Social Economics
Roberto Marie Ike
Lincoln University of Missouri
Social Economic Theory
There are three ideas that enhance understanding about social economics: Ludwig Von Mises’ notion of natural law and income equality or inequality argument, Robert Nelson’s economic theology, Catholic Social Principles and family economics. Knowing that there are many aspects of theological understanding, the writer cautiously focuses this paper on economics and Christian theology.
Social economics derives from an interdisciplinary field in the bid to achieve sustainable ways to better the human condition. When it comes to the human condition, social economics argues that economics must seek solutions as well as theology, sociology, psychology or philosophy. One of the questions Ludwig Von Mises (1881-1973) asks is whether the progressive arguments on income inequality are any different from feudalism, even though liberals want nothing in common with feudalism.
Income Equality
Ludwig Von Mises (1996) argues that in the past laissez-faire capitalism did not appeal to the Communists or to Islam. The point is that if a society is concerned with equality, especially with income equality, one must realize that a laissez-faire market structure will not always lead to that income equality, especially because of market failures. Within the Communist or Muslim societies, it is hard to argue for a completely free market without government control. Therefore, income equality remains a fantasy, although liberals say it is possible to obtain income equality (Von Mises, 1996, p. 841).
Liberals/progressives argue that we must fight for the equality of all because all men are legally and biologically equal. They also argue that society has all the institutions necessary to achieve this equality. Within the law, everyone is born equal. Based on utilitarian and social philosophies, progressives argue that we must fight to secure the equality of all and work to prevent ideologies that inhibit individuals from achieving their full potentials. Equality is not only based on the notion that everyone has inalienable rights, but also based on the idea that it serves the interests of all. Thus, everything must be left to the voter to decide. Voters must decide who holds public office, just as consumers decide who directs the activities of production (Von Mises, 1996, p. 842).
Liberal ideologies usually argue against religion and other ideas that the middle ages represent. Von Mises suggests that the only way liberal philosophy about income equality would begin to make sense is to have inequality. This idea makes liberal ideologies not so different (as we may be led to believe) from the feudalist, Communist or Islamic understanding of income inequality and its impact on bettering the human condition. All humans are not born equal. Voters cannot solve all the problems about income inequality. Therefore, unlike progressives, every idea whether theological or otherwise is necessary to understanding and solving problems related to human development (Von Mises, 1996, p. 842).
When the capitalistic market works, it means that individuals in society should be able to participate in the systems and survive through their participation without hindrance. For instance, if you have a piece of bread for sale, any one who is willing to buy the piece of bread at the price you are offering will get it. It is that simple. You do not need any intervention. However, if the piece of bread is rotten or if it is advertised as a piece of bread but is really a piece of foam, then there is a problem. The market has failed to deliver.
With the collapse of the stock market in 1929 came the Depression, and the New Deal was chosen as a solution. At the time, it really was a solution. The New Deal was a "necessary evil," just as the plan to rebuild Europe and Japan after WWII. The capitalistic market failed woefully. The government had to do something. Franklin D. Roosevelt and his administration choose the New Deal. The New Deal was a mixture of ideas from various sources. And for the most part, it helped the country to look ahead.
Recently the stock market (February 2007) was reeling under the rumors of what the Chinese government might do with capital gains tax. We are not used to having governments meddle with the stock market. With the growth of the Chinese market and its growing importance to global economy, laissez faire capitalism may become a thing of the past. No one ideology (liberal, conservative, feudal or communist) could by itself address the vast needs in social economics. There must be a value laden combination of ideas, philosophies and disciplines in social economics.
Catholic Social Principles
It is readily noticeable that many economists dismiss the economic ideas of popes and other religious leaders because they believe the ideas have no merit. These economists say that the popes apply theological ideas on economics without understanding economic theories and policies. Macro and micro economics are concerned with issues of inflation, unemployment, demand, supply, production and price of goods, services and idea, etc. The popes on the other hand are concerned with justice, peace, preferential option for the poor, common good, human dignity, solidarity, subsidiarity, freedom of social participation, etc. According to these economists the two areas are different and should not be made to relate. One area is economics, and the other is theology. Economics deal with the knowledge of the economy, which indicates that you add to the knowledge base. Theology deals with knowledge about God and there is nothing anyone could add to that knowledge.
Social economics helps to understand the views of religious leaders on economics, and explains why some economists do not understand religious views on economics. Social economics explains why some economists do not understand papal writings on economics. While economists are concerned with the workings of the economy, its theories and policies, the popes are concerned with its social aspects. The social aspects deal with how economic theories and policies affect individuals in society. Social economics argues that economists should pay attention to the effect of economic policies (capitalism, socialism, and communism) on individuals in society. Thus, economists, like theologians must seek ways to address social impacts of economic ideas and movements.
Economic Theology
In today’s world, the process of eliminating economic evils is not only a theologically problem but also one that entails eliminating economic scarcity. If we can find a way to satisfy material needs, it is fair to assume that many of the troubles we face in the world would be eliminated. People would spend their energy promoting issues that would really enhance the wellbeing of humanity. The ideas of John Maynard Keynes have helped to shape the modern welfare state, where individuals seek non-capitalistic, exploitative methods. Keynes ideas encourage eliminating scarcity in the bid to achieve social harmony and economic wellbeing (Nelson, 1991, pp. 3-4).
Economic theology does not assume that human conflicts are caused by economic forces (scarcity, poverty) alone. Ignorance also contributes to human conflicts. Robert Nelson argues that modern economics is not different from Judeo-Christian philosophies of the past. Modern economics is the “secularization” of the Jewish and Christian traditions. It has only tried to recreate the past theological controversies (wages, tax, usury, etc.). According to Nelson (1991), what we have today are “modern economic theologies” instead of strictly positivist economics as we are led to believe. The twenty-first century welfare states with their social legitimacy come out of a theological tradition and not out of positivistic and scientific tradition (Nelson, p. 23).
In his work, Roberto Nelson differentiated between what he called the Roman tradition where rationality governed, and the Protestant tradition because this group protested against rationality, and held views other than reason. The Roman tradition according to Nelson sought answers to Roman problems (life) through reason.
Nature, including man, is guided by the dictates of reason. The material and external world are the original and fundamental reality not the world of the mind and ideas. Men are in principle capable of discovering and understanding the rationality of human existence (Nelson, 1991, p. 31).
The Roman and the Protestant traditions teach us that there is no difference between what a theologian would want and what philosophers and economists wanted for society down through the centuries. Bertrand Russell believed that “men were evidently influenced in their behavior by factors beyond economic well being.” Russell was disappointed when his expectations about better economic situations for all were shaken by WWII. He thought that “if rational men cooperated and used their scientific knowledge to the full, they would now secure the economic welfare of all” (Nelson, p, 218).
The Protestant tradition, on the other hand, sought answers through revelations: “True progress demands a revolutionary transformation of human existence. Life is lived not for happiness but for disciplined labor in the service of God and history” (Nelson, p. 53). These traditions show us that social sciences like economics must entail values like theology. The new world of the welfare state and of economic pursuits would have to be placed within the context of a broader understanding of the meaning and purposes of human existence. The progressives use scientific management of society, necessarily as a central element of the production of goods and services. For progressives, “salvation was still to be achieved by following a path of economic progress, directed by people possessed of expert knowledge” (Nelson, p. 219).
Robert Nelson sees some light to solving economic problems in the post-modern era in what he views as a “world-wide economic union.” In the global economic union, “each group of people would be free to enter into or to secede from an economic union, according to their perception of the merits of union” (Nelson, p. 328). Like Gaudium et Spes, a dogmatic constitution of the Catholic Church in the modern world of Vatican Council II (O’Brien & Shannon, 1992, p. 210), Nelson states that “people can help to shape their own [economic] fate” (Nelson, p. 331). By “post modern economic theology,” Nelson indicates that a social science like economics “must entail values like theology” (Nelson, p. xvi). Economic pursuits within the new welfare states should have a new understanding, which must be placed in the context of a broader “meaning and purpose of human existence.” This context has largely been ignored by economist in the past centuries (Nelson, p. xvi).
Family Economics
Family economics is derived from the writings of an English-German economist E. F. Schumacher. Schumacher published his bestseller book, Small is Beautiful in 1973. One of the things that many admirers of Schumacher, especially fellow economists, do not know and would not like to admit was that Schumacher’s Small is Beautiful was strictly influenced by Rerum Novarum, Quadragesimo Anno and Humanae Vitae. In 1891, Pope Leo XIII wrote Rerum Novarum addressing the new things (concerns) about labor, wages, families, etc. He also was concerned about the dangerous impact of communism, socialism and capitalism in the life of families, individuals and society. In 1931, Pope Pius XI wrote Quadragesimo Anno, on the 40th anniversary of Rerum Novarum updating the world on the issues raised by Leo XIII. Pius XI exposed the worsening of economic conditions for families. Pope Paul VI published Humanae Vitae in 1968, outlining the modern dangers on human life and dignity. Unbeknown to many of his admirers, Schumacher used these encyclicals to espouse his teaching on “family-friendly economics” arguing unlike laissez-faire ideology, that capitalism should seek the advancement of human dignity and subsidiarity. Schumacher argues that consumerism and capitalistic expansion could have adverse effects on the environment. He later wrote A Guide for the Perplexed explaining the philosophical and spiritual reasons behind Small is Beautiful (Joseph Pearce, 2007, pp. 7-8).
Like Ludwig Von Mises, Schumacher disagreed with many modern economists who presume that tradition is not dynamic but redundant. According to Schumacher, there are undying truths that guide human history. There are many things of the past that are still relevant today and tomorrow. The ideas of corporatism and mergers could lead to the suppression of the beauty of littleness. In families (small human entities) the individual finds meaning and self-worth. Corporatism could become unresponsive and impersonal thereby dispossessing individuals, making them powerless and alienated. As technology grows there is the danger that the world may become artificial disconnecting individuals from the real world of interpersonal relationships. This may lead to individuals viewing themselves not as part of nature but domineering over nature. Individuals would eventually become locusts not stewards. These ideas enhance understanding on a social economics that is inclusive of sustainable helpful ideas (Joseph Pearce, 2007, pp. 7-8).
Linking Economics and Theology
Social economics entails that economics and theology work together. It argues that economics and theology basically seek the same goals to better the human condition. Social economics explains the views of religious leaders on economic policies, and explains why, in their opinion economics like theology must seek to better the human condition.
Theology
For the most part, theology finds its expression in religion. Religion means to find or to tie oneself to someone. Cords are a way of binding or bridging a gap or idea together, which involves necessary actions. We pray because we are human. Prayer is an activity. We pray because we are in need, not because we are Jews or Muslims or Christians. Activities with special meaning can be called holy or sacred. For instance, when Native Americans undertake buffalo hunting they first pray to appease God because they are going to take the life of a buffalo to support their own lives. When we create actions that have special meaning, they become sacred religious rites that explain the relationship that binds us to God (Mueller, 1997).
Theology addresses the question of whether there is a God. It searches for explanation, reasons and patterns that are usually there but that we do not readily observe. Asking questions is part of the nature of man; humans ask questions. Theology means the study of God. It is, according to Peter Abelard, faith seeking understanding. It means that understanding or reason is acting upon the experience of faith. Theology is also a discipline. When you say God is good, you are saying He is good to us. As human beings we need to strive to be good. In theology, sin means to miss the mark or to go astray. Religion is the experience of faith while theology is the understanding of that experience. Faith is leaning on something with all one’s weight. Hope is built on faith and love is the expression of faith and hope. These three theological virtues are ways that bind us to God (Mueller, 1997).
The basis of the social and economic documents by popes and bishops derives from biblical and faith perspectives, in relation to who God is and who we are. They come out of tradition, which is a deposit of faith; and the notion of a covenant, which is a contract or pact, initiated by God with strings attached. In creation, theology speaks about humanity, that we are brothers and sisters. God said creation was good. God gave the parameters of good and freedom, and then we sinned. Temptation says that something is good when it is really not. The story of creation is a story that speaks about who we really are as human beings. Creation story says we are made by God but through our free will we have jeopardized our relationship with Him. This jeopardized relationship will be restored through obedience: like that of Abraham, Isaac, Jesus, etc. Thus, in creation we are brothers and sisters (Mueller, 1997).
Jesus called us to a new covenant that is not like the covenant of Moses. The covenant of Jesus is called the Kingdom of God. Kingdom is the rule, reign, power, and sway of God turning human hearts into good. A Christian locates the Kingdom of God in Jesus: in His words and deeds. Jesus tells us the Kingdom of God means love of God and love of neighbor, which go together. The people of the new way, later called Christians, share the common bond of faith as followers of Jesus. Discipline and challenges to discipleship bring the gospel vision to bear on a complex economic and social environment. These thinking could be based on one’s understanding of humanity, that is, other beliefs that are not Christian, but are still theological (Mueller, 1997).
Economics
A modern economist, Alfred Marshall, says that man’s character has been modeled by everyday work. World history has been shaped by religion and economics. It is not clear how economics and religion relates. But there are possible ways in which they are related. Statistically 100% of Americans need to eat, so economic matters are important. Everyone has a belief system. Everyone values something more important than everything else. Paul Tillich says that your ultimate concern is your God. When one considers the story of the “Golden Calf” in Exodus 32, the question that comes to mind is where does religion begin and economics end? The story of the “Golden Calf” indicates where religion and economics come together. Economic ideas influence religious beliefs. An individual’s economic position may inform his or her ideas of religion. Economics is a social science that studies how to “best” use scarce resources to satisfy unlimited wants and needs. There are four issues at work in this definition: social science, scarce resources, unlimited material wants and needs, and the word “best” (Welch, 1997).
As a social science, economics is placed within the intellectual community alongside history, political science, sociology, etc., that study how people behave in groups. Unlike the social sciences, the natural sciences use controlled experiments. Thus, you can with certainty say why a plant dies in one dish and not in another. Economics deals with a complex entity not controlled experiments. Economics tries to emulate controlled experimentation of the natural sciences. And to do so economics builds on models. With a model one assumes everything else will be unchanged. Assumptions are conditions we hold to be true. Assumption can change everything. Economists like to talk about price and quantity demanded, which is loaded with assumptions (Welch, 1997).
Examine the story about three pigs. One built a house out of straw, another out of wood, and a third out of bricks. The third pig was laughed at because of the time spent on building the brick house. Eventually, a bull attacked the first two houses, which fell. The third house did not fall after the bull’s attack. The third pig ended up housing the rest of the pigs. There are assumptions going into the building construction. What if the first is a poor single mother, the second has some means and the third has a father who is president of a brick company? This assumption/scenario changes everything. The moral is that it pays to have money or influence. The role of assumptions is colored by people’s belief systems, which play a great role on the outcome of a model. Positive economics is said to be value free, while normative economics (welfare economics) is value judgment. The economic model that the quantity demanded equals the function of price, etc., is incredibly value laden (Welch, 1997).
There is a relationship between religion and economics. People’s beliefs relate to their assumptions. Assumptions are embedded in culture and in everything we do. The question about scarce resources depends on how you look at them. Are there enough resources to satisfy people’s wants and needs? Generally, resources are very scarce. And this is where religion has a lot to say about economics. Why are resources scarce? The first explanation or reason why resources are scarce comes from the definition of economics. Resources are scarce because wants are unlimited. There are some things we want, others we want up to a point. Some of our wants are limited and some are unlimited. The second reason why resources are scarce is greed. Religious people will present this as the real problem. Most people see a problem when 800 million people are starving around the world and yet a watch is sold for $250,000. If we have enough resources, distribution should not be a problem. Anytime something goes wrong with the economy somebody is the problem (Welch, 1997).
In Genesis 1: 26-28 we read that man was made to have dominion over creation. The personalist philosophy of Emmanuel Mounier indicates that by virtue of the fact that I know what I know implies that I know myself. Human beings are made up of material and spiritual dimensions, which is the nature of who we are as people. The spiritual side is unbounded while the material side, as economists theorize, is bounded. Human beings usually spiritualize their wants. But we are never spiritually satisfied. It is assumed that material things bring us closer to attend what will never be attended. In the definition of economics given above it is said that economics deals with how scarce resources are best used to satisfy unlimited wants. The word “best” is purely value judgment. People’s value judgments are not typically influenced by their belief traditions. For instance, how do individuals deal with the issue of minimum wage or the question of fairness? What is the definition of fairness? Economist talk about justice but religion best defines what justice means. The question of environment, stewardship and collective responsibility to the poor are influenced by belief traditions. No particular principle, economic or otherwise, leads directly to a clear blue print of what to do or to the application of a specific issue. In policy issues people may agree on a principle but not necessarily on its application (Welch, 1997).
Methodologically there are huge similarities between economics and theology (religion). Theology is a theory: the study of, while religion is like a policy: the practice of. The understanding of beliefs gives rise to religion. This can go both ways. In this there is a lot of parallel between economics and religion. Another relationship between theology and economics is that both are dependent on the assumptions of what a rational person can do. When one is not competent can theology or economics prescribe the rules that must be followed? Both economics and theology deal with maximizing behavior. In Christian tradition theology and religion are about eternal salvation (Welch, 1997).
The Role of Culture
Religion affects culture and culture affects economics and vice versa. Hayden White (1978) asserts that a historical text is literally artifact. He said that history is fiction. Stories are told within the context of culture. The plot structures by White include:
- Romantic: quest for a higher state of perfection. Individuals can achieve as in the creation story
- Comic: stories about bringing order to evolutionary or revolutionary change as in economic equilibrium and creation.
- Tragic: stories about decline and fall as in the story of Adam and Eve, and Malthusian population theory.
- Ironic: stories about random or casual catastrophe as in the parable of the 10 virgins and creative destruction. When things get better other things may be destroyed by it.
Different people, depending on their cultures, view the same stories differently. Economics and theology appear to be different due to differences in cultures (Welch, 1997).
In economics, distribution of income is a mainstream theory. Your income is an outcome of what you add to output (production). Your income is a result of what you produce. In early history of economics, income distribution was a function of class structures (social working class, land owning class, entrepreneurs). Is it distributive theory to argue that you get what you put into the market? Here one must deal with the problem of justice, the dimensions of the issue, plus the context within which the justice occurs. Is it just to say: “from each according to their ability, to each according to their need?” How do you measure need from higher to lower level of abstraction? Is there any merit in arguing for subsidiarity and/or preferential option for the poor? (Welch, 1997).
The government is always involved in economics. For instance, within the federal deficit we usually speak about balancing the budget. The Constitution is required to balance the budget. Why is it balancing the budget instead of controlling the deficit? Or is this question really addressing class warfare in America? Is it about the budget or about class warfare? It could be said that maybe people prefer a balanced budget in the abstract, but “not in my backyard.” Is the government a vehicle for getting things down or a vehicle for balancing class warfare? This is where the popes’ notion of the principle of subsidiarity becomes vital (Welch, 1997).
Why do we really have tension between economics and theology? What are the points of tension between these two fields? John Stuart Mill asked: “suppose all your objectives in life are realized, will you be satisfied?” Religious beliefs address salvation, economics addresses scarcity. Suppose there were no scarcity? How happy would you be? What causes you to value what you value? The empirical nature of economics entails moving forward on how to solve problems. Institutions serve to preserve something of value. Belief is an objectified image of faith by which someone understands his religion, for instance a text or bible. Faith is an ongoing encounter with God. Christianity, in a way is a mode of being in the world (Welch, 1997).
Conclusion
What economists think about theologians and vice versa has a lot to do with our ultimate concerns regarding the knowable and the unknowable. Isn’t religion an agent of the market place when it moves into economics? How can religion function in the world without being an economic agent? The following are the major issues religion and economics should be concerned about: human destiny, using resources to meet wants and needs, are we material beings or spiritual beings or both, and opening the gates for dialogue (Welch, 1997).
Because economics make assumptions which are conditions we hold to be true, it leaves itself open to theological questions. This is because these assumptions can change our understanding of issues in both economics and theology. The role of assumptions is colored by people’s belief systems, which plays a critical role in the outcome of economic models. It is easier to discuss the similarities than the differences between economics and theology. Both economics and theology have theories and practice. The practice of theology is in religion, while the practice of economics is in its policies. In other words, there is the application of economic theories into policies, and theologies into religion. Both economics and theology: give rules and instructions on how to act, are explicit about choices, consider opportunity cost of choices made, and do not pay enough attention to culture (Welch, 1997).
Are people’s value judgments not influenced by their belief traditions? For instance issues with minimum wage, questions about the environment, collective responsibility to the poor etc. are influenced by individual values. There are no particular principles that lead clearly to a blue point of what to do. Although religion can call economics to task in some area, economics likes to emulate natural sciences use of controlled experiments. By so doing many economists like to be value free. Economics tells us there are scarce resources while theology doesn’t. Scarce resources produce goods and services to satisfy wants and needs. The scarcity of resources depends on how you look at it (Welch, 1997).
References
Marshall, Alfred. (1975). The Early Economic Writings of Alfred Marshall (Edited by J. K. Whitaker). New York: Free Press.
Mill, John, Stuart. (1967). Essays on Economics and Society. Toronto: University of Toronto.
Mounier, Emmanuel. (1951). Be not Afraid: Studies in Personalist Sociology (Translated by Cynthia Rowland).
London: Rockliff.
Mueller, J. J., & Welch, Patrick. (1997, Spring). Religion, Economics and Culture: Survey and Critiques
(Unpublished Manuscript).
Nelson, Robert. (1991). Reaching for Heaven on Earth: The Theological Meaning of Economics. Maryland:Rowman
& Littlefield Publishers, Inc.
O’Brien, David J., & Shannon, Thomas. A., (Eds). (1992). Catholic Social Thought: The Documentary Heritage.
Maryknoll, New York: Orbis Books.
Paul, Tillich. (1955). Biblical Religion and the Search for Ultimate Reality. London: J. Nisbet.
Pearce, Joseph. (2007, February 25). Family-Friendly Economics: Why Small Is Still Beautiful. National Catholic Register,
Volume 83, No. 8. pp. 7-8.
Von Mises, Ludwig. (1996). Human Action: A Treatise on Economics. San Francisco: Fox & Wilkes.
Welch, Patrick, & Mueller, J. J. (1997, Spring). Religion, Economics and Culture: Survey and Critiques
(Unpublished Manuscript).
White, Hayden. (1978). Tropics of Discourse, Essays in Cultural Criticism: The Historical Text as Literary Artifact.
Baltimore: The John Hopkins University Press. |
