The release of the encyclical Laudato Si by Pope
Francis last week had the predictable result of winning the Pontiff plaudits
and huzzahs in the world’s press, and another round of bewildered head-shaking
among observant Catholics. Whether in his formal remarks or his off-the-cuff
observations, Pope Francis repeats many of the common objections to (and
caricatures of) the market economy, objections we might encounter in the
writings of any of the leftist thinkers who dominate the Pope’s Jesuit order.
Meanwhile, so-called progressives in the Church, not
normally so deferential to authority, triumphantly proclaim that matters of
economics have been definitively settled and that the faithful ought to shut
up and obey.
The antidote to all this, released just this year, is the
tenth anniversary edition of Tom Woods’s book The Church and the Market: A Catholic Defense of the Free Economy, which won first prize in the books division of the Templeton
Enterprise Awards shortly after its release a decade ago.
Tom’s thesis and its rapid spread have put Church liberals almost
hysterically on the defensive – be sure to read Tom’s entertaining and
relentless takedown of a left-wing Catholic
conference warning the faithful of the terrible dangers of libertarianism –
and has blasted open a discussion that progressives have been so eager to
insist is closed.
Before I explain what makes this book especially
original, unique, and valuable, let me note that what it contains is of the
greatest interest and importance no matter what, if any, religious
convictions the reader may hold. It is the perfect book to read between Henry
Hazlitt’s Economics in One Lesson on the
one hand and advanced Austrian treatises like Mises’s Human Action and Rothbard’s Man, Economy and State, on the
other.
Tom begins by explaining praxeology, the Austrian method
of economics, and shows how Austrians derive the concept of costs, value
scales, supply and demand schedules, and the law of diminishing marginal
utility, all from the simple proposition that human beings act, and that they
use scarce means to substitute a more preferable for a less preferable state
of affairs. If you’ve ever wondered exactly how Austrians employ the “action
axiom” to arrive at robust economic conclusions, you’ll understand after
reading this chapter.
The rest of the book covers a vast array of topics, the misunderstanding of
which has led to gross moral confusion: labor unions, wage rates, the “just
price,” banking, money, inflation, business cycles, interest, monopoly,
foreign aid, the welfare state, distributism, and a great deal more. The
tenth anniversary edition contains a new introduction and an extra chapter.
That extra chapter amounts to an overall defense of the book’s thesis, and
takes the form of a systematic reply to a critic you almost feel sorry for.
In other words, the book makes an extremely vigorous and
persuasive case for Austrian economics as a science and the market economy as
an economic system. I guarantee you will be better able to defend both after
reading it, and that you’ll enjoy every page of Tom’s unrelenting
presentation.
When the book came out, it caused instant controversy.
Catholic leftists and even some traditionalists denounced it. But Tom had
plenty of supporters, among them Fr. Martin Rhonheimer of the Pontifical
University of the Holy Cross in Rome; Crisis magazine; Fordham
University’s James Lothian (writing in Homiletic and Pastoral Review);
Bill Luckey, chairman of the department of economics at Christendom College;
Sam Bostaph, chairman of the department of economics at the (conservative
Catholic) University of Dallas; and even a scholar who had a hand in drafting
a previous papal encyclical.
The key thesis of the book that caused controversy among Catholics, the
majority of whom never read the book and caricatured its argument, was as follows.
A Catholic looks to the Church on matters of faith and morals. The technical
details of particular academic disciplines, on the other hand, lie beyond the
Church’s competence.
For example, whether a particular medicine works or has
side effects of varying degrees of intensity is a matter for physicians and
medical researchers to say. If this medicine can be produced only by tearing
the hearts out of living human beings, the Church may of course say that the
use of the medicine is morally unacceptable.
The Church may say that church architecture ought to draw
the mind toward the contemplation of God, and be built in such a way as to
stand the test of time. But churchmen would be going beyond their competence
to describe the technical methods that are most suitable for this purpose.
Likewise, it is all well and good to say that the welfare of the family, the
building block of society, is of great importance. It is quite another to
take sides regarding the precise, technical means of securing that welfare,
as if the edifice of economic reasoning of the past 200 years did not exist.
Demands for a “living wage” would of course be destructive to the family.
Tom’s uncomprehending critics pounced. How dare Woods
insist that the Church may not speak on economic matters! But Tom was not
saying that at all, as we’ve already seen. There’s no reason Church
authorities cannot make general statements about moral issues that happen to
intersect with economics. What Tom did say – quite correctly, of course – was
that the qualitative propositions of economic science, being facts of
reality, lie conceptually beyond moral critique.
In other words, if wage rates rise in a particular way,
no amount of moral exhortation can make them rise another way. If the
constraints of a finite world mean we can enjoy A only at the expense of B,
no amount of pious mockery of the market system can eliminate this brute
fact. We don’t condemn Avogadro’s number, or set down moral exhortations to
change it.
Some of the traditional Catholics who now object to Pope
Francis’s encyclical Laudato Si were first in line to condemn The Church and the Market for its
alleged dissent from other papal encyclicals. But the grounds on which these
Catholics object to Laudato Si are in good measure the ones on which
Tom pointed out difficulties with earlier documents. If we begin with faulty
presuppositions drawn from misunderstandings of secular disciplines, any
subsequent moral reasoning based on them is sure to be equally distorted.
Quadragesimo Anno (1931)
of Pius XI could look at the Great Depression and blame it on greed, and even
the otherwise conservative Benedict XVI responded to more recent economic
problems with what Tom has called “platitudinous warnings about materialism
and greed.” As Tom wonders in the book, why is there no room in all this
moral reckoning for even one mention of the moral problems of central
banking?
On this very site, and then developed further in The Church and the Market, Tom
applied this analysis to Pope Paul VI’s Populorum Progressio (1967),
which highlighted poor living conditions in the developing world. He jumped
from a perfectly natural desire to improve those conditions to the wild non
sequitur that state-led development aid programs, funded by the West, were
the solution. He further expressed his belief in the Singer-Prebisch thesis,
that a secular decline in the terms of trade – e.g., that the prices of
commodities, which Third World countries tended to produce, were moving
downward, while manufactured goods, produced by more advanced countries, saw
their prices on the rise – meant that a liberalization of international trade
couldn’t solve the developing world’s problems.
At the time, economist Peter Bauer was warning in vain against
development-aid programs. First, he said, they are unnecessary: if poverty
were really a vicious circle, every country would still be in the Stone Age.
When the right cultural attitudes and political and economic conditions are
in place, funding for domestic projects will freely flow from abroad. Second,
these programs would lead to bloodshed, as antagonistic groups clawed at each
other for a share of the grant money. Such violence did indeed occur in about
a dozen countries. Third, these programs subsidize evil, by allowing vicious
government thugs to continue their destructive predations without having to
face their full economic consequences.
All of these predictions by Bauer came true as
spectacularly as one could ask for. Even the New York Times,
international agencies, and the Clinton administration were at last forced,
albeit reluctantly, to admit that the programs had been a grotesque failure.
But who, they pleaded – as if Peter Bauer had never existed – could have
known?
Even the empirical grounding of Paul VI’s case crumbled in
the face of closer examination. Subsequent research found that there had been
no secular decline in the terms of trade after all, so the major basis on
which Paul VI proceeded to base his moral judgments was simply incorrect – a
perfect illustration of Tom’s warning about the fate of moral judgments with
which potentially faulty empirical claims or scientific understanding are
intertwined.
Tom notes that this embarrassment could have been avoided
easily enough, had Paul VI enunciated general principles, as opposed to
trying to pinpoint precise technical solutions on a matter on which he
personally possessed no expertise, and to which the authority Catholics
ascribe to the pope did not extend.
Tom first explored this topic all the way back in 2002,
in a paper for the Mises Institute. When the feedback was enthusiastic, he
decided to write a whole book on the subject. We invited him to deliver our
Lou Church Lecture in Religion and Economics in 2004, and his book was
published the following year.
Now Tom has written a dozen books, to be sure, ranging
from The Politically Incorrect Guide to American History, which spent a dozen weeks on the New York Times
bestseller list and sent both the neocons and the establishment into a frenzy
– Tom’s book was the subject of a signed editorial on the New York Times
editorial page – and Meltdown, Tom’s 2009 bestseller,
featuring a foreword by Ron Paul, that diagnosed the financial crisis from an
Austrian, free-market perspective.
But in terms of his most lasting contributions to
Austrian or libertarian thought, The Church and the Market is
Tom’s masterpiece. It has forever changed the nature of the discussion of
Catholic social teaching, and it ranks among the most compelling and
effective short presentations of the ideas of Austrian economics I have
encountered. Treat yourself to a copy of this vigorous polemic.
