Thursday, December 11, 2014

The Church and the Market: Economic Law

After responding to the efficiency argument, Thomas E Woods Jr. mentions another argument that the same person raised. This time it is about the incompatibility of economic law with the Catholic faith. 

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The problem, says Woods, is that Sharpe presumes to know about the Austrian concept of economic law, but in fact, knows nothing at all about it. Though Woods concludes in this way, still he tried to understand what Sharpe meant when he said that "the 'laws' which the Austrians maintained have nothing whatsoever to do with the Natural Law of philosophical realism and the Catholic Faith" (p. 28). If by this, Sharpe meant "that the law of diminishing marginal utility" "has nothing directly to do with the Catholic faith", Woods grants that this is true. However, Woods sees no problem with this for a lot of temporal matters has also no direct connection to Catholicism. And besides, as already mentioned in the previous article, the Austrians' concept of economic law finds justification in the teaching of Aquinas. 

The Austrian concept of economic law and its methodology are not inimical to Catholicism, but to logical positivism. Woods identifies that most critics of praxeology came from this camp. They malign Austrian method as scholastic, old-fashioned, and unscientific. By the last word, they mean the natural science, as if, it is the only valid kind of science, and failure to follow after its footstep is considered unacceptable. 

Woods advances his response by referring to Richard Weaver who considers libertarians as "conservartors of the real world" (p. 29) for praxeology is simply an extension of the recognition about "the existence of natural constraints" (p. 28). If this is the case, it implies that the critics of praxeology are actually promoters of a fantasy world. 

Due to this recognition of natural limitation, heads of the state dislike Austrian economists and view them as "mischief makers" (p. 29). Consequently, the study of real economics was replaced with "'historical economics'" (ibid.). Woods quotes Mises describing the unfortunate state of "economic history" as "a long period of government policies that failed because they were designed with a bold disregard for the laws of economics" (ibid.).

In Bureaucracy, Ludwig von Mises also mentioned this deplorable situation about the expulsion of economic education from mainstream universities (1944, p. 83). The advocates of totalitarianism were only able to advance as far as they were successful in preventing the youth from learning economics and indoctrinating them instead with their tenets (p. 81). 

Returning to Sharpe's criticism, Woods enumerates examples of economic laws: the law of supply and demand, the law of diminishing marginal utility, division of labor and specialization, the connection of demand and supply with the price of goods, and the relationship between the growth of money supply with price increase. None of these laws are contrary to Catholicism. Woods suggests that instead of being critical about something that you don't know, Catholics should learn economic law to come up with better and "informed economic decisions" (p. 29).

Source: Woods, T. E. Jr. (2005). The Church and the Market: A Catholic Defense of the Free Economy. Lanham/Boulder/New York/Toronto/Oxford: Lexington Books.