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What has Augustine to do with Neoclassical Economics?

3 Feb

From John Mueller (full article):

I’m grateful to my old friends at the Tocqueville Forum and the Society of Catholic Social Scientists, Patrick Deneen and Steven Brust, and pleased to join John Médaille and Barry Lynn for this discussion of “Economics at the Crossroads.” Though also disconcerted to find myself on this side of the podium. I’ve attended the Tocqueville Forum so often that Tara Jackson said she was surprised I had never submitted an IRS W-9 form. Yet, as Walker Percy warned in Lost in the Cosmos, “a charade was being played” with “William Faulkner, doing a morning’s work, then strolling in the town square to talk to the farmers and have a Coke at Reed’s drugstore…. Though Faulkner went to great lengths to pass himself off as a farmer among farmers, farmer he was not.” Or take “Søren Kierkegaard, who, every hour, would jump up from his desk, rush out into the streets of Copenhagen, and pass the time with shopkeepers. . . ..[B]y his own admission, he was playing the game of being taken for an idler at the very time he was writing ten books a year.” Now I too must admit, every month, by jumping up from my desk, rushing out into the streets of Washington, and passing the time at the Tocqueville Forum, to have been playing the game of being taken for an idler, at the very time I was churning out a book every ten years!

The thesis of my book is straightforward: The most important element in economics is missing, and its rediscovery is priming a revolution the likes of which has occurred just three times in more than 750 years.

I must begin with a simple but widely overlooked fact: the logical and mathematical structures of scholastic, classical and neoclassical economics differ fundamentally. Yet few economists today are aware of the differences because American university economics departments, led by the University of Chicago in 1972, abolished the previous requirement that students of economics master its history before being granted a degree. This calls for a brief, structural history of economics.

What is economics about? Jesus once noted — I interpret this as an astute empirical observation, not divine revelation — since the days of Noah and Lot, people have been doing, and until the end of the world presumably will be doing, four kinds of things. He gave these examples: “planting and building,” “buying and selling,” ‘marrying and being given in marriage,” and “eating and drinking” (Luke 18:27-28). In other words, we produce, exchange, give, and use (or consume) our human and nonhuman goods.

That’s the usual order in our action. But as St. Augustine first explained, the order is different in our planning. First we choose For Whom we intend to provide; next What to provide as means for those persons. Finally, Thomas Aquinas latter added, we choose How to provide the chosen means, through production (always) and exchange (almost always), both of which Aristotle had described.

So, economics is essentially a theory of providence: it describes how we provide for ourselves and the other persons we love, using scarce means that have alternate uses. Human providence is a synonym for the cardinal virtue of prudence. Aristotle had divided moral philosophy into ethics and politics. But he also aptly described humans as “rational,” “matrimonial,” and “political animals.” So Aquinas redivided moral philosophy into three, distinguishing personal, domestic, and political prudence — or equivalently, “economy” — according to the social unit described.

Scholastic ‘AAA’ economics (c.1250-1776) began when Aquinas first integrated these four elements (production, exchange, distribution, and consumption) into an outline of personal, domestic, and political economy, both positive and normative, organizing Aristotle’s contributions according to Augustine’s framework. The scholastic economic theory was taught at the highest university level for more than five centuries by every major Catholic and (after the Reformation) Protestant economic thinker before Adam Smith — notably Lutheran Samuel Pufendorf, whose work was used by Adam Smith’s own teacher to teach Smith economics, and also highly recommended by Alexander Hamilton.

Classical economics (1776-1871) began when Adam Smith cut these four elements to two, trying to explain what he called “division of labor” (specialized production) by production and exchange alone. Smith was addressing the main drawback of scholastic economics, which lay not in the theory itself, but the routine assumption that the economy did not grow in the long run — which had been true on average for about two millennia. To explain growth, Smith and classical followers like David Ricardo undoubtedly advanced the two elements Smith retained. But it was on oversimplification.

Neoclassical economics (1871-c.2000) began when three economists dissatisfied with the practical failure of Smith’s classical outline independently but almost simultaneously reinvented Augustine’s theory of utility, starting its reintegration with the theories of production and exchange.

Thus Adam Smith’s chief significance is not what he added to, but rathersubtracted from economics. As Joseph Schumpeter noted in his History of Economic Analysis, “The fact is that the Wealth of Nations does not contain a single analytic idea, principle or method that was entirely new in 1776.”

Neoscholastic economics (c.2000-). I argue that Neoscholastic economics is already and will continue to revolutionize economics in coming decades, by replacing its lost cornerstone, the theory of distribution.

This historical analysis offers a framework for analyzing other schools of economics. But I will not pursue these lesser differences unless someone asks.

Since Smith essentially “de-Augustinized” economic theory, a re-evaluation is overdue and quite likely for Adam Smith but especially Augustine. So I’ll consider Augustine’s contribution to both scholastic and today’s neoclassical economics, then give an example of the problems in today’s neoclassical economics caused by the failure to restore them, and close with a word about the world views implicit in each theory.

A. Positive scholastic theory. To explain the Two Great Commandments, Augustine had started from Aristotle’s insight that “every agent acts for an end” and his definition of love — willing some good to some person. But Augustine drew an implication that Aristotle had not: every personalways acts for the sake of some person(s). For example, when I say, “I love vanilla ice cream,” I really mean that I love myself and use (consume) vanilla ice cream to express that love (in preference, say, to strawberry ice cream or Brussels sprouts, which reflects my separate scale of utility). Augustine also introduced the important distinction between “private” goods like bread, which inherently only one person at a time can consume, and “public” goods (like a theater performance, national defense, or enforcement of justice) which, at least within certain limits, many people can simultaneously enjoy, because they are not “diminished by being
In other words, Augustine’s crucial insight is that we humans always act on two scales of preference — one for persons as ends and the other for other things as means: personal love and utility, respectively. Moreover, we express our preferences for persons with two kinds of external acts. Since man is a social creature, Augustine noted, “human society is knit together by transactions of giving and receiving.” But these outwardly similar transactions may be of two essentially different kinds, he added: “sale or gift.” Generally speaking, we give our wealth without compensation to people we particularly love, and sell it to people we don’t, in order to provide for those we do love. Since it’s always possible to avoid depriving others of their own goods, this is the bare minimum of love expressed as benevolence or goodwill and the measure of what Aristotle called justice in exchange. But our positive self-love is expressed by the utility of the goods we provide ourselves, and our positive love of others with beneficence: gifts. Hate or malevolence is expressed by the opposite of a gift: maleficence or crime.

The social analog to personal gifts is what Aristotle called distributive justice, which amounts to a collective gift: it’s the formula social communities like a family or nation under a single government necessarily use to distribute their common (jointly owned) goods. Both a personal gift and distributive justice are a kind of “transfer payment”; both are determined by the geometric proportion that matches distributive shares with the relative significance of persons sharing in the distribution; and both are practically limited by the fact of scarcity.

That’s “positive” scholastic economics in a nutshell: describing what is, not necessarily what ought to be.

B. Normative” scholastic theory. We naturally love ourselves, Augustine pointed out. All other moral rules are derived from the Two Great Commandments because these measure the degree to which our love is “ordinate”: rightly ordered. If a good were sufficiently abundant we could and should share it equally with everyone else. But with such goods as time and money, which are “diminished by being shared” (i.e., scarce), this is impossible. Therefore “loving your neighbor as yourself” can’t always mean equally with yourself: “All men are to be loved equally. But since you cannot do good to all,” Augustine concluded, “you are to pay special regard to those who, by the accidents of time, place, or circumstances, are brought into closer connection with you.”

The (neo-) scholastic model is a powerful tool of analysis. In the book I suggest several important applications, which I’m willing to discuss at the drop of a question. In view of our severe time limits, though, I will focus here on one simple and striking example: the inverse tradeoff between fatherhood and crime.
In a famous paper co-authored with John J. Donohue and later featured in his book (and now movie) Freakonomics, Steven D. Levitt argued that after abortion was legalized by several states starting in the late 1960s and nationwide by Roe v. Wade in 1973, millions of fetuses were killed who, when old enough, would have been disproportionately likely to commit crimes. Abortion’s culling of them should therefore have lowered crime rates. To prove this, Levitt and Donohue looked at crime rates 15-18 years after Roe and claimed to have found the drop they had predicted.

However, Levitt and Donohue actually found their results indistinguishable whether they used 1970s or 1990s abortion rates to try to explain overall ’90s crime rates. When both were included the models went statistically haywire (“standard errors explode due to multicollinearity”). Failing to uncover any statistically valid evidence for either a 20-year lag or for no lag, Levitt and Donohue replaced the missing facts with an arbitrary assumption: “Consequently, it must be recognized that our interpretation of the results relies on the assumption that there will be a fifteen-to-twenty year lag before abortion materially affects crime.”
They justified their assumption by quipping that “infants commit little crime.” But nearly all violent crime is committed by men (women are equal only in nonviolent crime) precisely the ages of the fathers of aborted children. In short, the missing variable is “economic fatherhood.” (“Economic” fatherhood is defined not by biological paternity nor residency with but provision for one’s children.) The relationship between economic fatherhood and crime is a straightforward application of Augustine’s personal “distribution function” to the most valuable scarce resource of mortal humans: our time.

Including “economic fatherhood” as a variable not only invalidates Levitt’s claim but reverses it. As far back as data exist, rates of economic fatherhood and homicide have been strongly, inversely “cointegrated” — a stringent statistical test characterizing inherently related events, like the number of cars entering and leaving the Lincoln Tunnel. Donohue and Levitt’s correlation is thus shown to be a “spurious regression,” which was misspecified by omitting a crucial variable: the one describing Augustine’s personal “distribution function.” Legalizing abortion didn’t lower homicide rates 15-20 years later by eliminating infants who might, if they survived, have become murderers: it raised the homicide rate almost at once by turning their fathers back into men without dependent children-a small but steady share of whom do murder. The homicide rate rose sharply in the 1960s and ’70s when expanding welfare and legal abortion sharply reduced economic fatherhood, and it dropped sharply in the ’90s partly due to a recovering birth rate, but mostly because welfare reform and incarceration raised the share of men outside prison who were supporting children. [This scenario didn’t occur to Levitt not because of a lack of ingenuity or data but because of the inherent weakness of the theory he was trying to apply, which Nobel Prize-winning economists George J. Stigler and Gary S. Becker, Levitt’s mentor, called the “economic approach to human behavior.” Levitt was unable to see the true correlation between abortion and crime because he was among the first victims of the epic change in the teaching of economics orchestrated by Stigler with Becker’s support].

The choice of 1776. What I call “Smythology” (with two y’s) is the myth that Adam Smith invented or is somehow indispensable to understanding economics. By far the most influential piece of “Smythology” was Milton Friedman’s linking in Free to Choose of “two sets of ideas — both, by a curious coincidence published in the same year, 1776…. the economic principles of Adam Smith…and the political principles expressed by Thomas Jefferson.”Like many others, I found Friedman’s argument persuasive and incorporated it into my own views, until I discovered that the “choice of 1776” was actually a divergence, not a convergence, and of three, not two world views. The third event of 1776 was the death of Smith’s dear friend, the Epicurean skeptic David Hume.

When the Apostle Paul preached in the marketplace of Athens (probably in 51 A.D.), he prefaced the Gospel with a Biblically orthodox adaptation of Greco-Roman natural law. The evangelist Luke tells us that “some Epicurean and Stoic philosophers argued with him” (Acts 17:18). The same dispute has continued ever since, particularly among scholastic, classical, neoclassical, and now neoscholastic e

In (neo-) scholastic natural law, economics is a theory of rational providence, describing how we choose both persons as “ends” (expressed by our personal and collective gifts) and the scarce means used (consumed) by or for those persons, which we make real through production and exchange. By dropping both distribution and consumption, Smith expressed the Stoic pantheism that viewed the universe “to be itself a Divinity, an Animal” (as he put it in an early but posthumously published essay), with God conceived as its immanent soul, so that sentimental humans choose neither ends nor means rationally; instead, “every individual…intends only his own gain…and is led by an invisible hand to promote an end which was no part of his intention.” By restoring consumption but not distribution, neoclassical economics expresses the Epicurean materialism that claims humans somehow evolved in an uncreated world as merely clever animals — highly adept at calculating means but not ends, since “reason is, and ought only to be, the slave of the passions,” as Hume put it. The three theories provide three views of both human and divine nature, but only the anthropology and theology of the scholastic theory are compatible with Christian orthodoxy.

As historian of economics Henry William Spiegel noted of the “marginal revolution” that ended classical and launched neoclassical economics in the 1870s, “Outsiders ranked prominently among the pioneers of marginal analysis because its discovery required a perspective that the experts did not necessarily possess.” I don’t underestimate the time or effort it will take. But I confidently predict that in coming decades, neoclassical economists now advocating the “economic approach to human behavior” will either become or else be supplanted by “neoscholastic” economists — who will find full employment rewriting neoclassical theory because they understand the original “human approach to economic behavior” of Aristotle, Augustine, and Aquinas.

John Mueller is a fellow at the Ethics and Public Policy Center in Washington, D.C.

The War on Poverty can’t overcome the demise of the family

24 Feb

Good book review in the WSJ today:

No one today seriously questions the wisdom of the Civil Rights Act or the Voting Rights Act. But consider the Great Society’s record on poverty. From 1959 to 1966, the number of Americans living below the poverty line had fallen to 14.7% from 22.4%—without the benefit of the Great Society. Since then, the poverty rate has remained stubbornly above 11%. As Nicholas Eberstadt has noted, in 2012 (the year with the latest available data), it was at 15%—slighter above the 1966 rate.

Consider also the War on Poverty’s effects, like welfare dependency. In 1983, one in five Americans belonged to a family receiving means-tested federal benefits like food stamps or Head Start (in other words, not Social Security or Medicare); in 2012 the number had risen to one in three. Family life suffered related changes, as Uncle Sam steadily replaced parents as a family’s principal breadwinner and the number of reasons to remain married—or get married—dwindled away. The Great Society and the War on Poverty helped set off an explosion of out-of-wedlock births. That is one reason why the poverty rate for children today is higher than before the mid-1960s—and why more than half of black children (about whom Johnson expressed so much concern) live with only their mother and why nearly half of those children live below the poverty line.

Read it all

Its that time of year, when the biblically illiterate receive front page coverage to attack the Christian faith

24 Dec

It’s that time of year… when the biblically illiterate get front page coverage to accuse Christians of being biblically illiterate. Apparently, the only criteria for publishing in Newsweek these days is attacking Christian faith, not fairness or even accuracy. Read the story, and if you can’t see the gaping holes in it, listen to Dr. James White, then sit back and have a hearty, merry, bowl full of jelly, laugh!

From Alpha Omega Ministries:

Newsweek Does Its Christmas Attack Upon Christianity: Refutation of Kurt Eichenwald’s Article

Other than a few magical moments with my surprise co-host Clementine (stage name “Clemskidoodles”), this 90 minute program is a review and refutation of this horrifically biased, erroneous, and just plain anti-Christian cover article in the current issue of Newsweek magazine.  If you encounter anyone spouting this stuff, please, please, share this program with them!

Here is the audio player for the show:

Original link from

Secular liberalism and Christianity: same in form different in content.

3 Dec

The doctrine of original sin, church discipline and excommunication, creedalism and confessionalism, shunning, temples, sermons, evangelism and conversion, orthodoxy and heresy, book burning, it is all there, in the religion of secular liberalism.

From Joseph Bottom:

Every day she must search her conscience. Every day she must confront her flaws—discern the dark that dwells within her, seek the grace to turn toward the light. Oh, she is a moral person, she believes: good willed and determined to do good deeds, instructing us all about the heart’s deep iniquity. But even she, Kim Radersma, a former schoolteacher now preaching our bondage to sin—even she still feels the fault inside her. Even she must struggle to be saved. And if someone like Kim Radersma has to fight the legacy of inner evil, think of all that youmust do. Think how far you are from grace, when you do not even yet know that you are lost and blind.

In another age, Radersma might have been a revivalist out on the sawdust circuit, playing the old forthright hymns on a wheezy harmonium as the tent begins to fill. In a different time, she might have been a temperance lecturer, inveighing in her passion-raw voice against the evils of the Demon Rum. In days gone by, she might have been a missionary to heathen China, or an author of Bible Society tracts, or the Scripture-quoting scourge of civic indifference—railing to the city-council members that they are like the Laodiceans in Revelation 3:16, neither hot nor cold, and God will spew them from his mouth.

But all such old American Christian might-have-beens are unreal in the present world, for someone like Kim Radersma. Mockable, for that matter, and many of her fellow activists today identify Christianity with the history of all that they oppose. She wouldn’t know a theological doctrine or a biblical quotation if she ran into it headlong. And so Radersma now fights racism: the deep racism that lurks unnoticed in our thoughts and in our words and in our hearts.

Read the rest

He “never made me feel like a project.” The unlikely conversion of Rosaria Butterfield

11 Nov

Former lesbian, feminist scholar, turned PCA pastor’s wife sits down with Russell Moore to talk about her unlikely conversion.

We know of its alleged benefits, but we never hear of the costs of sex education… undermining marriage

29 Oct

Excerpt from Cassandra Hough:

Although classified as education in sexual “health,” the comprehensive sex education offered at the primary, secondary, and collegiate levels reflects a very limited understanding of human health. There is no discussion of the emotional and psychological effects of sex before marriage and of sexual promiscuity and experimentation. These programs also aim at teaching something else besides avoiding health risks. The author of You’re Teaching My Child What?: A Physician Exposes the Lies of Sex Ed and How They Harm Your Child, Miriam Grossman, M.D., argues that comprehensive sex education courses do not actually aim at preventing disease and risk so much as they are a social movement for moving society in a certain direction.

That direction is not the proliferation of healthy, high-quality marriages.

Sex Education Does Not Prepare Students for Love and Marriage

The comprehensive sex education of today’s primary, secondary, and collegiate institutions may purport to aim at sexual risk reduction, but it effectively instructs young men and women in sexual risk-taking. It sets up abstinence as an unrealistic ideal and neglects adequate discussion of the importance of sexual restraint and the attitudes, behaviors, and environments that best enable young people to practice that restraint. It encourages condom use as a means of reducing risk while simultaneously normalizing behaviors that make the incidence of sex more frequent and that create environments of increased vulnerability. In reducing sexual safety and responsibility to the use of a condom and the acquisition of consent, comprehensive sex education sends the inaccurate and dangerous message that these two precautions allow one to have lots of sex without consequences.

As if this weren’t bad enough, comprehensive sex education programs like HiTOPS and Teen PEP regularly disconnect sex from the context of a committed, loving, exclusive relationship (i.e. marriage). This saturates the young imagination and whets the appetite not for a relationship but for sex itself, disconnected from any person or commitment of love. It is no wonder that the hookup/friends-with-benefits/anything-goes sexual culture has become normalized among today’s emerging adults. Contemporary sex education prepares young men and women not for the fullness of friendship, intimacy and love, but for casual relationships and recreational sex.

This is not simply inadequate education in sex and relationships. This form of sex education is definitively anti-marriage (and this, without even considering how such programs define marriage itself). As Rhoades and Stanley found, the quality of marriage is adversely associated with having sex with someone other than one’s spouse, with having multiple sex partners, and with having a marriage begin as a hookup. Other studies have shown these or similar premarital behaviors to be associated with other adverse marital outcomes such as higher incidence of divorce and infidelity and lower quality of health and happiness. Although marriage may be far in the future for a twelve-year-old or even a twenty-year-old, comprehensive sex education programs at the primary, secondary, and collegiate levels do young men and women a disservice by training them year after year in attitudes and behaviors that undercut their chances of future marital success.

It is encouraging that the pre-marriage courses typically offered engaged couples seem to have a positive effect on early marriage. However, if these courses follow the trend of comprehensive and abstinence programs alike, their effects will fade over time. What then? Probably, these young couples will fall back on the understanding of intimacy and relationships that was taught to them for over a decade.

For my own part, learning to live out a commitment to abstinence brought with it an education in something much greater: chastity. It was this education that best prepared me for married life; for it established an understanding of and appreciation for the unique relationship that is marriage—and it cultivated habits that directly support marital fidelity and selfless love.

Comprehensive sex education provides none of this, instead offering a most disappointing and weak foundation for any committed relationship, least of all marriage. Our educational institutions would do well to consider how comprehensive sex education jeopardizes young men’s and women’s futures and launches them into greater, not less, risk.

Cassandra Hough is Founder and Senior Adviser to the Love and Fidelity Network.

Full article here

Personal Freedom and Sphere Sovereignty; responding to the “choice-enhancement state”

28 Oct

From Dr. David Koyzis:

More than half a century ago, Roman Catholic philosopher Yves René Simon observed that authority has come to have a bad reputation in the modern world. Our western societies value personal freedom so highly that any intervention by an authority outside our own wills is deemed an imposition at best and outright oppression at worst. The French Revolution of 1789, perhaps more than any other event in recent history, has implanted in western consciousness the myth of the heroic popular revolt against oppressive authority. So thoroughly did the Revolution succeed in this that the default position for many of us today is to be suspicious of authority’s claims from the outset, whatever their content.

The cultural shifts of the 1960s further exacerbated this prejudice against authority when the larger liberal tradition took the form of what I have elsewhere called the “choice-enhancement state.” By the turn of the last century, the state had expanded to check the private economic power of trusts and monopolies and to preserve market competition. By the 1930s, the state had expanded further to secure equality of opportunity for everyone, which necessitated the development of the welfare state. During the 1960s, however, professed progressives concluded that the principal threat to individual freedom was not the state, big business, or economic privation, but traditional customs and social mores that claimed authority over people’s lives and actions. Only if we can manage to liberate individuals from the authority of the past, they reasoned, will they truly be free. This movement from authority to autonomy called for a new ethic based on John Stuart Mill’s harm principle: “The only purpose for which power can be rightfully exercised over any member of a civilized community, against his will, is to prevent harm to others.”

The problem was, and is, that there has never been a society for which this harm principle forms the primary, much less the sole, basis of freedom. In a mature differentiated society, there is a multiplicity of non-state communities, each of which has its own identity and its own standards for membership. These standards are intrinsically related to the mission and task of the communities and necessarily impose constraints on those subject to them. But because the homogenizing worldview of liberal individualism exalts individual autonomy over all standards outside the will, adherents regard with suspicion all communities based on non-individualist assumptions, especially those such as marriage, family, and even the gathered church which are not obviously reducible to private contract.

All of these factors together have tended to reinforce the notion that authority and freedom are at least in tension with each other, if not altogether opposed. If freedom expands, then we assume that authority must proportionately diminish. If we seek to advance freedom, we must concomitantly try to decrease the role of authority.

But what if it turns out that personal freedom, far from being opposed to authority, is simply another manifestation of authority? If this is true, and I believe it is, we must change the way we view our society. When a child is small, she is directly subject to her parents’ authority in the minutest areas of life. They keep a close eye on her, feed her, clothe her, house her, and generally take care of her. But as she grows to maturity, her parents increasingly pull back, allowing her to take on more and more responsibility for the direction of her own life. And that is as it should be. As Simon observes, parental authority properly aims at its own disappearance. Yet as parental authority continually recedes, the adolescent, who is now free to set her own life goals, is simply assuming more authority for the direction of her life.

More than a century ago, Dutch statesman Abraham Kuyper coined the term “sphere sovereignty” to account for the diverse forms of community found in the mature society. Families, business enterprises, states, labor unions, and schools each have their own proper sphere of authority, as ordained by God. But so does the individual as individual. The freedom that individuals legitimately claim for themselves is another manifestation of authority which other authorities are bound to respect. Although it may seem counterintuitive in our post-1789 world, I strongly believe that respect for the human person and his status as image of God is dependent on a general respect for authority in all of its pluriform manifestations.

David Koyzis teaches politics at Redeemer University College in Canada and is the author of We Answer to Another: Authority, Office, and the Image of God. This post is cross-listed at Capital Commentary.

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