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Restoring Economic Orthodoxy: Outline of (Neo-) Scholastic Economics

John D. MuellerDirector, Economics and Ethics Program

Ethics and Public Policy Center (www.eppc.org)

President, LBMC LLC (www.lbmcllc.com)

Association of Christian Economists Conference

Baylor University, 17 April 2009

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What is Economics About?

Well, what do people do all day?* Order in doing:

1. “Planting and building”: production

2. “Buying and selling”: exchange

3. “Marrying and giving in marriage”: distribution

4. “Eating and drinking”: use (consumption)

*Luke 18: 27-28

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Economics as human providence

Order in planning: 1. For whom? 2. What? and 3. How (shall I provide)?

• For whom: Augustine’s theory of personal gifts/crimes, Aristotle’s social, political distributive justice (distribution)

• What: Augustine’s theory of utility (consumption) How (a): Aristotle’s theory of production—of and by (i.)

people and (ii.) property How (b): Aristotle’s “justice in exchange” (equilibrium)

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Positive: Augustine’s “Law of the Gift”Premises: 1. All persons motivated by love of some person(s). 2. Love is “willing some good to some person” (Aristotle). 3. We express personal love/hate by our distribution of goods.

Descriptive (“positive”): Outer Acts toward:Kind of love Inner Act Self OthersOrdinate Benevolence Utility Beneficence (Gifts)Inordinate Malevolence Vice Maleficence (Crime)

Prescriptive (“normative”): Two Great Commandments*Standard of benevolence (“goodwill”): negative Golden Rule

(“Do not do unto others” = justice in exchange)Standard of beneficence (“doing good”): positive Golden Rule

(“Do unto others” = personal gifts, distributive justice)*”Love God…with all your heart” (Lev. 19:18), “neighbor as

yourself” (Deut. 6:5)

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Gifts to others (express love)

Crimes against others (express

hate)

Pure selfishness (assumed by Adam Smith and

neoclassical economics)

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How the Structure of Economics Has Changed (1): Simplified

Element

Outline

Distribution Consumption Production Exchange

Scholastic

(Thomas Aquinas)

Yes Yes Yes Yes

Classical

(Adam Smith)

No No Yes Yes

Neoclassical

(Jevons, Menger, Walras)

No Yes Yes Yes

Neoscholastic

(Scholastic outline,

elements updated)

Yes Yes Yes Yes

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How the Structure of Economics Has Changed (2): Detail

Element

Outline

Distribution

(Gifts/crimes & distributive justice)

Consumption

(type of utility)

Production

(people/property)

Equilibrium (“justice in exchange”)

Scholastic Yes/Yes Yes (ordinal) Yes/Yes Yes

Classical No/No No Yes/No*

(*“labor theory”)

Yes

Neoclassical Austrian (Menger)

British (Jevons)

Chicago (Schultz)

Lausanne (Walras)

No/No

No/No

No/No

No/No

No/No

Yes (mixed)

ordinal

cardinal

cardinal

ordinal

Mixed

No**/Yes

No*/Yes

Yes/Yes

No**/Yes

(**“stork theory”)

Mixed

No (Mises)

Yes

Yes

Yes

‘Neoscholastic’ Yes/Yes Yes (ordinal) Yes/Yes Yes

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Divine Economy: The Three Theories of Providence

1. Biblically orthodox natural law: God freely created man as a rational animal though sinning person: free to choose persons as ends, other things as means (AAA’s*)

2. Stoic pantheism: Cosmos one big rational animal, God its immanent soul; man a puppet manipulated by “invisible hand” to “ends ... no part of his intention” (Adam Smith)

3. Epicurean materialism: no Creator or providence, only “matter and chance”; man a clever animal choosing means, not ends: reason “slave of the passions” (Hume)

Thus the “Choice of 1776”: Created Equal—Or Not?* Aristotle + Augustine, first integrated by Aquinas