By:Thomas Storck | January 25, 2010
Next let us turn to Woods’ comments on my discussion of scarcity as an economic concept. I again quoted Paul Samuelson who introduces the topic as fundamental to economic analysis and concludes by saying: “If you add up all the wants, you quickly find that there are simply not enough goods and services to satisfy even a small fraction of everyone’s consumption desires.” I then gave examples of those who in fact claimed that their “consumption desires” were basically satisfied and that they were not looking for a greater share in material goods, and I suggested that culture plays a part in how people view the satisfaction of their “consumption desires.” What does Woods say about this? “Samuelson’s remark is surely correct. From an empirical standpoint, it is safe to say that most people would indeed like more consumption goods than they presently enjoy. Anecdotal evidence from isolated pockets of contrary behavior does not constitute an argument, particularly when Samuelson is claiming to set forth not an apodictically true praxeological law, but an empirical generalization about the general run of Americans.” I hardly know how to begin to respond to Woods here. First, the examples I brought up were hardly “isolated pockets.” They included, for example, the majority of the population of the Netherlands. Second, is not Woods’ admission that Samuelson’s principle holds good for “the general run of Americans” an admission of the role of culture in economic choices? Most Americans do seem to have unlimited “consumption desires,” but does this have something to do with a culture in which more consumption is deliberately equated with happiness and in which we are relentlessly bombarded by propaganda urging us on to more and more consumption? In fact, consumer spending is almost made into a civic duty, for it is said to be the mainstay of our economy.
But Woods’ defense of scarcity goes farther, it seems. He observes that “Samuelson is claiming to set forth not an apodictically true praxeological law, but an empirical generalization”? So what sort of scarcity is Woods defending and how does he defend it? He writes, “Since man’s time, his resources, and his body itself exist in finite quantities, any expenditure of these things in the pursuit of some end necessarily comes at the expense of a foregone alternative. He cannot simultaneously perform or enjoy the fruits of all the ends he wishes to pursue. Time, for example, is an irreversible continuum; an hour, once devoted to a particular task, is never again available in the service of another task.” Well, yes, one will not deny any of this. But is this the notion of economic scarcity as Samuelson expounds it? That we are finite creatures who exist in time is not a discovery of economists. The examples of constraints on man’s conduct that Woods mentions have nothing particularly to do with economic activity. They are facts of man’s existence, indeed of any finite thing, as we were created by God and are necessarily presupposed in any consideration of any subject. To aspire to anything different is to fall victim to the whispering voice of Satan, “You will be as gods.” But this was not the concept of scarcity that I was speaking of.
Neoclassical economics considers scarcity as one of the fundamental points of its analysis. But could we not just as easily begin to construct an economic science by noting the bounty of God in providing goods for mankind and making that the beginning of our analysis? One of the results of the neoclassical understanding of scarcity is that it absolutely prevents us from distinguishing between needs and wants. God has not seen fit to provide the human race with a superabundance of pleasure boats. But He has provided food, usually in abundance if we take the elementary trouble to treat the soil and the waters around us with appropriate care. Of course, if we treat land and water as a gigantic trash heap or a source of quick profits, then we can hardly expect that God will make up for our criminal foolishness.
In my paper I use the term “economic science” more than once, indicating thereby that I consider economics to be a science, but a social science, or as it has been called, a “human science,” one that deals with human beings and their behavior. But Dr. Woods takes exception to this usage of mine, saying “Storck uses the term ‘economic science’ favorably, speaking in footnote three of ‘the necessity for a non-deductive economic science of the kind offered by some of the “heterodox” schools of economic thought.’ This claim calls into question just how deeply he has understood the institutionalists and the German Historical School, the traditions of thought he recommends. Members of these traditions, by and large, did not conceive of themselves as developing an economic science, since they did not believe universally valid causal laws existed in the economic order. . . . For consistency’s sake, Storck should give up trying to argue that there is or could be a ‘human’ or economic science. He should instead say, as the rest of his paper indirectly argues, that there is no such thing as science in these areas.”
But what do we mean by a science of economics? I quote in note number 34 the great Jesuit economist Heinrich Pesch to the effect that economics is a science since it is “a knowledge of things traced to their causes and certified by proofs.” Pesch’s treatment of economics in the Lehrbuch includes discussions of law, economic history and statistics, as well as human behavior and moral philosophy, but he does not hesitate to call economics as he conceives it a science. John R. Commons, one of the principal American Institutionalist economists, regularly refers to political economy as a science in his 1934 work, Institutional Economics. Just as we can speak of sociology as a science or of political science, without asserting that we can draw up strict causal laws in these areas, so in probably any attempt to study economic behavior one would make generalizations that could be considered scientific. Even in history, although the primary data that we deal with are particular and unrepeatable events, one can make certain generalizations such that we often speak of historical sciences. It is not necessary that we have “universally valid causal laws” in the strict sense, which is what Woods appears to require in a science.
The last part of my paper and of Woods’ reply deals with the so-called Chicago School of economists, whose most well-known representative was Milton Friedman. Woods suggests that I think that “on methodological grounds Catholics might have prima facie reason to be sympathetic” to this school. And he helpfully tells us, in a note, that the case is the exact opposite, that “If anything, there may be a prima facie case against Chicago School economics from a Catholic point of view.” But again, what did I actually say? I wrote, “It may be objected, however, that the foregoing criticism of mainstream economics does not apply to adherents of the so-called Chicago School” because they claim “a purely empirical basis” for their statements. Now Woods could not have known that in fact it was one of the peer reviewers who suggested I treat the Chicago School at length, but he might have noticed that my wording “It may be objected” does not imply any sympathy on my part or any suggestion that I find their doctrines even superficially attractive. In any case, Woods also objects to the Chicago School, and especially to Friedman’s use of abstraction in his famous essay, “The Methodology of Positive Economics”, something which I criticize too. But Woods goes further and attempts to save the sort of economic deductions which Austrian economists make. He writes: “By nonprecisively specifying the existence of these excluded features, as opposed to precisively specifying their nonexistence, such theories need not be ‘descriptively false’ at all. Thus when Austrians contend that minimum-wage laws lead to more unemployment than would have existed without them, they are engaged in a nonprecisive abstraction that applies to all cases involving minimum-wage laws, not a precisive abstraction that would apply only to cases in which the minimum wage was a single, isolated factor affecting labor markets.” Abstraction is the means by which human minds disregard or abstract from non-essential features of things so that they can consider only their essential features, their natures. So, for example, we need not consider the color of horses when speaking of horses as such, of their nature and essential characteristics. Any science at all must use abstraction, for otherwise we could speak only of particulars. But ordinarily when we abstract we don’t mean to exclude the existence of the accidental qualities, simply to ignore them for our present purposes; we know that every horse is of a certain color, but a biologist or even a horse trainer can make general statements about horses without concerning himself with their various colors. Woods, however, relies upon an article which notes the distinction between nonprecisive abstraction and precisive abstraction. In precisive abstraction we “cut off or exclude something from a notion” as Armand Maurer explains Aquinas’ use of the term. In other words, we don’t just ignore its presence, we purposively exclude it, as if we said not only that the color of horses was generally unimportant to a biologist but somehow asserted that horses had no color. But I don’t entirely understand what this has to do with Wood’s obiter dictum that “when Austrians contend that minimum-wage laws lead to more unemployment” they can make a judgment that is always and everywhere true in contrast to Milton Friedman’s exact same judgment based on his methods. My discussion of Friedman turned on the question of how those who claim to be pure empiricists can make sweeping statements about any and all cases and how they can as part of their methodology exclude certain data from consideration because it might contradict their preconceived conclusions. But the essentially deductive nature of Austrian economics again shows up in Woods’ contention that Austrians can make a judgment “that applies to all cases involving minimum-wage laws,” for given the immense effect of cultural and legal institutions on complex human behavior, it is hard to imagine asserting once and for all of the effect of minimum-wage laws on employment.
The purpose of my paper was to show that the popes, in their teaching on economic morality, incidentally make use of a kind of economic analysis very different from that of neoclassical economics, and of Austrian economics to the extent that it shares the former’s deductive nature, and to suggest that there exist other approaches to economics which comport better with the papal statements. In his reply Woods has chosen to repeat his assertions about the limits of papal teaching as well as to seek to defend Austrian economics. The former is the more fundamental and important questions, for if the magisterium of the popes must submit to the limits that Woods seeks to impose upon it, than the popes had better just limit their moral teaching to statements such as “Be Nice” or “Be Good.” For it is hard to see how moral teaching that concerns itself with the world in which we live can avoid making judgments not only about how we ought to act, but observations about how we in fact do act. And it is Thomas Woods’ objection to this feature of papal teaching when it impinges upon his understanding of the realm of economics that constitutes his fundamental error. With regard to Austrian economics, Dr. Woods has to some degree misread my intentions, for as I noted at the beginning of my paper, I was speaking broadly of all deductive kinds of economics, not asserting that the Austrian school was like neoclassical economics in every respect.
With regard to the more fundamental point, the right of the popes to teach in this area and in the manner that they have historically done, there can be no serious debate. Pius XI’s use of the concept of “social modernism” in his first encyclical, Ubi Arcano, underlies the importance and seriousness of this aspect of their teaching and may fittingly provide the last word. He wrote,
60. Many believe in or claim that they believe in and hold fast to Catholic doctrine on such questions as social authority, the right of owning private property, on the relations between capital and labor, on the rights of the laboring man . . . In spite of these protestations, they speak, write, and, what is more, act as if it were not necessary any longer to follow, or that they did not remain still in full force, the teachings and solemn pronouncements which may be found in so many documents of the Holy See, and particularly in those written by Leo XIII, Pius X, and Benedict XV.
61. There is a species of moral, legal, and social modernism which We condemn, no less decidedly than We condemn theological modernism.