Correspondence

I am grateful for Pater Edmund Waldstein’s excellent essay critiquing the new nationalism. Not only does he illuminate its incompatibility with Catholic integralism; he astutely observes that nations themselves are often formed by imperialistic means. His description of Protestantism’s relationship with the nation, however, warrants a response.

Following Yoram Hazony, Waldstein argues that Protestant political theology is anti-imperialistic and entails sovereign independent nation-states. Implicit in Waldstein’s understanding of this political theology is the notion that it illicitly frees the nation from its obligation to order its life to God. Waldstein’s rejoinder to this position is worth quoting at length: “Any complete human community that does not give the one God the worship that is His due and submit itself to the spiritual authority He has established will inevitably tend to idolatrous totalitarianism. . . . To the lay estate is given power over temporal matters, but a power that it must submit to the judgments of the spiritual power entrusted to the clergy.” To understand where his account of Protestantism’s intrinsic anti-imperialism errs, we must first set the record straight on the Protestant understanding of Church-state relations.

It must be said at the outset: classical Protestantism rejects the secular nation. As Calvin observed, not even pagans denied their civic obligations to the gods, and almost all Protestant confessions assert, in the words of the Westminster Confession of Faith, that the magistrate “hath authority, and it is his duty, to take order, that unity and peace be preserved in the Church . . . that all blasphemies and heresies be suppressed; all corruptions and abuses in worship and discipline prevented or reformed.”

The Reformers rejected not the claim that society should be ordered to God, but the claim that this ordering entails the subordination of earthly magistrates to the church militant. Understanding their logic will help explain Protestantism’s relationship to nationalism. Luther and his heirs foregrounded the fact that the church is of the world. Word and sacrament are spiritual realities; the church’s exercise of jurisdiction is not. Thus, when the church passes judgment on temporal affairs, she acts as just one more temporal power.

What follows from this? If the church’s action in the world is worldly, then the demand that magistrates submit their judgment to her is an attempted usurpation of the authority given them by God. The magistrate’s authority is not limited to executing justice in a narrow sense, as when early modern ecclesiastical courts convicted men of heresy only to deliver them to the king for burning. Rather, the magistrate’s authority extends to all matters of justice as set forth in the natural law and Ten Commandments: it includes the sword but extends beyond it to the regulation of the church’s temporal life, as seen in both the Old Testament and the Constantinian imperial order. While Protestant political theology would eventually develop its understanding of the magistrate’s authority with regard to the church — creating space for a Protestantism without state churches — the Reformers’ chief political aim was thwarting the papacy’s attempt to usurp the magistrate’s authority and become a pseudo-spiritual imperial superpower. In short, Protestants sought to re-establish the Constantinian ecclesial order.

The Reformation’s tendency to identify the nation as the primary unit of political organization is therefore not integral to its political theology. Rather, the monarchs of Europe, Protestant and, ironically, Catholic alike, were simply the most effective agents of resistance to papal encroachment. Protestant defenses of the nation were pragmatic, not principled. Although Hazony is right that in the seventeenth and eighteenth centuries, Protestant thinkers laid increasing stress on the benefits of the nation state as a political form, the key issue was upholding an order in which the temporal authority maintains its own, God-ordained integrity. This did at times require an assertion of national rights, but such an order also existed in Calvin’s Geneva, Luther’s Electoral Saxony, and indeed, in Constantine’s Roman Empire.

Onsi A. Kamel,
The Davenant Institute

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The author replies:

Onsi A. Kamel is quite right to point out that the Reformers did not desire a secular state. Nevertheless, the secularization of the state would not have been possible without their distinction between the visible and the invisible Kingdom, their exaltation of the freedom of conscience, and their exaggerated regard for natural goods, rooted in Calvin’s inadequate understanding of nature and grace. To establish that thesis would, however, require another essay.

Pater Edmund Waldstein, 
O. Cist.

The pseudonymous author of “A Catholic Economics” has exaggerated the importance of utility maximization and misunderstood both the causes and the verifiability of the law of demand. The law of demand is true because of simple tendencies in human behavior that have nothing to do with utility maximization, and which all Catholics could agree typically hold in their own lives and the lives of those around them. And the passage of time no more interferes with the law of demand’s verifiability than it does with that of the law of gravitation.

All that it takes for the law of demand to hold at the market level is two things: for people who are willing to buy at a given price to still be willing to buy at a lower price; and for there to be diversity across people in the upper limit that they would be willing to pay. The first assumption implies that as the market price decreases, we should not lose buyers; the second implies that we might gain them. Hence, the law of demand. Note that neither of these assumptions require non-satiety or imply any utility maximization. Neither needs to hold perfectly in order to produce the law of demand at the market level; it is sufficient that they usually hold. In the limit, the second assumption is strictly implied by the existence of constraints on individuals’ budgets and variation in those constraints across people. It is thus difficult to imagine a universe in which scarcity exists and the law of demand does not hold on average across large groups of people.

As one might expect given its strong theoretical foundations, we can find empirical evidence for the law of demand in markets everywhere. Thousands of laboratory experiments have shown its existence in carefully controlled conditions. Many hundreds more of natural experiments have produced results from real economies that are not easily explainable unless the law of demand is true. Obviously, the fact that time passes between variation of the control variables in these economics experiments is no more of a problem than the implied passage of time in the authors’ recommended gravitational experiments.

Unfortunately, after arguing that economic laws are no more than “empty tautologies”, without which “the edifice — a large pile of supply and demand diagrams — collapses,” the author does not seem to realize that (s)he implicitly uses the law of demand twice in the final section: once to evaluate vice taxes, and once to evaluate the Pappin Molla plan.

But indeed, how could it be otherwise? If we are to follow the author’s own advice and use economics to “teach us how, given extra-economic judgements, we might be able to allocate resources without tripping over our own feet,” then we must have some ground for believing that such feet tripping is possible. The ground is that there exist real patterns in the world around us, that some of these patterns are implied by scarcity-induced tradeoffs, and that such patterns can produce unintended consequences if we don’t study them. Chief among these patterns is the law of demand, which the author uses without attribution in order to explain that vice taxes discourage vice, and child subsidies encourage investment in goods for children.

After reading more than one muddled account of the evils of economics, this Catholic economist has concluded that Catholics thinking about economics need to spend less time worrying about utility maximization and more time just learning about how scarcity — and the tradeoffs which scarcity inevitably creates — produce patterns in the world around us. Perhaps the Catholic economists that the author does not want to invite to a dinner party would make useful interlocutors, even if they don’t get to come to dinner.

Kirk Doran, Ph.D.
Henkels Family Collegiate Chair and Associate Professor of Economics
The University of Notre Dame

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Economics is “inherently evil” in its “mainstream neoclassical” strain and contrary to the social teaching of Mother Church, says the scribe with the clever sobriquet “John Paul Maynard Keynes.”

Our author presents two main arguments, each of which fails to land a blow. First, he (if I may make this gender assumption) argues that economics is normative, given its use of indifference curves and an assumption of insatiability that would make Mick Jagger proud. But these are simplifying assumptions to provide clean mathematical models, not norms. The normative force of economics lies with instrumental rationality: it lays out the necessary conditions for achieving desired policy ends (a level of employment or inflation, for instance), but doesn’t specify which ends to pursue.

Second, he argues that economics fails as a predictive science: it is non-falsifiable pseudoscience because its predictions only hold ceteris paribus, other things being equal. While economics has a mixed record of prediction (remember the Great Recession?), it is simply unfair to economic theory to lay those failures entirely at its feet, since economists themselves are their own harshest critics and have been actively researching how human behavior diverges from rational agents since the pioneering work of Kahneman and Tversky forty years ago. The behavioral economics program does not, however, require discarding foundations of economic theory like the principle of demand.

As far as economic theory being reliant on ceteris paribus assumptions, the objection here is simply too generic, as a number of theories across multiple disciplines do so. The author even claims that classical economic principles are empty tautologies — but this cannot be a criticism, since a tautology is true by definition!

The author’s argument is further undermined in his presentation of a proposed alternative, economics for the common good. The Pappin-Molla family and fertility program, he suggests, would aid families by redistributing income and thus shifting expenditures in the economy toward family-friendly industries. But his argument here explicitly relies on the basic economic principles regarding expenditures and income that he wishes to reject as false and evil.

A more balanced view of economics can be found in the author’s own words: “It is not a science in the sense that it will give us a final answer to the question of how we, as a society, should allocate resources. Rather at its best economics can teach us how, given extra-economic judgements, we might be able to allocate resources without tripping over our own feet.” Economics by itself does not dictate how to organize society but can be harnessed together with the Church’s moral and social teaching to determine what is both feasible and permissible in the economic sphere.

If mainstream economic theory since Adam Smith is truly evil, it is remarkable that it has never been condemned as such by any pope who has spilled infallible ink on Catholic social teaching.

Matt Hoberg Plymouth, Minnesota

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Certainly the time has come for “A Catholic Economics,” as suggested in your Assumption issue. The Apostolic See has made this abundantly clear: insisting, for instance, that research into a coronavirus vaccine must be ordered toward the end of public health rather than that of private profit. The cheerful faith of the Bush-era fusionists, that capital and Christianity were kindred and complementary powers, may never really have been plausible, but the tendency of capital to profane all that is holy, degrading both our morals and the material conditions of our life, has never been more obvious than in the Year of Grace 2020.

And “John Paul Maynard Keynes” can be thanked for offering us a systematic account, blaming this degradation not on the personal avarice or malice of this or that businessman, but on the theoretical underpinnings of the theories of political economy that our society has been laboring to make real. We may suspect nevertheless that he has offered us only half a critique, and half a solution.

We may agree with him that there is founded at the heart of liberal political economy an evil vision of man, a portrait of perfect pleonexy approximated in the flesh only by certain types on Wall Street and in the City. But if it is true that “mainstream neoclassical economics is inherently evil,” we may think a Catholic ought to be less than enthusiastic about using the mechanisms of this “economics” even for the noblest and most Christian of ends.

The specific practical measures “Keynes” proposes are inoffensive enough: sin taxes may successfully move us to a more virtuous segment of the indifference curve, incentives for family formation may “nudge” the birth rate up and create profits for wholesome family-oriented businesses, and so on. But apart from the straightforwardly redistributive aspect of these schemes (which cannot be gainsaid — providing for the poor is a worthy task regardless of the fiscal mechanism used), they depend on the very toolkit of indifference curves and incentives that has wrought the situation we find ourselves in today. The pursuit of a Catholic “telos” through the mechanisms of a system rooted in evil assumptions about man’s nature and his end is likely to be disappointed. As an observational study, “macroeconomics” perhaps has some things to teach us: but it can hardly be all the story, and the assumption that it is a neutral set of tools, waiting only for a worthy craftsman to set to work, may blind us to certain evils. If we conduct ourselves in accordance with a theory whose evil implications we deny (perhaps we tell ourselves we’re interested only in the practical side of things), we should not be surprised if our actions speak louder than our words.

While we are living within a liberal political economy, while we are subject to the compulsions of capitalism, such mechanistic interventions in the markets may be both prudent and salutary. But a “Catholic economics” that will give us only a Catholic “telos” to impose on the ungodly machinery of market mechanisms, or a Catholic mode of reading the auspices of Moloch and celebrating the rites of capital, is only a first step. The Church, after all, has in Her power to propose to us not only to what ends we shall live, but also how we might honestly and virtuously get there.

Kevin Gallagher,
Lake Wylie, South Carolina

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The author replies:

Dr. Doran addresses my piece by stating what he thinks to be an empirical psychological truism: that “the law of demand is true because of simple tendencies in human behavior.” But in my piece I explicitly stated that empirical discussions of the law of demand were largely fruitless. Specifically, I wrote that many “suspect that [neoclassical economics] does not describe how human beings actually make decisions” and that this was “an empirical statement and thus rather difficult to prove.” Why do I believe that empirical discussions of the reality or unreality of the psychological assumptions embedded in neoclassical economics are fruitless? Because so-called “behavioral economics” has been running experiments disproving many of these assumptions for over four decades. Daniel Kahneman won the Nobel Prize in Economics in 2002 for starting this trend. Yet the psychological assumptions behind neoclassical economics lumber on in the textbooks.

If Doran wants to address the reality or unreality of these assumptions, he should take it into a behavioral lab and compare notes with the other psychologists. My criticism, like Hans Albert’s and Joan Robinson’s before me, is that neoclassical economics is pseudoscientific. That is, it is unfalsifiable. In the case of the law of demand, this is because the ceteris paribus clause allows any behavior that appears to fall outside the axioms to be explained away. This unfalsifiability, generated as it is by a certain vagueness in the research program, probably goes a long way to describing why even when behaviorists’ critiques of utility theory appear in the textbooks students are taught contradictory things in class. Personally, I think the whole pseudo-psychological program is a waste of time and we would be better off moving on from it.

Again, Doran misses the point of the Pappin-Molla program. I will quote myself once again:

Many have focused on the most obvious part of the program: the channeling of money toward families to encourage their formation. This is certainly a core component of the program. But it is only when we look at the program from a properly macroeconomic point of view that we realize it's true ambition. The authors have stated this explicitly, but few have paid attention: the economists, psychologists that they are, were too focused on the “incentives” of the program.

Doran in his letter, is “too focused on the ‘incentives’ of the program” and therefore misses the redistributive component. If he is a self-declared defender of the neoclassical research program, Q.e.d. Here a neoclassical is faced with an interesting question of social organization only for his framework to have him focus on the secondary psychological elements to the detriment of the redistributive element. It is this narrow vision that has stymied worthwhile economic programs for decades and given us pointless “reform conservative” projects that have no impact on the culture such as the Earned Income Tax Credit.

Dr. Doran makes the same mistake when he says that I deploy the law of demand when discussing vice taxes. In fact, I do no such thing. I am agnostic on whether vice taxes decrease consumption of the product taxed — it took an all-out smoking ban and years of propaganda to cull smoking in any meaningful sense; taxes were never enough. Again, my focus was on the redistributive element. I wrote that the “revenue raised [by the tax] can be channeled into an activity we judge more in line with the common good.” No law of demand to be seen. Just redistribution. What about paying people to have families? Will it increase family formation? Quite possibly. Paying people to do things — like turn up for work, for example — gives them a reason to do the things that they are paid for. If that is what the law of demand teaches, then I encourage the reader to skip their microeconomics class.

Mr. Hoberg objects to my pointing out the underlying assumptions of neoclassical economics. He says that these are “simplifying assumptions” to “make clean mathematical models.” Certainly they are assumptions — they are assumed in the theory and are integral to it. That they are “simplifying,” however, is something of which I am not convinced. I have never seen them made more complex. Hoberg tells us that economics is not pseudoscientific because a. “economists are their own harshest critics” and b. “a number of theories across multiple disciplines” rely on ceteris paribus assumptions. I cannot answer a., as I do not believe self-criticism is an adequate prerequisite for science. As for b., he has not listed these theories so we cannot discuss them. He is also confused by my use of the word “tautology.” I meant it in the sense in which it is used as a term of critique in philosophy of science; I refer him to the work of Imre Lakatos, but my explicit reference to Hans Albert would also do in a pinch.

Hoberg says that I have denounced “basic economic principles about expenditure and income.” In fact, I endorse these in the piece when I write “a basic precept of macroeconomics is that all expenditure is income.” Once again, I am criticizing mainstream neoclassical economics — mainly the use of utilitarian microeconomics. I am endorsing macroeconomic reasoning and quite explicitly so.

He also raises the interesting question of why, if mainstream economic theory since Adam Smith is evil, it has not been condemned as such by the popes? There is some evidence that this is beginning to happen. In Laudato Si’ we find at least three explicit references to the evil of the utilitarian mindset: “Isolated individuals can lose their ability and freedom to escape the utilitarian mindset, and end up prey to an unethical consumerism bereft of social or ecological awareness.” I believe that the Church would be well served exploring these critiques thoroughly. That, in a sense, is why I wrote my little essay.

Mr. Gallagher says that I have only provided half a critique and half a solution. My critiques feel whole to me. But perhaps I am like a blind man raised by wolves: I do not miss my sight because I have no awareness that it is missing. First he asks why we should use the mechanisms of economics if “mainstream neoclassical economics is inherently evil.” Well, I should think because mainstream neoclassical economics — based on utility calculus — does not encompass all of economics. As I stressed in the piece, good macroeconomics has no truck with the assumptions of neoclassical economics.

Often the most striking thing about the correspondence one receives is what it does not address. A good portion of my essay criticized neoclassical economics and the utilitarian mindset it promoted as corrupt and degraded. I alluded to the proliferation of the opioid and the pornography industries, but I assume readers could see that I was criticizing the entire culture of the “bottom line” — where the selling of dangerous but profitable drugs is treated as medicine and human beings are reduced to being filmed as pieces of meat to satisfy base urges. This is only at the bottom of the pile. In the middle are “songs” by “artists” that degrade women and films like Cuties that stir up pedophilic urges in viewers for profit.

None of my interlocutors responded to this. None of them denied that what is taught in the economics classroom promotes this garbage.

John Paul Maynard Keynes