But consider the range of America’s political-economic challenges: How to balance our budget; how to reform the major entitlements of Social Security, Medicare, and Medicaid; how to get the economy growing again; how to increase employment; how to increase social mobility; how to help the poor.

Though related, these issues are profitably examined one at a time. Poverty, for example, is undoubtedly linked to our debates about government regulation, taxes, and budgets. It is certainly tied to our debates about income inequality, social mobility, and unemployment. But poverty in America is not primarily about any of these issues. And political commentators of all stripes perform a major disservice when they mesh them together.

Thankfully, Lawrence Mead knows this, and has been instructing all who will listen on issues of poverty and policy for the past thirty years. A professor of politics and public policy at NYU, Mead was the intellectual driving force behind the welfare reform act of 1996. His latest work, From Prophecy to Charity: How to Help the Poor, is a concise statement of a lifetime of scholarship. It is a wonderful book that covers the causes of poverty, how we measure it, who the poor are, how government has tried to help, where it’s gone wrong and where it’s succeeded, and how competing ideologies have hindered or helped real policy reform. Though the book is short, it contains a wealth of information and wisdom. (The volume appears in the AEI Values and Capitalism series; I discussed another title in that series, Wealth and Justice, here.)

The critical questions for Mead are these: What do the poor really need? How can we effectively meet that need? Money comes second to what Mead argues the poor truly deserve: a lifestyle transformation. “Progress against poverty,” he insists, “requires programs with the capacity to redirect lives, not just transfer resources.” In reaching that goal, he adds, “recent conservative policies are more effective than what came before, and it would be a mistake to abandon them.”

Mead self-consciously argues against those who “have contended that the poor are entitled to aid regardless of lifestyle or, alternatively, that they should get nothing at all from government.” He appeals instead to Biblical wisdom, where our duties to the poor are based “not on abstractions such as rights, freedom, or equality but on restoring community.” The key, then, is to promote “right relationships”—with spouses, children, employers, and the broader community. To do this, Mead thinks, we need to understand better the causes of poverty.

While government measurements of poverty focus on economic factors, Mead stresses that behavioral dimensions play a larger causal role. Poverty would be simple to fix if it were just about economic need: then we would only have to give more money. But the long-term poor today are unlike the working poor of yesteryear. In an affluent society like ours, Mead argues, “poverty is not usually forced on people for very long by conditions.” Rather, “most have become poor, at least in part, due to not working, having children outside marriage, abusing drugs, or breaking the law.” Simply doling out more money does not counter these underlying causes of poverty, which call for behavior changes that encourage law-abiding, productive lives.

The World Bank classifies moderate poverty as living on less than $2 a day. By that standard, the U.S. has virtually no poverty. In the 1960s, our government’s official measure was set at three times the cost of a minimal food budget, which, adjusted for inflation, came to $17,285 in 2009 for a family of three (consisting of one parent and two children). Given this standard, the official poverty rate was 13.2 percent in 2008 and 14.3 percent in 2009. While these figures note anyone who fell beneath the poverty line in a given year, Mead asks us to focus on those who remain poor for multiple years, not those who hit a temporary rough patch. This long-term group includes 6 to 7 percent of the American population. And while the young, disabled, and elderly used to make up their majority, Mead notes that now they are outnumbered by healthy working-aged people.

Why are people in the prime of their lives poor? Mead argues that “poor families typically arise when parents have children without marrying and then do not work regularly to support them.” This pattern provokes a vicious cycle: children reared in these circumstances grow up to be poor themselves because they are more likely to drop out of school, get involved in crime and drugs, become sexually active at a young age, and never learn the value of an honest day’s work. “By these routes,” he says, “women end up early as single mothers on welfare while men go to prison. … Despite having children, neither men nor women usually attempt to marry or work regularly. That is the immediate reason they usually become poor.” If one graduates from high school, gets a job, marries, and then has kids—in that order—there is very little chance of falling into poverty.

Mead responds to a host of competing arguments about poverty, noting that “poverty is caused mostly by low working hours, not low wages.”  Good middle-class jobs may be hard to find right now, but there are ample low-skilled jobs available: “In 2009, only 12 percent of poor adults who did not work blamed this on their inability to find work. In 2007, before the recession, the figure was only 5 percent.” These jobs, Mead insists, “are still sufficient to avoid poverty and welfare for most families.” Our recent economic downturn isn’t to blame, for “in good times and bad, most poor adults are not even in the labor force, so the recession little affects them.” (In fact, the recession has mainly hit the middle class, and, Mead helpfully reminds us, “inequality and poverty are largely separate problems.”)  While he has a lot to say about employment, Mead has less to say about causes of and responses to the erosion of marriage, where 40 percent of all Americans are born out of wedlock, including 71 percent of blacks.

The welfare reforms of the 1990s worked precisely because they addressed both material and behavioral causes of poverty. While critics argue that welfare reform consisted of budget cuts, Mead notes that after the reform more money was spent helping the poor, not less. But the money came with strings attached—recipients had to work. According to Mead, “Most experts opposed reform, believing that few poor could work, given the barriers they faced. But most welfare mothers successfully left the rolls for jobs, with most of the leavers emerging better off.” This confirmed Mead’s central insight that cultural (and political) expectations, not economic barriers, prevented employment. Mead admits that low-skilled workers do not have an easy life, but he insists that working makes for a better life than not. And how to get people working is a separate question from how to get them moving up once in the job force.

Mead’s arguments partly counter some of those made by Charles Murray. While Murray focused on the rewards (and hence incentives) for bad behavior that welfare provisions provide, Mead argues that “the seriously poor are less calculating than economists suppose. If they were economically rational, they would never have engaged in the patterns that made most of them poor.” And yet, the way in which welfare was provided did keep people from working. So, while research has “not shown that social problems like nonemployment or unwed pregnancy result chiefly from the economic incentives set up by welfare,” he writes, “It is indeed true that liberal social programs have been counterproductive, but that is chiefly because they are permissive, giving no clear guidance about how recipients ought to behave.”

While the first wave of welfare reform largely affected poor women—mothers with children receiving aid—a second round of welfare reform, Mead argues, should find effective programs that put nonworking men into the workforce, and establish better academic and moral standards in schools. Mead unabashedly says that education and welfare need more paternalism. This paternalism is bemoaned by many for being judgmental (not being “value-free”), but this is precisely what Mead thinks the poor need. And what we owe them. Mead argues that the most effective welfare programs administered by the states “all set clearer rules for client behavior and back them up with oversight. Evaluations confirm that paternalistic programs generally perform better than nondirective ones.” Religious and other non-governmental partnerships can play an important role in this, Mead suggests.

While From Prophecy to Charity has certain limitations, it should be read by anyone who cares about government policy that helps the poor. I would like to have seen more discussion about prudential concerns: how to counter government-provided welfare’s crowding out effect on private charity, how to best structure government partnerships, and what is entailed by a precedent of attaching moral strings to welfare when government is run by the morally corrupt.

Mead’s discussion of competing perspectives on welfare also leaves much to be desired, as it consists largely of his own idiosyncratic interpretation of a handful of Biblical passages, and, in justified frustration with religious voices who have opposed welfare reform, he overstates his case against them and too quickly dismisses important voices. He is correct to say that a major problem with the prophetic tradition is its scarcity of guidance for what the rich can effectively do to help the poor, and of requirements for the poor themselves.

As I see it, the two dominant political philosophies of our day are forms of liberalism, but neither deserves the title nor lives up to the merit of classical liberalism. Neither the Right’s form of libertarian liberalism nor the Left’s  form of social welfare liberalism (both of which show strong streaks of lifestyle liberalism) can adequately form the basis of a governing philosophy, especially when it comes to the plight of the poor.

The libertarian argues that the sole purpose of government is the protection of rights, and that the only real rights are negative rights—freedom from force, fraud, and harm, whether perpetrated by other individuals or by governments. Taxing the non-poor in order to assist the poor is robbery, a violation of property rights, and itself a form of injustice. Provided they do no harm to others, individuals should be free to live life as they please, the libertarian argues, even if this means ignoring the plight of the poor. Market forces and private charities, if left free from state interference, will sufficiently succor the needy.

The welfare state liberal champions a conception of government where every citizen solely in virtue of his humanity has rights to adequate material resources necessary for a dignified life. Whether it be John Rawls’s “primary goods” or Martha Nussbaum’s “central capacities,” the state is supposed to equip people with a fair share of what they need in life—but it isn’t to influence how they use that share, nor to place moral conditions on how they receive it. At the heart is a positive right to materials coupled with a negative right from influence.

A sound political philosophy would hold that the state should be concerned about the welfare of all people. This means that our obligation to the poor has to be tied to their well-being, and thus necessarily connected to influencing their behavior. This is best understood not in terms of rights—whether positive ones to welfare or negative ones of noninterference—but in terms of promoting their good, with its material and moral components. In essence, any legitimate care for the poor has to be paternalistic. It has to teach true moral values: that one needs to be educated, that one needs to work, that one needs to marry before having children, that one needs to respect the law.

Classical liberal political philosophers understood this, because they knew that protecting natural rights also entailed promoting what Michael Zuckert has called a “natural rights infrastructure.” This can’t simply be a physical infrastructure of highways and courthouses, but a moral and behavioral infrastructure as well. An earlier political philosophy simply termed this infrastructure the common good. Promoting this necessarily forces us into discussions about human well-being and the moral norms that should govern our behavior. Sound guidance on this is what we owe everyone, poor and rich alike.

Ryan T. Anderson is Editor of Public Discourse: Ethics, Law, and the Common Good.

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Romney had a tax rate of 15 percent because, apparently, most of his total income for those two years came in the form of capital gains and corporate dividends, both of which are taxed at this lower rate (compared to the top rate for wage income, 35 percent). Leaving aside the issue of capital gains taxes (which involves separate pros and cons), dividends are given a lower rate exclusively to avoid “double taxation,” when the Feds take a bit off the top from the corporation, then a bit more from the individual taxpayer. For illustrative purposes, let’s follow the money from an investor’s pocket and back if there were high taxes on both corporations and personal dividends.

A man named Willard invests $10 million in Company A. This company, in the year 2011, has a profit of $20 million. It decides to pay out 100 percent of its profits in dividends to the 20 million outstanding shares (to make the math simple). Willard owns 1 million shares, so would receive $1 million in dividends. But Company A must pay a 35 percent corporate income tax on its profit, so it would have 35 percent less to give to each shareholder. Willard would then receive only $650,000 in dividends after corporate taxes. Since Willard is in the top income bracket, the federal government would then take another 35 percent, leaving him with $422,500 after personal income taxes. Willard would suffer a tax loss of 57.75 percent of the income from this corporate investment.

One can see why this could be a problem. If investors stand to lose almost 60 percent of the value they would have realized from corporate dividends, they will be less likely to invest in corporations. New businesses would have trouble finding the capital to get started while fewer corporations would be able to expand and hire. Hence, double taxation would be an economic depressant. To avoid this result, dividends are taxed at a low rate of 15 percent. The result is that people like Romney end up only paying 15 percent on their income from dividends, and that strikes many wage-earners as unfair (“His $1,000 from dividends is worth just as much as my $1,000 in wages; why does he get a break and not me?”) But as long as the corporate income tax remains, any increase in the dividends rate will de-incentivize investment.

So why not just end the corporate income tax? There are many reasons to do so besides avoiding double taxation—reasons that Republicans and Democrats can support.

Reason #1: Our current Corporate Income Tax is uncompetitive.

Our top federal corporate income tax (CIT) rate of 35 percent is the second highest in the world, behind only Japan. The average top rate of other industrialized nations is 25 percent, the rate of China. Simply put, this harms all domestic businesses, making them spend money on taxes that could go toward expansion and job creation. It increases the cost of doing business in America, causing firms to relocate elsewhere. Lowering—and even better, eliminating—the CIT would provide a significant economic boost to our slow economy.

Reason #2: The Corporate Income Tax punishes Labor

We might be forgiven for thinking that the CIT is a good way to ensure that “rich” corporations pay their fair share in a society that gives them special benefits, such as limited liability. But we would be wrong.

Studies show that rather than taxing the vast bank accounts of the corporate world and trimming beefy corporations down to size, the CIT is ultimately a tax on labor. The corporations pass the tax burden onto their employees by lowering their wages. In 2006, William C. Randolph of the Congressional Budget Office estimated that “domestic labor bears slightly more than 70 percent of the burden” of the CIT. A research study at Oxford University concluded that “a substantial part of the corporation income tax is passed on to the labor force in the form of lower wages.” In this sense, the CIT is regressive. Those who have less income (workers) eventually bear more of the tax costs. This works against the tax code’s commitment to a kind of social fairness, where those who benefit more pay more and those who benefit less pay less.

Reason #3: The Corporate Income Tax has been rigged by Big Business, and probably always will be.

Besides being (in practice) a regressive tax that burdens labor with its costs, the CIT also causes an unfair and distorted business environment as big corporations work to avoid taxes and create loopholes in the system. As President Obama himself noted in last year’s State of the Union address, “Over the years a parade of lobbyists has rigged the tax code to benefit particular companies and industries. Those with accountants or lawyers to work the system can end up paying no taxes at all. But all the rest are hit with one of the highest corporate tax rates in the world. It makes no sense, and it has to change.” The President was right: recent studies have shown this exact trend, highlighting outrageous tax avoidance by big corporations.

A study released last November by Citizens for Tax Justice and the Institute on Taxation and Economic Policy noted that the effective tax rate (after deductions and other loopholes) of the 280 largest and most profitable U.S. corporations for the past two years (2009 and 2010) “averaged only 17.3 percent, less than half of the statutory 35 percent rate.” In fact, thirty companies—including Pepco Holdings, General Electric, Verizon, Wells Fargo—had a tax rate of zero or less (meaning, the government paid them, in subsidies and the like, more than they paid the government). Eventually, smaller corporations suffer in the competitive marketplace because they can’t afford such high-priced tax lawyers and lobbyists. Different industries are also subject to different tax burdens, which further distort the fairness and predictability of the market. For example, U.S. retailers and construction firms generally pay around 30 percent effective rate on income taxes, but financial services companies pay only 20 percent and mining pays only 6 percent.

This topsy-turvy world of tax avoidance and special tax advantages, with GE paying less income tax in total than your local hardware store, is as outrageous as it is predictable. The corporate form allows for vast concentrations of capital, which then have an interest in avoiding taxes. A report released only weeks ago estimates that 280 profitable Fortune 500 corporations spent $2 billion on federal lobbying from 2008–2010. During this time, these same companies received $223 billion in tax rebates and credits. With this kind of money at stake for the biggest corporations, lobbyists and lawyers and politicians get very busy. We can expect that a corporate income tax will always be a feeding frenzy for the largest corporations, which have all the time and, almost literally, all the money in the world. (These 280 companies had profits during this time period of $1.3 trillion in U.S. profits, more than the entire yearly GDP of South Korea.) If we end the CIT, smaller businesses might have more of a chance to compete on the merits rather than on the tax bill.

Why support the Corporate Income Tax in the first place?

The CIT still has its supporters who offer three main arguments in favor of it. First, some argue that it is easier to tax a corporation than an individual, and so the corporate tax provides an important and relatively simple source of income for the federal government. The CIT eliminates some transaction costs since it helps fund the government with larger tax payments from fewer taxpayers. Furthermore, they insist, it is easier to obtain financial information from corporations because they are required to keep documents, which eases enforcement of the tax rules. But as noted before, if corporations are potential taxpayers because they have a lot of money, then they also have the most resources to avoid paying taxes. When the biggest corporations pay an average effective tax rate of around half of the stated tax rate, and when a significant number pay nothing at all, the wealth of corporations begins to be more of a problem than an opportunity for the taxing authorities.

Second, some believe that a corporate tax is justified by the benefit conferred on corporations for limited liability. Corporations get a benefit from society, the argument goes, so they must pay for it. But this more theoretical line of reasoning fails to convince: corporations themselves are merely fictional persons. The idea that they should “pay their fair share” in society is wrong, for the simple reason that if a corporation is taxed, it is not the corporation that bears the burden (nothing “burdens” a corporation, because corporations don’t have feelings, suffer loss, or deal with hardship) but instead some real person, often a worker, who has less income than he or she previously had. It is laudable to try to make the rich owners of capital in the corporate world contribute a just amount for the maintenance of the system that benefits them, but in headlong pursuit of this goal the CIT ends up shearing the wrong sheep.

Third, corporate taxes are defended as a necessary backstop to a personal income tax. As Uwe Reinhardt of Princeton has written, “If the profits of corporations were not taxed, the corporate form of enterprise would become one more major tax shelter through which wealthy people could shield their income from taxation. That probably is the main reason why abolishing the corporate tax has never had any political traction, in the United States or abroad.” The specter of the income-shifting wealthy individual who takes advantage of tax-free corporations to shelter himself from “paying his fair share” is certainly a politically salient one. But is it so dangerous that it requires a CIT with all its economic distortions and secondary effects?

Probably not. The IRS is quite adept at fighting back against tax avoidance. Megan McArdle of The Atlantic writes:

While owners of corporations do manage to chisel at the margins, the smart ones don’t funnel their whole personal budget through the firm, because doing so is a sure route to an audit and a hefty fine. [Without the CIT] there’s no reason to worry about wholesale abuses of the system, because the IRS is already reasonably adept about ferreting these out.

In other words, the U.S. need not fear rampant individual income tax avoidance if the CIT is eliminated. With the funds freed from the losing battle of corporate tax enforcement and added to individual tax enforcement, our tax authorities will be better equipped to enforce these rules. If wealthy individuals still find ways to use corporations as tax shelters, additional rules can be passed to help prevent them as needed. We might establish some sort of cap on retained earnings, or tax corporate earnings directly to the stockholder on something like a pass-through basis. Proper enforcement and good rules can keep the tax dodgers at bay, without the unique distortions and unfairness of the CIT.

Imagine politics without a Corporate Income Tax.

We can expect many good things from the elimination of the CIT, starting with the removal of a huge amount of special interest money from politics. Without the CIT there would be a much smaller financial incentive for corporations to lobby for special tax rules and tax breaks. Moreover, the elimination of the CIT would allow a simplification of the personal tax code by taxing dividends like the normal income they obviously are. It would make our tax environment the most business friendly in the world. It would prevent big businesses from gaining a tax advantage over smaller ones. It would ease the financial burden on labor, whose wages are depressed by the CIT. You can almost hear the rallying cry at the first joint Occupy Wall Street/ Tea Party Rally: “Tax Romney’s Dividends – End the Corporate Income Tax!”

Thomas Haine is a lawyer and a First Lieutenant in the U.S. Army on educational delay, soon to join the U.S. Army JAG Corps.

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This development came to mind when reading Ryan Anderson’s recent admonition, published here in Public Discourse, that conservatives should pay more attention to social justice. Anderson identifies two concerns about capitalism: First, capitalism tends to promote materialism, which corrupts culture and morals. Second, though capitalism benefits the poor more than non-capitalist systems, there remains the question whether the prosperity that capitalism has created is distributed justly. Anderson invites conservatives to consider what obligations individuals might have in justice to share their wealth.

Anderson’s challenge is well-timed. Material inequality is presently a hot topic, with good reason. And he is right that the champions of economic freedom can do more to affirm the obligation that each of us has to provide for the least well-off. One wonders, is it possible to challenge both the collectivist practices that have impoverished Cubans (and millions of others) and the radical individualistic claims that are often invoked in support of free economic institutions?

It seems that any account of how to improve our system of free enterprise ought to begin by observing what we already do well. The United States, for all of its faults, is a generous nation. Set aside the aid and development assistance that the United States government spreads around the world. Look merely at the actions Americans take through our private associations and institutions. To take just a few examples, American-based non-profits fight slavery and sex trafficking; build sustainable drinking water resources in impoverished villages; provide micro-finance loans to the world’s deserving poor; create educational opportunities for under-privileged urban youth; and visit those in prison. American individuals, foundations, and corporations gave nearly $291 billion in 2010, despite the hard times. Of this, $211.77 billion came from individual donors. More than a quarter of Americans over the age of 16 are reported to have volunteered through or for organizations, and in 2009 volunteers contributed service worth approximately $169 billion.

If social justice is primarily a matter of equal distribution of resources, then why do Communist nations such as Cuba do so little, by comparison, to promote justice? (Are there in Cuba any such organizations as those listed above?) On the other hand, it seems equally clear that a defense of free markets is not the same as a defense of justice. Charity is not a market exchange.

These are obvious facts, but one must sometimes call obvious facts to mind. Here’s another fact that bears observing: all of the organizations enumerated above, and many others like them, are faith-based institutions, run and financed by people who take religious teachings as true and obliging. They are members of faith communities, who subject their own preferences to moral truth claims, and submit in varying degrees to the authority of clergy, religious teachers, and traditions. They sacrifice in some degree their individual autonomy for the sake of some good greater than themselves. They are, in short, communal beings who act through communal means for common goods.

This observation suggests an answer to the materialism that lurks within capitalism, and which threatens the good that capitalism has achieved. If free institutions protect only the rights of the individual to pursue his own material comfort, then they are difficult to reconcile with the demands of justice. But viewed as communal institutions that serve truly common goods—ends that are both good for all and known to all, though realized in plural and incommensurable varieties—free institutions can act as vehicles of both opportunity and justice. Indeed, they might render obsolete the trench warfare between the individual and the state that pervades much contemporary public discourse about questions of justice.

Take, for example, the institution of private property. If property is viewed through the usual lens, it distends in tension between the individual preferences of property owners and the collective good of the greatest number. On this view, property must either free the individual to pursue whatever he finds subjectively satisfying, or instead sacrifice the individual’s property rights for the sake of some greater societal end. Both of these options are troubling. Property rights proponents rightly excoriate collectivist approaches to property, in which the rights and interests of some property owners are sacrificed for a greater collective good, often to the benefit of the wealthy and well-connected. This logic was on display in the Supreme Court’s decision in Kelo v. City New London, which upheld the taking of a private citizen’s home to make way for a redevelopment plan, the primary beneficiaries of which were to be Pfizer and private developers. The means were unjust and contrary to the constitutional text, and the end used to justify the means, renewed economic prosperity, never materialized.

On the other hand, state interference in property looks more attractive to many people as the gap between rich and poor grows wider, and particularly as opportunities for the poor become fewer. Some wonder why property rights should protect consumption at the expense of one’s neighbors. A particularly galling abuse is strategic default, in which a homeowner who owes more than his house is worth (and in many cases purchased more house than he needed and could prudently afford), but is able to make payments on his mortgage, nevertheless defaults in order to avoid the loss. In states that do not permit lenders to seek recourse against the defaulting mortgagor in his personal capacity, that mortgagor walks away from his obligation without cost to himself. His neighbors bear a cost, however, in depressed real estate values.

What if property could serve truly common goods, which are reducible neither to individual preferences nor to the collective decisions of political bodies? Property, in the central case, is neither an atomistic nor a collectivist institution. Indeed, when it is working at its best, property does much to promote human flourishing, enabling property owners to realize common goods both for themselves and for their families and communities. Communities pursue goods that are truly good for all, the value of which is knowable by all. Property, understood as a communal institution, can and should serve these goods.

In order to work properly, property must to a large extent be a free and independent institution. The private charity described above would not be possible if citizens were not free to exercise sovereignty over their assets. And something equally valuable would be lost, as well. Charity makes a difference not only to the material condition of the recipient but also to the moral condition of the donor herself; it makes the donor a different sort of person. But the charitable act could not have this effect upon the charitable person if it were coerced. One who is required by law to give to another is not making the other person a reason for her action. She has not established a moral connection with the recipient.

On the other hand, the law need not recognize rights to use assets to satisfy whatever desires individuals happen to have, particularly where those satisfactions cause harm. Property is properly directed, at least to some extent, toward ends that the community identifies as worthwhile and away from ends that the community perceives as harmful. Freedom to do good things with one’s property need not conflict with the obligation to act rightly toward one’s neighbors.

All of this suggests a way forward on questions of social justice. A successful account of social justice must affirm the primacy of communities, and institutions directed by communities, over both the individual and the state in promoting human flourishing. The job of the individual in promoting social justice is to act in concert with others in his or her community to serve real needs, both within the community and in other communities. The job of the state is to support and enable free institutions—the church, the family, property ownership, charitable organizations, for-profit businesses, trade groups—to do their good work. This perhaps is not all that social justice requires, but it is a good place to start.

Adam MacLeod is an Associate Professor at Faulkner University’s Thomas Goode Jones School of Law.

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DoJ’s position is reminiscent of a prior era of antitrust regulation, in which preventing market concentration was prized over economic efficiency and clear consumer interests (e.g., lower prices and higher quality). That trust-busting ethos no longer holds much currency at the Supreme Court, but it is alive and well in the Obama administration, thus demonstrating that the pursuit of a policy agenda—be it a throwback to an age of liberal monopoly regulation or an advancement of the common good through a pro-life agenda—relies not only on the courts, but also on the properly oriented engagement of the administrative state.

AT&T–T-Mobile Merger

The $39 billion deal would have given AT&T access to more wireless spectrum in order to enhance its network with T-Mobile’s assets, and it would have taken the American company off Deutsche Telekom’s hands. Instead, as per the merger agreement, AT&T owes Deutsche Telekom $3 billion in penalties, and Deutsche Telekom is still looking for a way to unload T-Mobile. AT&T also had to relinquish spectrum to T-Mobile, thus presumably affecting adversely the needs of its existing customers. This result came about because, “in the end, [AT&T] decided it couldn’t come up with a package of divestitures or other changes to the deal to appease U.S. officials that had deemed it anticompetitive.” Indeed, “people familiar with the matter” told the Wall Street Journal that “no amount of divestitures would appease government lawyers.”

The result of the merger would have been to unite the number two and number four cellular providers, essentially creating a three-firm market with AT&T, Verizon, and Sprint. Verizon favored the merger, but Sprint did not, as it would have been the distant, third-ranked player in the market. Another loser in the deal was the broader mergers and acquisitions market, which, adding this failed merger to a string of other soured deals, finds that “the value of corporate deals struck in 2011 may be lower than the year before. The last time that happened was 2009, in the teeth of the financial crisis.”

DoJ’s interest in the merger made sense given the market context. Increased market concentration is a concern of the Obama Justice Department, as laid out in its merger guidelines. Here, the threshold application of the Herfindahl-Hirschman Index (HHI, the prescribed test for analyzing relative market concentration under the guidelines) shows a move from a moderately concentrated market to a highly concentrated one. The guidelines warn that such a situation might “raise significant competitive concerns and often warrant scrutiny.”

The Return of Liberal Antitrust

The appropriateness of this scrutiny is debatable. As one commentator noted about a leaked FCC report on the merger (and AT&T’s response),

Not only is there no actual evidence of consumer harm resulting from the sort of increases in concentration that might result from the merger, but the [FCC] staff seems to derive its negative conclusions despite the damning fact that the data shows that wireless markets have seen considerable increases in concentration along with considerable decreases in prices, rather than harm to competition, over the last decade. While high and increasing HHIs might indicate a need for further investigation, when actual evidence refutes the connection between concentration and price, they simply lose their relevance.

Others took away from the whole ordeal a simple lesson: “Don’t underestimate the Justice Department’s newfound toughness in policing mergers between rivals.” Those authors point out, “The tougher stance shouldn’t come as a surprise. President Barack Obama campaigned on reinvigorating antitrust enforcement, reversing the previous administration’s more hands-off approach to mergers between rivals.”

Such a result follows from the position established at the outset of the Obama administration by its first Assistant Attorney General for Antitrust, Christine Varner. As the New York Times reported on a speech she gave before the liberal Center for American Progress, she announced “that the administration would restore an aggressive enforcement policy against corporations that use their market dominance to elbow out competitors or to keep them from gaining market share.” While she placed this commitment to preventing “market dominance” in the context of “consumer welfare,” at a more fundamental level, it harkens back to an earlier age of antitrust enforcement in which an ideological aversion to market concentration qua market concentration (or, arguably, to market concentration as a threat to competitors not competition) was read by the courts into the antitrust statutes, in particular the Sherman Act.

It is a view succinctly described by Judge Learned Hand in United States v. Aluminum Co. of America (1945): “We have been speaking only of the economic reasons which forbid monopoly; but, as we have already implied, there are others, based upon the belief that great industrial consolidations are inherently undesirable, regardless of their economic results.” Judge Hand cited as support the Supreme Court’s first decision on the merits of the Sherman Antitrust Act, United States v. Trans-Missouri Freight Association (1897), in which Justice Peckham denounced even those monopolies that drove down prices (that is, enhanced consumer welfare by one very important quantitative measure), saying,

In business or trading combinations they may even temporarily, or perhaps permanently, reduce the price of the article traded in or manufactured, by reducing the expense inseparable from the running of many different companies for the same purpose. Trade or commerce under those circumstances may nevertheless be badly and unfortunately restrained by driving out of business the small dealers and worthy men whose lives have been spent therein, and who might be unable to readjust themselves to their altered surroundings.

Like Justice Peckham, the Obama administration seems willing to dismiss concrete consumer benefits (like lower cost or enhanced service with a more reliable wireless network) as ancillary to perceived non-economic negative effects (like hurting “worthy men” in competition or “keep[ing]” competitors “from gaining market share”).

The Supreme Court and the “New Learning” in Antitrust

While DoJ seems to be applying century-old ideological concerns about the inherent threats posed by market concentration to competition, the Supreme Court, over the past forty years, has moved away from non-economic consideration like harm to competitors, focusing instead on concrete harm to consumer welfare and economic efficiency. As Judge Douglas Ginsburg recently wrote, “Starting in the 1970s, the Supreme Court began systematically reworking antitrust doctrine in order to bring it into alignment with the modern economic understanding of competition.”

Describing this reworked doctrine as the “new learning” in antitrust, Judge Ginsburg lays out various antitrust trends at the Supreme Court. He notes that as a result of this new learning, “During the most recent decade, defendants won all thirteen, that is, one hundred percent of the Court’s antitrust cases. These figures reflect the Justices’ increasing embrace of the economic approach to antitrust law, which—relative to approaches based upon amorphous sociopolitical goals—limits liability to those relatively few business practices truly inimical to consumers.” Or, paraphrasing Judge Robert Bork, the current consensus is that our antitrust laws “would promote consumer welfare, not the various sociopolitical aims that judges had read into [them].”

Perhaps even more surprising to the outside observer, Judge Ginsburg shows that the Supreme Court not only employs the “economic approach” to antitrust in favor of defendants with regularity, but also does so with increasing agreement among the Justices. As he explains,

[Between 1997 and 2007], when the Court decided all thirteen cases for the defendants, a supermajority obtained in eighty-five percent (eleven of thirteen) of the cases. Over [the past] four decades, the percentage of all antitrust cases that the Court decided by a supermajority in favor of the plaintiff fell from fifty-five percent to zero. As these figures suggest, the economic approach to antitrust has conduced to clear and largely predictable outcomes in favor of defendants.

While this situation is not always reflected in all federal jurisdictions, the sharp change in antitrust posture at the Court today as compared to fifty years ago has altered the legal landscape. As Judge Ginsburg concludes, the triumph of economic efficiency “does significantly constrain the decision making of the Court and thereby narrow the range of plausible outcomes.”

The Importance of Agencies

Against this backdrop, the AT&T merger shows that the administrative state matters. While not making any definitive judgments on the specific antitrust implications of this merger, it remains the case that AT&T would at least have faced a favorable environment if it fought DoJ in court, given the Supreme Court’s defendant-preference in accordance with the modern economic understanding of antitrust. Indeed, given that AT&T, in response to the FCC, made, at minimum, colorable claims that the merger would benefit consumer welfare in a number of ways, surely AT&T and T-Mobile were not despairing of their chances in court.

Yet, as is said sometimes of criminal law, the prosecution can be the punishment. Here, civilly, it was the litigation brought by DoJ, as AT&T and Deutsche Telekom’s stockholders can surely attest. (Shares of AT&T saw a series of drops in August, coincidentally the month when DoJ announced its antitrust suit.) This phenomenon is especially acute for ex ante merger regulation, in that, while AT&T may have prevailed in court, antitrust litigation is a long and costly process. As mergers are typically stayed while proceedings continue, the market conditions might no longer be ripe for the acquisition by the time the case is resolved and the merger can proceed. So, as was the case with AT&T, the parties will contort themselves into pretzels to appease the regulators and avoid the litigation, and when they can’t, the merger fails. Even the Supreme Court might have held AT&T to be in the right, but, in the end, it was the bureaucracy that scuttled the $39 billion deal. In an election year, there are lessons to be learned from this, which extend far beyond the realm of mergers and acquisitions.

If a president wishes to effectuate policies that advance the common good (as he ought to), he needs to do so on multiple fronts. Given President Obama’s policy interest in reviving a more activist conception of monopoly regulation, he not only placed traditional liberals on the courts, but also arranged the bureaucracy so that it would take a harder look at monopolies and—as with AT&T—provide an administrative backstop in case an antitrust defendant-preference persisted in the courts.

In many ways, this is the mirror image of what happened in the 1980s, when President Reagan appointed not only new-learning judges like Robert Bork and Richard Posner to important federal courts, but also economist James Miller to run the Federal Trade Commission. The synergy of the related actions in distinct branches—according to James Q. Wilson’s Bureaucracy—allowed “economists [to] increase their strength at the Federal Trade Commission,” with the result that “as the courts became skeptical of the argument that big corporations were inherently less desirable than small ones, the FTC became less likely to bring cases that asserted the proposition that big was bad.”

Candidates for the Republican presidential nomination should pay heed to Reagan and Obama’s multi-branch approach to achieving desired antitrust policies, which can inform how administrations can best achieve policy goals, not only in market regulation but also in areas such as the regulation of abortion and its related policy issues. There is a temptation for Republican candidates to respond to the judiciary’s arrogation of the abortion issue in Roe v. Wade by simply promising to appoint “originalist” Justices to the Supreme Court, whose “faithful application” of the Constitution will overturn federal judicial abortion protections.

While judicial appointments are surely an essential element of any coherent policy to extend greater legal protection to the unborn, the AT&T lesson demonstrates that it is not sufficient. It was not the confirmation of Sonia Sotomayor to the Supreme Court or David Hamilton to the Seventh Circuit that killed the AT&T merger and thus preserved “competition” and forestalled “excessive” concentration in the cellular-provider market; on the contrary, ex post antitrust enforcement in the courts would likely have faced bleak prospects even with Obama’s appointments. Obama’s antitrust policies were adopted by DoJ, and that is where they were effectively applied, even in the face of likely unsympathetic courts.

In addition to appointing originalist judges, a Republican administration will have numerous opportunities to advance pro-life policies at the administrative level. It can reinstate robust medical conscience regulations; it can rescind the broad new abortifacient insurance-coverage mandates; it can retrench the marketing of abortifacient drugs like ulipristal; it can pursue more active enforcement of federal laws like the Partial-Birth Abortion Ban Act and the Born-Alive Infant Protection Act. These policy goals can be sought either in conjunction with an increasingly sympathetic judiciary (as with Reagan’s FTC) or as an alternative avenue of effecting policy in the face of a hostile judiciary (as with Obama and the AT&T merger).

A sincere pro-life candidate needs to recognize that the same channels of power that the current administration uses to protect competitors can and should be used to protect the unborn.

Michael A. Fragoso is a student at Notre Dame Law School.

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You will say that we had the Great Recession, and that bad policies played a role. But will you be able to add that we elected politicians who rose to the challenge and forged a new social compact—one with fewer billionaires but more decent jobs, one with less unsustainable welfare but more family and community support for the poor and the elderly?

Could this be our future past?

I think it could be. To make the needed improvements, we must focus on three key concepts: government, economics, and virtue.

The first two dominate the headlines and the larger public discourse. The financial and fiscal crises have forced us to rethink how politics and economics interact. A consensus is finally emerging about the tough choices that Western democracies must make—thank you, Europe!

But getting our economic house in order, though necessary, is not sufficient. In order to achieve a better government, one that keeps within its competency and fiscal means, we have to think hard about the kind of lives we want and ought to live. The moral character of citizens and the possibilities for good government go hand in hand.

The crucial question is whether we can encourage a more responsible citizenry to address many of the social needs that we have hitherto entrusted to government, often with disastrous results. I believe we can, but we will need to remind ourselves of the basics: Economics 101, Political Economy 101, and Ethics 101.

Here is a taste of Economics 101:

The government must not spend more than what it takes in, except in crises. Even then, it must return to the norm within a few years. In general, targeting the size of government at around 20 percent of gross domestic product (GDP) is a reasonable benchmark for efficiency. To approach and maintain that goal, we must address the following issues: entitlements, taxes and regulation on the fiscal side, and central banks on the monetary side.

Western social democracies must reform entitlements, but the public must first be persuaded that there are better ways to structure society with less government regulation and fewer transfers of wealth. We also must simplify the tax code by eliminating loopholes that favor the politically influential and distort incentives for productivity. Another essential step is that we demand of the government what we expect of corporations: an honest assessment of all financial obligations. Regulations should reward good behavior as well as penalize bad behavior wherever the existing market structure does not; it is especially important that businesses bear the costs of their own bad decisions rather than distribute their losses to taxpayers through politically brokered bailouts.

Lastly, central banks must adopt a clear rule, a single mandate of targeting inflation, price level, or nominal-GDP targeting. They must be the lender of last resort but allow institutions to fail, regardless of size, when they have made bad bets.

This is an enormous undertaking, but it is not impossible. It becomes less daunting the more we remember what is at stake: not only immediate material benefits, but the possibility of long-term economic stability.

Now, turning to Political Economy 101:

We must set the record straight about two notions: that only a crisis will force politicians to act, and that politicians who cut spending will be punished. In the last twenty years, Canada, Sweden, and Australia have found politically feasible ways to cut back on entitlement commitments in times that were tough but not dire. Moreover, research suggests that a platform of limited government can win at the ballot box.

Are we going to court entitlement bankruptcy and risk the social unrest that emergency solutions bring? Or will we direct our efforts to long-term security now? People can work harder to meet higher ideals set by strong leaders. More importantly, people are willing to make sacrifices when they see the bigger picture and understand the greater good they are advancing. The question, then, is what sorts of ideals can motivate citizens to trade short-term self-interest for interest in today’s downtrodden and tomorrow’s citizens?

This brings us to Ethics 101:

People’s ethical convictions are most shaped by the institutions of civil society, particularly religion and the family. This suggests an answer to the question of how to promote the ethical foundations of a good society: Let the government make space for private institutions to develop their own practices and promote their associated virtues. Let it encourage virtue by, for instance, enforcing laws that protect children’s innocence, encouraging (or at least not discouraging) family stability, supporting parental rights in education, refusing to sponsor gambling, and so on.

Government can promote virtue in at least three ways. First, it can enforce criminal laws against obvious and gross vices: theft, child pornography, rape, murder, and other clear moral evils. Second, it can avoid well-meaning but counterproductive social policies that end up discouraging virtue. Third, it can let formative private institutions, including businesses, flourish on their own terms.

We know that top-down economic structures foster cronyism, corruption, and abuse of power. But the alternative vision of free markets requires a societal commitment to responsible living, and a government that provides the legal structures necessary for private enterprise and the institutions of civil society to play their indispensable roles. Government cannot be the primary teacher of virtue, but it can and should encourage virtues at the margin and likewise discourage vices, especially by protecting individuals and social institutions—beginning with the marriage-based family—that promote virtue.

Finally, governments should target assistance to the disadvantaged in two ways: first, by shifting responsibility to more local levels, where care can be best administered; and second, by facilitating the good work of private charities. Historically, the initiatives of churches, community organizations, and other non-profits have been models of effective aid, not least because they understand the local realities and people with whom they deal. Moreover, even the most disadvantaged are often capable of contributing to their own betterment, if those caring for them understand their unique abilities and needs and are willing to make demands of them. This approach to assistance is more effective and dignified; it’s not perfect, but it is better than the alternatives.


Luis Tellez is President of the Witherspoon Institute in Princeton, New Jersey.

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For most of Europe’s political establishment, the eurozone’s shrinkage or implosion would represent a severe setback for their particular vision of European unification. Some government leaders, such as France’s Nicolas Sarkozy, are consequently pushing for massive bond-market intervention by the European Central Bank. Others, most notably Germany’s Angela Merkel, favor an approach with even farther-reaching implications: renegotiating the Treaty of European Unification so as to provide for common fiscal governance. That would necessitate a significant diminution of eurozone members’ sovereignty.

However, should the apparently unthinkable happen and the common currency as we know it come to an end, European governments will have a once-in-a-lifetime opportunity to rethink the type of monetary order they wish to embrace. But this would involve widening the range of political choices about Europe’s future they are willing to contemplate.

One such scenario is a three-way monetary division within the EU that reflects the differing political commitments and economic priorities of different nations. Germany and the more fiscally responsible eurozone members such as Austria, Finland, and the Netherlands could, for instance, decide to reconcile themselves to being the only ones with the necessary fiscal and monetary discipline to maintain a common currency.

Alongside this bloc would be two other groups. One would consist of those EU countries such as Britain, Sweden, and Denmark that have maintained their own monetary systems because of reservations about the euro’s implications for national sovereignty. Another group would include EU nations such as Greece, Portugal, and Italy that are simply unable or unwilling to embrace the disciplined monetary and fiscal policies required by a common currency; these nations would consequently find themselves outside the eurozone and reverting to their national currencies.

A more radical monetary opportunity for a post-euro EU would be currency competition. This was once proposed by Britain’s Margaret Thatcher as an alternative to the present common currency. Contemporary proposals for currency competition, such as that advanced by Philip Booth and Alberto Mingardi, involve the monetary authorities of different countries authorizing the use of currencies alongside the euro in domestic settings other than their own. Consumer choice rather than state sovereignty would thus ultimately determine which currencies were used.

Yet another option would be the embrace of what might be called a European gold standard. In the 1950s and 1960s, the German economist Wilhelm Röpke argued that European monetary integration could occur via a nucleus of countries agreeing to adhere to a gold standard, much as had happened somewhat spontaneously in the nineteenth century through a process of unilateral decision-making by individual countries. Once this had occurred, adherents of such a gold standard would have to insist upon all members maintaining monetary discipline as well as freedom and stability in foreign exchange markets. Countries unable to adhere to these rules would not be admitted to the European gold club. Those who failed to abide by the club’s rules would simply be expelled. There would be no “once-in, never-out” policy.

There are European precedents for this type of monetary union. In 1865, for example, Italy, Switzerland, Belgium, and France agreed to fix their currencies to particular weights of gold and silver, and to allow their currencies to be freely interchangeable. Other countries such as Romania, San Marino, Greece, Spain, and Serbia gradually joined this group to form what became known as the Latin Monetary Union (LMU). Over time, the LMU moved in the direction of a de facto gold standard as silver came to be used less and less. The LMU, like the international gold standard, eventually crumbled as a consequence of World War I, though it formally lasted until 1927. Greece, interestingly enough, was expelled from the LMU in 1908 for debasing the gold in its currency.

Needless to say, none of the monetary options outlined above is likely to gain much support from contemporary European politicians. Partly, this reflects awareness of each option’s particular drawbacks. There is no such thing as the perfect monetary system. The ability of gold standards, for instance, to function as regulative monetary mechanisms traditionally has been impaired by the slowness with which the gold supply adjusts to real changes in demand. In political terms, these options also demand a discipline from governments that will not necessarily help their reelection chances.

But a more important, long-term reason for political resistance to adopting any of these post-euro possibilities is that each would mean that the days of European politicians’ using the process of monetary and fiscal harmonization as a vehicle to cement continent-wide political integration from the top down would be over. That would, in turn, require significant rethinking of the very meaning and character of European integration.

Here we see how a lack of political imagination about the EU’s future on the part of much of Europe’s political class limits their economic imagination when it comes to Europe’s monetary possibilities. All of the present fiscal governance measures being proposed by government leaders such as Chancellor Merkel assume that the most appropriate response to the present monetary crisis is the centralization of fiscal policy.

In one sense, that is the correct response, if Europe’s leaders want a single monetary policy managed by a central bank for economies as different as Greece and Germany. This assumes, however, that Europe’s political and economic integration must involve the gradual centralization of monetary and fiscal policies managed by supranational European institutions that, by definition, diminish national sovereignty in the name of harmonization.

But why, one may ask, must this be the case? Certainly, there are good reasons for a gradual political and economic integration of European countries. It is easy to dismiss some European politicians’ insistence that a eurozone breakup would eventually lead to war as alarmist and as a way for convinced dirigistes to avoid giving substantial answers to critical questions about the EU’s direction. We should not forget, however, that the modern European nation-state’s development has not proven to be an unmitigated blessing. When mixed with forces such as fascism, nationalism, and communism, the nation-state has provided a potent means for oppression, not to mention violent aggression against other Europeans.

Yet achieving an integration of nation-states through gradually embracing a centralized supranational European state brings with it all the problems of political and economic centralization on a much larger scale, not least among which is the likelihood of a steady diminution of political and economic liberty. Not long before his death in 1966, Röpke maintained this would be the logical trajectory of any such European entity that directed a centralized monetary policy and sought to implement top-down fiscal governance.

But Röpke also took a dim view of such policies because he believed that the subsequent centralizing tendencies of Europe would have deeply detrimental effects upon the genuine pluralism represented by the vision of l‘Europe des patries—an idea, Röpke noted, articulated by modern Europeans ranging from Montesquieu to Charles de Gaulle. This alternative idea of Europe, Röpke maintained, translated into a federalism that emphasized market freedom and competition across borders, and that precluded any kind of centralized European economic planning precisely because top-down fiscal governance was incompatible with a highly decentralized form of political integration.

From this standpoint, most contemporary European leaders’ responses to the continent’s currency and fiscal problems underscore just how much they have lost sight of one of Europe’s great strengths: genuine pluralism amidst the many commonalities that have linked Europeans for centuries, since long before the Treaty of Rome was signed in 1957. Indeed, the present EU habit of hammering together policies at the top before occasionally submitting them (almost as an afterthought) for ratification by national parliaments or popular referenda helps to fuel dislike of the entire integration process, not to mention the legitimacy crisis that increasingly confronts Europe’s political classes.

There is, however, an alternative: that the process of European integration be primarily driven from the bottom up. Here the focus of integration would shift away from politics. Instead the emphasis would be individuals and businesses trading with, competing against, and investing in each other across borders. Governments would primarily limit themselves to removing barriers to the free flow of persons, capital, and trade between nations. One example of what such integration might look like is the European Free Trade Association (EFTA). Created in 1960, EFTA’s attention has always been upon liberalization of the movement of persons, goods, and capital between its member-states. It has never tried to impose fiscal, social, or monetary policies upon its members.

Of course, if the EU moved in such a direction, it would mean a much smaller role for European politicians and bureaucrats. It would also run contrary to their deeply ingrained dirigiste instincts. Nonetheless, it would allow for an escape from the pattern of one-size-fits-all approaches that tend to diminish the space for political and economic experimentation throughout today’s EU. In this respect, a willingness to explore post-euro monetary options that break away from the hitherto dominant European trend toward top-down centralization of monetary and fiscal policy would be a step in the right direction.

Samuel Gregg is Research Director at the Acton Institute. He has authored several books including On Ordered Liberty, his prize-winning The Commercial Society, Wilhelm Röpke’s Political Economy, and his 2012 forthcoming Becoming Europe: Economic Decline, Culture, and America’s Future.

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Peter Wehner and Arthur Brooks provide a prime example as they helpfully lay out much of the case for democratic capitalism in their new book in the AEI Values and Capitalism series, Wealth and Justice: The Morality of Democratic Capitalism. They start by arguing that democratic capitalism is the political-economic system that best corresponds to a human nature that is neither hopelessly flawed nor infinitely perfectible, but rather is a mix of beast and angel. The system allows citizens to pursue their self-interest, rightly understood, in a way that need not be either selfish or selfless, but still contributes to the common good. It also avoids the coercion and corruption present in the more totalitarian alternative regime structures while more satisfactorily helping the poor: “Markets, precisely because they are wealth-generating, also end up being wealth-distributing.”

They go on to recount the economic achievements of capitalism, which are, quite simply, staggering. Regardless of how you measure standards of living—infant mortality, life expectancy, literacy, hunger, disease, violence—the spread of capitalism has benefited everyone, they argue, and particularly the poor. As they note: “If you were born in London before the dawn of modern capitalism, the norm was destitution and grinding poverty, widespread illiteracy, illness and disease, and early death. And, even worse, your children could expect a similar fate. The possibility for progress was almost nonexistent for your progeny.” But with the rise of capitalism, all of this changed. Though they are careful to note the downsides of the Industrial Revolution, they argue that it needs to be measured against life prior to it, which was “bleak, cruel, and short.”

The attempts to fix the problems of industrialization proved to hurt the poor, not help them. Wehner and Brooks document the failures in worldviews that sought “a world with the benefits of capitalism, but without its costs.” So they tally the effects of communism, as it misread human nature and “shackled more people in more chains than any other political theory in history.” Concentrated power led to abuses, atheism devalued humanity, and a materialistic outlook viewed people as “merely economic units in the service of the state.” In the end, 65 million died under Mao, 20 million under Stalin and Lenin, and 2 million (a quarter of the Cambodian population) under Pol Pot. And for those who survived, living standards were poor.

But in “places where capitalism has taken root and flowered, income and living standards have shot up.”  In “capitalist nations, extreme economic poverty has been largely eliminated. There is an abundance of food. Literacy is commonplace; so are clean water, vaccinations, and access to advanced medical care.” Wehner and Brooks note that where capitalism has not taken root, “people live under brutal tyrannies, political corruption, malnutrition, and even starvation; social and technological progress is stymied, economies are stagnant, and the quality of life is dismal.” They conclude that “Capitalism has done more to lift people out of abject poverty than any other system in human history. All the other models—including collectivism, socialism, and communism—have proved to be deeply flawed, and their human effects are often calamitous.”

What about the impact capitalism has on culture, morality, and the human character? While claiming they have sympathy with some of these criticisms of capitalism, Wehner and Brooks explore none of them and “begin with an obvious counterpoint: The material progress that flows from capitalism is no small matter. Lifting people out of poverty is a hugely impressive and important moral achievement.” They continue in this vein by arguing that capitalism avoids the coercion of alternative political regimes and thus preserves a crucial human value: freedom. Not only that, economic liberty helps bolster and support other political goods, especially civil rights and religious liberty, and it helps foster peace between nations.

So what about the Bernie Madoffs of the world? Wehner and Brooks argue that Madoff isn’t the result of “free markets corroding moral character,” but rather of “poor moral character corroding free markets.” They conclude that “the answer is not less capitalism. It is better capitalists.” But we can’t expect the economic order to produce this. Nor can we expect the political order (the government) to produce this: “A free economy, like a democratic political community, requires certain preconditions in order to best function, most especially a strong civic and social order and a shared belief in an underlying moral code.” In other words, the mediating institutions of society—families, churches, schools, voluntary associations—need to produce what the market and the state can’t—decent people—but without which neither can survive.

Wehner and Brooks conclude the book by asking, “Is capitalism unjust?” They claim that starting in the 1970s, academics in America “broke with previous political philosophers from the ancient Greeks to the American founding fathers in arguing that the fundamental task of the state is to end inequality.” And they claim that “the core of this belief is that inequality is intrinsically bad and even intolerable” and that government should do something about it. Their response is odd: “First, we note that jettisoning capitalism will not lead to greater equality.” But who is suggesting we jettison capitalism? Still, they go on for several pages recounting, again, the ills of communism, and then move on to ask a string of rhetorical questions about how far liberals want us to go in addressing inequality:

What would proper redistribution of income look like? Should everyone have the same income, regardless of one’s occupation and station in life? … Should their income be set by the federal government? If not, should income equality be achieved by taxing at such a prohibitive rate that the gap between LeBron James and the hotdog vender is largely eliminated? And, if so, what would be the negative impact on the performance and output of people who now earn huge salaries? In short, what lengths are the new egalitarians willing to go in order to eliminate or reduce the gap? And at what cost?

They answer none of these questions, cite no egalitarian scholars who support such a worldview, and entertain no alternative conceptions of social justice. Instead, they do their best to explain away many worries one might have about economic inequality and to argue that government measures to fix them would be worse than the problem itself. They conclude: “Efforts to achieve level income have failed everywhere they have occurred because such efforts cut against the human grain. Yet even if it were achievable, we would still reject it on moral and philosophical grounds.” On their view, “forced egalitarianism is itself unjust.” They cite select Biblical verses and church teachers to conclude that redistribution of wealth, “if it is done at all, it is done voluntarily, as an act of charity, out of gratitude for what God has done, not as an action of the state, through coercion.”

Wealth and Justice highlights both the strengths and weaknesses of the conservative case for democratic capitalism. Yes, capitalism protects liberty and free enterprise, and it raises the standard of living as it creates and distributes wealth. But Wehner and Brooks say hardly a word about property duties or about what a just distribution of wealth on their view would look like (one fears that for them it is whatever the market produces). Also, in their rush to defend capitalism against critics, they fail to discuss any of its downsides. For a generation wrestling with economic questions (see: Occupy Wall Street and Tea Party), conservatives need to provide a more thoughtful consideration and response to what worries people about capitalism.

First, capitalism and culture. Much of Wehner and Brooks’s defense of capitalism relies on the strength of the civic and social order. But while they want this sphere to influence the economic sphere, they have little to say about how the economic sphere also influences culture. For them, capitalism didn’t corrupt Madoff, Madoff corrupted capitalism. One need not be a Marxist, however, to note that our economic arrangements influence our culture and morals. Every notable political thinker has thought this; start the list with Plato and Aristotle. So saying that the answer is “better capitalists” doesn’t take seriously the effect that capitalism can have on character, especially given its reward structure. And while Wehner and Brooks mention the neoconservative Daniel Bell’s Cultural Contradictions of Capitalism (only to dismiss his worries), they have little to say about the consumerist and materialistic culture that capitalism can promote. Ditto on the debasement of popular culture with mass-produced, market-driven “art.”

Second, social justice. Wehner and Brooks assert “that capitalism is best at doing what it is most often accused of doing worst: distributing wealth to people at every social stratum rather than simply to elites. The evidence of history is clear on this point—the poor gain the most from capitalism.” Is this really true?  It depends on how one reads the passage. Yes, considered historically, the poor gain the most from capitalism as compared to alternative economic regimes, especially where communism is presented as the only alternative regime. But do the poor benefit the most from capitalism, as compared to the rich? This is a concern that animates many, and not only those in the OWS movement. Wehner and Brooks are silent about it.

In fact, they make an unfortunate claim that “what fundamentally separates capitalists from those who want to redistribute income is a different concept of justice—‘distributive justice’ versus what has been called the ‘productive justice’ of capitalism.” So after claiming that the 1970s egalitarians broke with the tradition of philosophical thought, Wehner and Brooks reject a central theme in that tradition, first articulated by Aristotelian and Thomistic philosophy: distributive justice.

In its place, they believe in “productive justice,” the view that “economic growth will create opportunity and wealth for those in every social stratum—and, in the end, generate the best of all worlds: allowing people to succeed without penalizing excellence and achievement and providing opportunity for those at the bottom rungs of the ladder to move up.” But this ignores the issue: Are the gains of economic growth distributed justly? Noting that capitalism creates the highest Gross Domestic Product, and the fastest GDP growth, says nothing about how that wealth is distributed. Wehner and Brooks offer no standard, no principles of justice on how to think about this question. And the idea that we always will be able to grow ourselves out of economic problems is wishful thinking, as thinkers as diverse as the libertarian entrepreneur Peter Thiel and the economic scholar Tyler Cowen have argued.

Perhaps most disconcerting, however, is that Wehner and Brooks offer no principles of justice on how individuals should deploy their wealth, and in a book titled Wealth and Justice this is disappointing. Supporting free markets and limited government doesn’t even begin to address the question of how citizens should behave in the market: Can a citizen be guilty of injustice in how he uses his wealth? Do citizens have duties—in justice—to distribute their wealth? Wehner and Brooks are silent.

In framing their argument as a defense of capitalism against the alternatives of life pre-Industrial Revolution and life under communism, Wehner and Brooks have made their task too easy. The real question facing developed capitalist countries now is what type of capitalism to have, and what type of wealth distribution. Among the most thoughtful thinkers on these questions, few are strict egalitarians, and so even here Wehner and Brooks have engaged a strawman. One might think current disparities in wealth are unjust, not because material equality is the goal, but because human flourishing is, and too many people lack the requisite material goods for that flourishing. Income and wealth equality isn’t the concern, but having sufficient goods to meet one’s needs and fulfill one’s vocation is. Likewise, one might worry about the disparate political power that comes with gross material inequalities. Wehner and Brooks say nothing about these concerns.

When the godfather of neoconservatism, Irving Kristol, wrote Two Cheers for Capitalism, he intentionally held back from giving it a resounding three cheers. He knew there were downsides, and that conservatives had to be honest about these in order to address them adequately. But the conservative message about capitalism today glosses over these facts, proposes no principles of justice, and fails to engage—let alone persuade—our fellow citizens who worry about our economic order. Conservatives writing in defense of democratic capitalism need to spend less energy fighting off communism, and more energy developing a conservative vision of social justice, painting a picture of what a better capitalism could look like. If conservatives don’t, the only alternatives will be coming from the Left. And that would be an injustice.

Ryan T. Anderson is Editor of Public Discourse: Ethics, Law, and the Common Good.

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Nussbaum is Professor of Law and Ethics at the University of Chicago and, along with Sen, a Founding President of the Human Development and Capability Association, the publisher of the Journal of Human Development and Capabilities, which works closely with the United Nations Development Programme (UNDP). In other words, this is an important, indeed consequential, body of scholarly literature, and it challenges many reigning scholarly orthodoxies about “development” in hopes of changing public policy. As Nussbaum notes, “We need a counter-theory to challenge these entrenched but misguided theories, if we want to move policy choice in the right direction.”

What are these entrenched but misguided theories? Nussbaum explores three approaches to development: GDP approaches, utilitarian approaches, and resource-based approaches. A GDP approach tries to measure development in terms of GDP per capita, the average amount of wealth in a nation. But Nussbaum faults this approach for failing to pay attention to each individual, especially those at the bottom, who might not enjoy any of the benefits of increased average GDP if the distribution of benefits lies solely among those at the top. Furthermore, this approach treats incommensurable aspects of human lives—“health, longevity, education, bodily security, political rights,” and more—as if they could be measured by a single number. Utilitarian approaches, measuring average utility (understood as preference-satisfaction), face similar challenges, for they too aggregate across lives and components of lives. But more troubling is the subjective nature of the measure, falling prey to the “social malleability of preferences and satisfactions.” After all, “when society has put some things out of reach for some people, they typically learn not to want those things.” Resource-based approaches make the mistake of assuming that material goods and wealth are adequate “proxies for what people are actually able to do and to be.”

This concern for the opportunities actually available to people drives Nussbaum’s capabilities approach. As she states repeatedly, the key questions to ask are: “What are people actually able to do and to be? What real opportunities for activity and choice has society given them?” We can’t measure this, even approximately, by looking to GDP, self-reported satisfaction, or physical resources. Instead, Nussbaum argues that there are multiple irreducible factors necessary for human development, and that each of these has to be measured individually, not with an eye to aggregate or average scores, but by taking each individual as a locus of value. Her measure is not materialistic: social and legal policies and conventions play an important role in shaping what opportunities really exist. In other words, culture counts.

Nussbaum’s approach focuses on each person as an end, with the ability for choice and freedom among a multiplicity of values. The capabilities approach is “evaluative and ethical from the start,” asking “which [capabilities] are the really valuable ones, which are the ones that a minimally just society will endeavor to nurture and support?” But while her conception is moral, Nussbaum insists that it is not moralistic: Governments should support the development of capabilities, but not influence their functioning, leaving individuals free to choose how to exercise their capabilities, for “capabilities have value in and of themselves, as spheres of freedom and choice. To promote capabilities is to promote areas of freedom, and this is not the same as making people function in a certain way.” So, she concludes, “there is a huge moral difference between a policy that promotes health and one that promotes health capabilities—the latter, not the former, honors the person’s lifestyle choice.”

What are the central capabilities? Nussbaum’s list includes ten broad areas:

1. “Life.”
2. “Bodily health” (“including reproductive health”)
3. “Bodily integrity” (including “opportunities for sexual satisfaction and for choice in matters of reproduction”)
4. “Senses, imagination, and thought” (“being able to use the senses, to imagine, to think, and to reason”)
5. “Emotions” (“being able to have attachments to things and people outside of ourselves”)
6. “Practical reason” (“being able to form a conception of the good”)
7. “Affiliation” (“being able to live with and toward others”)
8. “Other species” (“being able to live with concern for and in relation to animals, plants, and the world of nature”)
9. “Play” (“being able to laugh, to play, to enjoy recreational activities”)
10. “Control over one’s environment” (“being able to participate effectively in political choices” and “being able to hold property and having property rights”)

Nussbaum doesn’t offer much in defense of this list, as she subscribes to John Rawls’s theory of political liberalism, by which we must offer citizens “public reasons” free from any particular “comprehensive doctrine” of the good or the right in framing our public policies. Nor does she explain why states have a duty, in justice, to immanentize the eschaton: “The basic claim of my account of social justice is this: respect for human dignity requires citizens be placed above an ample (specified) threshold of capability, in all ten of those areas.” Sadly, she neither specifies these thresholds nor provides any argument for why this is a valid principle of justice. Even if it is (and I’m inclined to think something like it is), she owes her readers an argument. Instead she makes ungrounded appeals to human dignity and equality, and then claims that these are entitlements that a state must provide: “All people have some core entitlements just by virtue of their humanity, and it is a basic duty of society to respect and support these entitlements.”

Perhaps that’s the proper place to start highlighting the severe defects in Nussbaum’s Creating Capabilities. First, she never defends her conception of justice against competing conceptions. F. A. Hayek and Robert Nozick leveled serious criticisms against the concept of “social” justice and defended alternative classical-liberal (libertarian) conceptions. Whether or not one thinks they got it right, their arguments demand a response. Nussbaum shows no awareness that not everyone is a welfare-state liberal.

Instead she asserts that the American Founders, and the Declaration of Independence, support her view. Citing the Declaration, she writes that governments are founded “to secure these rights,” and then concludes that if government doesn’t “secure basic entitlements” (her ten capabilities), then it is unjust. She adds some rhetorical bluster: “The idea that the American Framers were libertarians, or fans of ‘negative liberty,’ is extremely misleading,” and continues: “The very idea of ‘negative liberty,’ often heard in this connection, is an incoherent idea: all liberties are positive, meaning liberties to do or to be something.” She concludes that her capabilities approach “is no recent invention,” but is “a deep part of mainstream liberal enlightenment thought.” Of course the American Founders, along with Hobbes, Locke, and Kant, as well as Hayek and Nozick, would have disagreed.

Second, regardless of the political justice of her account, she puts remarkable but utterly naïve faith in governmental institutions. One of her bald assertions is that “governments of richer nations ought to give a minimum of 2 percent of GDP to poorer nations.” She then shows deep hostility to free enterprise, civil society, voluntary associations, and private charity as proper remedies for poverty: “Suppose a nation attempted to solve its distributional problems through private philanthropy. It doesn’t work, and we know that.” Tell that to the students trapped in our inner-city government-run schools who yearn to attend the Catholic school across the street.

She continues in this vein. “However fine the [charitable] organizations are,” she notes, “they are not accountable to people in the way that a democratic nation is accountable.”  Really? Is a public school—beholden to the teachers’ union and city hall—more accountable to the people than a charitable charter school? Here Nussbaum does attempt to offer a reason: “if [charitable organizations] listen to anyone when setting strategy, it is, most often, to their big donors.” Unlike politicians, of course. Are our foreign aid programs really more responsive to “the people” than an Evangelical micro-finance charity?

Third, Nussbaum thinks that “equal respect for persons” requires that we “avoid taking a stand” on the controversial metaphysical issues that divide citizens, and instead base “political principles on some definite values, such as impartiality and equal respect for human dignity.” But as has been shown repeatedly, the Rawlsian search for “public reason” that is distinct from “reason” is a fool’s errand. Every time one rules out certain reasons as “non-public” but summarily includes one’s own as “public,” one necessarily appeals to a controversial standard, and merely asserts one’s preference for one’s own view (as is evident in Nussbaum’s list). More importantly, what we owe our fellow citizens as a matter of equal respect, when making law, is the truth: to give them good reasons, sound reasoning thought all the way through. Why should we artificially disqualify a class of true reasons from being the basis of political action? Nussbaum gives no reason.

Her Rawlsian predilections help explain why her theory of justice is weak: “I argue that the entire world is under a collective obligation to secure the capabilities to all world citizens.” But she doesn’t argue this; she just asserts it. From within her Rawlsian confines, she can’t offer any reason for this “collective obligation.” She must realize her weakness, for she admits that “my view does need to rely on altruism,” and by the book’s closing she is seeking to develop a “political psychology” to promote “emotions of compassion and solidarity.” When you can’t provide reasons to care for others, the only things left to do are to psychologize and to manipulate the emotions. A better philosophical approach would be able to appeal to our rational faculties.

Not only can’t Nussbaum explain why we have these duties in justice (or why we should be just in the first place), her account is inherently statist because of its Rawlsian “political, not metaphysical” framework. Since her approach only allows for reasoning about political institutions, once she identifies her central capabilities, “we cannot move directly to the assignment of duties to individuals: key duties must be assigned to institutions.” But this gets the entire story wrong. As thinkers as diverse as Aquinas, Locke, and Kant have argued, individuals have moral duties to assist those in need, and while the state should promote the common good, the state’s role in directly providing assistance to the poor is a secondary function, one where the state ought to assist individuals and voluntary associations in meeting their tasks before usurping that role from them.

(One must also ask how Nussbaum’s argument in favor of animal rights and animal entitlements meets the demands of “public reason” by avoiding controversial metaphysical claims: “That animals can suffer not just pain but also injustice seems, however, secure.” After all, “animals pursue not simply the avoidance of pain but lives . . . of honor or dignity.” She takes this bizarre anthropomorphism so seriously that she writes: “One form of intervention into nature that seems crucial is animal contraception. This will mean, for animals, modifying the capability list where reproductive choice is concerned.” Animals, as a matter of justice, don’t deserve reproductive choice.)

Fourth, and perhaps most crucial, Nussbaum never gives an argument for why we should care about capabilities rather than the exercise of those capabilities toward fulfilling ends. While she is willing to make morally controversial claims about which capabilities are central, she refuses to say how they should be exercised, claiming that this agnosticism respects freedom. But we best respect freedom by promoting a broad range of worthy ends for which to act, while also insisting that certain ends are unworthy of choice precisely because they degrade those people who choose them.

Nussbaum’s failure to explain how capabilities should be exercised brings out a central problem in her talk of “human dignity.” Repeatedly, she claims that all nations contain “struggles for lives worthy of human dignity.” That phrase occurs again and again: “some living conditions deliver to people a life that is worthy of the human dignity that they possess, and others do not.” Disregard the infelicitous usage of “lives worthy of dignity”—all lives are worthy of dignity. What she ignores is that “some living conditions” aren’t the only qualifiers for human dignity—so are human choices. Some exercises of human capabilities, some choices, are in line with human dignity, and some are not. If we are to measure human development and think about its justice, we must think about how capacities are exercised.

In another effort to avoid talking about how capabilities are to be exercised, she declares that Aristotle “did not instruct politicians to make everyone perform desirable activities. Instead, they were to aim at producing capabilities or opportunities.” But Aristotle thought that the entire point of politics was promoting the good life—not promoting morally ambiguous capabilities, but directing them to their appropriate ends.

Nussbaum uncritically helps herself to an Aristotelian understanding of government—without arguing for it— and then distorts it to rush to her own conclusion: “Given a widely shared understanding of the task of government (namely, that government has the job of making people able to pursue a dignified and minimally flourishing life), it follows that a decent political order must secure to all citizens at least a threshold level of these ten central capacities.” Among her fellow liberals, this is not a “widely held” view of government. Nevertheless, she needs to explain why concern for a dignified and flourishing life should translate into a threshold of capacities without concern for their exercise. She’s wrong to think that we should promote “health capabilities” rather than health. Health is the human good, and we can promote it in a way that respects human freedom.

If you put it all together, Nussbaum’s theory demands that a state coercively tax its citizens (ignoring negative-liberty claims to private property rights) to create a government-run program (disregarding subsidiarity) that will ensure that “opportunities for sexual satisfaction and for choice in matters of reproduction” are provided (regardless of how those capabilities are exercised). In fact, she writes that “thinking about sexual orientation through the lens of the whole list of capabilities” makes us see that laws refusing to treat same-sex relations as if they were marriages are “unfair,” just like “antimiscegenation laws,” “conferring a message of stigma and inferiority.” But if we really want to measure human development, we should ask how our sexual capabilities can be exercised in accord with human dignity, in a truly ennobling way, and we should seek to promote a culture (including a legal culture) that respects and promotes that ideal.

A sound theory of social justice would have to explore the constituent aspects of human flourishing—not just capabilities, but their truly perfective ends. It would have to investigate the moral norms that govern conduct with respect to these ends, particularly property rights and duties. Finally, it would have to ask what role the state plays in helping to secure human well-being. Social justice is too important a topic to leave matters where Nussbaum’s Creating Capabilities leaves them.

Ryan T. Anderson is Editor of Public Discourse: Ethics, Law, and the Common Good.

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These stories do not (yet) reflect the views of most lawmakers. As Thomas Merrill and Henry Smith, two prominent defenders of property, have observed, the law still reflects our strong moral intuition that property rights are important. At the core of property lies a simple and widely shared principle: We believe firmly that stealing or trespassing is wrong, and the law backs this belief with strong sanctions. The owner has a right to exclude, which is enforceable against the whole world.

Of course, the way one uses one’s property nearly always affects other people, and governments reasonably police the margins of property use in order to promote the common good. Sometimes governments succeed and sometimes they overreach, but as long as the core of property remains intact, excessive regulation does not destroy the institution of property.

Now, however, even the core of property is in question. A formidable challenge to the very notion of private property recently has emerged from the property professoriate. In an influential series of articles, four property scholars have articulated and defended what they call a “Statement of Progressive Property.” They doubt that property owners can be trusted to use assets wisely for the common good. They would like, therefore, to make government the ultimate arbiter of property rights. Owners would exercise sovereignty over their assets only as the state permits.

Strikingly, two of the authors, Gregory Alexander and Eduardo M. Peñalver, defend the Progressive Statement on Aristotelian grounds. Peñalver envisions a law of property that “affirmatively promotes human virtue and flourishing.” This law will authorize state usurpation of property rights when “collective decision making” can be expected to “generate outcomes superior to individually determined conduct.” Alexander claims that the core of property contains a “social-obligation norm,” which requires property owners to share with others to foster human flourishing. The state should be empowered, and often has an obligation, to enforce this norm by coercion.

It should be noted that the authors of the Progressive Statement deny that they are challenging the institution of property. They deny that the core of property is a clearly defined domain of owner sovereignty. Thus, state incursions on private property rights are not limitations on property but rather part of the institution itself. Yet it is the right of the property owner to exclude that makes property unique. If property rights are created by, and maintained at, the discretion of the state, then property ceases to be property.

The authors of the Progressive Statement have performed a great service by calling attention to the values that sometimes warrant limitations upon property rights. They rightly affirm that these values cannot always be compared with each other on any scale, and that economics alone cannot explain the institution of property. They do well to remind property scholars that virtue plays an important role in law, even in property law. Nevertheless, they can be faulted for lack of attention to the implications of the very principles they invoke. It is not at all clear that one who is committed to virtue in the use of land also must be committed to state governance of land. Many defenders of property understand themselves to be in favor of both virtue and property rights.

Is the disagreement over the efficacy of property really a moral disagreement? Henry Smith does not think so. He holds that both defenders and critics of property rights are in favor of virtue and human flourishing. He criticizes the Progressive Statement authors for their insufficient attention to the means by which their proposals are supposed to serve these ends. The problem, in Smith’s view, is not that private property fails to promote human flourishing but rather that the critics of owner sovereignty are impatient with the “mysterious way” in which property does its work.

Property Promotes Human Flourishing, the Common Good, and Human Dignity

The manner in which property serves human flourishing is not really a mystery; it is merely very complex. Indeed, the operation of private property is as complex as the human goods that property serves. Property serves the common good in as many different ways as there are property owners. Just as one person’s notion of the good life differs from his neighbor’s notion, one person’s use of his assets to pursue the good life differs from his neighbor’s use.

Moral obligations sometimes require limitations upon property rights. One should not use one’s property to injure another person, to destroy the natural environment, or to harm another’s property rights. But most choices about the use of property are governed by pre-moral considerations. That is, absent some moral constraint, one may choose among equally reasonable, possible uses of property. Some people use property to raise and support families; others use property to pursue education and knowledge; others donate property to charitable causes. That different people use property to pursue different aspects of the good is one of property’s great strengths.

Property is, in this sense, one of the truly pluralistic institutions in American law. That the operation of private property is complex, however, does not mean that the rules of property must be equally complex. Indeed, the core of property is very simple: the property owner has the right to exclude others from his or her asset. This right to exclude gives the property owner space in which to exercise other rights, such as the right to use, exploit, and encumber the property. To undermine these simple rights is not to promote but rather to impoverish human flourishing. In order to work effectively, property rights must free the property owner to pursue projects that others do not value. Property must honor and protect the freedom of the owner-sovereign to choose.

Alexander and Peňalver suppose that property must be either individualist or collectivist. They pose a dichotomy between allowing individuals to serve their own interests and authorizing the state to promote collective interests. This is a false dichotomy. Even as it enables pluralism, property-owner sovereignty serves a truly common good, which is reducible neither to individual interests nor to collective political decisions.

Notwithstanding the plurality of uses of property, private property serves common values. Even individual property owners can and do choose to use their property for the benefit not only of themselves but also of others. Children benefit from the property ownership of their parents. The destitute benefit from charitable gifts. Employees benefit from capital investments in the corporations that employ them.

Furthermore, not all property owners are individuals. News agencies, athletic clubs, neighborhood associations, churches, and unions own property. Schools, social clubs, charitable organizations, for-profit companies, and many other associations serve common goods through the responsible exercise of property rights. The principle of subsidiarity reminds us that these institutions and associations are often better equipped to promote human flourishing than are governments, especially central governments. The purpose of a community is to help its members to help themselves, in the words of John Finnis, “to constitute themselves” by choosing and realizing their common good. The process of decision-making should, for this reason, be closest to those who will carry out the decision. Centralized governments should not assume authority that can be exercised by more local associations.

So, robust property rights are not in tension with human flourishing; but one can claim even more. Strong protections for the rights of property owners actually promote human flourishing, especially virtue, in ways that state governance of assets cannot. (Leave aside the empirical question whether private property or state control better promotes the economic prosperity of the least well-off.) Property-owner sovereignty enables a significant exercise of virtue that state governance actually destroys. By using property to choose between equally reasonable options, a property owner in an important sense makes his or her own life, brings a new reality into being. He or she exercises free choice (what many people would call “personal autonomy”) to bring about a new state of affairs. This is a distinctly human achievement. Strong property protection secures the freedom to exercise free choice. State governance destroys it.

Because an owner’s decisions about property use generally rest upon pre-moral considerations, the owner’s sovereignty over assets epitomizes the exercise of free choice in its highest and best form. One might encumber one’s house with a second mortgage in order to remodel one’s kitchen and host more dinner parties, or one might assume a mortgage obligation in order to further one’s education. One can just as reasonably choose to devote one’s assets to being more hospitable as to acquiring knowledge. Given finite value in the house (in the current real estate market, this is not implausible), one cannot choose both. Neither, however, is per se unreasonable or immoral. In such cases, which comprise the overwhelming majority of choices about property use, it is the act of choosing that settles the question.

In a society such as ours, which values pluralism and choice, property is precisely the place to protect the freedom to choose, and that freedom secured within the property owner’s sovereign domain can be exercised for great good. It is true that this freedom can be abused, as in cases of conspicuous consumption, reckless gambling, or miserly hoarding, but these abuses are the exceptions that prove the rule. We recognize abuses of property rights as abuses precisely because we know what good property use looks like and see it so often practiced.

This suggests a reason why the Progressive Statement fails to persuade. Perhaps the authors of the Progressive Statement neglected to look around at their neighbors and observe how owner sovereignty is actually exercised. Had they done so, they would have recognized that millions of property owners daily exercise their property rights to promote the common good and should be trusted to do so in the future.


Adam MacLeod is an Associate Professor at Faulkner University’s Thomas Goode Jones School of Law.

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Such limitations also apply to social programs, the primary focus of much of federal spending. In the United States, entitlement spending accounts for over 70 percent of government expenditures and its reform is increasingly linked to discussions of deficits and growing debt-to-income ratios. Uneasiness related to this “entitlementationism,” like uneasiness related to Keynesianism, derives from its current association with national debt. Much of the health-care bill debate (as well as the debate over Medicaid, Medicare, and Social Security), for example, has to do not with the objectives of the programs themselves but with this alternative economic issue.

Continuing freely to apply Keynesian fiscal policy is today considered to be a middle-to-left-of-center political emphasis, while preventing dangerous levels of debt accumulation is generally considered a middle-to-right-of-center priority. Thus, it should be of interest to all parties to address both concerns while accomplishing positive social program outcomes—and, fortunately, there is guidance, consistent with modern economic principles, for doing so.

“Entitlementationism” is a concept that first surfaced in the mid-twentieth century—the period framed by the second term of Franklin Roosevelt and the Great Society years of Lyndon Johnson. It is the view that private goods such as health care, education, old-age consumption, and sometimes food, housing, and transportation can be effectively provided publicly. As a technical matter, economists distinguish between pure private goods, which provide benefits solely to the individual who consumes them, and pure public goods, such as national defense, which provide benefits to everyone.

The pairing of public and private provision of public and private goods results in four possibilities. Private provision of private goods through competitive markets is economically and scientifically supported as efficient. Public provision of public goods such as national defense (protection to everyone from enemies without) and law and order (protection to everyone from enemies within) is both a historically and theoretically valid government function. Private provision of public goods through market means can range from impractical to impossible and few polities have attempted it. The last pairing, public provision of private goods, particularly through entitlement programs, is primarily a twentieth-century phenomenon that seems to be running into trouble.

Modern Tools …

Is there a better way to accomplish entitlement objectives than through public provision of private goods? Low income is often correlated with low living standards and little access to good health care and education. Economists know, however, that lack of income is not intrinsically a health care problem, nor is it is a food problem, a housing problem, or an education problem; it is, of course, an income problem. Moreover, treating lack of income as if it were a health care problem (e.g., creating a program such as Medicare or a system of government health clinics) flies in the face of an economic principle of efficient policy referred to as “the intervention principle.” The intervention principle states that an economy that is run for the benefit of its members can best achieve an objective by its government intervening at the relevant price margin most closely connected to the object of interest.

Application of the intervention principle is straightforward. For example, if the social objective is to get the individuals in group A, who do not purchase health insurance, to do so, the lowest-cost way to accomplish this goal is to make purchasing health insurance more attractive to members of group A; this is achieved by precisely rewarding the purchase of health insurance precisely for the members of group A. Establishing government health insurance programs is not efficient for a number of reasons, including the fact that they tend to be too big to be precise. Government programs tend not to be targeted and usually provide goods rather than the prescribed incentives. In-kind giving (e.g. government-provided private goods or purchasing power such as vouchers or cash that can be spent only on the good) is inferior to cash, which can purchase the good in question but can be used for other necessaries by the recipient, as well, if warranted. Cash also does not encourage wasteful use as in-kind transfers do. (In-kind giving can lead to the following mindset: “I will accept the $100 of health care given to me, even if it is worth only $10 to me, because I cannot use that money for anything else.”)

Why would government engage in direct public provision of private goods rather than incentivizing their purchase (and handing out income) where needed? The primary justification for this is lack of information: If I want the individuals in group A to buy health insurance, but cannot identify who they are in order to incentivize the purchase, perhaps I should give everyone insurance; I know, however, that it will be disproportionately paid for by the rich and used equally or disproportionately by the members of group A. As just described, such entitlement programs will be more costly to society as a whole than targeted plans.

A companion to the intervention principle, the “incentive symmetry principle,” says that positively rewarding a desired action can be equivalent to negatively rewarding the opposite of the desired action. For example, rather than paying accused defendants to appear for their trials, the legal system applies the negative equivalent by making them post bond, which they lose if they do not show up. To make two reward systems equivalent in an economy sometimes requires making money payments to particular parties. For example, if food and insurance are the only two goods, you can make insurance more attractive relative to food either by raising the price of food or lowering the price of insurance. If the price of insurance is lowered, it eventually becomes affordable to everyone but creates an unnecessarily costly program, whereas if the price of food is raised, some may not then be able to afford insurance, even if they now want it.

Neither the intervention principle nor the incentive symmetry principle was known fifty years ago when most of our welfare programs were first enacted. When jointly employed, they form a powerful tool to lower costs and solve information problems as we now try to reform these same programs.

… For Modern Problems

Both the intervention and incentive symmetry principles apply in the case of health insurance (and for most other services provided by social programs), and they need to be taken into account by those struggling to lower costs while providing private goods. First, imagine the consequences of a hypothetical world where everyone is desperately interested in buying health insurance. Those who can afford to do so make the purchase. Those who cannot afford the purchase are invited to self-identify by visiting the government window and explaining their circumstances. If they qualify, they are granted cash. (We already know that the individual wants insurance because the motivation to buy insurance can be made as strong as we want as explained in the next paragraph.) So, without loss of generality, we may assume that the cash is applied toward insurance purchase. The necessary group self-identifies, so lack of information (i.e., inability to identify the group in need) is no longer an impediment. Ineffective in-kind programs are no longer needed, because outlays are granted in cash form and incentives satisfy the intervention principle. Relative to a broad-based entitlement program, expenses are low because they are targeted.

Next, consider the motivation to buy insurance. Incentive symmetry suggests that there are always alternative means to creating incentives, and one useful approach is to apply a broad-based tax that raises the price level by a given amount. (Some variant of a consumption tax, such as a value-added tax, would raise prices. If prices are raised high enough, they form the strong incentive: no one will pay five times more for their food and clothing if this can be avoided by buying health insurance.) Those who have health insurance would be rebated the tax or would not pay it at the point of purchase. Coverage can be verified in several ways, such as by swiping a card at the point of purchase. Another alternative is for rebates to be applied for periodically, as is done now for sales tax credits when federal taxes are filed. The net result is that there is a reward for buying insurance. Those with insurance face unchanged net prices, however, and thus pay no tax, and since everyone has the ability to buy insurance (though some self-identify to receive aid before buying it), no one will pay the incentive-creating tax. The incentive does its job without collecting any revenue or requiring any government outlay. Incentive symmetry informs the design of the incentive, and application of the intervention principle ensures that the intervention is targeted and rewards precisely the desired activity.

It is undeniable that improving the way we provide entitlements would lead to massive savings. The U.S.’s many entitlement programs each affect the deficit and debt differently, but let us take a look at Medicare. According to evidence cited by Thomas Saving, former trustee of the Social Security and Medicare Trust Funds, and John Goodman, President of the National Center for Policy Analysis, “seniors on Medicare use twice the health insurance as seniors who are still on private insurance, everything equal.” The suggestion—though more work would be required for a proof—is that entitlement programs that publicly provide private goods are financially inefficient and can be replaced by targeted interventions that are much less costly and no less effective.

Spending less ultimately leads to lower deficits and lower debt. This, in turn, frees Keynesianism and other social policies to be evaluated and implemented on their own merits.

Earl L. Grinols is a former Senior Economist for the President’s Council of Economic Advisors. He is currently Distinguished Professor of Economics at Baylor University. His most recent book is Health Care for Us All: Getting More for Our Investment published in August 2009 by Cambridge University Press.

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In their own way, both events were about human freedom. The American revolutionaries were fighting for independence from a government that, in their view, kept violating a hard-won principle: no taxation without representation. Likewise, Smith’s Wealth of Nations severely criticized mercantilism—the dominant economic system of eighteenth-century Europe that routinely undermined economic liberty in the name of extensive, state-driven economic development.

Two hundred thirty-five years later, many Americans remain acutely aware of economic freedom’s moral and political significance. This is partly because, in the last ten years, we’ve seen state intervention expand into American economic life in ways that seem far removed from the vision of America’s Founders. Among other things, this has been reflected by increases in the state’s share of GDP, the steady devaluation of our currency, “stimulus” packages funded by deficit spending, the explosive escalation of public debt, the bailing out of politically connected industries, the remorseless growth and duplication of welfare programs, and the government’s extension of its control over healthcare.

The causes of these unhappy developments are many: several generations of politicians, public officials, and economists who have distrusted (and sometimes disdained) Americans’ ability to take responsibility for their own economic future; businesses that prefer to lobby for corporate welfare instead of creating goods and services that people actually want; and, perhaps most troubling, the many citizens who have gradually started to see the state as the primary means of securing their livelihood.

We can see signs everywhere of the damage wrought by economic freedom’s decline in America. Few people, however, speak of this decline’s moral and cultural consequences.

The economist Arthur Brooks is exactly right when he notes that the end-game of America’s free enterprise culture is not the endless acquisition of wealth. The goal is human flourishing. This idea is as old as Aristotle, but it is deeply integral to the American experience and the aspirations contained in the immortal phrase, “Life, Liberty and the Pursuit of Happiness.”

Respect for economic liberty is indispensable if we want to live in an America that promotes human flourishing. Market economies are, for example, especially good at furnishing societies with the material basis they need to preserve and protect human life, expand the frontiers of knowledge, support the arts, engage in philanthropy, and address the needs of the least among us. A decline in free markets thus undermines our ability to produce the material resources that help us to live human life as it ought to be lived.

No doubt, we can find much happiness in pursuit of some of the wide-ranging and often very uneconomic interests of a Thomas Jefferson, Benjamin Franklin, or Charles Carroll. But other realizations of happiness can take shape in the pursuit of the means that allow us to engage such interests: in the development, for example, of the moral and practical habits that are crucial to success in dynamic business environments.

In much of Europe, a contrary attitude has long been characteristic of its economic culture: that if people are to lead fulfilling lives, they need to be given things and protected from risk. In policy and institutional terms, this translates squarely into the European social model, which is presently collapsing before our very eyes throughout the Old Continent.

Ironically, however, there is a scarcity of evidence that such policies actually help make people happy. Why? Because people who are always given things know that they have not earned what they have. As evidence, Brooks points to studies that underscore correlations between unearned income and dissatisfaction with life. These illustrate, for example, that welfare recipients are generally less happy than those who earn the same income through employment.

The fight to take back America’s economy from those who have sought to realize the social democratic dream over the past eighty years must thus be more than an argument about the relative efficiency of markets versus mixed economies. It must have a moral dimension. Man does not live by efficiency alone. Life is about much more than maximizing utility.

There is a role for government in our economy’s restoration, but it is a limited one. Much of the disorder that presently characterizes America’s economy comes directly from the pathology of government overreach.

Market economies need institutions that can provide the legal apparatus that protects property rights, enforces and adjudicates contracts, maintains the rule of law, and furnishes the police function. Each of these responsibilities requires an authority with a monopoly of legal coercion, something the Western tradition has long assigned to the state.

Once, however, governments and courts expand their economic remit beyond these areas, their effectiveness is much more questionable. Indeed, the evidence is overwhelming that when governments seek to “spread the wealth” or “end poverty forever” through welfare programs, they distort (and often suffocate) the usually far more effective role long played in this area by strong families, intermediate associations, religious organizations, and other private actors.

If this is true, then part of the debate about the economy that will shape the 2012 elections should be about identifying principles we can use to distinguish the state’s proper economic responsibilities from activities that others should fulfill.

One such principle might be called the “Adam Smith” principle. Though often caricatured as an eighteenth-century Ayn Rand, Adam Smith thought long and hard about the government’s appropriate economic role.

Broadly speaking, Smith held that the government’s general responsibilities embraced foreign policy, national defense, the administration of justice, and public works. Each of these responsibilities has an economic dimension, especially the last two. Beyond these areas, Smith was willing to contemplate limited interventions in certain spheres of the economy and in particular circumstances. Nevertheless, he generally considered these to be the exception rather than the rule.

No doubt, some will regard this view of government’s primary economic functions as excessively minimalist. That, however, may underscore just how habituated we have become to the state’s excessive intervention into many spheres of life. Moreover, when we consider the legitimate government functions identified by Smith, we realize that activities such as the administration of justice (understood as the application of the rule of law through courts and maintenance of public order through the police function) for all 310 million Americans can hardly be dismissed as small undertakings.

Still, as Smith himself acknowledged, there will be exceptions. But how do we prevent the exceptions from becoming the rule and thus a rationalization for endless economic intervention by the government? Part of the answer lies in a second principle: the much-misunderstood idea of subsidiarity.

Subsidiarity may be summarized in the idea that “higher” organizations (such as governments) should normally not directly intervene in the life of “lower” communities (such as families, businesses, and churches). Subsidiarity thus assumes that the best people to address economic and social problems are usually those closest to the difficulty. Intervention by higher bodies is permitted, however, when (1) a “lower” community has proved itself manifestly incapable of addressing problems that properly fall within its sphere of responsibility; and (2) other communities closer to the problem are unable to resolve the difficulty.

Subsidiarity consequently tells us that in normal circumstances, the function of child-raising is properly performed by families. It also tells us that when a family proves incapable of addressing particular problems associated with child-raising, non-governmental actors such as churches should usually be the first to render assistance. When no other group can provide appropriate forms of help, governments may then need to act—at least until the problem is resolved, at which point the state should bow out to prevent the permanent displacement of families from their proper functions.

As the example of child-rearing shows, subsidiarity combines axioms of noninterference and assistance. It follows that when a case of assistance and coordination through law or government proves necessary, as much respect as possible for the rightful liberty of those being assisted should be preserved. Why? Because freedom—including economic liberty—is essential if people are to realize human happiness.

A moment’s reflection on what the application of these principles might mean for the state’s economic role soon indicates that it would result in a significant winding back of government intervention in America’s economy. Both Obamacare and the Dodd-Frank Financial Regulation Act, for instance, are very hard to justify according to these criteria. Corporate welfare would also be radically curtailed. Those promoting government entitlement programs would have to prove that a perceived social or economic deficiency cannot be adequately addressed by non-state associations. It might even start a long-overdue discussion about whether or not the state should exercise a monopoly of the money supply.

Consistent application of these principles would also remind us that there are many free associations and communities that precede the state and which directly provide most of the conditions that assist people to pursue human happiness. And that brings us squarely to another crucial insight with enormous potential for restoring health to America’s economy and reducing the size of government.

America’s commitment to economic freedom has never been understood as absolving us from our concrete responsibilities to those in need. As the Wall Street Journal’s William McGurn writes, the argument of American conservatives with American liberals is not about whether people should help those in need. The issue concerns the how: how, McGurn asks, do we “balance our care for fellow citizens without wrecking the economy, ruining families, or giving birth to more soulless bureaucracies?”

Historically speaking, free associational approaches to resolving social problems are deeply ingrained in American civic culture. Not even FDR’s New Deal or LBJ’s Great Society managed to undermine America’s position as the world’s most generous nation in the areas of private charity, private philanthropy, and voluntarism. From this standpoint, a “Tocquevillian” civil society approach to addressing social problems may well be a powerful way of forestalling the development of proto-European tendencies to regard government as the primary means of addressing social difficulties, thereby (albeit often unintentionally) inflicting enormous damage on the economy.

Economic freedom is not the only bulwark against governments with exalted senses of their own importance. Such governments invariably seek, for instance, to unduly restrict the liberty of religious organizations and to weaken the family, precisely because these also constitute spheres of freedom that check state power.

But if the economy features as the biggest single issue in the 2012 election, defenders of the market should be willing to supplement empirical economic arguments with full-bodied contentions about the nature of human happiness and how we realize it. To do so would not only be consistent with the very best of the American Founders’ vision; it would also breathe new life into America’s great and ongoing experiment of ordered liberty. 

Samuel Gregg is Research Director at the Acton Institute. He has authored several books including On Ordered Liberty, his prize-winning The Commercial Society, Wilhelm Röpke’s Political Economy, and his forthcoming Becoming Europe: Economic Decline, Culture, and America’s Future. This essay is part of the 2012 Election Symposium. Read all of the entries here:

• Ryan T. Anderson, “Liberty, Justice, and the Common Good:
  Political Principles for 2012 and Beyond”
   
• O. Carter Snead, “Protect the Weak and Vulnerable:
  The Primacy of the Life Issue”
• Maggie Gallagher, “Defend Marriage: Moms and Dads Matter”
• Samuel Gregg, “Fix America’s Economy:
  Two Principles for Reform”
• Ed Whelan, “Defend Our Laws: Justice Matters”
• Helen Alvaré, “Uphold Conscience Protection:
  Religious Freedom’s Contribution to the American
  Experience and Threats to its Survival”
   
• Jennifer Bryson, “Promote Democracy:
  Start at Home but Don’t Stay at Home”
• Yuval Levin, “Heal the Sick and Reduce the Debt:
  The Moral Economy of the Healthcare Debate”
• Jane Robbins, “Empower Parents:
  Return Educational Policy to the States”
• Patrick Trueman, “End Child Pornography:
  Enforce Adult Pornography Laws”
• Laura Lederer, “End Human Trafficking:
  A Contemporary Slavery”
   
• Robert P. George, “Reflections of a Questioner:
  The Palmetto Freedom Forum Revisited”

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Copyright 2011 the Witherspoon Institute. All rights reserved.

In the present conflict, this temptation has been most powerfully felt by, and has most successfully coaxed to action, the American left. In recent weeks, liberal legal and political commentators have claimed that, should Congress fail to raise the debt ceiling, the President, in order to prevent default, would be constitutionally authorized to incur new debt on behalf of the United States. Defenders of this idea pointed to the Fourteenth Amendment, which states that the “validity of the public debt of the United States, authorized by law . . . shall not be questioned.” This language, however, cannot plausibly justify the power some have claimed for the President.

The Amendment speaks of debt “authorized by law,” thus creating a heavy presumption that in our system of government, public debt can be incurred only by an act of the legislative power. This, indeed, is the explicit sense of the Constitution in Article I, Section 8, which provides that Congress “shall have the power . . . to borrow money on the credit of the United States.” On a plausible reading, the Fourteenth Amendment provides that the debt of the United States may not be repudiated. That only means, however, that should the government fail to make good its obligations, its creditors could take their grievance to the Courts to get their claims lawfully enforced. The Amendment says nothing in general about how the monies to pay the debt should be raised, and it certainly is completely silent on any executive power to raise such monies. It therefore contains nothing to modify or repeal the express provisions elsewhere in the Constitution that only Congress has such an authority.

Indeed, Article I, Section 8 of the Constitution gives Congress not only the power to borrow money on the credit of the United States, but also the power to “lay and collect taxes, duties, imposts, and excises, to pay the debts” of the United States. Therefore, if the interpretation advocated by the President’s partisans in the present dispute were correct, it would equally prove that the President, to avert default, could impose new taxes. Surely this implication is sufficient to bring to light the radically unconstitutional nature of the presidential power that is being suggested. Indeed, if the President may issue debt to prevent default when Congress will not raise the debt ceiling, then there is nothing to prevent him from vetoing whatever debt ceiling increase Congress might enact and then raising the revenues on his own authority and spending them according to his own discretion. To affirm the power of the President to issue debt would be indistinguishable from denying Congress the power of the purse, and would accordingly constitute a giant leap in the direction of one-man rule of our nation’s finances.

It is also worth noting that this expedient, which is presented as a way of preserving the credit of the United States and preventing the evils that would arise from a default, would, in all likelihood, do the reverse. Those who defend the idea note that even a temporary default on the nation’s debt payments would drive up rates of interest and make the public debt even more crushing. Continued borrowing will be necessary for the short and even mid-term, and new lenders would, in light of such a default, demand greater compensation for the now much greater risk of a future default. This analysis is correct, but the issuance of executive-authorized debt would do nothing to address it helpfully. The worst thing you could say about debt incurred on the authority of the President alone is that it is absolutely invalid and therefore not worth the paper on which it is printed. On the other hand, it is possible that the courts, in the end, might uphold the validity of such debt despite its obvious constitutional infirmity. It is possible, but not certain. Accordingly, the best thing you could say about executive-authorized debt is that its value is highly questionable and that it might never be repaid. In view of these circumstances, which will be evident to anyone in a position to lend to the government, executive-authorized bonds would have to command a very high rate of interest to compensate for the real possibility that they would never be repaid, and the near-certainty that if they were repaid, it would be only after a costly and uncertain process of litigation—one in which the Congress of the United States might be contending against their validity.

Unfortunately, in the debt ceiling controversy, the American right has also succumbed to the impulse to politicize constitutional interpretation, although not as brazenly as has the left. In response to the above interpretation, some conservatives have claimed that the Fourteenth Amendment does not create any executive authority but that it instead limits it, that it in fact requires what President Obama and his supporters surely do not want: namely, it requires the President, faced with insufficient revenue because of Congress’s refusal to raise the debt ceiling, to use present tax revenues to service the existing debt before paying for any other government programs. This interpretation was advanced, for example, by Republican Senator Mike Lee of Utah.

This, too, is an overreaching interpretation. The language of the Fourteenth Amendment, read impartially, does not really constrain executive discretion in this manner. Again, the pertinent passage holds that the “validity of the public debt of the United States, authorized by law . . . shall not be questioned.” This passage certainly means that the public debt cannot be repudiated by the government of the United States, but it does not prescribe any specific course of conduct for a president confronted with government revenues unequal to government commitments. A president in that situation would find himself with insufficient resources to meet all legislatively authorized objects; in the absence of legislation specifically constraining his choices, he would be free to use his own discretion as to which public obligations should be paid for first and which should, temporarily, at least, go unpaid. He might well decide to pay for other government programs before paying on the debt service. The exercise of such discretion would in no way deny or question the “validity” of America’s public debt. It would merely represent a temporary concession to a real and insuperable necessity: the absence of revenues with which to meet all the obligations Congress has authorized.

This is not to deny that there are powerful prudential and moral reasons to treat the public debt as having a claim on revenues prior to that of any other governmental obligations. After all, by damaging the nation’s credit, missed debt payments will likely do more harm to the national interest than, say, postponed expenditures for authorized programs, or even delayed social security checks. Also, the moral obligation to pay the public creditors is more pressing, because the government’s relationship to them is contractual. That is, it has promised to pay them back on a certain schedule, while other government programs represent more of a decision to execute a certain policy than a promise to specific individuals. Nevertheless, these prudential and moral considerations cannot be understood to impose a constitutional constraint on the discretion of a president faced with inadequate revenues. After all, one can easily conceive some public needs—such as defense or intelligence—that a prudent president might place even before paying the nation’s creditors. And once we concede this much discretion, there is no credible constitutional principle on which to limit that discretion at all.

Such politicization of constitutional interpretation, whether of the left or the right, threatens deep harm to our way of life as a nation committed to constitutional government. The point of the Constitution is to foster energetic but moderate government that can secure the common good while protecting fundamental liberties. It can only achieve that worthy end, however, if its provisions have a stable meaning that is largely immune to political perversion. Put more simply, the Constitution is meant to establish the rule of law, but there can be no rule of law in any meaningful sense when the fundamental law is routinely subjected to implausible interpretations that are pressed for the sake of temporary political advantage.

Resisting the politicization of the Constitution also has a bearing on our nation’s financial and economic fortunes. The credit of the United States reached its unsurpassed quality not only because the government has reliably paid its debts, but also because it has a system of laws, including the fundamental law of the Constitution, that renders the government’s behavior more regular and predictable than that of most other nations in the world. When we bend the Constitution to passing political purposes, however, we introduce an element of anti-constitutional banana-republicanism into what is meant to be a government of constitutionally delegated and distributed powers. We thus strike deeply at our reputation as a nation of laws, and that reputation is no less essential to its credit than its record of repaying its debts. Consider this in relation to the liberal claim that the Fourteenth Amendment authorizes the President to issue debt. By attempting to do so, he might succeed in temporarily making certain immediately pressing debt payments, but he would at the same time render the general principle of debt-repayment questionable. After all, if one can ignore a constitutional provision as clear as that which empowers only Congress to borrow money on the nation’s credit, one could just as easily ignore the Fourteenth Amendment’s provision that the validity of the nation’s debt shall not be questioned.

The temptation to politicize the Constitution is understandable. Everyone who is seriously engaged in politics passionately wishes for his side to prevail, and so deeply desires to impress the Constitution into the service of his cause. Nevertheless, for the sake of maintaining a free and prosperous polity under the rule of law, this temptation should be resisted with a resolution more than equal to it.


Carson Holloway is a Political Scientist and the author of, most recently, The Way of Life: John Paul II and the Challenge of Liberal Modernity.

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First, in this era of political correctness, it appears that Americans are increasingly less likely to acknowledge what should be common sense—that “single parenthood and divorce make people and countries poor.” Harnish McRae continues by affirming that in order for these disconcerting trends to change, there must be an “altering of people’s attitudes.” Although we should always show compassion toward individuals who suffer from problems unique to non-traditional family structures, divorce, and pre-marital intercourse, none of these should be regarded from a morally neutral standpoint.

Second, in the name of compassion, people should acknowledge the unique challenges faced by children from non-traditional family structures. As Sara McLanahan states, “More than half of the children born…will spend some or all of their childhood apart from their biological fathers.” Unless more Americans acknowledge the unique challenges faced by many children in these family structures, the needs of so many youth will not only go unrecognized, but also unmet. In spite of these facts, American society has done little or nothing to defend the well-being of children in such a way as to reduce the liklihood of family dissolution. In fact, one can even argue that the U.S. government has instituted a tax system and implemented welfare programs that clearly undermine the strength of the family.

Third, American society should stop devaluing fathers and recognize that they are a crucial pillar of the family. Although parental divorce is far more common than it was prior to1963, research still indicates that children function best when they have both their biological parents present. Copious studies show that fathers and mothers each provide qualities that are very difficult, if not impossible, for the other gender to replicate. Not only have too many academics and leaders downplayed the effects of non-traditional family structures on children, but they also have devalued and in some cases even disparaged the roles that fathers play in the family. David Popenoe argues, “Fathers are important to their sons as role models. They are important for maintaining authority and discipline” as well as for helping sons develop “empathy” toward others. Research studies also consistently show that parents are far less likely than stepparents or other sexual partners to abuse children in the household.

Fourth, American society and particularly certain facets of society, such as Hollywood and the academic world, need to be more responsible in communicating to youth the importance of acting not only with integrity and sensitivity, but also with a prudent view of the long-term consequences of their actions. Since the 1960s, the average age of a person’s first act of sexual intercourse has lowered steadily. For youth to have their first act of sexual intercourse between the ages of eleven and thirteen is now quite common. In addition, during the 1960s until about 1970, only 2% of adults were cohabitating. Now approximately one-quarter of young adults engage in this type of relationship. Although many people identify these problems as those associated with racial differences, they are actually problems more closely connected to family structure than to race. “About 70% of African-American children are born out of wedlock, and many of the problems and challenges that people generally associate with African Americans are understood in a more complete and accurate context “when one considers this reality.” Teaching responsible behavior among young adults is imperative.

Fifth, American society needs to encourage institutions that serve to strengthen the family, including the church and other groups that promote loyalty and justice. Scholars have argued for many decades that Christianity promotes economic prosperity by its direct promotion of the family and by its support for a value system that is consistent with bringing wealth both to individual families and to the nation as a whole. Clearly, the Bible encourages not only marriage, but also marital fidelity and the faithful raising of children. Scripture exhorts parents to love and serve members of their family and to form children into loving, responsible adults. The phrase “faith and family values” is commonly used largely because of the connection between the Bible and strong families.

Robert Barro and Rachel McCleary present one of the most thorough examinations of the relationship between religion and economic prosperity. Essentially, their research concludes that “religion is good for the economy.” Americans should value churches and other institutions that esteem and promote marriage, faithfulness, and raising children in the ways of integrity.

Quantitative research makes it clear that marriage is a key pillar of economic prosperity. Unfortunately, the present system of government in the United States discourages marriage, marital fidelity, and loyalty to one’s spouse. As Popenoe asserts, “Women no longer need men for provision or protection…they have access to government supported welfare programs.” To make matters worse, Daniel Patrick Moynihan may have said it right when he asserted that too many Americans were defining deviance down. An increasing number of social scientists believe that the matter of family dissolution is being taken far too lightly by American society at large. As Popenoe observes, “Because children represent the future of our society, these negative consequences are a social calamity in the making.” As long as non-traditional family structures are becoming more widespread in American society, stimulus packages, no matter how highly leveraged they are in debt, will not raise the United States out of its present malaise.

A nation clearly lacks proper priorities when the basic truths that have prevailed in its society for several centuries are mercurially discarded in favor of programs that are unproven, ineffective, and unnecessarily complicated. When such a large number of non-traditional family structures are surging, many economic policies are relegated to short-term effects. Americans would do well to substantially reduce the extent to which they rely on government for economic solutions to the nation’s struggling GDP and instead rethink their definition of a healthy family based on eternal principles that have stood the test of time.


William Jeynes is Professor of Education at California State University, Long Beach. He is a Senior Fellow of the Witherspoon Institute.

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The present political and economic strategies proposed to resolve our problems are patently superficial, especially when one considers that the surge of non-traditional family structures has unleashed deleterious forces upon the American economy for nearly five decades. It is probably no accident that, statistically speaking, the United States reached the pinnacle of its economic power in the mid-to-late 1950s. At that time, although the United States comprised just slightly over 5% of the world’s population, it produced 56% of the world’s goods.The United States then enjoyed the highest marriage rate in the world. By contrast, today America has the world’s highest divorce rate.

After a slight but steady decline from 1948 to 1962, the American divorce rate skyrocketed in 1963 and continued to rise for 17 consecutive years; the levels have hardly abated since. Daniel Lapin expresses the conclusions of countless social scientists when he argues that “for less than fifty years we have been living with the result of saying all ways of organizing families and societies are equally valid.” Aside from their pervasive effects on a number of behavioral and academic outcomes, non-traditional families produce a prodigious drag on the American economy. It is distressing that we apply what are nothing more than band-aid solutions to fix the American economy when these family factors are some of the most substantial long-term forces debilitating the country’s financial health.

The relationship between the two-biological-parent family and economic prosperity is an immense one. As Harnish McRae observes, “the conventional family is an efficient mechanism for combining bringing up children and making a living.” There are a number of reasons why non-traditional family structures constitute such a drain on the American economy. In fact, unless this trend is reversed, the United States appears destined to lose its position as the world’s foremost economic power, a position it has enjoyed since about 1900.

First, non-traditional family structures are the greatest cause of American children’s living under the poverty line. In the United States, only about 10% of children raised in a two-parent family live below the poverty line. Approximately 66% of children from single-parent families live below the poverty line. In addition, nearly 50% of adults who have lived on welfare consistently started there after becoming a single parent. Nicholas Wolfinger notes, “Divorce often takes a dramatic toll on women’s incomes. Partially as a result, rates of poverty for mother-headed households traditionally have been about five times those for two-parent families.” Since the rates of single-parenthood have risen so greatly, the largest proportion of the poor is no longer the elderly, but children.

Second, the United States has spent an unprecedented amount of money to support these children. No nation in the history of humanity has spent so many billions of dollars to improve the financial situation of the impoverished. From this we can conclude that no other civilization has ever so vigorously attempted to ameliorate the situations of single-parent children. The percentage of American children under the poverty line rose from 14% in 1969 to 20.6% in 1990. A growing number of researchers and politicians are acknowledging that the best anti-poverty program for children is a stable, intact family. The United States is creating a society in which the major distinguishing feature between the “haves” and the “have nots” is which child has a father at home.

Third, the prevalence of non-traditional family structures is putting the offspring of these parents at a competitive disadvantage with children from intact families, so that a smaller percentage of children from non-traditional families will likely realize their potential. Lief Jensen, David Eggebeen, and Daniel Lichter conclude that “changing family structure is the greatest long-term threat to U.S. children.” Children from non-intact families are much more likely to be on welfare.

McRae observes that “another set of costs is imposed by family break-up … Even after adjusting for the greater poverty of one-parent families, it appears that their children are more likely to leave school early, and to be unemployed than children from homes with two parents present.” Today it is almost universally recognized that the scholastic achievement of children wields great power over their future economic success. Poverty that results from single-parenthood is one of a variety of factors that causes single-parent families to be less stable for children than if they lived in an intact two biological parent family.

Fourth, the increase of non-traditional family structures has produced a large number of children who suffer from behavioral problems. Their struggles have robbed them of a good future and have hurt the lives of countless others affected by their actions. These behavioral problems significantly impact the long-term economic welfare of these youth.

Boys from single-parent families are much more likely to join gangs than their counterparts in two-parent families. Generally speaking, about 90% of adolescents and pre-adolescents in gangs come from single-parent families. This finding is consistent with conclusions reached by psychologists that one of the primary reasons that boys join gangs is because they are looking for a surrogate father. David Blankenhorn observes, “Put simply, we have too many boys with guns primarily because we have too few fathers.” Research has shown that many youth possess feelings of anger toward one or more family members because of family dissolution or because the child does not know who his or her father is.

Social scientists cannot be phlegmatic about the influence of single parenthood on children, because the consequences of this family structure are much more far-reaching than short- (or long-) term economic instability. David Popenoe declares,

Father absence is a major force lying behind many of the attention-grabbing issues that dominate news: crime and delinquency, premature sexuality, and out-of-wedlock teen births, deteriorating educational achievement, depression, substance abuse, and alienation among teenagers, and the growing number of women and children in poverty.

The truth is that children from fatherless homes are more likely to be rapists, murderers, or commit suicide. They are more likely to drop out of school, to be unemployed for long periods of time, and to be homeless. They are more likely to abuse women and their own children. The need for compassionate individuals who can reduce the effects and, more broadly, the incidence of single-parenthood is manifest. Children from intact families are less likely to have pre-marital intercourse and are less likely to get divorced than their counterparts from non-traditional family structures. On average, children from intact families consistently fare better by almost every measure of psychological, behavioral, and academic well-being than their counterparts in non-intact families. As Popenoe avers, “the problem of divorce would surely be less serious if children were not involved.”

If one considers Japan and South Korea as the nations that have experienced the greatest increase in their standards of living since 1960, it is no accident that each of these nations had very low levels of single parenthood during their times of explosive economic growth. During the 1960-1990 period, which was Japan’s period of most dramatic growth, the divorce rate in Japan was one of the lowest in the industrial world. Outside of the United States in the 1950s, it is also interesting to note that West Germany and Japan grew the fastest in legal marriages per 1,000 in population. In the 1960s, Japan surpassed the United States as the country with the highest marriage rate. Over the next twenty-five years, Japan has had the fastest growing economy in the world. (In the U.S., the divorce rate surged after declining from 1948 to 1962, so that the U.S. surpassed all industrial nations in this measure.) Similarly, today Korea has the lowest rate of pre-marital intercourse in the industrialized world. There is often a high positive correlation between marriage rates and Gross Domestic Product (GDP) growth, and a negative correlation between divorce rates and GDP growth. Granted, these statistics are correlational and, were they to stand by themselves, they would not necessarily imply causation. However, the juxtaposition of these statistics with other facts indicates some of the reasons why there is such a strong relationship between marriage and economic growth. Appreciating this relationship can yield economic and social policies that are teeming with acumen far more than the policies of the present administration.

What should we do about these findings? Answers to that question in part two of this article.


William Jeynes is Professor of Education at California State University, Long Beach. He is a Senior Fellow of the Witherspoon Institute.

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In very broad terms, social contract theory is a way of understanding the relationship between governments and the people. It holds that, having agreed upon the need for a government, individuals create a state on the basis of mutual promises. This permits the state to claim that its authority is based on a delegation of people’s rights to pursue their particular interests in their own way.

Our present economic disputes are, at a deeper level, about the precise content of those mutual promises. One influential interpretation may be found in John Rawls’ Theory of Justice.

On the basis of what reasonable people in an imaginary “original position” and blinded by a “veil of ignorance” about their future abilities, social status, etc., would want, Rawls argued that each person had “an equal right to the most extensive total system of equal basic liberties with a similar system of liberty for all.”

As part of this calculation, Rawls maintained that no one in the original position would risk being abandoned at the bottom of the social heap. Rawlsian social contract theory has thus, economically speaking, usually been interpreted as translating into extensive entitlement programs and large welfare states.

At the other end of the social contract spectrum is an older concept. This was given prominent expression in John Locke’s Second Treatise of Government.

In Locke’s view, what he called “the Law of Nature” meant that individuals were morally bound not to damage other people’s lives or property. The only way to ensure that this was given effect was through a government that defended everyone against anyone else’s attempts to damage their lives or property. The citizens thus agreed to set up a state that would protect the life, liberty, and property of everyone living under its sovereignty.

In economic terms, this position broadly equates to a state that focuses upon protection of property rights and adjudication of contractual disputes. Issues of distribution according to criteria such as need are deemed beyond the state’s competence.

The significance of these understandings of the social contract is difficult to overstate. The Lockean conception profoundly shaped the Declaration of Independence and much of today’s movement for limited government. By contrast, the Rawlsian interpretation represents the most contemporary philosophical underpinnings of modern American progressivism.

Indeed, once we bracket out the technical economic arguments informing today’s opposed positions—symbolized by, say, President Obama and Congressman Ryan—it’s likely that most of the philosophical assumptions informing today’s heated discussion of political economy fall more or less into one of these camps.

But both conceptions of the social contract pose significant problems. Ironically, it was the libertarian philosopher Robert Nozick who pointed out in Anarchy, State and Utopia that Locke (seen by some as one of libertarianism’s progenitors) “does not provide anything remotely resembling a satisfactory explanation of the status and basis of the law of nature in his Second Treatise.”

As for Rawls, numerous scholars have observed how his particular social contract theory simply excludes widely accepted criteria of justice, which leads to endorsement of essentially unjust wealth-distributions. For once we exclude considerations such as merit and desert (as Rawls insists we must), we cannot look backwards to judge who, for example, has worked harder or contributed more. We are thus forced to make arbitrary judgments about when to assess the validity of the precise distribution of wealth at any one point of time in the future.

If, then, considerable incoherence characterizes each of these positions, perhaps we should consider that something may be wrong with the very notion of a social contract itself.

One problem is social contract theory’s assumption that society is essentially artificial. This flies in the face of the commonsense observation that humans are naturally social and political beings. Another difficulty is that the people’s supposed delegation of authority to a government is—as figures as different as the natural law scholar John Finnis and the father of modern skepticism David Hume have noted—invariably a fiction rather than a real historical act.

A third problem lies in social contract theory’s conscious choice to eschew robust conceptions of human happiness, flourishing, or any substantive discussion of the proper ends of human choice. Much social contract theory assumes there is such disagreement about these matters that it is better to avoid them altogether (which itself invariably ends up privileging particular positions).

With other social contract theorists, there’s often an unspoken commitment to relativism. In the end, happiness is whatever you “feel” (not reason) it to be. The main action is subsequently to be found in arguing about the rules of the game that might be agreed upon by what an older Rawls described as a “reasonable overlapping consensus” (which turns out to be less than reasonable, far from overlapping, and based less on agreement than upon who turns out to be more ruthless in seeking official endorsement of their particular desires).

But what if there are in fact conceptions of the flourishing of free, rational, individual, social, creative, and flawed human beings that can be demonstrated by reason alone to be more coherent than other conceptions?

What would be, for instance, the implications for political economy if it could be reasonably demonstrated that entrepreneurship, for example, is not only central to wealth-creation but also an action through which I can realize virtues such as industriousness, prudent risk-taking, and courage?

Note the implicit claims underlying this example: that, in themselves, industriousness, courage, and prudent risk-taking are good, and that laziness, cowardice, and recklessness (or excessive caution) never constitute human flourishing. The way to prove this is to ask ourselves who can reasonably claim that, for instance, laziness is ever intrinsically better than industriousness.

Granted, attention to human flourishing does not in itself resolve every question posed by concerns for freedom and justice in the economy. It does, however, give content to a number of ideas that help us think coherently about important aspects of political economy, such as the state’s role in economic life.

A basic requirement for human flourishing is that we act for ourselves—as the fruit of our own reflection and choices—rather than have others act for us. It is thus extremely important that people are free to make such choices.

To make these choices in economic life, people need certain things. For most people, it’s very hard to take the risk of starting a new business without a loan and it’s often imprudent to do so without such assistance. The same people, however, also require the liberty to make the choice to start the business for themselves. We will never know how many potential entrepreneurs have been deterred from taking a prudential risk by all 9,834 sections of the United States’ Internal Revenue Code.

The principle that helps us to resolve these dilemmas in ways consistent with a commitment to human flourishing is the oft-cited, much misunderstood concept of subsidiarity.

Subsidiarity’s genius is the manner in which it uses this attention to free choice, human flourishing, and the need for support to provide guidance concerning how we apply subsidiarity’s two axioms of non-interference and assistance. It helps us determine (1) what economic roles can only be performed by the state (such as the provision of courts to adjudicate contractual disputes); (2) when the state should allow other communities to provide assistance (private banks should normally be the first place of call for loans); (3) when the state should intervene outside its normal economic responsibilities (when those communities that would normally assist are clearly unable to do so); and (4) when such interventions should cease (when they start impeding human flourishing or when the communities that normally provide assistance are now able to do so).

Does this always produce clear-cut answers about the state’s economic role? No. There will always be reasonable disagreements over precisely when an intervention should begin or cease.

But the process of deliberation is one marked by coherence and undergirded by a reasonable conception of human flourishing that takes free choice and assistance seriously. It also helps to rescue contemporary political economy from the fictions and cul-de-sacs associated with social contract theory. That subsidiarity tends to facilitate more efficient outcomes and would most likely result in scaling back what many regard as the state’s currently excessive economic role is, in some ways, beside the point.

None of this means that technical economic arguments about matters ranging from the efficacy of markets versus neo-Keynesianism to the merits of fiat money versus the gold standard are unimportant. If anything, these issues require even more attention.

But political economy, strictly speaking, has always been about more than positive economics. A serious concern for human flourishing has the potential to transform our starting-points for economic reflection. Given the serious failures of much mainstream economics over the past decade, what have we got to lose?


Samuel Gregg is Research Director at the Acton Institute. He has authored several books including On Ordered Liberty, his prize-winning The Commercial Society, and Wilhelm Röpke’s Political Economy.

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Or consider the work of Lee Epstein and Jack Knight in what is viewed as the most important book on judicial behavior in the past generation, The Choices Justices Make (1998). In explaining the causes of justices’ behavior, Epstein and Knight write, “Among the most important of these is the primacy of policy preferences; that is, judicial specialists generally agree that justices, first and foremost, wish to see their policy preferences etched into law. They are, in the opinions of many, ‘single-minded seekers of legal policy.’” While policy preferences are the most important determinant, according to Epstein and Knight, they go on to show how Justices act strategically, given the institutional constraints of the Court and other branches of government, to get their preferred outcome.

Both of these examples, from Congress and from the Court, show the insufficiency of the reigning models of political science. They are either simply false, or they’re tautological. Anyone familiar with elected officials, or who pays any attention to electoral politics, knows that there are differences among politicians. Some really are single-minded reelection seekers. But some aren’t. Some take positions on controversial issues that cost them votes, and they do so knowing that it will cost them votes. Are the actions of a Rick Santorum or Sam Brownback or, for that matter, a Joe Lieberman, best understood as rationally selected means to the end of reelection? Or might some politicians take positions on policy that they truly think best, consequences be damned? This is an empirical question. And an empirical science can answer it only if it does not start by assuming an answer.

So, too, with the Court. Without a doubt, there are some justices whose behavior has quite explicitly revealed that their loyalty is not to the Constitution, but to the policy outcomes they prefer. But is this the best explanation of Scalia’s vote to uphold the constitutionality of flag burning? Might Justice Scalia and Citizen Scalia vote differently if it came to a question of the current constitutionality of flag burning, and the question of whether to amend the Constitution to prohibit it? Again, the only political science that can tease out when a justice is deciding cases to advance a policy preference and when a justice is deciding cases based on his best reading of the Constitution will be one that doesn’t assume that all justices act to advance policy preferences. Insofar as good constitutional law is simply treated as a “legal policy” preference, then the theory simply becomes a tautology; the input and the output of the theory contain the same exact variable: justices decide cases according to how they think cases should be decided. This is, of course, no explanation at all.

I mention these two examples from political science to show how similar faulty assumptions lie at the heart of economic science (which views man as a “single-minded utility seeker”), and thus John Mueller’s Redeeming Economics: Rediscovering the Missing Element can profitably be read by many social scientists seeking a cure for what ails their disciplines. Mueller, following Gary Becker, notes that most modern economic theory assumes that “consumers derive satisfaction or ‘utility’ directly from products that they purchase in the market from business firms and that in demanding such goods, consumers seek to maximize their satisfaction.” Mueller then discusses Becker’s helpful modifications to this theory. But with or without modifications, Mueller argues that the theory is incomplete, for the choice of goods as means does not tell us whom the goods will be chosen for as ends. Insofar as economic theory addresses the issue of ends at all, it pushes it off as if it were a normative question.

But this question cannot be removed from any descriptive theory, for an adequate theory needs to provide an analysis of the ends chosen. As Mueller writes, “Neoclassical economics does not provide a coherent, empirically verifiable description of how people actually choose—rightly or wrongly—to distribute the use of their resources, whether as individual persons, as members of a family household, or as a whole society under the same government.” Insofar as contemporary economists have tried to answer the question, they “have tried to deduce final distribution from utility—in effect, to argue that the economic means determine the economic ends.” But as we have seen from the above examples in political science, this “approach relies on circular logic, and its hypotheses about final distribution are either empirically false or not falsifiable [i.e., are tautologies].”

That capitalism breeds a culture in which everyone is a self-interested utility maximizer is not a conclusion that good social science has taught us, for it’s an assumption built right into the foundation of the economic theory. So it should be no surprise that the popular presentations of the theories conclude that businessmen are greedy, self-interested, and concerned only with the bottom line: How could the science, given its starting assumptions, conclude otherwise? But whether all businessmen are greedy or not, in fact, is an empirical question. And to answer it, one will need to employ a methodology that actually considers and investigates distribution. That is, a sound philosophic anthropology reveals that “a complete description of economic behavior has always required both a ranking of persons as ends of economic activity—the distribution function—and a ranking of scarce goods as means—the utility function.”

Mueller’s discussions of Augustine’s theory of distribution are perhaps the most important contributions of Redeeming Economics. He praises the scholastic theory of economics because it can be formulated as “a set of economic equations” that is “logically complete,” “empirically verifiable,” “purely descriptive,” “valid at every level of analysis,” and, therefore, such that “the outline itself never changes in the least.” But this is possible only with the reintroduction of distribution. Augustine’s key insight was that, no matter what, “every human does, as a matter of fact, always act with some person(s) as the ultimate end or purpose of action.” While Augustine’s normative teaching about the proper ordering of loves sought to guide people to make the right choices in selecting God and other people as ultimate ends, one shouldn’t overlook the reality that all of our choices, right or wrong, place someone as the end of our actions.

Economic science goes wrong in assuming that “every human acts solely for him- or herself. That is precisely what each person is free to decide.” As Mueller argues, “each of us has not only a scale of preferences for instrumental goods as means but also a scale of preferences for persons as ends of our actions.” With this understanding in place, Mueller can develop his modified Augustinian theory of gifts, exchange, and crimes. Whereas contemporary economics reduces all human activity to exchanges, Mueller argues that we make gifts towards those we particularly love, commit crimes against those we fail to love, and make exchanges with those in between.

The crucial distinction is one between benevolence and beneficence. While we are called to love our neighbor as ourselves, we are not (because it would prove impossible) called to love our neighbor equally with ourselves. Mueller argues that, for Augustine and Aquinas, there are “two ways in which we can love our fellow man: benevolence, or goodwill, which can be extended to everyone in the world, and beneficence, or doing good, which cannot.” Because our goods are scarce resources, we cannot be beneficent with everyone; we have to prioritize certain people (ourselves, our families, our immediate neighbors) to be the objects of our economic actions. As Augustine taught, “Since you cannot do good to all, you are to pay special regard to those who, by accidents of time, or place, or circumstance, are brought into closer connection with you.” At the same time, we can be benevolent to all by respecting their wellbeing in refraining from causing harm (in economic-speak, in refraining from giving them a negative value on the distribution scale).

There is too much in the many pages of Redeeming Economics to be discussed here. In addition to his discussion of the history of economics, Mueller insightfully applies his neoscholastic economic theory to topics of personal economy (the “mother’s problem,” homicide, and the Good Samaritan), domestic economy (discussions of marriage, childbearing and rearing, lifetime family earnings and spending), and political economy (discussions of infant industry, unemployment, and inflation). The book closes with a short but insightful consideration of “divine economy” and the three different worldviews that underlie classical, neoclassical, and neoscholastic economic theories. Two of Mueller’s applied discussions merit particular attention: abortion and crime, and parenthood and population.

In 2001, John Donohue and Steven Levitt claimed that “legalized abortion appears to account for as much as 50 percent of the recent drop in crime.” Mueller writes that Donohue and Levitt’s theory followed the “economic approach to human behavior,” based on “a highly restrictive set of assumptions to reduce human behavior to the choice of means—a maximization of ‘utility’—but also gratuitously redefines utility as a synonym for pleasure.” Investigating the same crime data, Mueller proposes to use his “human approach to economic behavior” to better explain the phenomenon by considering distribution based on “preferences for persons” and utility as our “order of preference for economic goods as means for those persons.”

Donahue and Levitt make a straightforward argument: Women abort babies when the utility in aborting is higher than the utility in bringing the pregnancy to term; babies aborted now are less likely to commit crime 20 to 24 years later; and because crime is disproportionately committed by African Americans, and because African-American babies are disproportionately aborted, the first effect is magnified. Their theory, Mueller argues, does not consider why people commit crime, but relies on an “environmental” explanation that people in lower socioeconomic classes simply commit more crime. Having fewer of “them” will result in fewer crimes committed.

Mueller’s response entails both a broadening of the data examined (he goes back further in history to examine all of the 20^th century’s crime fluctuations, and not just post-Roe behavior), and a deepening of the reasons examined. He notes that the data do not quite fit the story Donahue and Levitt tell about abortion and 20-year-delayed crime rates, but that the data do fit current rates of fatherhood and current crime rates. What Donahue and Levitt failed to realize is that the same young adults who pressure their girlfriends to have abortions—or who otherwise act as absentee fathers—are the same young adults who currently commit crime. The distribution function of their actions, demonstrating a strong preference for themselves over love of their children, begins to show the psychology involved not in ranking means and utility, but in ranking persons and distribution. In other words, “those behaviors which involve raising the significance of the self relative to other persons (crime and other antisocial behavior) also should be positively correlated with one another.” Applying his thesis to what really explains the abortion data, Mueller argues that “since the vast majority of homicides are committed by men, and because not all biological fathers take responsibility for their children, we should see the largest opposite shifts in the rates of economic fatherhood and homicide,” for “the time devoted to committing crimes against others is a subset of time not devoted to helping them.” When Mueller empirically tests his theory, he finds that “over the sixty-five years for which we have data, there is a 90 percent inverse trade-off between the current homicide rate and the current rate of economic fatherhood.” He concludes: “both Augustine’s and Becker’s theories can explain the behavior of people who are selfish, but only Augustine’s can explain the behavior of people who aren’t.”

In a similar way, Mueller uses his neoscholastic economic theory to explain why people have children. Current economic thinking tries to explain fertility rates in relation to social spending by the state and to national savings, the idea being that people have kids for reasons of economic utility, and when there is great social spending and savings, children are less useful. But Mueller insists, and has the facts to show, that neoclassical economics cannot “explain anything so fundamental as fertility—the reproduction of human persons—without the element of economic theory that describes one’s preferences for persons.”

As Mueller sees it, “people have children either because they love the children for their own sakes, or else because they love themselves and expect some personal benefit from the children (or some combination of these motives).” While government social spending and national savings might relate to the second reason, they do nothing to address the first reason. As an empirical measure of this, Mueller looks to weekly worship rates—a proxy to measure one’s preference for someone other than the self—for “whether the other person is God or another human being,” the decision to worship each week “entail[s] sacrificing scarce goods that could otherwise have been used for oneself.” The data show that “the rates of weekly worship and fertility are always positively related across countries, with relatively minor variation by religious denomination.” Once “purely selfish factors are accounted for, acting on belief in God . . . makes the crucial difference as to whether people reproduce themselves. It suggests that the personal gift of time and resources involved in worship is closely systematically associated with the personal gift of having children for their own sake rather than for the pleasure and utility of the parents.”

Mueller knows that his explanation of fertility rates “is not the last word” on the matter. Rather he offers it “as a first effort in what promises to be a fruitful new program of research.” The same could be said for the entirety of Redeeming Economics. It repays reading and re-reading, and its discussions of historical, analytical, and applied topics will be invaluable for anyone working in economics, political science, and philosophy, especially those working at the intersection of the three: political economy. For those concerned with normative questions of how we ought to structure of common economic life, an adequate description of that economic life will be required. But that description can be given only by recovering a more adequate anthropology. Utility must be seen at the service of persons. Utilitarianism fails both as a prescriptive and descriptive theory. And John Mueller has helped us all to “rediscover the missing element.”


Ryan T. Anderson is Editor of Public Discourse.

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A generation later, in Natural Law and Natural Rights (1980), the Oxford analytic legal philosopher John Finnis challenged the reigning orthodoxy within the legal academy that uncritically accepted legal positivism, either in its primitive Benthamite form or in the more sophisticated form proposed by Finnis’s mentor H.L.A. Hart. Finnis’s critique paralleled Strauss’s in being two-pronged, but went deeper in its identification of the grounds of our practical judgments in what Finnis called “basic human goods,” fundamental and irreducible aspects of human wellbeing and fulfillment that, as such, provide more than merely instrumental reasons for acting and whose integral directiveness offers a rational standard of moral judgment. The first prong of Finnis’s critique showed that even to attempt to perform the type of descriptive legal theory that Hart set out to do requires one to grasp focal cases of law, and thus to grasp the intelligible purposes—the human goods—that law, in the focal sense, seeks to secure, and that lawmakers must at least claim, for the sake of their own legitimacy, to be pursuing. Any adequate description, therefore, rests on getting these prior judgments right. The second prong of Finnis’s critique showed how these evaluative judgments in identifying focal cases and principles of right action are possible (hence his defense of basic human goods as first principles of practical reason).

Now, another generation has passed, and John D. Mueller’s new book, Redeeming Economics: Rediscovering the Missing Element, seeks to reorient the debates within economic theory in the way that Strauss reoriented debates in political philosophy and Finnis reoriented debates in philosophy of law. Mueller’s book is not quite on a par with the other two, for Mueller is not, strictly speaking, an academic: he is currently The Lehrman Institute Fellow in Economics at the Ethics and Public Policy Center, and has extensive experience as an economist, speechwriter (to Jack Kemp), and policy advisor (to Ronald Reagan). Redeeming Economics, however, displays the virtue of an author who possesses a breadth and depth of knowledge not only of economics but of a whole host of other topics, as well (including philosophy, theology, and political theory).

Redeeming Economics is an ambitious, wide-ranging book. Though it clocks in at 450 pages (100 of which are endnotes), it is intended for and accessible to the common educated reader. Its thesis is simple: In order to provide an adequate description of economic activity, one must take seriously the reasons actors have for their economic choices. Reducing everything to self-interest and utility is descriptively inadequate, because it fails to take seriously the real nature of economic behavior that seeks to benefit people. Though he is not primarily wrestling with questions of good and bad, right and wrong, Mueller’s critique is fundamentally akin to Strauss’s and Finnis’s in insisting that economic science attend to the salient aspects of human behavior and that only a sound philosophic anthropology can reveal which aspects are salient. Mueller knows that what he has written isn’t the last word on this topic, but an important first word, intended to provide an overarching critique of current neoclassical economics and launch us into the next phase, what Mueller dubs “neoscholastic economics.”

Neoscholastic economics will take its bearings from the economic theory first articulated by Thomas Aquinas. Unlike those who equate Aquinas with Aristotle, Mueller is clear that his is an AAA theory: “Aristotle + Augustine = Aquinas.” And in the first section of Redeeming Economics, Mueller provides readers with a history of economic theory from Aristotle to today. As Mueller tells the story, Aquinas was the first to put together a complete economic science by combining key insights from both Aristotle (on production, exchange, and political distribution) and Augustine (on personal distribution and consumption based on utility). Mueller explains:

The first revolution in economics had occurred five centuries before [Adam] Smith, when Thomas Aquinas (1225-74) set forth the basic elements of economic theory. Synthesizing the work of Aristotle (384-322 B.C.) and Augustine of Hippo (A.D. 354-430), Aquinas offered a comprehensive view of human economic actions. All such actions fall into four categories: humans produce, exchange, distribute, and consume goods (human and nonhuman). Thus the theory Aquinas outlined—known as “Scholastic” economics—had four key elements: the theory of production, which explains which goods (and how many of them) we produce; the theory of justice in exchange, which accounts for how we are compensated through the sale of goods for our contributing to their production; the theory of final distribution, which determines who will consume our goods; and finally, the theory of consumption (or utility), which explains which goods people prefer to consume.

Production, exchange, distribution, and consumption: Any adequate economic science will need to account for all four of these aspects of economic choice. And Mueller is insistent that this is true of all economic choices, across time and place, for individuals and families, corporations and nations.

The second revolution took place when Adam Smith, whom history holds up as the founder of economics, did a grave disservice to the science by eliminating from the economic equation both distribution and consumption based on utility. This incomplete economic science helps explain why classical economics did such a poor job of describing and predicting economic behavior. Neoclassical economics of the previous century or so, the third revolution in Mueller’s account, restored the utility variable, but it, too, Mueller argues, fails in its descriptive and predictive power, because it overlooks and thus reduces an irreducible variable. Only with all four variables restored, by the neoscholastic revolution Mueller hopes to spark, can economics flourish.

But before embarking on this fourth revolution, it behooves us to understand where economics went wrong. Joseph Schumpeter, the great economic historian of the 20^th century, wrote of Adam Smith in his History of Economic Analysis (1954) that “the Wealth of Nations does not contain a single analytic idea, principle or method that was entirely new in 1776.” Mueller goes a step further to say not only that Smith does not add anything to economics, but that his theory actually leaves out both distribution and utility.

The elimination of these two aspects should come as no surprise to anyone familiar with the debates in philosophy and political theory over the so-called “modernity project.” Consider how a Scholastic such as Aquinas understood various sciences. At the heart of Aquinas’s social thinking was a recognition that order exists on four irreducible planes, distinguished by how they relate to our mind and will: the order that exists in nature, independent of human thought and choice; the order that we bring into our thinking itself; the order that we bring into our thinking about what to do; and the order that we bring into our thinking about how to do it. These four orders give rise to four irreducible sciences: first, metaphysics and natural science to study what is, what exists independently of human choice; second, logic to study the relations of concepts; third, ethics and practical philosophy to study what is to be, the ends of human choice; and finally, the applied arts and sciences to study how to achieve those ends, the means.

Yet much of modern social thinking rests on the explicit rejection of this third order, and thus of this third science. Machiavelli announced the ambitions of this new political science in Chapter 15 of The Prince (1513): “Many have imagined republics and principalities that have never been seen or known to exist in truth; for it is so far from how one lives to how one should live that he who lets go of what is done for what should be done learns his ruin rather than his preservation.” In a thinly veiled assault on Plato’s Republic and Augustine’s City of God as the imagined republics and principalities that argued for how one should live, Machiavelli set out to reveal the “effectual truth” of how successful people do live. Implicit here was a reduction of political thought to the first and fourth orders. Investigate how people are (first order), and then reason about the means (fourth order), in this case, to staying in power, without any concern for how people ought to be, quite apart from how they might serve our interests (third order).

Thomas Hobbes and David Hume make this reduction even more explicit. In the Leviathan (1651), Hobbes writes that “the thoughts are to the desires, as scouts, and spies, to range abroad, and find the way to the things desired.” And in A Treatise on Human Nature (1739), Hume argues that “reason is, and ought only to be the slave of the passions, and can never pretend to any other office than to serve and obey them.” The third-order science that considered which ends one should act for has been eliminated. It is now for political science to study man’s passions as they are given (first order), and then to devise the best way to secure those ends (fourth order). If this is how one understands human action, then, of course, distribution (deciding which people should be the ends of one’s economic acts) will be eliminated from consideration.

Yet Adam Smith went even further. Smith was, of course, taught by David Hume and Francis Hutcheson (the famous Scottish Enlightenment moral sense/sentiment theorists). Mueller argues that Smith, in his quest for a Newtonian science of economics and under the influence of Stoic pantheism, went further than Hume to deny reason a role in selecting either the ends or the means. Smith thought that the sentiments fully determine human action, so that the only variables to explain are production and exchange: a streamlined science with fewer moving parts. (And, it should be noted, this theory of production and exchange logically leads to Karl Marx’s criticisms, based on Smith’s faulty “labor theory of value” of modern capitalism.)

With time, economists came to understand just how thin this theory really was and reintroduced the concept of consumption based on utility (helpfully refining the idea into one of marginal utility). This reintroduction of the Augustinian understanding of consumption based on utility corrected for the problems in both Smith and Marx. Rather than viewing the worth of objects for human consumption as intrinsic to the object (or the labor that produced the object), the theory of utility saw that an actor’s preference for an object, based in the utility it brought, explained the value in and the choice for the object. But this still left unexplained the choice of which person(s)—self, other(s)—would obtain the object. That is, it left out distribution. And rediscovering that element of economic science is at the heart of Redeeming Economics. More on that in Part II.


Ryan T. Anderson is Editor of Public Discourse.

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As a preliminary matter, I note that, unlike MacIntyre, virtue theorists generally have not rejected capitalism. Indeed, even the specifically Roman Catholic tradition of the virtues to which MacIntyre subscribes does not teach that capitalism is immoral. For example, in Rerum Novarum Leo XIII reaffirmed the Catholic teaching on the legitimacy of private property, including private ownership of the means of production, and this position has remained an important part of Catholic social teaching to this day. That others who draw on the tradition of virtue ethics have not detected the incompatibility that MacIntyre finds should raise doubts about whether such an incompatibility really exists.

One argument for that supposed incompatibility is that, according to MacIntyre, capitalism systematically teaches people to regard as a virtue the vice of greed. Now, this argument can be viewed in two ways: either empirically, in which case it means that, in fact, people living in capitalist societies are greedier than other people, or conceptually, in which case it means that capitalism includes a norm in favor of the unreasonable acquisition of wealth.

This latter strikes me as the more interesting form of the argument, and I discussed it in the First Things article, but Schaengold takes up the empirical version, arguing that “under capitalism, people who structure their lives around the pursuit of wealth are frequently richly rewarded, both with riches and with the praise and respect of their fellow citizens.” This is true, of course, but, as I explained at length in First Things, such things can be said about people in any society, whether capitalist or otherwise. Greed is a universal human failing, and moralists have decried it cross-culturally down the ages. That capitalist societies include some greedy people, or even many greedy people, does nothing to prove that capitalism encourages greed.

To make the empirical charge stick, MacIntyre and Schaengold have to show not that people in capitalist societies are greedy but that they are significantly greedier than people in non-capitalist societies. If we could measure greed statistically, compare the levels of greed across societies, and control for other relevant variables, such an argument might get off the ground, but I rather doubt that this is possible. It is certainly not possible with respect to societies from the distant past, and so reliable historical comparisons are probably forever beyond our reach. This leaves MacIntyre and Schaengold with their vague impressions of what life was like at different times and places, but such impressions are not serious evidence that people in contemporary capitalist societies are greedier than others. O tempora, O mores! Indeed, for any impressionistic comparison cutting in one direction, there will be another cutting in the opposite direction. For example, Schaengold points to medieval usury laws as proof that medieval societies suppressed greed, but as checks on the accumulation of wealth these are nothing compared to the progressive income tax, the estate tax, the labor laws, consumer protection statutes, the social security system, welfare, public housing, and the vast array of wealth-redistribution programs characteristic of advanced capitalist societies. To judge by legal structures, it seems clear that capitalist societies are less greedy than medieval societies, not more so.

Schaengold next says that, for Aristotle, the function of the state is to promote comprehensive human flourishing—in Aristotle’s words, “what is advantageous for life as a whole” and in Schaengold’s words, “the flourishing of each of its members in sufficiency.” Schaengold says—quite rightly, I admit—that the liberal state does not see itself as having such a function. Therefore, Schaengold concludes, the liberal state and the Aristotelian one are importantly different.

The first point here is that, in my First Things article, I was not talking about the liberal state. I was talking about capitalism, which is a set of economic arrangements (e.g., strong property rights, freedom of contract, minimal governmental interference in market transactions), not political ones. Although often combined, capitalist economics and liberal politics are conceptually distinct and practically separable. Witness Singapore, which has a fiercely capitalist economy but surely not a liberal political regime. So Schaengold’s argument is basically misdirected here: I said that Aristotelianism is compatible with capitalist economic arrangements, but Schaengold replies that Aristotelianism is not compatible with liberal political arrangements.

Still, capitalism and political liberalism sit easily together, and so I am happy to take up Schaengold’s argument. In my view, the key point is that, whatever it means to say that an Aristotelian state aims at the comprehensive flourishing of its citizens, it does not mean what it sounds like—i.e., a totalitarian state seeking to control all aspects of life. Aristotle thinks, and I think, that there are some things that the state can do much better than other organizations and so are the special province of the state—for example, providing for the national defense, making and enforcing a criminal code, maintaining courts for the settlement of civil disputes, and so on. Of course, the modern liberal state does all these things and vastly more besides, including many things no doubt best left undone.

So the question becomes what, in Schaengold’s view, the state ought to do that a liberal state does not do, and to this question I think there is no plausible answer. Certainly Schaengold provides no examples in his essay. For my part, if I ask myself what else the state might do to help me live a good life, all that comes to mind is the famous declaration of Ronald Reagan: “The nine most terrifying words in the English language are, ‘I’m from the government, and I’m here to help.’”

More generally, human beings need certain things in order to live good lives, including some things that are best provided by the state (e.g., physical security), some things that are best provided by the market (e.g., most goods and services), and some things that are best provided by non-market voluntary associations (e.g., family life). To insist that the state be concerned with comprehensive human flourishing while conceding that so many aspects of that flourishing should be provided by other organizations not under state control strikes me as an idle quibble. Aristotelian premises require that the state help its citizens flourish by doing those things necessary for human flourishing that other organizations cannot do or cannot do nearly as well. More than that is not required. I do not think this involves me in contradicting the historical Aristotle, but if it does, all the worse for Aristotle. He was wrong about other things, too.

Finally, some perspective is in order here. I regard Aristotelian virtue ethics as the true moral philosophy, the correct account of the human good and of the moral right and wrong applicable to human beings always and everywhere. It achieves such generality because it is based on universal human nature shared by all human beings, wherever and whenever they may be found. This generality comes at a cost, however. The list of actions absolutely incompatible with the human good—things like the intentional taking of innocent human life—is short. For all other actions, whether in particular cases they are right or wrong, whether they appropriately conduce to the human good or detract from it, depends on the totality of the circumstances.

The true moral philosophy thus entails precious few definite requirements about political or economic arrangements. For example, human flourishing does not absolutely require a democratic form of government, and so in some times and places, democracy is not morally required. Rather, many different forms of government are in principle morally permissible, and which is best for a given society at a given time depends on that society’s particular circumstances. Similarly for economic arrangements. Capitalism is not absolutely required for human flourishing, but neither is it absolutely prohibited; rather, many different kinds of economic arrangements are, in principle, morally permissible, and which is best in any particular case varies with the circumstances. To be sure, human beings need to flourish comprehensively, but there is no single set of political or economic arrangements, applicable in all times and places, necessary to achieve such comprehensive flourishing. In particular, there is no necessary connection, either positive or negative, between human flourishing and capitalism. For people like us in a society like ours, liberal democratic capitalism seems obviously to offer the best prospects of creating the conditions under which individual human beings can lead good lives. That is why I favor our system.

Robert T. Miller is an associate professor of law at Villanova University School of Law.

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It should be noted that a major portion of Miller’s article relates to comments MacIntyre made about the recent global financial crisis, and Miller’s response to these comments is unobjectionable. Whether or not the financial profession is indeed engaged in a form of legal burglary, as MacIntyre claims, it does not do so in the manner he describes, and for the reasons Miller outlines.

But Miller goes astray when he attempts an answer to MacIntyre’s two “philosophical” objections to Capitalism, as he calls them. Compared to his antique theories of the value of labor, these objections stand on much firmer ground, much nearer to MacIntyre’s fields of accomplishment. Yet Miller devotes less space to answering them.

These two objections, as Miller describes them, are as follows:

First, MacIntyre argues that capitalism is immoral because it systematically teaches people to regard as a virtue the vice of greed.

And:

As an Aristotelian, MacIntyre holds that the true final end can be pursued only by human beings acting together in a community [and capitalism makes acting together in this way impossible].

Even without any discussion of the Protestant work ethic and bourgeois consciousness, one way capitalism promotes greed is quite straightforward: under capitalism, people who structure their lives around the pursuit of wealth are frequently richly rewarded, both with riches and with the praise and respect of their fellow citizens. This praise and respect is natural, since the very power and ubiquity of business ensure that the practice of acquiring money is a central one in our society, and it is natural for people to praise excellence in practices central to their society. By contrast, pre-capitalist societies often used various means to check the acquisitive impulse in their members. The anti-usury laws common in Medieval Europe, for instance, strongly discouraged people with access to capital from structuring their lives around acquiring wealth, because it directly prohibited an easy way of doing so.

Needless to say, this does not mean that on balance it is better to have anti-usury laws than a modern financial system. But it does mean that greed has often been publicly suppressed, when now it is publicly promoted. The early modern theorists who created our tradition of economic analysis understood this clearly; they just thought inducement to private vice was a fair price to pay for the great material benefits to all that Capitalism provided. As Mandeville wrote, allegorically describing how a Capitalist economy works:

Millions endeavouring to supply
Each other’s Lust and Vanity [...]
Thus every Part was full of Vice,
Yet the whole Mass a Paradise.

Miller’s answer to the second MacIntyrean objection holds together better. Many of the great theorists of Liberalism have articulated a version of it. It is unsurprising, then, that it is not compatible with the Aristotelian concept of human flourishing. Miller states the argument in this way:

The final end for human beings can be adequately pursued only in community with other human beings, but it does not follow that every community in which human beings participate must be dedicated to that end. Everyone participates in many different communities—nuclear family, extended family, school, business firm, church, military unit, government, etc. As long as enough of these are cooperative endeavors aimed at the human good, there is no need that all be such, provided only that none aims at an end incompatible with the true human good.

Essential to the idea of cooperation towards human flourishing is that the cooperation is oriented not merely towards some constituent element of flourishing but towards comprehensive flourishing. There is a distinction in kind between organizations established for some end other than comprehensive flourishing and those established precisely for the sake of comprehensive flourishing. The former may be organizations of any kind, but the latter are political organizations, paradigmatically cities. No collection of the first kind of organization sums up to the second kind because its aim is different from any of theirs. That this was Aristotle’s view is clear enough. Here is Book VIII of the Nicomachean Ethics (9.1160a.10):

the other [i.e., non-state] communities aim at some particular advantage … but all of these seem to fall under the political community; for it aims not at present advantage but at what is advantageous for life as a whole.

It is equally clear that under a social arrangement liberal in politics and capitalist in economics there can be no community that answers to this description unless it constitutes itself as an economic isolate exactly as in the examples given by MacIntyre. Miller suggests that private, non-economic associations are all that is needed by way of a state in Aristotle’s sense, but this cannot be true. In Aristotle’s view a state addresses itself to the flourishing of each of its members in sufficiency (note, for example, Politics I.2). A community that does not aim to comprise all that its citizens need is not a political community, and no private, voluntary community in a liberal society can do so. Nor does the liberal state itself aim at comprehensive human flourishing, by definition.

There is thus an enmity between the liberal idea of society and the Aristotelian idea. Miller’s argument pretends that this enmity is an eccentric and crabby invention of MacIntyre’s, but it has been widely discussed. And so MacIntyre is hardly being “dogmatic,” as Miller says, when he notes that capitalist societies do not allow for “constructing and sustaining forms of community directed towards the shared achievement of those common goods without which the ultimate human good cannot be achieved,” at least in their best and most perfect mode.

Miller’s failure to appreciate the radical difference between liberal and Aristotelian societies is perhaps connected to his unfortunately Whiggish reading of history: “Throughout history … cooperation usually has been secured by coercion and, ultimately, the use of force,” he writes. This statement requires Miller to ignore actual reports about life in pre-modern societies and to neglect basic inductive reasoning about the world around him. It is in fact very difficult to secure cooperation from large numbers of people purely by coercion. Much more powerful are shared ideology and culture, shared ambition, social scripts, and material interest. But because pre-modern societies often looked askance at cooperation aimed at material interest, Miller suggests that only brute force could possibly have allowed their members to cooperate for any common end. In doing so he dismisses communities as various as the University of Paris, the Roman Catholic Church, the Vestal Virgins, sports teams immemorial, Junior Women’s Clubs, and the secret societies of the Pythagoreans.

Undoubtedly Miller can articulate many reasons for preferring liberal societies to Aristotelian ones, even without resort to such specious parochialisms. Economists no doubt find much to criticize in Aristotle’s treatment of trade as a marginal phenomenon in human communities, for instance. But it is idle to suggest that these concerns do not militate against Aristotle’s concept of cooperative flourishing, or that there is no real opposition between capitalism and Aristotelianism. Very possibly the advantages liberal states offer over Aristotelian political communities do make them preferable, but they do not preserve in the private realm the community they displace from the public. MacIntyre’s opposition to Capitalism is not accidental, or merely a holdover from his youthful Marxism. In fact it is difficult to see how anyone strongly committed to Aristotle’s account of flourishing in common could fail to think capitalism radically defective.


David Schaengold is an assistant editor of Public Discourse.

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More than one commentator has observed that the intensity of the struggle in Wisconsin and other states is partly fueled by a subtext of public sector unions’ being able to influence who their employers are (i.e., the executive and legislative wings of government) via political donations. Those union-supported politicians in turn accede to these unions’ salary and benefits demands. The same politicians also help unions to fund themselves by mandating that union dues simply be extracted from government employees’ paychecks, and by creating impediments that obstruct those public sector workers who might choose to exercise their freedom of association by declining to join a given union.

The situation is further complicated by the fact that neither public sector unions nor governments have to consider an omnipresent reality for private sector businesses: the need to make a profit if they are to survive. Instead, governments are able to fund the salary and benefit packages demanded by many public sector unions through increased taxes, deficit spending, and ever-increasing amounts of debt.

Fewer observers, however, have noted the growth of an unhealthy collusion between government and many American companies that is equally damaging to the common good, not least in that it allows many businesses to escape the disciplines of market competition.

The most visible examples of this are obviously bailouts and subsidies for businesses and industries that have established close relationships with federal and state politicians. In recent months, the Washington Examiner’s Timothy Carney has illustrated in pointed article after pointed article the disturbing links between government subventions and those businesses that enjoy political connections on both sides of the aisle.

There are, however, less visible ways in which many American businesses seek to avoid the rigors of competition and pass on the costs of doing so to taxpayers and consumers. A good example is America’s tariff regime.

In his book Mad About Trade (2009), the trade-analyst Daniel Griswold points out that “The official Harmonized Tariff Schedule of the United States rivals the U.S. income tax code for random complexity.” Its 2,959 pages encompass 99 chapters and feature 10,253 tariff lines. Each tariff line consists in turn of three different tariff rates.

When we look at the details, we find Byzantine provisions for different products that defy rational explanation. Why, for example, is the tariff on men’s overcoats 15.9 percent if made of cotton, but only 5.6 percent if the coat is primarily of manmade fibers, but contains 25 percent or more by weight of leather?

Page after page of America’s Tariff Schedule reveals a mishmash of similarly arbitrary, discriminatory, and distortionary customs duties. The only way to explain this situation, Griswold concludes, is the ability of different businesses to persuade legislators that their particular industry (such as those who manufacture coats made of cotton) somehow requires more protection from foreign competition than others (such as those manufacturing coats made of man-made fibers with a substantial leather content).

No doubt many of these provisions are publicly justified as somehow being in the national interest. But as Adam Smith once sagely commented, “I have never known much good done by those who affected to trade for the public good.” In other words, businesses (such as Detroit-based car companies) in financial distress will often claim they merit special government assistance because their continued existence is somehow essential for the common good, whereas the real reason they want legislators to privilege them with taxpayers’ money is their failure to compete in the marketplace (such as with Japanese car manufacturers who have created profitable factories – and thousands of well-paying jobs – in America’s UAW-free South).

Then there are the ways in which some American businesses use government power to try to shut down their domestic competitors. Anti-trust laws are a prominent instance of this.

As Judge Robert Bork illustrated in his book, The Antitrust Paradox (1978), the original purpose of anti-trust laws was to promote consumer welfare and competition. Today, however, anti-trust laws are often used by businesses seeking to undermine the competitive advantages that their rivals have developed in perfectly legal and entrepreneurial ways. The Justice Department is thus used to weaken one’s competitors, not least by forcing them to incur considerable legal expenses.

The attractions of business-government collusion are enhanced when the state’s involvement in the economy grows. This is partly a question of incentives. The larger the scope of government economic intervention, the more businesses are incentivized to cultivate politicians in much the same way that public sector unions have.

As a result, consumers become displaced as the focus of business activity. Nor do the incentives for people of an entrepreneurial bent lie with creating something that the entrepreneur thinks consumers will value.

Instead the incentives become increasingly aligned with successful political entrepreneurship. Competition becomes less about a company’s ability to offer new and better products for consumers at lower prices. Instead, it become a struggle among businesses to secure state subsidies, to lobby legislators to establish tariffs that stack the deck against foreign competition, or to persuade governments to provide one company with exemptions from regulations that apply to every other company in the same industry.

It’s a form of soft corruption that produces higher prices for consumers, undermines value creation in the marketplace, and facilitates unwholesome relationships between politicians and businesses. It also represents the gradual subversion of the market economy by mercantilist arrangements. Smith identified the core of the problem in his Wealth of Nations (1776): “in the mercantile system, the interest of the consumer is almost constantly sacrificed to that of the producer; and it seems to consider production, and not consumption, as the ultimate end and object of all industry and consumption.”

In the end, however, everyone loses. Economies dominated by the struggle for government favors and largesse become less competitive in the global marketplace. Governments actually begin to believe the dirigiste illusion that they, rather than private enterprise, are the real drivers of economic growth. Technological and business innovation begins to falter. The commercial world slowly becomes dominated by “insiders” (those close to legislators and governments), while “outsiders”—such as entrepreneurs with creative ideas and capital but few political contacts—begin to consider moving to more hospitable economic climates. The work of wealth creation subsequently begins to decline in intensity.

Circumventing this situation is not simple. The more companies invest themselves and their assets in the business of political entrepreneurship, the less likely they are to favor the type of market liberalization that might shift the incentives back towards meeting consumer demand. Nor do those politicians who derive their own benefits from the patronage system implicit to corporate welfare arrangements have any strong interest in winding back these neo-mercantilist trends.

There is, of course, something fundamentally wrong about businesses and governments behaving in this manner. In market economies, companies are rewarded for their ability to innovate and produce more and often higher quality goods at comparatively lower prices by the choice of consumers to buy their product rather than the merchandise offered by others.

By contrast, corporate welfare and regulations that shield companies from competition amount to granting legal privileges to businesses primarily on the basis of their ability to court the favor of politicians. How many people can honestly describe this as just?

One byproduct of the 2008 financial crisis has been a revival of discussion about the need to restore a modicum of moral coherence to those parts of the business world that went astray in the 2000s. Unfortunately in our relativistic ethical environment, this rarely goes beyond platitudes and appeals for greater social responsibility on the part of business. This often translates into businesses being cajoled into supporting any number of politically correct causes—something increasingly described in business circles as just another cost of doing business.

Given the degree of business-government collusion that increasingly disfigures American economic life, perhaps one step forward for a morally healthier commercial culture would be for businesses to voluntarily swear off the addictive practices of political entrepreneurship and corporate welfare.

By all means, businesses should defend themselves against competitors who cynically employ political influence in an effort to drive them out of the market place. It takes, however, another type of moral courage to tell your family, shareholders, and employees that the days of cuddling up to Senator Leveraged and Congressman Influential are over.

Certainly, extracting themselves from the sticky web of government patronage or refusing to contemplate seeking corporate welfare might well prove economically costly—at least in the short-term—for many businesses. They would, however, no longer be open to the charge of behaving in ways not dissimilar to public sector unions. They would also have the satisfaction of knowing they are back in the business of creating wealth, instead of the less dignified endeavor of perpetually trying to live at everyone else’s expense.


Samuel Gregg is Research Director at the Acton Institute. He has authored several books including On Ordered Liberty, his prize-winning The Commercial Society, and Wilhelm Röpke’s Political Economy.

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