Catholicism and Economics: Towards a “Deeper Reflection on the Nature of the Economy and its Purposes”

• DOI: http://doi.org/10.1111/ajes.12273
• Date: 01 March 2019
• Published date: 01 March 2019
• Author: Charles M.A. Clark

Catholicism and Economics: Towards a

“Deeper Reflection on the Nature of the

Economy and its Purposes”

By Charles M.a. Clark*

abstraCt. Many of the problems neoclassical economic theory has in

explaining the real world stem from its narrow view of human

nature—the “rational economic man” model, which forces economists

to exclude social and historical context. Every social theory starts with

a view of human nature that necessarily comes from outside the social

sciences. Philosophy and theology are the sources of our ideas about

the nature of humans, society, and the good that humans pursue.

Catholic Social Thought has a rich understanding of human nature,

which includes both the uniqueness of persons and their inherently

social nature. Starting from this foundation, economists can develop a

deeper understanding of the nature of the economy. Catholic Social

Thought does not offer a different economic theory or model, but it

does provide an alternative vision upon which more adequate and

realistic economic theories can be constructed.

“The economist, like ever yone else, must concern himself with the ultimate

aims of man .”

Alfred Marshal l ([1890] 1920: BK I, Ch. 2)

Introduct ion

The last 50 years have been a challenge for economists, culminat-

ing in their failure to foresee the Financial Meltdown of 2008. The

United Nations (2009b), in a report by its Commission of Experts

on the financial crisis, stated t hat strict adherence to free market

American Jour nal of Economics and Sociology, Vol. 78, No. 2 (March , 2019).

DOI: 10 .1111/ajes.122 73

© 2019 American Journa l of Economics and Sociology, Inc.

*Senior Fellow, Vincentian Center for Church and Society. Research Fellow, Center for

Global Business Stewardship. Professor of Economics, Tobin College of Business, St.

John’s University (NY). Email: clarkc@stjohns.edu

410 The American Journal of Economics and Sociology

fundamentalism by economists was a factor contributing to the cri sis,

just as adherence to “Say’s Law of Markets” contributed to the Great

Depression of the 1930s. Even the Queen of England publicly rebuked

the profession. The crisis of 2008 was not the first m ajor economic

event that caught the economics profession by surprise: the rise of

both unemployment and inflation in the late 1970s and early 1980s,

as well as the prolonged period of low inflation and unemployment

in the 1990s were a surprise and were not adequately explained.

Furthermore, each financial cra sh seems to catch economists sleeping

at their computer as bubbles and crashes contradict the “financial

efficiency hypothesis” regularly taught to economics and finance stu-

dents. This poor performance has led ma ny to write about the “crisis

in economics.” Even Gross Domestic Product, the marque economic

statistic and main policy target, has i ncreasingly come under attack as

out of touch with measuring how a society is doing in terms of social

well-bei ng.1

If a theoretical system assumes something cannot happen, it is

unlikely its adherents will see it coming. While there are many ideo-

logical, political, and sociological reasons for the narrowness of

neoclassical economics, the root of the problem is theological and

philosophical. The purpose of this essay is to perform a root canal

(so to speak) with the hope that cleaning out the decay caused by

the narrow “vision” of neoclassical economics will allow for a “new

and deeper reflection on the nature of the economy and its purposes”

(John Paul II 2000).

The call by Pope John Paul II for a “new reflection” did not propose

that theology and philosophy can or should replace economic theory.

We still need economists to do what economists should be doing,

helping us to understand the economic aspects of social life. John

Paul II (1991: CA 43) was very clear that Catholic Social Thought is not

an alternative economic theory or economic system:

The Church has no models to present; models that are re al and truly effec-

tive can only arise with in the framework of different his torical situations,

through the efforts of al l those who responsibly confront concrete prob-

lems in all their soci al, economic, political and cultural a spects, as these

interact with one another.

411Catholicism and Economics

Implicit in this statement is a critique of the contention that there is one

economic theory that explains all economic activit y, from the feudal

manor in the Middle Ages to the modern transnational cor porations.

Historical and social context matter. John Paul II rejected an analysis

which treats the economy and economic outcomes as if humans had

no agency, where markets are omnipotent, and humans are impotent.

This fallacy stems from the reduction of the human p erson to a cari-

cature of itself. John Paul II is calling for a broader understanding of

economic life, one that places the person and not the individual at the

center. The distinction between “person” and “individual” is critical to

what is wrong with neoclassical economic theory and this di stinction

can only be understood at the theological and philosophical level.

Whether one views a human being as a “person” or an “individual”

cannot be derived from an economic investigation; it is determined

before an economic investigation can be undertaken, part of what

Veblen (1899-1900) called the “philosophical preconceptions” upon

which every economic theory is constr ucted. These are the roots of

economic theory ment ioned above.

Pope Francis (2013: ¶55) linked the financial crisis to our under-

standing of what it means to be human:

The current fina ncial crisis can make us overlook the fact that it originated

in a profound human crisis: the denial of t he primacy of the human per-

son! We have created new idols. The worship of the ancient golden calf

(cf. Ex 32:1-35) has returned in a new and ruthless gu ise in the idolatry

of money and the dictatorship of an imperson al economy lacking a truly

human purpose. The worldwide crisis a ffecting finance and the economy

lays bare their imbalances and , above all, their lack of real concern for

human beings; man is reduced to one of his needs a lone: consumption.

The insights of John Paul II and Francis are not new. Every pope who

has written about capitalism made similar st atements. In The Idea of

a Universi ty , John Henry Newman objected to the growing trend of

economics to cut itself off from other disciplines, which reflected t he

narrowness of economics. Writing in the mid-19th century, just before

the rise of neoclassical economic theory, Newman ([1852] 1982: 71)

argued that the insights derived from economic theory are necessar ily