] In his words, the “social assistance state”

The Common Good

The prevailing ethos in today’s world seems to be “watching out for number one”, that is to say “I simply have to do what is best for me”.  Many of the legends in the business world are seen as “self-made men”, individuals who struggled against mighty odds to achieve their dream and become rich.  When it comes to being happy, we are exhorted to find happiness within ourselves, that we cannot depend upon others for making our lives better. 

The truth underlying the principle of the common good proceeds from the fact that we all exist “with” others and that we cannot find fulfillment without them.  But that is only part of the truth; the other part brings in the dignity of those others.  They too desire the same fulfillment that each of us seeks and the social nature of our design calls us to not prevent them from reaching for the same ultimate end that we strive to find.  The foundation of the principle of the common good is thus the acceptance that “the human person cannot find fulfilment in their self apart from the fact that they exist ‘with’ others and ‘for’ others”.  (CDSC 165)  The common good is “the sum of those conditions of social life which allow people, either as groups or as individuals, to reach their fulfillment more fully and more easily.”  (GS 26) These social conditions that are the common good are not any sort of a utopian society, they do not imply an equal distribution of all property, and they do not demand that everyone be the same.  The creation of the social conditions which are the common good is not an end in itself.  The common good is more than socio-economic well-being.  Because the human person is a creation of God, the common good has a transcendental nature which is directed towards a specific goal, that of attaining the ultimate ends of the person, eternal beatitude.   

The common good is bound up in the idea that no one should be excluded from such basics as food, housing, work, education, and access to culture, transportation, basic health care, the freedom of communication and expression, and the protection of religious freedom.  For example, racial discrimination is a social condition that detracts from the common good because it creates barriers which deny access to employment, adequate housing, and education to persons of color.  The key concept is that society be structured and individuals act so that no one person or group is excluded from the opportunity to attain their fullest meaning. 

One immediate implication of the common good is the idea of the “universal destination of goods” because God created and gave the earth to the whole human race for the sustenance of all its members, without excluding anyone. People must have the material goods that will meet their primary needs and are thus the beginning of their existence; people must feed themselves to grow, communicate and associate with others, and reach the highest purpose to which they are called.  The universal destination of goods calls all of us to stop looking at the things of this world as economic science sees them, scarce resources.  The universal destination of goods calls us to reorient ourselves to the creation of wealth rather than the hoarding of goods.  This creation of wealth is not to be understood in a monetary sense; all too often the creation of wealth is understood as becoming rich.  The traders and hedge-fund managers of Wall Street, along with the heads of the large financial firms do not create wealth, they accumulate wealth.  Henry Ford’s assembly line decreased the time to make a car from over twelve hours to two and a half hours.  The cost of each car fell so that a much larger part of the population could buy them.  Even with the drop in the price of cars, Ford paid a very good wage for the time, a wage that would allow his workers to buy the cars they produced.  Henry Ford created wealth in that not only did he become very rich, but thousands became much better off in the process.  The universal destination of goods encourages us to “develop an economic vision inspired by moral values that permit people not to lose sight of the origin or purpose of these goods, so as to bring about a world of fairness and solidarity.”  (CSDC 174) 

The principle of the common good and its chief implication of the universal destination of goods are not and cannot be opposed to the right to private property.  However, the universal destination of goods indicates a need to regulate private property.  Private property is not absolute; it must be seen as a means rather than an end.  The social doctrine of the Church teaches:

The universal destination of goods entails obligations on how goods are to be used by their legitimate owners.  Individual persons may not use their resources without considering the effects that his use will have, rather thy must act in a way that benefits not only themselves and their family but also the common good.  (CSDC 178)

For a single individual to buy a great deal of farm land is not wrong or opposed to the idea of the universal destination of goods.  For that individual to grow a great deal of corn this year is likewise not wrong.  To withhold that corn from the market, to allow the land to lie fallow so that the price of corn rises a great deal and then sell the corn would be detrimental to the common good and thus violate the concept of the universal destination of goods. 

Taking these two together, the common good and the universal destination of goods, calls us to consider the poor; together they create what is called the “preferential option for the poor”.  This requires that the poor, the marginalized, and all those whose living conditions interfere with their proper growth be of particular concern.  The idea of the poor in this sense is different from the idea of the poor as understood in economic theory.  In economics, being poor is a result of a lack of work effort; people are poor because they choose not to work.  This understanding of poverty creates a great deal of resentment against the “poor” who are thought to be seeking a handout rather than a job.  To this kind of poverty people often recall the word of St. Paul in his second letter to the Thessalonians:  “in anyone was unwilling to work, neither should that one eat.”

There is another type of “poor”, those who are poor due to exclusion.  These are the poor who dearly want to work but for whom there are no jobs.  These are the poor who are excluded from access to education.  Whether the exclusion if deliberate or the result of a long established social custom, these are not poor because of their own choice.  It is to these that we have social responsibilities and it is this preferential option for the poor that would have us examine all our decisions regarding the ownership and use of goods. 

This second permanent principle, that of the common good, recognizes what economic science recognizes, that people work hardest when working for themselves; it does not deny that self-interested behavior is a prime motivator.  What this principle does is to recognize that the pursuit of self-interest is not a behavior undertaken by independent individuals; it is a behavior exhibited by people striving for the same end who are interdependent, who are intimately associated with each other and who can become beneficial to each other’s quest.  This principle places limits upon self-interested behavior because no person is independent from others, no decisions can be made in a vacuum.  Orthodox economics holds for the idea that the best for society is a result of people pursuing their own interest without regard for others; the principle of the common good says that the best for society is not a result but rather it is a choice to recognize the benefits to all that can arise from acts of mutual responsibility and interdependence.

CSDC refers to the Compendium of the Social Doctrine of the Church and the number refers to the paragraph in which the quote was found.

The Dignity of the Person

From the viewpoint of the world, molded as it is by the scientific developments which have followed Isaac Newton, Charles Darwin, Stephen Hawking, and Richard Dawkins, a viewpoint which guides the “science” of economics, the human person is a result of chance.  From the moment of the Big Bang some fourteen billion years ago there has been a sequence of random, chance events which the present field of cosmology is trying desperately to trace, a sequence that has brought us to where we are today.  Events in the first few seconds following the Big Bank determined much of the physical structure of “space”, of the universe we know today.  The coming into existence, one cannot say creation in this sense for nothing was created, all simply came into existence, of the four fundamental forces (gravity, electro-magnetic, strong, weak) and of hydrogen (the building block of the universe) was in a strong sense deterministic, owing to the nature of the Big Bang.  After the first few minutes following the Event, randomness began to set in and following the first billion years of so random events began to congeal into the embryonic stages which have resulted in stars, planets, and galaxies.

The formation of all this is thought to be truly random.  In the developing theories of astrophysics and cosmology there are indications of a multi-verse rather than a uni-verse and in the universes other than the one we inhabit there are quite possibly different rules of physics that determine the composition of each universe.  The universe in which we live is the result of random events that followed the Big Bang. 

From the random sequence of events leading to galaxies, stars, and planets comes the random set of events that ultimately led to the rise of homo sapiens on the third planet out from a medium sized star.  The randomness that has resulted in our existence has been calculated and projected outward in an effort to see if we are alone in this particular universe. 

From the viewpoint of the world as it is today, the rise of the human person is the result of chance, of a sequence of random events.  Human beings were not created; they came into existence after nearly fifteen billion years of random events.  In terms of a biological equilibrium, we may or may not be stuck in a stable equilibrium; the time frames are too long to know until well past its conclusion.  We came into existence to exist.

From the viewpoint of the Magisterium, the human person was the result of a deliberate choice by God to create.  This is not to deny evolutionary theory or give way to creationism.  Consider what Pope Francis recently said:

When we read in Genesis the account of Creation, we risk imagining that God was a magician, with such a magic wand as to be able to do everything. However, it was not like that. He created beings and left them to develop according to the internal laws that He gave each one, so that they would develop, and reach their fullness. He gave autonomy to the beings of the universe at the same time that He assured them of his continual presence, giving being to every reality. And thus creation went forward for centuries and centuries, millennia and millennia until it became what we know today, in fact because God is not a demiurge or a magician, but the Creator who gives being to all entities. The beginning of the world was not the work of chaos, which owes its origin to another, but it derives directly from a Supreme Principle who creates out of love. The Big-Bang, that is placed today at the origin of the world, does not contradict the divine intervention but exacts it. The evolution in nature is not opposed to the notion of Creation, because evolution presupposes the creation of beings that evolve.[1]

So it is that God created us, we did not come into existence as a result of random chance.  We were created with a specific design especially suited to bring us to an ultimate end, eternal beatitude with God.  Further, the human person is created in the image of God, in the imago dei:

Being in the image of God the human individual possesses the dignity of a person, who is not just something, but someone. He is capable of self-knowledge, of self-possession and of freely giving himself and entering into communion with other persons and he is called by grace to a covenant with his Creator, to offer him a response of faith and love that no other creature can give in his stead. (Catechism, 357)

There is a glimpse of the design of our nature – “to offer him a response of faith and love that no other creature can give in his stead” – and one of the first indications of the dignity of each person.  Every human being has been created in the imago dei and is free to offer back to God a response of faith and love that will lead to eternal beatitude.  “The human being is a personal being created by God to be in relationship with him. . .” (CSDC, 109) 

There is more to being created in the imago dei: the human person is created as a social being, reflective of the Trinity.  We are made to be with and to support others even as they are with and support us.  Thus, a part of the dignity of each person is reflective of the fact that to act according to our design is to reach out to others in a “response of faith and love” because they, too, were created in the imago dei.  Another part of the imago dei is seen in that we are able to work, to create.  Just as God created, so we are also able to impact the world around us by what we create, by the work we undertake.  This contributes to the recognition of each person’s dignity by going back to the recognition that every person is likewise call to share in the imago dei by creative acts which we can support or thwart. 

We are all in this together and the design of each of our being, that we are social creatures, is such that I am can only be better off if you are one, no worse off (a necessary condition), and more importantly, two, only if you are also better off (the sufficient condition).  Therefore, each of us has a dignity which we cannot deny in any other.  It is only the recognition of this human dignity that can make possible the common and person growth of everyone. (CSDC 145)  The root of all human rights is found in the dignity that belongs to each human being;

The ultimate source of human rights is not found in the mere will of human beings, in the reality of the State, in public powers, but in man himself and in God his creator.  (CSDC 153)

The dignity of the human person is the first permanent principle of Catholic Social Doctrine and the foundation of all the other principles and of all the content of the Church’s social doctrine.

CSDC refers to the Compendium of the Social Doctrine of the Church and the numbers refer to the paragraph in which the quote was found.

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[1] October 27, 2014; address by Pope Francis on the occasion of the inauguration of a Bronze Bust of Pope Benedict XVI at Pius IV Casina in the Vatican Gardens.

The Social Doctrine of the Church

Given that Catholic thought sees the consequences of people making choices as having a tendency towards negative outcomes, the social doctrine of the Church is quite different than the laissez-faire doctrine of orthodox economics.  The problem is that the Church agrees with one of the supporting ideas of laissez-faire; people work best when they are given the freedom to work for themselves, to pursue what is best for themselves, to engage in self-interested behavior.  The task of the Church’s social doctrine, then, is to find a way to balance the positive results brought about from a framework where the freedom to pursue one’s own self-interest provides substantial personal incentives against the potentially damaging social effects of self-interested behavior. 

Catholic Social Doctrine (CSD), or the Social Doctrine of the Church,[1]  begins with the acceptance that God has given the human person free will, an ability to choose what they would do in any given situation.  God is said to have created the human person as a rational being who is able and allowed to decide and direct his or her own actions.  The Catechism of the Church teaches that; “by free will one shapes one’s own life” (Catholic Church 1994, 430).  An earlier Catholic thinker went so far as to declare that “An act in which the will does not freely participate, by at least an implicit consent, is not, strictly speaking, a human act” (Snell 1899, 20).  Just as for orthodox economics[2], CSD does not view people as programed robots; individuals are free to direct and choose their own actions.

Where CSD departs from orthodox economics is in its view of how it is that people are designed.  Orthodox economics sees the human person as a creature designed to consume; the other economic activities of production and exchange are to insure consumption may continue until death.  Catholic Social Doctrine is built upon a much different view of the design of the person.  As we discussed earlier, similar to how a piano is designed to produce music but does not have to do so, or an automobile is designed to provide transportation but can be used for something else, the design of the human person is directed towards a very specific end, eternal beatitude, although it is not required to accept or reach for that goal.  Absolutely essential to CSD is that the person be understood not as a creature designed to consume, rather each person is designed as a sentient being, as a person striving for completeness, a completeness that is both intimately caught up in their actual, historical life and which also transcends it.  Consumption is not the goal; the ability to consume exists only in an instrumental rather than final sense.  Consumption exists to enable the person to go beyond consumption; it is a means enabling the person to move toward that other, higher goal  of eternal beatitude.  Each and every human person has been designed by a loving God in this way and each and every human person is totally, radically free either to pursue their ultimate end or to pursue some other end of their own choosing.  This is the first stone of the foundation upon which the Social Doctrine of the Church is built, that the God who created us loved us so much that we were designed to be able to share in the beatitude of God, if we so choose. 

Moving from this focus upon the design and freedom of the individual, we must continue to move further away from orthodox economics because the Church sees each individual as a Social being rather than an isolated, independent individual.  Orthodox economic models are built up from the assumption that each economic agent is completely independent from all other economic agents, that the preference ordering that guides the decisions made by each agent are without reference to the preferences or actions of any other economic agent.  The individual person in Catholic Social Teaching is quite the opposite.  Every individual is born into a family without which they would die.  As the child grows, their degree of social involvement grows as they become embedded in ever expanding circles of society: from family to neighborhood, school, and community.  From birth every person is continuously affected by others even as they affect others.  The English poet, John Donne, captured well the sense of the social nature of the human person’s design:

No man is an island,

Entire of itself,

Every man is a piece of the continent,

A part of the main.

If a clod be washed away by the sea,

Europe is the less.

As well as if a promontory were.

As well as if a manor of thy friend's

Or of thine own were:

Any man's death diminishes me,

Because I am involved in mankind,

And therefore never send to know for whom the bell tolls;

It tolls for thee.

That the human person is also created as a social rather than independent being is the second stone of the foundation upon which Catholic Social Doctrine is built.

From these adjoining foundation stones the edifice of Catholic Social Doctrine arises.  Catholic Social Teaching is comprised of four permanent principles: the unique dignity of every person, the common good, subsidiarity, and solidarity. Catholic Social Teaching is supported by four fundamental values: truth, freedom, justice, and love.  The permanent principles are interrelated and form a unity that affects the reality of society.  The effects of these principles impact the family, human work, economic life, the political community, the international community, and the environment.  These permanent principles and values have the ability to promote peace among all humanity. 

Snell, M.-M. 1899. The Catholic Social-Reform Movement. The American Journal of Sociology 5, no. 1 (Jul., 1899): 16-50.

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[1] There are two different phrases the reader will encounter as they read more into the topic of the Social Doctrine of the Church: Catholic Social Teaching and Catholic Social Thought.  Catholic Social Teaching is the moral teaching set forth by the Magisterium of the Roman Catholic Church.  Catholic Social Teaching is recognized as a set of encyclicals, apostolic exhortations, conciliar documents, and pastoral letters issued by bishops, singularly or jointly, all of which provide moral guidance for the faithful and increasingly for all humanity.  Catholic Social Thought is what people have to say about Catholic Social Teaching.  The encyclicals, Rerum Novarum by Pope Leo XIII and Centesimus Annus by St. John Paul II; the apostolic exhortation of Pope Francis, Evangelii Gaudium; the pastoral constitution of the Second Vatican Council, Gaudium Spes; and the pastoral letters from the bishops of New Zealand (“Mindful of the Common Good” in 2008) and the United States (“Economic Justice for All” in 1986) are all a part of the Magisterium’s Social Teaching.  “Catholic Social Teaching and Economic Law: An Unresolved Tension” by Woods; “Catholic Social Economics: A Response to Certain Problems, Errors, and Abuses of the Modern Age” by Edward O’Boyle; Modern Catholic Social Documents and Political Economy by Albino Barrera; and this book are the works of priests, theologians, and laypersons are examples of Catholic social thought, works where someone has something to say about the Church’s teaching.

[2]Of course this “freedom to choose” that orthodox economics claims to exist is at odds with the very behavioristic modes of behavior that form the basis of any model using the construct homo oeconomicus.