Markets, Catholicism, and Libertarianism

In a recent American Prospect article, John Gehring maintains that Catholics like myself who regard markets as the most optimal set of economic conditions are effectively promoting libertarian philosophy. Gehring’s concerns about libertarianism and what he calls “free market orthodoxy” have been echoed in other places.

The generic argument seems to be the following. Promoting market approaches to economic life involves buying into libertarian ideology. But libertarianism is at odds with Catholicism in important ways. This is especially apparent, the argument goes, in the age of Pope Francis. This pope has been very critical of free markets. To dispute aspects of Francis’s reflections on economic matters thus involves placing yourself at odds with the Pope in the name of libertarianism, a position that no faithful Catholic should want to be in.

What these critics seem to miss is that a favorable assessment of markets and market economics need not be premised on acceptance of libertarianism in any of its many forms.

Insightful Economics

Libertarianism’s great strength lies in economics. Prominent twentieth-century libertarian economists, such as Ludwig von Mises and Friedrich von Hayek, made major contributions to the critique of socialist economics. While ridiculed by some at the time, their criticisms turned out to be spot-on.

In Socialism (1922), for example, Mises illustrated that socialist economies can’t replicate the market price system’s ability to signal the supply and demand status for countless goods and services to consumers and producers at any one point in time. However intelligent and statistically equipped the top-down planners might be (whether they take the form of a Communist politburo, a Fascist dictator, or a 1970s British government), they simply cannot know the optimal price for any good or service at any point in time. Any attempt to dictate prices from the top-down will lead, paradoxically, to economic disorder and dysfunction.

Hayek’s contributions to economic thought are legion. They range from his work on business cycles to monetary theory. One of Hayek’s most significant economic insights concerned the unworkability of centrally planned economies. He called this “the knowledge problem.” The dispersed information and data held by millions of individuals and groups in a given economy, Hayek held, can only be fully utilized in a decentralized economic system characterized by competition and pricing: i.e., a market.

Given the twentieth century’s economic history, the validity of such insights by these scholars is difficult to deny. The truth of their economic views, however, isn’t dependent upon accepting libertarianism as a comprehensive philosophical position.

Inadequate Philosophy

Philosophically speaking, Mises associated himself, especially in Human Action (1949), with Epicureanism and utilitarianism. Hayek’s views were more complicated. While his Law, Legislation and Liberty (1973/1976/1979) rejected Benthamite utilitarianism, Hayek embraced a type of indirect-rule utilitarianism in works such as The Constitution of Liberty (1960). He also articulated progress-for-the-sake-of-progress arguments and social evolutionist positions heavily shaped by David Hume’s writings.

Such philosophical views are characteristic of many self-described libertarians. They are also difficult to reconcile with Catholic or natural law accounts of man and human flourishing. Catholicism and natural law theory reject, for example, the Epicurean notion that happiness consists in pleasure. They also regard consequentialist reasoning—which is central to any form of utilitarian philosophy—as irrational. Consequentialism seeks to determine the good by measuring what can’t be measured: all the known and unknown effects of a choice at some point of time in the future—a moment which can only be selected arbitrarily.

As for progress in the sense of forward-movement being its own justification, Hayek conceded that progress “in the sense of the cumulative growth of knowledge and power over nature is a term that says little about whether the new state will give us more satisfaction than the old.” Such a question, Hayek comments, is “probably unanswerable.” For Hayek, this doesn’t matter. More important is “successful striving for what at each moment seems attainable,” or “movement for movement’s sake.” This leaves important questions unanswered. Toward what are people moving? What are they becoming in the process of doing so? All of this is quite removed from Catholic and natural law conceptions of human flourishing and development.

None of the above-noted contributions to economics by Mises and Hayek are, however, dependent upon any of their libertarian philosophical commitments. A similar point may be made about the relationship between the ethical thought and the economic ideas of the father of modern economics, Adam Smith.

Close study of Smith’s Theory of Moral Sentiments (1759/1790) reveals that its ethical theory reflects Smith’s wrestling with Hume’s moral philosophy, Francis Hutcheson’s moral-sense virtue ethics, and Rousseau’s arguments about human nature. Catholic and natural law thinkers have rightly criticized aspects of this theory, particularly its Humean dimensions.

Tensions in Smith’s ethical theory, however, don’t invalidate the key economic insights expressed in his Wealth of Nations (1776). Smith’s systematic outline of basic staples of economic analysis—the division of labor, incentives, trade-offs, mutually beneficial exchange, unintended consequences, comparative advantage, etc.—don’t demand his reader’s assent to neo-Humean accounts of human action. Indeed, most of these economic insights were first discerned by medieval and early-modern scholastic writers. They didn’t study these issues as “economists,” let alone as “libertarians.” Such questions were addressed in the context of moral theology. The erudition of their analyses was such that, as Joseph Schumpeter wrote in his History of Economic Analysis (1954), in scholastic thought “we behold an embryonic Wealth of Nations.”

And Pope Francis?

If the foregoing analysis is accurate, it suggests that criticizing aspects of Pope Francis’s statements about economic questions doesn’t necessarily mean that you’re trying to promote libertarianism. Certainly, Catholics should be respectful of any pope’s observations about political and economic subjects. But they’re not required to remain silent when a pope (or any Catholic bishop) makes statements about the economy reasonably judged to be prudential or empirical claims and thus potentially disputable on grounds of logic or fact.

Take, for instance, the Pope’s statement in Evangelli Gaudium (2013) that “Inequality is the root of social ills.” We will leave aside the Catholic teaching that original sin and people’s free choices to sin are at the root of all ills, social or otherwise. Instead, let’s consider that not all forms of inequality—including economic inequality—are necessarily unjust.

This is not a libertarian argument. Reiterating long-standing Catholic teaching on this subject, Leo XIII noted that there are natural inequalities that come “from the very Author of nature.” Some people are more naturally gifted at some things than others. Even in matters of wealth and income distribution, a natural law account of justice examines factors that extend beyond need. These include consideration of merit (who, for instance, contributes more or works harder) and the degree of responsibility assumed in a given enterprise. Unequal economic outcomes are thus very often just.

Another example is Pope Francis’s invocation in his 2015 encyclical Laudato Si’ of “global north and south” language to designate particular workings of the global economy. Such terminology reflects the influence of dependency theory. This held that resources flow to a “core” of rich states from a “periphery” of poor countries. The wealthy thus benefit at the poor’s expense. Dependency theory economists insisted that “peripheral” countries should reduce trade with the developed world and limit foreign investment. The point was to minimize reliance on commodity and agricultural exports and to use the government to promote domestic industrialization.

This conception of the global economy has long been discredited. There are, for instance, countries in the “south”—New Zealand, Chile, Uruguay, Australia—formally classified as developed economies. They have become wealthy partly because of (a) agricultural and mineral exports and (b) conscious decisions to open themselves to the global economy. Again, however, there’s nothing specifically libertarian about this critique of the Pope’s view of the world economy. At no point does it require its advocates to embrace libertarian philosophy.

Beyond the Phony War

Looking beyond what I think is ultimately a phony war about Catholicism and libertarianism, one issue does require attention. How can “the economic technique” be integrated into more robust accounts of human flourishing than those offered by libertarianism?

Here, I’d argue, new natural law theory has much promise. Germain Grisez’s 1978 article “Against Consequentialism,” for example, discusses the economic method’s benefits and limits in detail. He illustrates how cost-benefit analysis is a valid way of determining how to make practical non-moral judgments. Economics, John Finnis states, “constantly reminds us that to spend on one thing is to use up what might have been spent (time and labor, money, other resources) on other purposes.”

New natural law’s advantage is its particular attention to the difference between (1) ends that are intended and freely chosen, and (2) the side-effects (what might be called “the invisible hand” writ large) of those very same choices. The economist’s emphasis upon unintended consequences relies implicitly upon this distinction. As Finnis observes in his Aquinas (1998), “Modern economics gets going with Adam Smith’s proposal that it be undertaken as a science of side-effects.” That, he writes elsewhere, is “its true utility as a help-mate for ethics and political theory and thus for jurisprudence.” Economic analysis, Finnis continues in another place, “brings to light the complexity of the impact which one’s choices have, beyond their purpose or intention.”

But new natural law also raises questions about efforts to establish economic reasoning as a comprehensive explanation of human action. This is central to new natural law criticisms of the Economic Analysis of Law as it relates to subjects ranging from economic justice to the legal treatment of sex and euthanasia. Core to this critique is Grisez’s observation that “at the level of basic commitments, the economic model is useless.” Notions of greater good may work when speaking of instrumental goods such as wealth, but they don’t work when discussing unquantifiable goods such as life, religion, and practical reason.

More work is needed in this area. Undertaking it, however, requires dispensing with a largely manufactured dispute about libertarianism and Catholicism. For, in the end, what matters is not whether a position is “libertarian”—or, for that matter, “conservative” or “social democratic.” What matters is whether it’s true. That’s what “orthodoxy,” in the truest sense of the word, is actually about.