Magazine | October 18, 2010, Issue

Summa Economica

Redeeming Economics: Rediscovering the Missing Element, by John D. Mueller (ISI, 400 pp., $28)

In this occasionally fascinating, occasionally maddening new book, John D. Mueller, whose work often illuminates the pages of this magazine, has set himself a formidable task: to reassert, convincingly, the value of a mostly abandoned model of economics rooted in Catholic ethics and Scholastic philosophy. He claims to have set the stage for a transformation of economic thought equivalent to the “marginal revolution” that enabled the emergence of neoclassical economics. Mr. Mueller, who does not shy away from bold assertions, maintains that his new economics 1) is expressible in the form of mathematical equations; 2) is logically complete; 3) is empirically verifiable; 4) is purely descriptive; 5) is valid at all levels of analysis, from the most micro to the most macro; and 6) will — because it is a “logically complete description of reality” — never require revision. The meek may be set to inherit the Earth, but economics apparently still belongs to the cocky.

Mueller’s concerns range from the astronomically abstract to the geologically concrete, but his first order of business, and the one he most obviously relishes, is the settling of scores with one Prof. Adam Smith, the moral philosopher who made something of a name for himself in the field of economics back in 1776 with the publication of The Wealth of Nations. He gets right to it, too: Chapter 1 is titled “Smithology and Its Discontents,” and in it Mueller lays out a detailed indictment of the classical-liberal economic model associated with the gentleman from Glasgow. His argument goes roughly thus: Adam Smith disfigured the field of economics by radically oversimplifying the intellectual framework he inherited from the Scholastic tradition synthesized by Thomas Aquinas, which combined classical sources with Augustinian interpretations to produce a model of economics comprising four elements: a theory of production, a theory of justice in exchange, a theory of utility (which enfolds the theory of consumption), and a theory of justice in the final distribution of goods. Smith is accused of shearing off the more important half of the model, jettisoning consideration of both utility and final distribution.

Mueller believes that Smith chose to do this for reasons that were, at heart, religious. He makes much — rather too much — of Smith’s anti-Christianity and his supposed Stoicism. The exact range and character of Smith’s religious beliefs is the subject of some controversy, and the path he took in negotiating what seem to have been the poles in his religious universe — the radical skepticism of his friend David Hume and the Christian Stoicism of his mentor, Francis Hutcheson — is unknown to us. It is presumptuous, and perhaps a little dangerous, to lean too heavily upon Smith’s religious beliefs to draw conclusions about his economic analysis. But here is Mueller on the subject:

Smith, having rejected his Christian baptism well before writing the Wealth of Nations, was a wholehearted convert to Stoic philosophy — and Stoics are pantheists. . . . Humans are not creatures endowed with reason and free will, but rather appendages of God fated to do everything they do, good or bad. What we humans consider reason, Smith argues, is ultimately only rationalization of actions we do not in fact understand. . . . According to Augustine’s more logically consistent theory of providence, the order we observe in markets and society results entirely from the virtue (itself a kind of rational order) that remains even in bad people as long as they exist.

#page#Smith’s humane understanding — that our advancement of our own interests requires us to take into consideration the needs and desires of others, suggesting a pleasing symmetry to the universe — is indeed a Stoic idea. As Marcus Aurelius writes in the Meditations:

In the morning when thou risest unwillingly, let this thought be present — I am rising to the work of a human being. Why then am I dissatisfied if I am going to do the things for which I exist and for which I was brought into the world? . . . Dost thou not see the little plants, the little birds, the ants, the spiders, the bees working together to put in order their several parts of the universe? And art thou unwilling to do the work of a human being? . . .

We are all working together to one end, some with knowledge and design, and others without knowing what they do. . . . But men co-operate after different fashions: and even those co-operate abundantly, who find fault with what happens and those who try to oppose it and to hinder it; for the universe has need even of such men as these. It remains then for thee to understand among what kind of workmen thou placest thyself; for he who rules all things will certainly make a right use of thee, and he will receive thee among some part of the co-operators and of those whose labours conduce to one end.

So Mueller is correct on that. But he is wrong to assert that this Stoic philosophy necessitates pantheism, and he doesn’t come close to proving that Augustine’s theory is “more logically consistent” than that of Smith. Mueller says, repeatedly and correctly, that order in markets is a fact, not a theory. But there are many competing explanations for the emergence of that order. One major figure in the Scottish Enlightenment, the ethicist Adam Ferguson, paid close attention to the question, and detected a providential design in which order emerged as the “result of human action, but not the execution of any human design.” (Friedrich von Hayek offered a variation on that theory; his version has become a cornerstone of Austrian economics.) On the other (invisible) hand, many contemporary theorists locate the root of human social cooperation in biology, in an evolutionary mandate to work together so as to maximize the survival of our genes. Each of these analyses is as facially plausible, and certainly as logically consistent, as the one Mueller favors.

Smith’s economics is of course far from perfect, and occasionally naïve — let us not forget that the seed of Karl Marx’s “labor theory of value” first was sown by the patron saint of capitalism. But if Smith’s thought was hamstrung by anything, it surely was the fact that differential calculus had not yet been applied by economics in his day, and not by the fact that he had an insufficiently sympathetic understanding of Christian theology.

But demolishing “Smithology” is only one half of Mueller’s project. The other half is restoring Scholastic insights to the broader economic discourse, or at least demonstrating the value of doing so. This leads him to ask some fascinating questions: What were the Augustinian insights into the problem of the scarcity of means? What is the economic meaning of love and hate? Can we use a quantitative model to understand a mother’s love for her child? And does this neo-Scholastic approach to economics in fact yield the revolutionary insights that Mueller promises?

#page#For the answers to the first three questions, I commend to you Mueller’s lucidly written, inventively argued book. The last question I will answer myself: No. Mueller’s achievement in this book is truly remarkable, but it is not quite as large as his ambitions. Part of that has to do with the fact that there is a tension between his desire to construct a purely descriptive “positivist” economics and his desire to put it in the service of particular policy ideas. At its simplest level, economics tells us things about how the world works, for instance that if you raise the minimum wage you will increase unemployment among workers in that wage range. Economics can establish that chain of causation and identify a tradeoff, but it does not have much to offer us in the way of guidance about whether we should prefer fewer jobs at higher wages or more jobs at lower wages (and still less does it offer any insight into the much more difficult question of whether the powerful, who will not personally bear the costs of the decision, have a right to impose their preference on the powerless, who will).

Mueller applies his neo-Scholastic economic analysis to a diverse collection of public issues, some of them issues upon which economics bears directly (Social Security) and some of them only partly economic (falling fertility rates). He makes a reasonably compelling case for continuing with a traditional pay-as-you-go model of public pensions and a less compelling case for increased investment in higher education; in neither case does his neo-Scholastic approach add anything dispositive to the debate. For instance, he dedicates an entire chapter to the question of inflation, which he identifies as an example of “injustice in exchange,” and explores in some detail the ideas of the French economist Jacques Rueff, commodity models of money, international balances of payments, the dollar’s unique status as the world’s preferred reserve currency, etc. He advocates a return to an international gold standard (or some technical approximation of an international gold standard), which will no doubt please many conservatives and libertarians. But in the entire discussion of inflation, I was not able to identify a single idea that was uniquely neo-Scholastic in its provenance. In the same way, his case for traditional public pensions and his analysis of unemployment incorporate some unique empirical observations, but these do not require the adoption of his broader neo-Scholastic view, nor do they seem to amount to the revolution in economics that he believes they do.

Mueller has not uprooted the tree of economic knowledge, but has grafted a branch onto it. That is no small accomplishment, even if it falls short of his promise of “redeeming economics”; economics is a science that has no need of redemption, nor any to offer.

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