Fortune Mag Attacks Tom Woods and the Austrian Critique of the Pope’s Economics

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Fortune Mag Attacks Tom Woods and the Austrian Critique of the Pope’s Economics

September 22, 2015

Chris Matthews (not the famous one from MSNBC) at Fortune today questions if “Catholics [can] love their faith and the free market.” In other words, it is presumed by the author (and many others) that there is a conflict between private property and Catholicism.

Now, normally, I wouldn't comment on this topic much here at Mises Wire, but Matthews uses Tom Woods — and specifically Austrian economics — as his case study of whether or not it is possible to reconcile Church economics with markets. In the process, Matthews makes a wide variety of lazy generalizations and vague innuendo in the process of arriving at the conclusion that Woods doesn't make his case very well.

Let's have a look at Matthews' text. My comments are in bold with brackets:

…At the same time, the typical American Catholic doesn’t necessarily vote in accordance with the teachings of their church. Just as many Americans don’t abide by the church’s teaching on birth control, the fact that U.S. Catholics are increasingly voting Republican suggests that many don’t agree with the church’s general predisposition towards social spending and foreign aid. [Matthews seems to equate Church teachings on contraception (which rises to the level of 2000 year-old doctrine) with the opinions of Popes on welfare programs and foreign policy, neither of which has ever been considered doctrinal. Indeed, Archbishop Chaput of Philadelphia recently cautioned against equating core moral issues with social policy issues. So, Matthews here is immediately starting from a shaky foundation that betrays an ignorance of how Catholicism works.]

So, how can the 48% of Catholic-American voters who voted for Mitt Romney in 2012 justify their support for the candidate’s economic policies? [So the policies of Mitt Romney — the man who invented Obamacare — are representative of free-market ideologies?  Once could easily answer Matthews's question here by stating that it is quite easy for Catholics to justify their support for Romney since Romney has a well-established record of increasing welfare spending, and never gave any indication that he had any intention of making any significant cuts to welfare programs. Thus, one could make the case that Catholic voters supported him because he posed no danger to the welfare state.]

Historian Thomas E. Woods has been leading an effort among Catholic intellectuals to harmonize the church’s thought and the free-market fundamentalism [it's “fundamentalism” and thus a type of religious extremism, you see] of America’s right wing. In his book The Church and the Market, Woods advocates for Austrian economics, a heterodox school that is even more suspicious of government intervention than famous right-wing [there's that “right-wing” thing again] economists like Milton Friedman. The book is part an explanation of the Austrian point of view, which rejects evidenced-based economics that relies on natural experiments and is instead in favor of principles derived by reason and logic. [This is a common attack by opponents of Austrian economics who like to make the Austrian school sound “unscientific.” The way Matthews has described the Austrian method has no basis in reality. Austrians like to measure and observe economic action as much as anyone. We reject, however, attempts to attach non-ordinal numerical values to subjective human desires and actions. That is, we can know that one prefers apples to oranges based on observation of his demonstrated preferences. We cannot, however, assign a value of 2 to a preference to apples, and a value of 3 to a preference for oranges. Thus, it's true that we reject mathematical modeling as a substitute for logical reasoning in economics, just as we reject empiricism if used in a way that makes economics into a branch of the physical sciences. But that's something quite different from “rejecting evidence.” Mises's core concept of human action, of course, is based on fundamental observations about human behavior.]  Woods points out that this approach is congenial to Catholic tradition, writing that, “The Church has always maintained that faith and reason are not in conflict, but rather constitute two harmonious paths to truth.”

To illustrate the difference between Austrian and mainstream, right-leaning economics, Woods examines the minimum wage. He writes:

“Since [Austrian] principles … are established on the basis of logical deduction from an irrefutable axiom, they are … apodictically true. They are not falsifiable by experience. Economic law is not disproved if no change in unemployment is observed after an increase in the minimum wage to $25 per hour. All we can say is that unemployment is higher than it would have been in the absence of the minimum wage.” [This is obviously true, ceteris paribus. But all things are usually not equal, and no Austrian denies this. One can certainly observe cases where increases in the minimum wage were not followed by measurable layoffs, at say, a specific firm. But that doesn't disprove the principal. The lack of observed layoffs simply illustrates other factors at play, such as deferred hiring. Moreover, no self-respecting economics instructor, Austrian or otherwise, would teach his Principles of Micro students that setting the minimum wage above the equilibrium price would not increase unemployment, ceteris paribus.]

The result of this faith [“faith” implies that Austrians are guided by quasi-religious beliefs and not by scientific inquiry] in Austrian principals leads its adherents to reject almost any kind of government intervention of economic activity as harmful to the very people, the working class and the poor, that it is often aimed at helping. Woods takes aim at classic conservative targets like rent control and minimum wage laws, which he argues end up hurting the most vulnerable by reducing the total amount of affordable housing and killing jobs. [These are mainstream positions among economists.]

Woods’ other targets include a Federal Reserve-managed monetary system, foreign aid, and, perhaps most controversial in terms of Catholic philosophy, the welfare state. [This sentence implies that there is a Catholic philosophical position on monetary policy and foreign aid, which there is not.]  He argues that the welfare state “amounts to a direct assault on the extended family.” When the state takes over the job of caring for the elderly through programs like Social Security, for instance, it “effectively subsidizes the breakup and dispersal of extended family units.” Woods argues that the welfare state isn’t effective at alleviating poverty and discourages institutions like marriage and values like hard work that would lift up the less fortunate.

Woods’ ideas are fairly similar to those of Republican hard-liners like Paul Ryan [Get that? Woods is a lot like a “Republican hard-liner.”], who has argued that reducing spending on the poor would be good for low-income people in the long run. But in the end, much of what Woods argues is hard to square with the Christian faith’s approach to charity. Woods does not explain, for instance, why public charity is so corrosive to the family, but private charity is not. [I'm willing to bet money that Woods has in fact explained this in many places. The first principle here is that coerced and violent redistribution of wealth by the state in no way fits the Christian definition of “charity.” Moreover, the Catholic concept of subsidiarity is central to this issue, although Matthews does not show any familiarity with the concept.] Nor does Woods address the Pope’s recent arguments that modern capitalism itself has a distorting effect on the human spirit. [Note the qualifier Matthews suddenly slips in here without explanation. What is “modern” capitalism? This implies there is some other type of capitalism that Matthews perhaps thinks is better or more compatible with Catholicism. What are these other types of capitalism?]  Welfare may erode a desire to pursue work, but the Pope is also arguing that materialism is eroding the desire for spiritual satisfaction. [Matthews is confusing materialism with Woods's position, which is a support for free will and freedom among licit owners of property. No Catholic denies that materialism (i.e., the habit of placing excessive value on the physical world) is a bad thing.]

It’s for these reasons that Woods and those who think like him remain outside the mainstream of Catholic thought. [“Mainstream Catholic thought” is something far beyond the opinions expressed by clerics over the past 5 years — or even the past 200 years.]   But his arguments offer a guide for Catholics who feel the need to reject Pope Francis’ condemnation of the global economic order. [It would be great if Francis were condemning the global economic order as it actually is. That is, a global economic order dominated by central banks such as the Fed and ECB, and by huge financial institutions protected by government favors and monopolistic power. But unfortunately, Francis seems to think that the global economic order is characterized primarily by unfettered markets, which is empirically wrong. It is this misinterpretation of the facts that animates so many of Francis's critics on this matter.]

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