Thomas Aquinas versus the Economists

It’s not an exaggeration to say that both economics as a social science and the economics profession lost considerable luster following the 2008 financial crisis. For many people, it was simply astonishing that so few academic economists, not to mention the legions of economics PhDs working in the private sector and the world’s finance ministries, forecast one of the worst economic downturns in recent memory.

In some circles, this has led to soul-searching about economics’ nature and ends. Many scholars have questioned the rational choice model (the notion that individual actors will generally assign the scarce resources at their disposal in ways that realize the most preferable package of goods obtainable to them) which has exerted a powerful influence upon the framing of economic analysis.

There’s no shortage of economists who recognize that the crude homo economicus model developed in the nineteenth century was never meant to summarize the entirety of human motivation and action. Other economists have acknowledged the limits of the rational choice model while simultaneously defending it from straw-men criticisms. That said, some economists remain uneasy about many of the assumptions built into mainstream economics and the types of conclusions to which it points.

A 21st Century Economist Engages a 13th Century Theologian

Mary L. Hirschfeld is one such economist. In her book Aquinas and the Market: Toward a Humane Economy (2018), Hirschfeld describes reservations which she has long entertained about modern economics. She notes, for example, what she describes as the “obsession with sophisticated mathematical models” which prevailed in the 1980s. While that problem, she suggests, has somewhat receded, Hirschfeld has other concerns.

Economic language, Hirschfeld maintains, “masks ethical differences in the goods individuals choose to pursue” and obscures “the features of life that give it its richness, meaning, and moral weight.” To this we could add that economics embodies an implicitly consequentialist methodology. That’s fine for those things which can be reasonably measured. Quantifiable entities can be quantified. Neither morality nor happiness, however, are measurable phenomena, as some of the more honest utilitarians have long conceded as a major flaw in their philosophy.

Hirschfeld’s worries about some of modern economics’ underlying premises, and her concern that several unspoken and highly debatable ethical assumptions are built into contemporary economics, were magnified by an unexpected conversion to Catholicism on her part. The Catholic account of human happiness, she contends, “is radically at odds with the modern take on these questions,” an interpretation that, in her view, is personified by economics as an intellectual discipline.

In many ways, Hirschfeld’s book reflects her wrestling through these quandaries. Her way to try to address these issues is to seek to ground economics in the thought of Thomas Aquinas, most notably his metaphysics and understanding of happiness. This is new insofar as natural law scholars have generally studied economic issues and methodology from the standpoint of justice (legal, distributive, and commutative) and the liberties and responsibilities associated with property. Hirschfeld doesn’t neglect these dimensions. Her focus, however, is on some of the Summa Theologiae’s more expansive vistas.

This approach allows Hirschfeld to highlight parallels between Aquinas’s studies of, for example, the political and legal spheres of life and the methodological underpinnings and priorities of mainstream economics. Positive economics’ insistence upon paying attention to the workings of factors like self-interest and incentives mirrors, she argues, Aquinas’ interest in “realistic descriptions of human beings as they are.”

Hirschfeld’s primary objective, however, is to establish a Thomist foundation for economics, if not outline the contours of a fully Thomist economics. This, she believes, will allow a Thomist understanding of the nature of the good to shape economic ideas, practices and institutions so as to contribute to the growth of what she regards as a more humane economy. According to Hirschfeld, such a project would help economics take into account some of those truths about the good and justice that, in her estimation, modern economics willfully excludes from its typical modes of inquiry.

Should Economics Become Theological?

There’s much to be said for pushing back against tendencies to establish economics as an all-embracing explanation for everything. I’m not sure, however, that the best approach for dealing with that and other problems is to make over economics in a Thomistic image. I happen to think that orthodox natural law accounts of human reason, choice, action, and happiness (as exemplified in John Paul II’s 1993 encyclical Veritatis Splendor) are far superior to everything else on offer. But I also have doubts about efforts to reconfigure economics as a distinct social science on explicitly Thomist metaphysical foundation.

My primary reason for such reservations is that it’s precisely because post-Smithian economics deliberately focuses on very particular—and, to an extent, empirically-verifiable—traits of human behavior while ignoring others that modern economics acquired its great analytical value. As John Finnis observes in his 1998 book Aquinas: Moral, Political and Legal Theory, “Modern economics gets going with Adam Smith’s proposal that it be undertaken as a study of side-effects.”

By “side-effect” is meant an effect that is not intended; i.e., not chosen as a means or end. One insight of natural law theory into human action is that all choices have more than one effect. Many of these effects are not intended. Instead of thinking first and foremost about the object of a free choice to assess its morality, economics focuses on studying the consequences that flow from an act, but which are not the immediate object of someone’s choice.

This emphasis on the difference between what is chosen intentionally and the side-effects of that same choice appears both in Smith’s Theory of Moral Sentiments and his Wealth of Nations. In Book IV of the latter, for example, Smith states that the person who pursues wealth “intends only his own gain” yet is nevertheless “led by an invisible hand to promote an end which was not part of his intention” (my emphasis). That unintended end is the overall economic well-being and increases in the sum total of wealth in society.

Part of the economist’s work is to examine the relationship between the effects of the choices of individuals and communities which go beyond what is immediately being chosen. Consistent study over time of these relationships and the achievement of a certain degree of predictability about how these interdependencies affect each other is central to economic analysis. By identifying these relationships and sometimes even producing approximate quantifications of these relationships, economics assumes the analytical characteristics of a positive science, one that often focuses on understanding the reasons for discernible changes in economic activity.

This does not mean that the study of these relationships acquires the same degree of certainty that we find in some of the natural sciences. Alongside known side-effects, there are also unknown side-effects. Knowledge of all these known or unknown side-effects of choices is not possible for one economist or group of economists. No individual or group can know all the different side-effects of the choices of millions of people and the way they affect each other. There are therefore significant limits to economics’ capacity to make the type of predictions characteristic of the natural sciences.

The Limits of Thomistic Metaphysics

Grounding the economic technique on Thomist metaphysics or theology would not overcome these limits. But going too far down that path would also distract modern economics from realizing its immediate purposes which are not pursuing happiness per se or even justice for that matter. Those ends are the more direct focus of other disciplines such as philosophy as well as other spheres of human activity like religion, politics, and law. Of course modern economics can help, for instance, those charged with political authority to make the right decisions by providing them with forms of information which would not be otherwise obtainable. But trying to focus economics more immediately on all-round human flourishing or even a vision of happiness as compelling as that articulated by Aquinas would blunt its ability to contribute to decisions that help to build up those conditions (the political common good) that enable people to pursue happiness under their own volition.

Does this mean that we should settle for the unsatisfactory state of much contemporary economics that rightly concerns Hirschfeld? By no means. Rather, however, than seeking to submerge economics into Thomistic theological inquiry, present-day dissatisfaction with economics might be better channeled in other directions.

These might include closer definition of economics’ purposes, a clearer specification of the limits of economic analysis, a more careful delineation of economics’ relationship to other modes of inquiry, and deeper attention to the particular ways that economics can illuminate aspects of the truth that might otherwise lie dormant. These characteristics, accompanied by a sense that the particular knowledge obtained via the economic technique needs to integrated into a wider account of human choice and political action, offers some potential for a reordering of economics that would address Hirschfeld’s questions, but in ways that would preserve the greatest achievements of Adam Smith’s intellectual revolution.

Reader Discussion

Law & Liberty welcomes civil and lively discussion of its articles. Abusive comments will not be tolerated. We reserve the right to delete comments - or ban users - without notification or explanation.

on November 08, 2019 at 12:42:02 pm

I dunno; Hirschfeld's premise sounds cool to me.

I guess I don't have such a tribalist instinct. As far as I know, all sciences focus on the same world (just as many religions seem to focus on the same god). Different schools of thought have different origins, and embrace different techniques and standards, and thus develop different strengths--but we should expect them to coalesce around similar conclusions. If a physicist tells me that an object is red, but a chemist tells me that it's blue, I don't walk away thinking, "Well, physicists and chemists belong to different tribes, so we shouldn't expect them to reach the same conclusions...." I walk away thinking, "This is a temporary outcome; some day someone is going to make a breakthrough to reconcile these competing accounts."

We have observed this in the field of economics. Behavioral economics is integrating ever more insights from psychology and sociology into economic models. And Picketty et al. have noted that a focus on national GDP glosses over changes in wealth distribution within a nation. These insights (among others) have promoted discussions about the merits of focusing on different measures than GDP--including, for example, "gross national happiness."

The point is not to sully rigorous, fact-based economics with a bunch of fuzzy-heading thinking. Rather, Moneyball: Baseball professionals had been relying on hard numbers--wins, losses, Runs Batted In, etc--for a long time. But new guys figured out that they had been focusing on the WRONG variables--variables only tangentially related to the goal of winning games. Likewise, conventional economic models may rely on rigorous, accurate data. But are these data and models actually designed to tell us what we really want to know? If not, then we may want to pursue revised models and additional data. The models grow more complicated--but arguably more accurate.

But note the trade-off: We (arguably) get more accuracy at the the expense of more complexity, potentially leading to that “obsession with sophisticated mathematical models” Hirschfeld complained of. More to the point, economics focuses on scarcity--and ideally this would include the scarcity of human attention and capacity for understanding. Models are SIMPLE--in both the good and bad sense of the word. Modifying these models to reflect the insights of Behavior economics, or of Hirschfeld, may add accuracy, but reduce popular comprehension.

It's a trade-off--and isn't that what economics is about?

read full comment
Image of nobody.really
on November 08, 2019 at 14:49:19 pm

The problem with academia is that its professors apparently see the world through the lense of their own respective theories and are unable to comprehend any other way of looking at things. Also, the limitations of their views bore me to pieces.

First of all, trade is a natural instinct whose purpose is to enhance our survival as a species. But, it does not stand on its own, meaning that every economic transaction takes precedence over every other consideration. We are commanded by our Maker to do good to our neighbor, not to lie, cheat, steal, murder or defraud him. We are commanded to respect the rights of others as we want them to respect us. We are to apply these principles to the marketplace.

I remember when I was young, perhaps 12, 13 or 14, coming out of church (an old-fashioned Evangelical Lutheran Church) one Sunday morning and somehow got into a conversation with some men about the Golden Rule which as I recall had been the lesson in Sunday School. One of the men asserted that the Golden Rule did not apply to business and I asked why not. I forget his answer, but I was appalled at his attitude. Jesus said, "In everything, as you wish that men would do to you, do ye likewise even so unto them," or words to that effect, and in Aramaic.

But, the marketplace is rife with lying, cheating, stealing, fraud and I suppose worse things. I've been told that you can't make money if you aren't ruthless. Oh? It seems to me that the underlying purpose of trade--to benefit all the parties to the transaction and their customers--has been forgotten, and making money the only object worthy of someone's time. Well, I cannot understand how anyone can live with themselves knowing they have caused harm to others so they can get rich. I cannot see the advantage.

The Universe is governed by laws of Cause & Effect which apply equally to everyone everywhere at all times. These Laws are the invisible hand Adam Smith talked about. Academics say he was a laissez-faire economist. This is not true for several reasons. He was not an economist, he was a Scottish Moral Philosopher. Sometimes he expressed himself in obscure ways, which is why a statement he made that means something about the marketplace should be unregulated by government except for what is necessary to protect the Consumer (read "public") seems to have gone under the radar for a long time.

What he was saying is that there is a boundary over which business should not cross. I don't think he would like the Fortune 500 corporations, the multi-national outfits that can buy and sell governments and eliminate their competition given enough time. Smith believed the marketplace should be a level-playing field, meaning the rules apply to everyone equally. But, we don't have that. Big corporations are allowed to control vast segments of the market. This is not good for anybody. But, this is the capitalism that people see and despise. It is not Free Market Capitalism, which I am not opposed to.

Capitalism is not a synonym for Free Market. That is because you can have capitalism in a Socialist, Fascist, Communist, Totalitarian society. A Free Market can't exist in those type of societies because government is always in control of outcomes.

The Invisible Hand does not operate effectively unless the players practice the Golden Rule. It is where the moral dimension of economics guides individuals to play by the rules, the result of which is a greater degree of prosperity without harm to anyone.

If you are making money by ruthlessly exploiting people and resources then what you have gained is ill-gotten and it will do nobody any good. Not even you.

I am not a Climate Change Science advocate, but I do recognize the damage we have done to the environment. For a long time humans did not understand the links between industry and destruction of the environment, or if they did they couldn't figure out how to stop it. But, we now know it is possible to clean up our act. I am for fossil fuels and drilling for oil & gas, but I am not for doing this in our national parks, forests, wilderness areas and other special irreplaceable natural places. Or in urban areas.

Also, I think it is time to get rid of the pro-growth economic model. The Earth is a finite place and much of it is uninhabitable, which is as it should be. We cannot continue to expand our markets, make things that in fie years will be in a landfill somewhere, and end up prosperous and healthy. We are destroying not only ourselves but the natural world around us. That natural world is what keeps us alive. God gave us this beautiful planet to live in, we should conduct ourselves as good stewards. He did not give it to us to plunder and ruin.

If everyone is to live under his own vine and fig tree, we will have to respect the rights of all our customers, competition, business partners, property owners, their tenants, and governments. And so forth. But, for this to work, it has to be voluntary. There has to be a way for us to make what we need and trade with one another to get the goods spread around, and make enough money to pay ourselves and our employees to save for their retirement, live in a decent house, and give our customers a good product at a fair price with good service.

Think small.

read full comment
Image of Standing Fast
Standing Fast
on November 10, 2019 at 17:14:29 pm

Some Thomistic scholastics discussed economics, id recollection serves. But does any of this matter much while we pretend "Economics" isn't really "Policical Economy" as smith had it? If we expect accurate forecasts, should we not be dealing with All of the pertinent forces? And note too the corruption imposed upon economists dependent upon government and terefore, politics?

read full comment
Image of Jack Curtis
Jack Curtis
on November 12, 2019 at 18:11:51 pm

The problem is that economist glide breezily between descriptive and prescriptive claims. The problem with being considered a 'science' is that scientists are, at some point, expected to deliver the goods, if that being nothing other principles by which a 'better mouse-trap' might be built. Operational -- prescriptive -- economics can be found at the Federal Reserve and it's been a woeful failure from the perspective of the common person (nice for the already-well-off, though). Science may be essential to civilizational development, but *scientists* are a luxury that need to pay their way. That is true for economists as well.

read full comment
Image of HamburgerToday
on November 13, 2019 at 11:53:52 am

I appreciate your engagement with my book. I do call for economics to be embedded in a Thomistic framework (at least, I think Catholic economists should strive to do something like this). But that does not cash out as a call for "outlining the contours of a fully Thomist economics". For me the Thomistic principles are not useful as a foundation for economic analysis. I accept the economic project as it is, for the real value it gives us. As you say, it takes people where they are and analyzes the unintended consequences of the choices they make. This sort of analysis is indispensable. The principles I am pointing to have to do with the philosophical/metaphysical presuppositions that guide our thinking about economic analysis. The descriptive aspect of economic science is useful, but no human science is purely descriptive. It is probably true that people can be well described as maximizing utility subject to constraint, and it is certainly true that incentives often shape behavior. But should we call such behavior "rational"? Should we accept that the fact that people always act as if more would be better implies that economic growth is intrinsically desirable? The modern economic approach obscures questions we should be asking -- what ends are served by our economic strivings? I could go on. My move to adopt Thomistic foundations is simply that it creates room for asking such questions. I think it better directs economic research using modern economic methods towards ends that would better serve us. I found it a fruitful way of articulating both what is valuable about modern economies and what is not valuable. It helped me sort through the insights that economists have that are important from those that obscure more than the illuminate. But at the end of the day the Thomistic economist would not be all that different from a modern day economist. The recommendations I give in the last chapter of my book, indeed, closely mirror the recommendations you offer in the last paragraph of your piece. So it is not clear to me that there is really much difference between us, save that you seem to think that I am advocating a blurring of the roles of philosophy/theology, when in fact what I am doing is proposing that we displace the philosophy/theology that tacitly undergirds modern economics with a more Catholic view, and use that to evaluate the strengths and weaknesses of both modern economics and the modern economy.

Hirschfeld’s primary objective, however, is to establish a Thomist foundation for economics, if not outline the contours of a fully Thomist economics. This, she believes, will allow a Thomist understanding of the nature of the good to shape economic ideas, practices and institutions so as to contribute to the growth of what she regards as a more humane economy. According to Hirschfeld, such a project would help economics take into account some of those truths about the good and justice that, in her estimation, modern economics willfully excludes from its typical modes of inquiry.

read full comment
Image of Mary Hirschfeld
Mary Hirschfeld
on November 13, 2019 at 14:17:57 pm

Why not just use the logic of Cause & Effect to sort all this out? We will be limited only by our ability to recognize what is true and what is not true, and how that plays out instead of relying on the assumptions of academia.

Aquinas is one of my favorite philosophers. I like that he does everything he can to stay in the real world. And apply the Laws of God and Nature, which are all about Cause & Effect, to his reasoning. I do not know if that is what you mean by Thomism.

read full comment
Image of Standing Fast
Standing Fast
on November 14, 2019 at 20:48:38 pm

Man is intrinsically selfish! Economics, especially Positive Economics, models the behaviour of man. In such an “imperfect world. The Ten Commandments and the Golden Rule, especially the latter parts of both, recognize the selfish nature of man and hence the rules. If one is to set Economics within the context of the Golden Rule, we will veering more to an utopian state of Normative Economics, where the “ought to“ be is just NOT!

read full comment
Image of Nii Sowa
Nii Sowa
on November 15, 2019 at 14:44:21 pm

The Golden Rule is an expression of the Laws of Cause & Effect. If we want Economics to really work as they are intended, we will introduce the Golden Rule into the marketplace. God wants us to be industrious, but he doesn't want us to exploit one another, lie or cheat or steal or bully people around, either. It means the goal of trade would not be about becoming the biggest dog in the arena, but about making money honestly with a goal of achieving without causing harm to our competitors. I would think, also, that government policy would not grant favors to large corporations. A level playing field isn't if one set of players receives benefits at the expense of the others.

I have a picture in my mind of owning a business with the goal of providing for my family, enabling my employees to provide for theirs, including saving for retirement, etc. I would want to provide the best product or service for my customers that I could. I think of it as a family business, so when it was time for me to retire some or all of my children would buy the business from me and carry on, and so on down through the generations.

My children & my employees would have jobs with a future, and if any of them met with hard times or sickness, we would pitch in and help them until they were back on their feet. Our goal would not be to get on the Fortune 500--in fact I would not want to sell stock in my company because then I would lose control of it.

I just don't understand why the goal of business is to make more money than everybody else. Isn't having enough a good thing?

No, The Golden Rule is not about creating a Utopian society or marketplace. It is about establishing Liberty so people can exercise their God-given Rights. It is by exercising those rights that we are able to do good to our neighbors and enjoy the fruits of our labors, and the blessings of Liberty.

read full comment
Image of Standing Fast
Standing Fast
on December 04, 2019 at 10:47:54 am

I have a few writings from the political science literature to recommend on the limits rational choice in terms of self interest maximization:
-Beyond Self Interest, ed. Jane Mansbridge

-"Are Homo Economicus and Homo Politicus Kin?," by Ed Banfield

read full comment
Image of CJ Wolfe
CJ Wolfe

Law & Liberty welcomes civil and lively discussion of its articles. Abusive comments will not be tolerated. We reserve the right to delete comments - or ban users - without notification or explanation.