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Economics and Profit: A Final Word

Thursday, 17th October 2002

I mirror this article so that it may not fall down the memory hole.

Economics and Profit: A Final Word
   by Thomas E. Woods, Jr.

I very much appreciated Br. Alexis Bugnolo’s article (“What Does It Profit a Man…?” October 11), since I believe it shows that less separates our respective positions than may at first appear. Let me say at the outset, though, that in my own article for I did indeed use Br. Alexis’ words on the profit motive, partially because when I first set out to write the article I was not intending to answer only the distributists, and thus I did not intend to imply that he was himself a distributist. (I also nowhere mentioned his name.) I apologize for having misled anyone.

Since I am positively overwhelmed with work at the moment, and in a spirit of mercy toward readers of, I wish to limit myself to a few observations. First, I am pleased to see that Br. Alexis recognizes that “the science of economics is a true science.” This is a crucial first step. Since writing my original article, I have received quite a bit of supportive correspondence (including a kind note from a professor at a pontifical university), but I have also received email from well-meaning people whose views on economics are very far from systematic, and appear to be informed simply by anecdote, emotion, or even logical error. Economics is a bona fide discipline and deserves to be studied. (I strongly recommend Gene Callahan’s brilliant Economics for Real People [2002], an outstanding introduction to sound economic thought, and Alejandro Chafuen’s Christians for Freedom: Late Scholastic Economics [1986]).

The German Historical School of the nineteenth and twentieth centuries likewise rejected the idea that such a thing as economic law existed — even such elementary relationships as supply and demand. They were, as Ludwig von Mises said, thereby rejecting economics as such. Such a philosophy lends itself quite well to fascism, since the fascist leader could captivate the masses by proclaiming that no so-called “economic law” was any match for his iron will. Such leaders do not, of course, appreciate being told that the definition of truth consists in conformity of mind to reality, and that economic reality precludes the dictator’s economic ambitions from being fulfilled. (That helps explain why Mises had to flee from Austria and settle in the United States in 1940 — where he found an academic establishment eager to welcome Marxists but uninterested in a genuine economist like himself.)

Br. Alexis is also correct to note that each individual discipline, while making its own contribution to knowledge, is necessarily limited in the amount of the truth with which it can enlighten us. Br. Alexis would doubtless agree with me that for too long, scientists have neglected this principle, arguing from the fact that they themselves study observable phenomena and concluding that observable phenomena are all that exist. Moreover, while scientists can tell us what is scientifically possible, and how a certain scientific goal might be reached, they can properly tell us nothing, qua scientists, about the morality of any of these things (e.g., should we investigate human cloning?).

Economics is no different. It cannot presume to tell us what we should desire, how we should live, or how we should use our wealth. This, I think, is one of the places where distributists commit an error. They are indicting economics in general and the free market in particular for not doing what they were never intended to do. The market does not prevent people from using their wealth badly; nor does it possess a built-in limit on the amount of wealth that someone can acquire. Neither does the discipline of economics itself have anything to say about these matters, which properly belong to moral philosophy.

To the contrary, economics is a wertfrei — value-free — science. Those who condemn the “materialism” of economists are not being fair. Economics is a study that reckons with the fact of scarcity in the world, and which demonstrates to man, given his ends, how they can or cannot be achieved. Thus if our end is to improve the lot of the least fortunate, economics can tell us whether a $25/hour minimum wage will or will not achieve that end.

Economics, therefore, does not presume to dictate to us what our ends should be. Neither does it attempt to claim, by being “value-free,” that all values are equal, or that morality doesn’t matter, or that all that matters is money. It is simply delineating the limits of its subject matter: it is a science whose purpose is to employ human reason to discover how man’s ends can be reached. What those ends are is a matter for theology and moral philosophy to decide. As any science should, economics properly acknowledges its limits.

A professor friend on the West Coast wrote to me to point out what distributists and other critics of the market consistently fail to acknowledge: “No one claims that anyone can, morally speaking, do simply whatever he wants with his property; the question is over exactly which uses are immoral uses, and which of these immoral uses ought also to be illegal ones.” Such considerations must take into account changing circumstances: theologians from 800 years ago could not in their worst nightmares have envisioned the modern state and its hostility to Catholic tradition. (Have a look at Paul Gottfried’s new book, Multiculturalism and the Politics of Guilt: Toward a Secular Theocracy for an update on what that modern state has been up to lately.) Even if we accepted the distributist premise (which I do not) that large accumulations of wealth should be broken up by the state, surely a relevant moral consideration includes whether authorizing the state to do so is really worth the price of strengthening an institution that to any sensible person is obviously an enemy of traditional Catholicism.

To be sure, then, there is more to life than economic profit. But practically everyone acknowledges this. The critiques of the market that have appeared in recent weeks and months seem to dwell on this point as if it were devastating to the free-market economist. All right, all right — there is more to life than economic profit. We know that. The point, though, is that the creation of wealth happens to comprise much of what economics studies. That doesn’t mean that wealth is all there is; it means that wealth is what this particular discipline investigates.

Msgr. John Ryan, the American priest who perhaps more than any other attempted to reckon with the question of labor and wages, himself acknowledged that men are “more susceptible to religious influence [and] can know and serve God better when they are contented and comfortable than when they are impoverished and miserable.” If that is so, then we should appreciate the market all the more. For some reason, critics of the market focus on the extraordinarily wealthy, as though only they were its beneficiaries. This is a ridiculous, even bizarre, misconception, as I explained in my article. Overwhelmingly it is the poor who have benefited from the extension of the market, and for whom the good things of civilization are available in much greater abundance than they were even for the greatest kings of centuries past. I’m not talking about mansions and boats; I’m talking about better housing, better health and sanitation, and dramatically lower infant mortality.

There are those who will say that none of that matters, that even to consider material well-being is, well, “materialistic.” Such criticism is hard to take seriously. As Mises explained, “In calling a rise in the masses’ standard of living progress and improvement, economists do not espouse a mean materialism…. They simply establish the fact that people are motivated by the urge to improve the material conditions of their existence. They judge policies from the point of view of the aims men want to attain. He who disdains the fall in infant mortality and the gradual disappearance of famines and plagues may cast the first stone upon the materialism of the economists” (emphasis added). Any takers?

Thus, again, economics is properly a value-free science that shows us how our ends can be reached. It doesn’t contain all the answers of life, nor does it claim to. It does, however, show how the morally acceptable desire for profit leads to spontaneous social cooperation that obviates the need for a bloated state apparatus to direct production. It shows us the fascinating mechanisms by which peaceful social cooperation leads to overall prosperity. And it would be silly to claim that a good Catholic could properly object to that.

One Comment leave one →
  1. RChavez permalink
    Thursday, 13th September 2012 01.30 pm +08

    ” I mirror this article so that it may not fall down the memory hole.” – Indeed! So many great ideas fell into the “land of forgottenness” simply because they don’t agree with mainstream consciousness.

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