The Pope on “evil incarnate”
Ryan Avent took Greg Mankiw to task for his criticism of the Pope’s statement on economics. The fact that two economists with relatively similar policy views on “free markets” (both are neoliberals, neither favor laissez-faire) had such diametrically opposed reactions made me want to examine the document first hand. My initial reaction is that:
1. Greg Mankiw is basically right.
2. The Pope would be almost as contemptuous of Avent’s policy views as he is of Mankiw’s policy views.
It’s actually difficult to make sense of the Pope’s statement, as he seems unaware of what’s going on in the world around him. Thus we are forced to guess what the Pope would think if he understood the actual impact of free markets. Let’s start here:
56. While the earnings of a minority are growing exponentially, so too is the gap separating the majority from the prosperity enjoyed by those happy few. This imbalance is the result of ideologies which defend the absolute autonomy of the marketplace and financial speculation. Consequently, they reject the right of states, charged with vigilance for the common good, to exercise any form of control. A new tyranny is thus born, invisible and often virtual, which unilaterally and relentlessly imposes its own laws and rules. Debt and the accumulation of interest also make it difficult for countries to realize the potential of their own economies and keep citizens from enjoying their real purchasing power. To all this we can add widespread corruption and self-serving tax evasion, which have taken on worldwide dimensions. The thirst for power and possessions knows no limits. In this system, which tends to devour everything which stands in the way of increased profits, whatever is fragile, like the environment, is defenseless before the interests of a deified market, which become the only rule.
The first sentence seems a bit odd, given that global inequality has been declining in recent years. So let’s assume that the Pope is thinking about the fact that inequality within countries has been rising (and put aside the question of why the Pope would take a nationalist perspective and not a global perspective.) The second sentence also makes no sense from a global inequality perspective, as inequality is falling precisely because non-market regimes such as Maoism and the Indian “license raj” are declining in importance. So once again we need to take a national perspective for this to make sense. The third sentence makes little sense, taken literally. A tiny number of dogmatic libertarians (mostly in America) oppose any form of control by the state, but have no policy influence. So once again let’s cut the Pope some slack and assume he’s engaged in poetical license. Maybe he’s also going after neoliberals who favor a state that spends 35% of GDP (as in the US, Switzerland, and Australia) not the 45% of GDP more common in Western Europe.
When I studied all 32 developed countries (before the crisis) I found Greece to have the least market-oriented policies, and of course Greece also has notoriously anti-market attitudes, and high levels of corruption. Now read the central part of the paragraph again, focusing on the burdens of debt and the problems of corruption. Pretty hard not to think about Greece, isn’t it? So what does this have to do with free markets?
The Pope’s entire statement might make a bit more sense if applied to the developing world. Certainly the suffering in that area is much greater, as is the social exclusion and savage inequalities. But there is one fundamental problem in applying the statement to the developing world, those countries tend to be much less market-oriented than the countries of the developed world. Instead, they are often ruled by oligarchs that have their foot on the throats of the poor, and who favor non-market regimes precisely because barriers to competition make them rich. Nobody “deifies” free markets in the Congo or Afghanistan.
If the Pope is talking about the developed world he has things exactly backwards; the problems he worries about tend to be the most severe in the least market-oriented the countries. And here I am being charitable, as he seems to have little or no knowledge of the actual policies failures that have created many of today’s problems. You might argue that this is as it should be, as you wouldn’t expect a religious leader like the Pope to get into the nitty-gritty of how the euro system led to high unemployment, for instance. OK, but then even the Pope’s supporters must squirm a bit when they see him try to take a stab at positive economics:
The current financial crisis can make us overlook the fact that it originated in a profound human crisis: the denial of the primacy of the human person!
And I thought it was because the US had failed to adopt the Canadian regulatory model. I apologize to my Catholic readers for the snark, but if you are going to speak out on important public policy problems, you really need to have some understanding of what caused them (or else hire some experts who do understand.)
Ryan Avent criticized Greg Mankiw for ignoring the term ‘inevitably’ in the following sentence:
In this context, some people continue to defend trickle-down theories which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world.
But when I read the following sentence I was completely mystified by the term ‘never’:
This opinion, which has never been confirmed by the facts, expresses a crude and naïve trust in the goodness of those wielding economic power and in the sacralized workings of the prevailing economic system.
Never? Trickle-down didn’t work in Switzerland? It didn’t work in Singapore? And don’t say those are not examples of “laissez-faire” and that the Pope is attacking laissez-faire. I find much of the Pope’s statement to be mystifying. I can’t tell if he is excusing violence and discouraging education aimed at making people less violent, or not. I can’t tell if he thinks things were much better in the good old days (as he seems to imply.) But if there is one thing that is crystal clear it is that the Pope is talking about the real world. And that means he is talking about countries when the government runs 20%, 30%, 40%, or 50% of the economy, not the (non-existent) system called “laissez-faire.”
So I ask you again, have free market regimes never succeeded in empowering the poor? This is why I claim the Pope is just as opposed to Ryan Avent’s economics as he is to Greg Mankiw’s. Try to read the document and think about actual examples of various policy regimes. How about his own country—Argentina? Isn’t the problem there a lack of free markets? That’s obvious to me, but I doubt the Pope would agree.
I could go on and on, as every single paragraph is full of disturbing claims and assertions. But I’ve gone on long enough. So let me instead recommend that you read the first 50 pages or so of Deirdre McCloskey’s “Bourgeois Virtues.” McCloskey is just as opposed to those who “deify” the market as the Pope. But McCloskey also understands that free market economic regimes do lead to greater “justice.” The Pope does not. Either he supports a statist economic system, or (like McCloskey) he supports free markets plus social insurance, in which case his entire economic statement is a complete mess. Here’s my favorite quote from McCloskey:
“I don’t care how one defines capitalism, as long as it’s not defined as evil incarnate.”
McCloskey would not like the way the Pope has defined “capitalism” in his statement on economics.
Tags:
2. December 2013 at 07:55
Phenomenal Yglesias post on new research:
“How Inflation Helps Heal Financial Crises”
http://www.slate.com/blogs/moneybox/2013/12/02/inflation_and_financial_crisis_the_healing_helps.html
2. December 2013 at 08:10
Why do people who have no idea what they are talking about instinctively choose to rail against capitalism? Why does socialism have such a strong emotional appeal to the uniformed when just looking around shows that wealthy countries have capitalism and poor ones do not? I’ll never really understand that.
2. December 2013 at 08:25
“I apologize to my Catholic readers for the snark, but if you are going to speak out on important public policy problems, you really need to have some understanding of what caused them (or else hire some experts who do understand.)”
Well I haven’t been to Mass in a while so I don’t think you need apologize to me. However, my impression is that Catholic economists attribute many current problems to the low birthrates resulting from widespread resort to contraception and abortion. That’s not a daft idea by any means. The ZLB, for example, is a lot less likely to cause problems in countries with a high birthrate.
2. December 2013 at 08:40
Knowing much about economics has never been a requirement for becoming Pope, but having a Pope from South America makes it worse, because the prevailing intellectual opinion down there is that the military dictatorships that ruled various countries of that continent represent true “laissez-faire” capitalism.
Of course you’re right that the real example of the effect of free markets is China, but the Pope, like a lot of Catholics, is more familiar with 70’s-style South American “Capitalism” than they are with the current state of “Socialism with Chinese Characteristics”
2. December 2013 at 08:56
When you get to be Pope, you get to be an Expert on Everything. Just like Professor Irwin Corey.
But, even in the Pope’s own neighborhood (South America) the one more or less free market country–Chile–is the happiest place to live. The most hostile to free markets–Cuba and Venezuela–are the disasters.
And pound another nail in the anti-EMH coffin;
http://www.voxeu.org/article/first-look-structure-and-dynamics-uk-credit-default-swap-cds-market
‘Figure 1 [in their spiffy color graphs] shows that, although aggregate daily volume in the UK CDS market dropped during our sample period from about €2 billion in 2007-08 to about €1 billion after 2009, the market never really shut down. Strikingly, volumes shot up in the wake of Lehman’s default; this is surprising given that Lehman Brothers was a major dealer in the CDS market. It thus appears that the market held up well against concerns about counterparty risk. ….Figure 2 shows that dealers continued to intermediate between ultimate CDS buyers and sellers throughout and at the peak of the financial crisis.’
2. December 2013 at 09:12
Like.
2. December 2013 at 09:19
I can’t quite get my head around what Avent’s issue is. He is annoyed that Mankiw is ignoring the efforts of all of the progressives and social justice workers have done? So is the Pope. And the Pope disparaged the very system that Mankiw claims smooths the work towards that justice. Even when Avent acknowledges that Mankiw could be intending to say this (which is pretty evident to me), he complains that Mankiw never mentions those workers. Then he complains that Mankiw is just complaining about the Pope’s complaint. Mankiw’s post may make people detest economists, but Avent’s post sure makes me detest Avent’s lazy writing.
2. December 2013 at 09:21
It sounds someone should give Pope Francis a copy of “The Theory of Moral Sentiments.” It is closer to his area of expertise than economics yet provides a stepping stone to the virtue of markets.
2. December 2013 at 09:23
“Never? Trickle-down didn’t work in Switzerland? It didn’t work in Singapore? And don’t say those are not examples of “laissez-faire””
No, trickle-down didn’t work in Switzerland or Singapore. Or anywhere. This is because, in a market economy, wealth does not trickle-down: it trickles (unsteadily) upwards. The market is a drip-up system.
First, capital must be invested and wage-earners must be paid; this is largely a redistribution of wealth from the rich to the poor (aside from cases of rich wage-earners and poor investors). Second, IF there are any economic profits that emerge from the investment, then these go to the investors; if not, then they experience a loss.
You know this stuff better than I do, so it’s a matter of phrasing it correctly: almost modern market processes begin, fundamentally, with redistribution of wealth from the rich to the poor.
(If we want to push the analysis back to where capital comes from, in the absence of coercion it comes from trickle-up consumption: the capitalist saves while others consume, and then the capitalist derives (again uncertain) consumption from her wealth.)
2. December 2013 at 09:23
(Thanks go to Thomas Sowell for making me realise what’s wrong with the concept of trickle-down economics and why it’s so misleading as an analysis of the market.)
2. December 2013 at 09:58
“in the absence of coercion”
not a very realistic assumption is it?
2. December 2013 at 09:58
Further to the point about declining global inequality, here’s an interesting chart that shows for income distribution we are now in a “dromedary world” rather than a “camel world”:
http://www.businessinsider.com/hans-rosling-inequality-chart-2013-11
2. December 2013 at 10:21
Wow, Avent is really clueless;
‘Neither did economic growth magically free American slaves or end Jim Crow.’
It did a lot more than the Catholic Church.
2. December 2013 at 11:34
BTW, Scott
McCloskey would not like the way the Pope has defined “capitalism” in his statement on economics.
I know you’ll think this is nit-picking, but that word isn’t even mentioned, much less defined, in EVANGELII GAUDIUM.
2. December 2013 at 11:44
Philippe,
“not a very realistic assumption is it?”
It depends on the case in which you’re assuming it. It would have been a very rarefied assumption in Medieval Europe and it’s a fairly accurate assumption today, unless you want to make a “taxation is theft!” argument about capitalists employed by the government (i.e. all public employees with savings) in which case I would simply narrow down what I meant by ‘coercion’ in a boring and pedantic way.
2. December 2013 at 11:52
I read the part about “financial crisis … originated [from] the denial of the primacy of the human person” as setting up the next section on financial regulation. Having a system that incentivizes loan origination over loan quality can result in worse outcomes that a system where lender, originator, and borrower incentives are aligned. That said the whole thing seems affected by both growing up in Argentina and his Jesuit training.
2. December 2013 at 12:05
“It depends on the case in which you’re assuming it”
You referred to “where capital comes from”. Well originally we weren’t all homesteaders with similar patches of land all trading with each other on equal terms.
2. December 2013 at 12:05
Travis, Yes, but it’s also important to keep in mind that 90% of the problems in the developing world are supply-side, where inflation cannot help.
Kevin, That’s an interesting point. Of course I think the ZLB is misunderstood, and doesn’t really prevent monetary stimulus. But let’s say I am wrong. In that case it would be a point in favor of Catholic economists, but still wouldn’t rescue the very confused statement by the Pope–which focused on other issues. But that is an interesting point I had not considered.
Fair point that he didn’t mention capitalism, but I think you’ll agree it was the system he was discussing. If not then he’s a horrible writer.
W. Peden, Yes, you are right that “trickle down” is bad terminology. Mea culpa.
Everyone, I agree with virtually everyone (for a change) so let me just single out this from Patrick:
“But, even in the Pope’s own neighborhood (South America) the one more or less free market country-Chile-is the happiest place to live. The most hostile to free markets-Cuba and Venezuela-are the disasters.”
Here’s another way of making my point. I think Avent, Mankiw and I would all agree that Chile has the best economy in Latin America, and Venezuela and Cuba some of the worst economies. But I suspect the Pope would not even come close to agreeing. That’s why I suspect that the Pope agrees with Avent much less than he assumes.
Also note the Pope’s comment about slavery. He seems to think slavery was part of the free market economy, a definition actual 21st century proponents of free markets completely reject. That’s one comment that made me think of McCloskey.
And was there a single line in the entire document about how statist policies in the third world lead to mass poverty? I didn’t see it.
2. December 2013 at 12:15
Philippe,
No, but we would be in a market system, and that’s what’s relevant if we’re trying to accurately characterise a market system.
2. December 2013 at 12:25
“No, but we would be in a market system”
what, all homesteaders with similar patches of land, all trading with each other on equal terms? Do you know of such a system?
2. December 2013 at 12:26
I think the pope view of capitalism is that of the type of crony capitalism that so common in the developing world…I doubt he knows what true capitalism is…he comes from a background of Liberation theology and from societies were the church has a much larger influence on public policy.
What is very interesting is how different religion in viewed in terms of social policy in countries with a strong separation between church and state vs latin america. In this country it is the left which seems to despise all things religious….but this is like a Ayn Rand vs Liberation theology debate…a throw back to the ’60s…
All I can say is thank god for Thomas Jefferson.
2. December 2013 at 12:26
Francis is much more parochial (sorry) than is commonly assumed. Read this as attempt to win supporters of Chavez inflected Kirchnererian socialism back to ‘orthodox’ Peronism and it makes a lot of sense …
2. December 2013 at 12:44
I don’t know if the Pope is a neo liberal or not. But this criticism of him is a strawman.
It the same as every criticism of neo liberals (like me) who believe that the laissez-faire aspects of our economy have gotten out of control and are resulting in outsized rents, and political power for the elite.
To suggest that the Pope, is ignorant of the benefits of capitalism or anti-capitalist is ridiculous. He specifically uses the phrase unbridled capitalism.
This kind of criticism thing is nothing more than an academic’s version of Rush bloviating that the Pope is a commie.
2. December 2013 at 13:00
The Pope references Exodus 32: 1-35, regarding the golden calf. Here are excerpts:
18 “It is not the sound of victory,
it is not the sound of defeat;
it is the sound of singing that I hear.”
19 When Moses approached the camp and saw the calf and the dancing, his anger burned and he threw the tablets out of his hands, breaking them to pieces at the foot of the mountain.
…….
27 Then he said to them, “This is what the Lord, the God of Israel, says: ‘Each man strap a sword to his side. Go back and forth through the camp from one end to the other, each killing his brother and friend and neighbor.'” 28 The Levites did as Moses commanded, and that day about three thousand of the people died. 29 Then Moses said, “You have been set apart to the Lord today, for you were against your own sons and brothers, and he has blessed you this day.”
He referenced that passage because he thinks the golden calf is the ethical problem there….which is disturbing.
The golden calf, pagans and witches, and modern capitalism are all part of the same centuries-long narrative. They represent an uncontrollable source of power and freedom in competition with the church, which is understandably frightening to the establishment leadership. Sadly, whipping up irrational frenzies against these competitors appears to be a highly effective means of consolidation, as demonstrated by all of the people who normally stand against the Pope’s social stances, but now are suddenly pleased by his rantings.
On the one hand, a Burkean defense of our received institutions, with all of their flaws, is probably the most defensible aspect of conservatism. But, in a witch hunt, the only ethical position to take is a defense of the accused witches.
2. December 2013 at 13:30
Bill, suppose we’re talking about two events. Event A is a bigger deal than Event B. And the cause of A is more certain than event B. Event A is more important, and better understood.
Then Event A should be a more important part of your worldview than B.
A= Growth in China, Singapore etc, blatantly associated with economic freedom, bringing hundreds of millions out of abject poverty.
B= Increased inequality in the West, which has many potential causes.
That the Pope obsesses about B, while ignoring A, shows he’s a lefty hack. Particularly since he lacks any special insight into B.
2. December 2013 at 14:06
I’m a Catholic (I even go to church), and I found the Pope’s statement equally mystifying. So there’s that.
2. December 2013 at 14:07
Distributism is the single most radical aggressive form of libertarianism.
One step after distributism is anarcho-capitalism.
BIG BIZ = BIG GOVT = LOSS OF LIBERTY
everytime.
Silly naive milquetoast libertarians without any true personal gumption will offer up mamby-pamby libertarian bromides, but when push comes to shove, they get beat like a gong, by rent seeking capitalists because they found the rule making to serve the interests of pirate and hackers over all else to be distasteful.
REAL MEN LIBERTARIANS WITH BIG GIANT HARRY ONES….
Codify the smallest number of limits to ensure that the large state CANNOT occur.
It took from Plymouth -1913, for the distributed power of America encoded smallness to get made into weak tea.
We should be trying to establish ANOTHER technological “legal” framework that can run distributed code for even longer.
So if the pope is simply arguing for Distributism, than Scott’s wrong.
If the pope doesn’t want to a system where big fish in little ponds exert far more control on their immediate environment – than Scott’s right.
I want to give the pope the benefit of the doubt.
2. December 2013 at 14:08
define….”unbridled capitalism”
If that means using the money that you acquired from free and legal enterprise to have an oversized influence on government operations and the legal system…then yes that is bad…not as bad as using money acquired from illegal enterprise (i.e. drug trafficing etc.) to acquire this influence…
If it means using the money that you acquired from free and legal enterprise to start new innovative ventures to fund non-governmental charitable institutions….how can that be bad?
Money is not the root of all evil…I thought the Catholic church believed the devil was….the guys that flew the planes into the trade center were not motivated by money…money is a tool that can be used for good or evil…just like the airplane..
2. December 2013 at 14:35
Bill, At least some disagreement. But what in the world does “unbridled capitalism” mean? There are no real world economies that are even close to being “unbridled.” And he’s clearly talking about the real world. So which economic regimes does he have in mind? Does he mean countries that rank relatively highly in “economic freedom?” I’m genuinely puzzled.
I presume the Pope’s statement is supposed to be USEFUL. To help Catholics move toward better economic policies. But which way do we move? I could not adopt his policies even if I was so inclined, because I would not know how. And I’m an economist!!
What government policy prevents a repeat of the financial crisis? How do we stop denying the primacy of the human person? I think we need to make almost all economies much more market-oriented to help the poor, and yet I completely reject the sort of dogmatic libertarianism that deifies the market. So is the Pope on my side?
You are a thoughtful American liberal. That’s fine. But I can’t even imagine how you come to the conclusion that the Pope is on your side. How do you know he’s not on Chavez’s side? My hunch is that he is (was.) After all his language is unlike that of most liberals, but very much like the language Chavez used to use.
2. December 2013 at 14:54
I love the reactions of the right wing to this pope. You mean it is not ordained of God that we have to cut marginal tax rates on billionaires in order to grow the economy? Heresy!
This Pope is 77 years old. He can well remember the period following WWII when countries like the US prospered as never before with high marginal tax rates, high domestic spending, and high unionization.
2. December 2013 at 14:57
http://wdtprs.com/blog/2013/11/evangelii-gaudium-54-trickle-down-economics-significant-translation-error-changed-meaning/
It looks like the English translation isn’t great. It should probably say “by itself” instead of “inevitably.”
2. December 2013 at 14:58
Scott,
To help you out, the Pope is using unbridled in a relative way. If someone said, “what period in the US had more unbridled capitalism? 1945-1980? or 1980-2013?” everyone would get that answer correct. We know it instinctively.
2. December 2013 at 15:45
Scott,
Since you haven’t read up on Catholic Capitalism (distributism) you don’t get “unbridled capitalism”
Take the time to read!
2. December 2013 at 15:55
Scott, that’s too rude….
Instead, I consider myself a virulent anarcho-capitalist, and I support both NGDPLT and GI / CYB bc they are optimal pragmatic hacks which help to maximizes the weakness of govt. and non-value trading.
So that later, govt. can be shrunk even more.
SINCE we are going to have a govt. since we are going to have a safety net…. the are the optimal policies.
That is what being pragmatic means, it means you temper your wishes, not that your wishes change.
2. December 2013 at 15:56
Is Catholic Capitalism where you pay people $1 an hour to pick up middle class dogshit?
2. December 2013 at 15:59
http://blog.p2pfoundation.net/p2p-and-distributism/2010/02/14
Scott that links for you.
Philippe don’t be an idiot, picking up dog shit will pay far more than $1 per hour…. closer to $20.
Man, one feels for those who can’t think mechanistically. At least learn to read better.
2. December 2013 at 16:32
Useful and amusing background reading to get the context:
http://www.amazon.com/Guide-Perfect-Latin-American-Idiot/dp/156833236X
Also, anything by Hernando de Soto.
http://www.ild.org.pe/index.php/es/
Priests and clerics are “gatekeepers of righteousness”. There is a natural inclination to be agin systems without gatekeepers. As in the C19th Papacy’s condemnation of Americanism:
http://en.wikipedia.org/wiki/Americanism_(heresy)
This is more pronounced in Catholicism, given authority proceeds to congregations rather than from them in, as in much of Protestantism. More specifically, in Protestantism, authority proceeds from Scripture, which every believer has access to. In Catholicism, Scripture is a product of the Church (understood as the community of believers) and all authority proceeds through the hierarchy of the Church–including the understanding of Scripture.
In other words, the Catholic Church is built on constructing massive barriers to entry …
2. December 2013 at 17:24
@Tom M.
Quick point, in the US at least the 1980-2013 period had HIGHER domestic spending than the post-WW2 to 1980 period, certainly in absolute terms, but more importantly in terms of as a percentage of GDP. Here’s the chart for total spending as a percentage of GDP (http://www.usgovernmentspending.com/us_20th_century_chart.html). Note that pre-1980 US government spending never got above the low 30% and at the start of that period was barely 20%. Then let’s look at military spending (http://www.usgovernmentspending.com/defense_spending). In the 1945-1980 period that was mostly over 10% meaning total non-military government spending was between 10-20% of GDP, rising to it’s highest level only at the very end of that time. Military spending has been pretty consistently lower since then as a portion of GDP, and with total spending consistently higher that means non-military government spending has been higher as a portion of GDP since 1980 than before it.
Talk all you want about higher marginal tax rates and union membership (which were declining prior to 1980, but did accelerate post-1980), but domestic spending has been going up.
2. December 2013 at 18:24
The Heritage Foundation ranks several “socialist hell-holes” in their top 10 countries for economic freedom and another group had similar results for its competiveness rankings.
http://radamisto.blogspot.com/2013/12/we-arent-all-that-exceptional.html
2. December 2013 at 18:26
define….”unbridled capitalism”
Selling MBS junk knowingly, rigging LIBOR and FOREX numbers.
2. December 2013 at 19:43
Tom, You think you know what the Pope is talking about, but you’d be horrified if you found out what he really thinks.
Post-1980 we have much more regulation of the environment, health and safety, labor markets, accounting, taxes, etc. Government spending is stable as a share of GDP. Is that what you think the Pope is talking about? I doubt he is even talking about the US. There are 200 countries in the world, and poverty is far worse in most of them. I assume the Pope has enough good sense to at least understand that much. You seem to assume he’s an idiot.
I guarantee the Pope is not talking about modest changes in US tax policy since 1980.
Steve, Thanks you for proving McCloskey’s point.
And I’ve done many posts on the Heritage rankings, read them and you might learn something.
2. December 2013 at 21:44
Scott,
Well I found it interesting that he used a particularly American(and partisan at that) term like “trickle-down”. So yes, I think the Pope is simply calling for a capitalism that looks more like the 50’s then the 80’s.
I think movies can be instructive in helping us think through things. With Christmas coming, we’ll be soon be treated to “It’s a Wonderful Life”. Don’t over-think things. The Pope wants us to be Bedford Falls and fears we are becoming Pottersville.
2. December 2013 at 22:17
The Pope insists on listening to Jesus Christ and not right-wing economists!
Despite widespread willful omission in U.S. churches, Jesus Christ warned that getting a camel through the eye of needle was easier than a rich man into heaven. Maybe they will open up the 2016 GOP convention with that particular reading from the Bible. Ha-ha.
Usury is not a polite Biblical topic either (though the foundation of capitalism).
An accurate reading of Christianity is that is not true free markets and capitalistic. Maybe some think it should be, but one has to torture the text to get it there.
The tension between free markets and Christianity becomes even more strained when one considers what true free markets will bring about: Open prostitution, open drug use and drinking, pornography at prime time, gambling 24/7, polygamy, child labor, the selling of body parts. Sell that in your local Christian or Catholic church (or Jewish).
The Pope is right from his point of view. He wants a society probably with universal health care, free housing and food as a last resort, and a government that enforces morals.
Such a society might have lower material living standards, but if all were cared for and morals maintained, the Pope would probably approve. After all, the Pope thinks we all have few billions years in nirvana ahead of us…is giving up second homes and jacuzzis worth that?
2. December 2013 at 22:35
“what, all homesteaders with similar patches of land, all trading with each other on equal terms? Do you know of such a system?”
Who said anything about “similar patches of land” or “equal terms”?
2. December 2013 at 22:47
Man, I can’t quite shake the feeling that free-market advocates are reading a whole heck of a lot into a few sentences. I think a lot of times the pope says something innocuous, like “we need financial reform,” and, because his tone and probably his personal preferences seem kind of pinko, free market types read “socialist commie financial reform.” But that’s an imposition! What the pope personally believes isn’t nearly as important as what he says, because it’s his explicit words and not his internal thoughts that 1. Will guide the church, and 2. Are his best attempt to set out what he thinks to be right, not just what his hunches are. Maybe he broadly refers to “financial reform” because, while he wants socialist reforms, he wants to give room in the church for more bleeding-heart libertarian type reforms (“let’s end FDIC!”, or whatever). It’s really unfair, when someone is taking pains to state their most minimal position and most confident views, to focus on what they “really believe” and attack that.
I also think there is a lot of the pope saying “here is a way x is bad along non-material dimensions,” which somehow is being interpreted as “x makes people materially worse off.” Like, if the pope says it is harder to find meaningful joy in life because of shallow materialism, I don’t know that “but median GDP is up because of shallow materialism!” hits the nail on the head.
Anyways, what follows is my pro-free market, pro wealth distribution, catholic take on it. Since Scott takes issue with every single paragraph, I will be thorough.
Paragraphs
1-51 This has more-or-less nothing to do with economics.
52 I more or less agree that we are at an epochal turning point, are entering an age of easy access to vast knowledge, are dealing with a general deadening of many people’s spiritual lives, and that most people live in what would feel to me like acute material want.
53 I agree that inequality is bad, that modern society has little care or need for ZMP workers, and that being poor increasingly feels like exclusion from society, not a station in society. “Increasingly” is over a centuries long timeframe, there, and obviously the lot of the poor has improved along other dimensions.
54 I basically agree that market growth is not enough to bring about a just distribution of goods and that in modern society it is startlingly easy to A. Feel indifferent to mass suffering, and B. Get caught up in unsatisfying materialism.. I think Scott read this paragraph to say “economic growth can’t help the poor,” but the Pope is clearly saying that economic growth, regardless of whether it helps the poor, is not sufficient provision for the poor without more. Indeed, it never has been, especially if you have a generous (Christian!?) definition of “sufficient.”
55. I don’t really know what the pope is saying here, but his driving point seems to be that you can’t ultimately find happiness by living for money. I think Scott reads him as saying “the financial crisis proves a capitalist economy is bad,” but in context it seems much more likely, to me, that he is saying “the financial crisis proves that the capitalist system doesn’t ultimately make you happy. It does not care about you in a real sense, and when the economy goes bad it will impersonally, mechanically trash you. Live for something nobler, more loving, and more permanent than money.” Remember, this whole aside about the economy is in the context of evangelism and what people should be living for — God. That’s what 90 percent of this exhortation is about. It is not in the context of an economics paper.
56. The pope is wrong about the trend and causes with regard to wealth inequality. He’s mostly right in this paragraph, though — tax evasion is immoral, we are not doing enough to care for the environment (ie, global warming), government debt is too high in many places, unlimited thirst for power and wealth is bad, and while minarchists aren’t the cause of global inequality, the pope is right that welfare for the poor isn’t politically popular and stands in dire need of expansion (it’s true that the state is big in the developed world, but how much of that goes to transfers to the wealthy, rent seeking, the military, middle class tax subsidies, etc? Meanwhile, where is the political consensus around transfer payments to fight global poverty? You chastise the pope for not taking an international view, but first world countries spend almost all their poverty reduction funds on themselves. Very worth chastising!).
57. I agree with the pope that modern people spend almost no time thinking about ethics and that it would behoove both themselves and society to do so more.
58. I agree that we need major financial reform – no more interest on excess reserves, an end to too big to fail by creating a clearer system for winding up large banks, legalize prediction markets, etc etc. I also agree that rich people should personally be more generous to the poor, because I think it will ultimately make the rich happier and more righteous (ie, it’s a form of consumption they wrongly underrate) and because of the diminishing marginal utility of fat stax.
59. I agree that there is a historical relationship between inequality and violence (though this may no longer be true in the first world, and the pope is not sensitive to that). I also agree that we should work more to reduce inequality. It does bother me some that the pope seems to use “inequality” and “poverty” interchangeably.
60. I continue to agree that inequality is a problem, I agree that education is not a sufficient solution, and I agree that corruption is both globally rife and an enhancer of inequality.
61-288 Back to not talking about economics, or only talking about it peripherally.
As for the, “what are you even supposed to take from all this?” question, I have way more solid personal takeaways (ie, try to give more of my income to the poor) than clear policy takeaways from all this, which I’m pretty sure is exactly what the pope intended.
3. December 2013 at 02:02
Scott: I mostly agree with you, however I also have a sympathy for pope. Being from Slovakia, which was during last 20 years or so in a “developing” category I gave much to say about free market policies. Just a few words:
1) One jab may be that free markets are not inevitable consequences of “free market policies”. You have consequentialist view which is not fair. Just one example to show how much confusion is there: for instance due to your monetary policy advices I can easily see you as a champion of true free markets. But somehow I have hard time imagining myself reading such stuff about you in WSJ.
2) So this means that to me and even to Pope it is sometimes hard to differentiate. We have IMF and World bank proposing advices to developing world that are being sold as policies promoting “free markets”. But many times they are shortsighted and sometimes outright damaging.
Nevertheless I think that you, Greg and Ryan have more common, you are just talking past each other. And no I do not think that pope makes this distinction. He just sees some ideas being promoted on the bases of free market reforms, see them fail horribly and so he criticizes them.
PS: additionaly I have a lot of sympathy for catholic Church here – especially when viewed through social doctrines by Thomas Aquinus. Capitalism in its crudest form says that selfishness can be a power for good. You do not fight it, you leash it and direct it to productive uses. It runs contrary to centuries of social doctrines of the Church, but they cannot deny that it is actually effective.
It is similar to ideas that Keynes mentioned in his famous essay “Economic possibilities for our grandchildren”
“”There are changes in other spheres too which we must expect to come. When the accumulation of wealth is no longer of high social importance, there will be great changes in the code of morals. We shall be able to rid ourselves of many of the pseudo-moral principles which have hag-ridden us for two hundred years, by which we have exalted some of the most distasteful of human qualities into the position of the highest virtues. We shall be able to afford to dare to assess the money-motive at its true value.
The love of money as a possession – as distinguished from the love of money as a means to the enjoyments and realities of life – will be recognised for what it is, a somewhat Keynes on Possibilities disgusting morbidity, one of those semicriminal, semi-pathological propensities which one hands over with a shudder to the specialists in mental disease. All kinds of social customs and economic practices, affecting the distribution of wealth and of economic rewards and penalties, which we now maintain at all costs, however distasteful and unjust they may be in themselves, because they are tremendously useful in promoting the accumulation of capital, we shall then be free, at last, to discard.”
3. December 2013 at 02:50
I think you are wrong about the Pope’s Statement Scott.
Firstly, all the way back to the fifth century, its been a pillar of Catholic-economic thought that “If everyone behaved perfectly, all forms of government are equally good, if everyone behaves badly, no form of government is sufficient to prevent disaster”.
Thus it has always been rather loath to criticise particular institutions of government, seeing their failures rather as the cumulative failures of the persons running them. Now its always been understood that some institutional arrangements can twist people/affect their judgement, but mostly, over the broad span of human history, if institutions were run by well meaning people who didn’t foster corruption, they mostly ended up doing kind of ok.
The exception was socialism of the marxist bent. The catholic church was all over that in the period 1870-1920, before it even really came into being, judging that it “denied the authentic truths of the human condition” and was therefore doomed to fail with great suffering all round.
Capitalism is a neutral tool, a response to the information problem. It can be turned to either good or evil, purely on the institutional constraints that are imposed. Do you forget so easily the early era of capitalism? The Rowntree Surveys? When workers were paid so little that they literally starved to death on the job. Partly by public shaming and partly by legislation in the 1906-1912 liberal reforms (in the UK).
You point to where trickle down economics worked – I point to those countries and see strong institutions and a public culture devoted to the regulation of capitalism.
If you look to (many) african nations you see that they function politically on a basically tribal level, when an institution is given to someone, they bring in their families as essentially nepotism, and it undermines the institutions. In such a situation capitalism will surely fail.
Development economics suggests that social trust is an essential part of building the complex supply chains and transactions that we take for granted. These cannot exist in the absence of strong and public minded institutions, and in their lack a free market may exacerbate rather than improve the situations. It is right that market freedom and strong institutions go together, thus when you look at restricted markets you see corruptions, but which came first?
This mainly is the Pope’s point, that you need to build a strong public culture and a strong institutions in order to enable a free market to function for the public good. Is this not the root of your point of why China will escape the middle income trap?
Finally, the “earnings of a minority” I understood to mean the top 0.1%. The “Davros Crowd” if you like. Its been a pretty big theme in UK political discourse, that we have a global plutocracy who live in london and pay tax nowhere. France had Depardieu (french move star) moving his tax residence to russia to avoid french taxes. There are a great many super rich living in london (or Hong Kong, or Singapore) who seem to pay tax nowhere. Partly through exploitation, and partly because it is unrealistic for a small(ish) country like the UK to have a revenue service with the manpower to chase down shell companies to the four corners of the globe. The US gets around this largely by just taxing you as a US citizen almost regardless of what other taxes you have paid – see the spate of eurozone living americans giving up their US citizenship to avoid double taxation/US regulatory headaches.
3. December 2013 at 03:52
I find that as a general rule of thumb, the more hyperbolic a person’s rhetoric, the less he understands the matter at hand. The Pope’s comments are a good example of that.
3. December 2013 at 08:58
Morgan – Great link, thanks for posting, esp
“But if some parties are vastly more powerful than others, then the market cannot be free. If some parties have vast piles of wealth, superior access to public resources, monopolistic control of critical supplies, then the market is no longer “free” in the sense of being a series of free exchanges between peers.”
Like you, I’m a fan of Distributism, the economic philosophy of Hillaire Belloc and G.K. Chesterton. Belloc was correct that both Capitalism and Socialism led to the Servile State where we are all servants of a handful of rich people in the former, or to government bureaucrats in the latter. So we should have a free market that determines prices, but with policies to encourage the widespread distribution of productive property. But I think the US has some Distributist tendencies, such as the Homestead Act of last century and 401ks of today. We should build on those and discourage consumer credit.
Benjamin Cole – Belloc insisted that usury doesn’t mean charging interest, it means “charging interest on an unproductive loan”. Business loans and home loans are very different than consumer credit.
3. December 2013 at 09:15
Having seen the sort of double-talk and denial the Pope’s apologists are capable of handing out, I’ll never complain about Krugman’s apologists again.
3. December 2013 at 11:11
W. Peden, could you explain your comment about trickle-down being the wrong term? I don’t think I understood it.
3. December 2013 at 11:14
Zrimsek- When everything you say is at risk of being treated as unerring truth, you tend to take pains to say very little definitively. Papal statements are often about shifting emphasis while giving those who disagree ample wiggle room. You can’t get mad if they respond by wiggling.
Remember, for us free-market minded Catholics the pope saying “price controls are great!” Or “capitalism is bad for the poor” or something would spark a crisis of faith. But the pope saying “think about inequality and poverty and flaws in the system and how to fix it; realize that capatalism won’t in and of itself solve the problems of inequality and poverty” is something we can handle, and if he goes on to imply that capatalism sucks we can ignore him. So that’s what he did. Again, he created the wiggle room intentionally, because 1. He is writing on behalf of hundreds of millions of people, and 2. He knows that, when it comes to public policy, what he thinks is right isn’t necessarily right.
Krugman writes in the same way, and also creates ambiguity and merely-implied arguments, but I think more for CYA reasons. The man can somehow argue that monetary policy is ineffective at the zero lower bound for years without ever outright saying it (or at least, not saying it outside a nested maze of qualifiers). Then when he starts cheering on Abenomics the gotcha quote just isn’t there.
In both cases it is the writing style, not the apologists, that are taking pains to promote ambiguity.
3. December 2013 at 11:39
Tom, You said;
“So yes, I think the Pope is simply calling for a capitalism that looks more like the 50″²s then the 80″²s.”
Ok, repeal the EPA, repeal OSHA, repeal Sarbanes-Oxley, repeal anti-discrimination laws, repeal food stamps, repeal most of welfare. Slash SS disability. Cut maximum unemployment to 26 weeks. Put women back in the kitchen. Make military spending 10% of GDP. Abolish Medicare. Abolish Medicaid.
I think you’d find lots of support for that among extreme conservatives. But I’m surprised to hear it from you.
Ben, In year 30 no one could even imagine a system called “capitalism.” So I’m quite sure the Bible has nothing to say about the subject.
Robert, You said.
“Man, I can’t quite shake the feeling that free-market advocates are reading a whole heck of a lot into a few sentences. I think a lot of times the pope says something innocuous, like “we need financial reform,” ”
I’m sorry that you wrote such a long comment, because I lost interest right after this idiotic statement. The Pope said the financial crisis was caused by the denial of the primacy of the human person. If you want to talk about what the Pope actually said that’s fine. If you are going to replace his nutty comments with your own much more reasonable comments then I’m not interested.
If the Pope really does share your ideas, and is as incompetent a communicator as you seem to think, then I really wonder why he was given the job. The left loves his comments, as they all think he’s bashing capitalism. And I think they are right. Maybe the Pope ought to learn how to communicate.
JV, I’m not fan of the IMF and World Bank, but if the Pope thinks their advice is what’s caused misery in the third world then he’s clueless on economics. And you can’t have it both ways. We can’t make excuses “well he’s just the Pope, why expect him to understand economics?” and at the same time be asked to accept his statements on economics. It’s one or the other.
You said;
“Capitalism in its crudest form says that selfishness can be a power for good.”
Nope, selfishness is not good, capitalism cannot work at all w/o altruism.
phil, You said;
“If you look to (many) african nations you see that they function politically on a basically tribal level, when an institution is given to someone, they bring in their families as essentially nepotism, and it undermines the institutions. In such a situation capitalism will surely fail.”
I strongly disagree. It may be harder to implement capitalism in Africa than elsewhere, but if implemented it will work better than socialism, (think Tanzania or Ghana–before and after)
3. December 2013 at 11:58
And when implemented, as in Botswana (not the Hong Kong of Africa, but perhaps the South Korea of Africa) there’s nothing in African culture that prevents them from prospering, even if they’re cursed with good natural resources.
3. December 2013 at 12:35
Scott – 1. The pope calls for financial reform in a totally seperate paragraph from the one you are quoting. I have no idea why you are
claiming I’m puting words into his mouth, “we need financial reform” is pretty much how he started a paragraph, then he makes some airy words that don’t actually explain what kind we need. 2. The pope doesn’t say ignoring the primacy of the human person causes the financial crisis, at least not clearly; he says the financial crisis originated in a society racked by a profound spiritual crisis, which the financial crisis is
Overshadowing. Specifically, “One cause of this situation [ie, a spiritual crisis] is found in our relationship with money, since we calmly accept its dominion over ourselves and our societiy. The current financial crisis can make us overlook the fact that it originated in a profound human crisis: the denial of the primacy of the human person!” If I say your phone originated in China it does not mean your phone is caused by China, especially here, where the pope’s import is obviously that the spiritual crisis he has been talking about for a paragraph is overshadowed by the financial one. 3. One of my major points is that “what the pope really believes” is the wrong question. This is an authoritative document Catholics have to take to heart. His goal isn’t to communicate what he believes, it’s to nudge doctrine and emphasis in the direction he wants without going too far or too far wrong to hold onto his flock. He is deliberately underselling what he really believes, and deliberately leaving ambiguities for people who disagree with him to exploit. It’s good he’s doing those things! All that means that it is important what the exortation *says*, not what the pope thinks. To make an analogy, you are reading a Supreme Court opinion like its a law review article.
3. December 2013 at 12:42
…..”Capitalism in its crudest form says that selfishness can be a power for good.”…..Nope, selfishness is not good, capitalism cannot work at all w/o altruism.
The problem is conflating self-interested behavior with selfishness (think going to school, or to the gym). Before capitalism, there was no mechanism for accumulation of human capital outside of a very small clique of powerful people. Capitalism allows for self-interested, non-selfish behavior, which has incredibly high positive externalities.
It’s a disappointing rhetorical failure that capitalism isn’t universally paired with the rights of peasants, women, etc. We have a biological urge to control others, and this confusion about selfishness is caused by the tendency for people to oppose self-determination for others without admitting to themselves that this how they feel.
3. December 2013 at 15:27
It’s not a question of taking advantage of actually existing wiggle room; it’s a question of using highly creative exegesis to create wiggle room where it doesn’t exist. Based on their showing here, if the Pope actually did say “Price controls are great”, conservative believers would deal with their crisis of faith by persuading themselves that he was really doing nothing more than warning against hyperinflation.
3. December 2013 at 15:32
Pope Francis speaks the language of globalism, and this tells you everything. This is clearly about harnessing state violence to seize and redistribute in the name of ethics. (He states that violence is on the way anyway in 59.)
There’s a whiff of religo-global socialism thuggery in all that love.
The church’s mission is to give voluntary help directly to the poor and suffering, and out of their own funds and efforts.
The church abandons its mission every time it exhorts and enables state coercion in lieu of its own mission.
The church’s mission becomes a lambskin, a shell, into which the coercive state wolf crawls.
I prefer Leo.
“If, then, a political government strives after external advantages only, and the achievement of a cultured and prosperous life; if, in administering public affairs, it is wont to put God aside, and show no solicitude for the upholding of moral law, it deflects woefully from its right course and from the injunctions of nature; nor should it be accounted as a society or a community of men, but only as the deceitful imitation or appearance of a society.”
http://www.vatican.va/holy_father/leo_xiii/encyclicals/documents/hf_l-xiii_enc_10011890_sapientiae-christianae_en.html
3. December 2013 at 16:46
Robert, The Pope said;
“The current financial crisis can make us overlook the fact that it originated in a profound human crisis: the denial of the primacy of the human person!”
And then you said:
The pope doesn’t say ignoring the primacy of the human person causes the financial crisis, at least not clearly; he says the financial crisis originated in a society racked by a profound spiritual crisis,”
So should I just ignore the Pope because I’m a lowly economist and I have no hope of ever understanding what the Pope’s comments imply about how we should run an economy? Or should I pay attention to what he says? You can’t have it both ways.
I guess that you interpret words differently from how I do. I thought it was very clear.
kebko, Good point.
3. December 2013 at 20:39
Scott — if you interpret “originating in x” to always clearly mean “being caused by x,” then yes, you interpret words differently from both me. When you watch ESPN, do you think touchdown drives are caused by deep in the other team’s territory? “The ultimate failure on fourth and goal can make us overlook that the drive originated in Bengal’s territory — Romo only failed after driving the whole field!” If that sentence doesn’t unambiguously mean that the failure on fourth and goal was caused by the drive starting deep in enemy territory, why does the pope’s sentence clearly mean that the financial crisis was caused by a profound human crisis?
In this case, I actually agree that the clause is ambiguous standing alone, because “originating in” *can* have a “caused by” flavor. That’s when I looked to the surrounding text and saw that all this was in the context of the pope talking about a spiritual crisis, not financial policy. In that context I think it is at least very possible that he meant “originating in the midst of” and not “caused by”. The important thing is the “human crisis,” and the financial crisis is brought up because it overshadows it and also lays bear the problems inherent in it (that second bit is a later sentence). The important thing is not the financial crisis, with the profound human crisis brought up because it caused it.
All of which is immaterial, because 1. In my original post, when I claimed the pope said we needed financial reform, I wasn’t talking about this paragraph, in which the pope doesn’t say we need financial reform. I was referring to paragraph 58, where he urges world leaders to engage in financial reform. It was at that point you stopped reading my response because I wasn’t engaging with what the pope really said, but I clearly was. 2. In the post you didn’t read I admit that I find the paragraph we are discussing to be his most confusing. I honestly don’t know what he’s getting at, as the paragraph is open to multiple interpretations. I’m not trying to claim your reading is impossible, just that there is no reason to prefer it, and I think some reason not to (not the least being “it’s makes the statement nonsensical, even from a socialist perspective).
And no, you shouldn’t ignore the pope, but you should focus on what he says, not what he believes. At least once you’ve responded to reasonable interpretations of the pope with “do you honestly think he believes that?” But who cares? It’s his words that will affect church policy and, consequently, hundreds of millions of opinions, because they are affectively commands. His beliefs, standing alone, will have much less of an impact, because they are not commands. Again, this is much more like interpreting a court opinion, where the important thing is figuring out what the judge is using his power to command, and much less like interpreting academic writing, where the important thing is to figure out what the writer believes, what his evidence for it is, and how he is trying to persuade us. I totally agree the Pope is personally a pinko, I agree he used far-left rhetoric, and I agree it wasn’t very persuasive (and sometimes just factually wrong). I just also think he carefully framed this document to not force those views on Catholics, while still urging free market Catholics to think more about inequality, poverty, and materialism. I respect him for that more than I condemn him for being a quasi-socialist. Way more!
4. December 2013 at 01:55
Scott, kebko on selfishness vs self-interest. Okay, we are going a little bit away but I will respond. What people think of when evoking “altruism” is based on evloutionary psychology. There are basically two types of altruism: the “true” altruism is mostly observed only in family context. It has perfect explanation from evolutionary psychology point of view where “winner” is an individual who has achieved preservation of his genes. It is that easy, a cold logic that if you exist here and now you are a product of millions of years of competition of genes for reproduction.
It is also observed in nature, where for instance no longer fertile lion grandmothers are willing to defend their grandchildren even at expense of their own lives where even mother may not be willing to go to such extremes if she still has a chance to have another litter with different male. It is not “intentional”, it is just logical result of evolution.
However main feature of capitalism is that it is mostly about individual being able to participate in anonymous exchange in a society with complex division of labor. Here if any altruism exists at all it is mostly reciprocal-altruism. This is also observed in nature especially with primates but sometimes even in bacterial colonies! There are numerous experiments that confirm that for instance if one non-related individuals are used to shares food with other individual it significantly increases his chance to have this act returnetd. The evolutionary result is that a winner is complex “forgiving” tit-for tat strategy with constant warfare of ones ability to get away witch cheating contesting with others ability to spot cheating. Jesus-like behavior where somebody has unconditional love fore everybody including ones enemies, where one shares all his wealth and food without any regard for what other’s response will be is almost unheard of.
Ok so what is my main point? My main point is that “free market” is at its best really only about this reciprocal altruism. Tit-for-tat. If people in Africa have nothing to give as a “tat” then free market doesn’t care. If the cost of creating cheap biofuels from agriculture products for small part of population of Earth means that billions of people without ability to reciprocate reciproce have to die, then they WILL die. Producing and selling designer purse for $3000 has the same value producing life-saving medicine for $3000.
Now I understand that free market can be “channeled” so to speak of so that these catastrophies do not happen. But it is not automatic process. It is like Ryan Avent says – there is not inherent property of “free markets” that lead to some good equilibrium.
And I understand your argument: “Hey, look at all rich countries – they all have more free market then poor countries”. But this only says that “free markets” (to some extent) may be necessary but they may not be sufficient condition for this to happen. It is even possible that promoting “free market policies” always and everywhgere may not actually lead to rich and free countries in the long term!
4. December 2013 at 02:04
PS: I just had to say that I am atheist liberal so I really do not care that much what pope says – other than his impact on people who take him seriously. But I also think about moral philosophy and here I can somewhat relate with what he says – or better what he could have said if he was not actually clueless.
It is like Nick sometime say not about what one actually meant to say, but also about finding out if there is something interesting that could have been said then it merits discussion. And Ryan Avent is onto something here even if pope would disagree with him.
4. December 2013 at 03:16
Its also important, from a philosophical perspective, that capitalism response to the needs of consumers.
When we ask “Was the financial system over large”, “was the system as a whole over leveraged”, we tend to talk about systemic forces, but these are just generalisations of individual choices. We can as easily spend our money on education and food for the poor as on designer handbags or savings. If we do that, the market will respond, and food will be provided. In this way capitalism provides a powerful tool with which to overcome the deficits of inequality, poverty, and famine. If we have failed to do so, everyone must bear some responsibility, because every purchase is a decision not to overcome these obstacles.
Since in part the crises was caused by the desire to have more saving than the economy could safely provide, and the market responded by packaging up risk as safety and providing yield through leverage. At least one solution would have been for society to spend more on the provision of good now, and save less.
More concretely, saving less would likely have allowed us to avoid the ZLB, since part of the setting of interest rates is about matching demand for savings with demand for investment.
4. December 2013 at 05:56
Robert, There’s a big difference between saying something originated in a place, and saying it originated in a behavior. The latter is a causal explanation.
Your claim is that the Pope successfully hid his true socialist leanings. My claim is that he did not.
JV, That’s not what we mean by altruism. We are saying capitalism can’t work without altruism, not that it’s nicer when we have some altruism too. It’s a system based on altruism. If everyone cheats when they think they can get away with it, then the system collapses. Indeed that may be the problem in certain failed states.
phil, You said;
“Since in part the crises was caused by the desire to have more saving than the economy could safely provide,”
That’s exactly the problem, people misdiagnose the crisis. Excess saving was not the cause.
4. December 2013 at 06:51
Scott: I have different view. Capitalism is a system where thanks to formal and informal set of rules – some being upheld by threat of violence – agents compete on “fair” grounds, like price and quality as opposed to competition in other areas like ability to control violence or ability to ingore/change rules in the middle of the game. If you want to call ability to tolerate those rules as “altruism” or “self-interest” etc. then I will not argue even though I think there may be some objections by somebody else.
The point is that the backbone of the capitalism is still a fierce competition where resources are allocated not according to how somebody needs them (like for instance in family context), but on free market according to ones ability to give something in return. Tit-for-tat. This operational framework governs exchange not only for complex human societies but it can be observed even as part of animal behaviour. It is produce of evolution. However the fact that it is “natural order” or the “best thing we can have” does not mean it is moral – doubly so if you use Christianity as your moral compas. That there are no moral choices left for us to make it “better”.
4. December 2013 at 09:39
Scott: 1. A “crisis” is not human behavior. “Don’t let his diplomatic career’s easy postings overshadow the fact that it originated in the suez crisis.” 2. My argument is not that the pope hid his views, it’s that the document is carefully crafted to not explicitly state or call for anything a free market type would find too objectionable (I’m a free market type and have already posted my interpretation of every paragraph, if you want to read what I’m basing that on). This is a church that denies communion to politicians who vote for abortion, and this obviously pinko pope could have taken some hard stance like that which would have brought my free market beliefs in contrast with my faith. He had the power to say “break up big banks, raise the income tax, the means of production should be owned by the government as much as possible,” etc etc. He resisted the temptation to do that, and instead wrote a document which, when read literally, very rarely unambiguously says something I disagree with. I don’t think that happened because he’s a bad writer who can’t communicate his socialist policy preferences, I think it happened because he genuinely did not want to force those preferences on the church. That’s the story — not that an educated Latin American distrusts capatalism, not that the pope moderated his tone or his beliefs (he didn’t), but that he moderated his commands and affirmative statements of fact. He managed to turn the church’s attention to poverty and inequality without taking more than an oblique stance on what policy solutions can solve those problems. Good on him!
Imagine a general writes to a colonel “Your battalion has to deal with the enemy. I prefer a direct assault, but feel free to try a strategy of maneuver.” That is how I read the pope’s message: “we have to get serious about poverty. I prefer leftist tactics, but feel free to try anything short of unbridled laisse faire to get there.” You appear to be reading him while totally ignoring the fact that the most important thing about his writings is that they border on commands, and are instead focusing on the preference rather than the orders.
5. December 2013 at 08:07
JV, You are still missing the point, You need altruism to get fair rules. It’s not in the ruler’s interest to have fair rules.
And I also disagree with your claim about how goods are allocated under capitalism. Capitalism has far more altruism that socialism. Far more charity.
Robert, You said;
“My argument is not that the pope hid his views, it’s that the document is carefully crafted to not explicitly state or call for anything a free market type would find too objectionable”
Then he obviously failed, didn’t he?
6. December 2013 at 02:03
This is getting a little bit too far away. I was growing up in communist Czechoslovakia and even if I still was a child when things changed I know socialism from first hand experience and I have family members who lived through a lot. I know socialism as a way to govern society is not good and it was never the point of this discussion. I am now sorry to use “to everyone according to his needs” in my post I hoped it would be taken for what it actually means.
Nevertheless I will risk another parable to try to explain what is my point. Every state be it communist or socialist has police and army. One can even say they form the basis of what state is. Now every now and then people in these forces do what they were trained to do – they use violence and kill somebody. Can we say that since army and police is indispensable part of every society – even society that is the best one in history of humanity – that therefore killing is good? Can we say that if police and army officers are curageous and they are capable of true altruism and their intent is good that therefore killing is good? Can we say that if killing a few is a price for having society that saves millions that killing is good?
I say no. We have to have strength to face the criminals lying dead on the street and enemies shot on the battlefield and tell them that we are sorry. We know that what we did to them was on some basic level wrong. We wish it was different that we were able to find another way and we hate that we were unable to do so. And we have to actually mean it, not using it as an excuse.
Also it is dangerous to switch means to ends for ends themselves. Like saying that police and army and free-markets enable good and just societies and therefore they are themselves good. No! It is just societies that are good. If we can have good and just societies without army, police or free markets for some commodities then to hell with them.
16. January 2015 at 12:50
[…] free market economists have taken umbrage at the pope’s seeming attack on free market economics. My perspective is quite different. […]