Home / David W. Cooney / The Science of Economics

 

Critics of Distributism often bring up the science of economics as though we are unaware of the concept. Some of these critics seem to think that economics is a natural science, like physics. This leads them to believe that there are hard and fixed rules that will always apply in every case. Just follow all of the fixed rules and the economy will run smoothly. In reality, economics is a humane science. It is a science of human interactions. The rules are not fixed by nature; they are governed by human relations, cultural standards, and philosophical views. This means that what worked one time just might not work another time. Yes, certain predictions can be made, but too many economists seem to forget the human element when making their predictions. This is even admitted by at least some economists, as is indicated in a surprisingly frank article from BBC News that can be found here. (Of course, they end up concluding that it is not the economists fault for failing to accept the human factor – it is the human factor’s fault for failing to act according to the economists predictions. Imagine any other scientific field making such a claim.) A financial deal that looks great when just looking at the numbers may get rejected because of a personal disagreement, prejudice or because one side thinks the deal is immoral. On the other hand, some deals may be taken simply because they will yield a large return regardless of the moral aspect.

Other critics, like Catholic Libertarian capitalists, acknowledge that economics is a humane science, but mistakenly believe that, since the authority of the Church does not apply to “science,” it does not apply the the humane science of economics. However, the limitation of the Church’s authority in regard to science only applies to the natural sciences, which concern observations of the fixed laws imposed by God on nature. Also, it is not the scientist who imposes this limitation, but the Church herself who acknowledges it in her understanding of her own authority. That same authority insists, however, that it does extend to economics and other humane sciences. All of the humane sciences involve the actions of people with free will, and the moral implications of those actions. Therefore, the Church’s teaching applies and must be accepted. This is why Catholic distributists insist on the validity of the Church’s authority in all humane spheres including economics. This topic is further explored in Thomas Storck’s articles on Economics and Catholic Social Doctrine.

Distributists have been able to point out that the current economic crisis could not be predicted by the capitalist economic “scientists.” Now, it is true that science does some times get things wrong. In the case of the natural sciences, this inevitably turns out to be because of some unknown or unforeseen law of the natural sciences that, once discovered, can be accurately applied to get predictable results. This is never the case with those involved with the science of economics. Even among the capitalists, we are told that the causes of this current crisis are opposite things (not enough government versus too much government) and are given opposite solutions (more government versus less government). You can’t simply run the numbers, ignoring the human aspect that can cause wildly different results, and come up with an accurate prediction of the outcome. If you could, the current economic crisis would have been avoided. Science is only science when it looks for the cause; and, in the case of economics, the primary cause of its many fluctuations is the action of humans. Indeed, the cause of economics itself is the need for humans to acquire the things they need or want in life. Therefore, economists won’t be able to really solve economic problems until they acknowledge that the science of economics includes a proper understanding of human nature.

Was our current economic crisis caused by too much government interference in areas of economics, or was it caused by greedy centralized international banks who control our currency as well as that of so many other countries and who should have been more tightly regulated by some government authority (or at least had the ability to mint our currency at will revoked)? I believe the answer to both questions is yes, and that this only begins to scratch the surface of our ongoing economic woes. This is why I believe that both Keynesian and Austrian capitalists are wrong. The reason they will never be successful in establishing a sound and stable economic policy is that they don’t address the entire problem. The basis for their “science” is incomplete which makes it a false science. Distributism addresses all aspects of this problem because it looks to the cause – humans and they way they act toward one another through their economic actions and their government structures. Yes, we need to look at economics in mathematical economic terms, but we must also acknowledge the human element and the moral aspects of our economic crisis.

 

About the author: David W. Cooney

 

David W. Cooney serves on the Editorial Board of The Distributist Review. His articles have appeared in Gilbert Magazine and he has also contributed to The Hound of Distributism, a book of various authors. Originally from Southern California, he now lives with his wife and two children in Western Washington state where he works as a network administrator.

 

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7 Comments

  1. I’ve previously heard the complaint that the rules of economics are not fixed by nature. I’m not sure what I make of it, however.

    Von Mises, at least, attempts to build up an absolutely certain proof for economic theorems from the ways in which humans always act. In so doing, he is in some ways Aristotelian, because he attempts to prove subsequent conclusions from prior, better-known premises that found his later conclusions. And he attempted to found as much of economics as he could upon such proofs.

    Now, I think von Mises was wrong; but I think he was wrong because his idea of human nature was wrong, not so much because his logic was wrong. If you read the first 50 pages or so of his “Human Action,” attentively, you’ll see him dismiss ways of human action that have in fact prevailed at various times in various ways over the course of human history, without good reason. He thus arrives at an excessively parochial view of human nature.

    But there doesn’t seem to be anything the matter with his attempt to make a science where the rules are “fixed by nature.” All he attempts to do is look at the nature of the human individual, and, from this nature–which he takes as absolutely fixed–deduce ways that humans act in concert. A Thomist might equally well look at what we take to be human nature, and try to do the same thing–if a Thomist were familiar with particularly Austrian ways of reasoning. The Thomist’s view of human nature may in fact make such deductions impossible, but there is nothing the matter with so acting in itself.

    So, with this in mind, I look at these statements:

    “In reality, economics is a humane science. It is a science of human interactions. The rules are not fixed by nature; they are governed by human relations, cultural standards, and philosophical views.”

    And

    “This is why I believe that both Keynesian and Austrian capitalists are wrong. . . . The basis for their “science” is incomplete which makes it a false science.”

    The first of these seems to complain that economics is wrong because it tries to make exact what cannot be exact. The second of these seems to complain that economics is wrong because its foundation in human nature is faulty. These are different complaints.

    I think that it might be better to try to attack their idea of human nature than complain that they try to make an exact science what cannot be an exact science, even if both are true. For as long as they think they have an exact science derived from a true view of human nature, we’ll just sound like people who can’t understand physics carping that, we don’t care what, quantum mechanics just can’t be right.

    But maybe I’m off the wall. Does this make sense?

  2. The mathematical economic models are still so “green”, but also including more and more psicological variables with the time. An example is the Consumer´s Theory, with its “decreasing marginal utility” that helps to explain, with psicological reasons, why after one point you feel unsatisfied of cosuming more and more. This is the same critic that the distributists would make to modern consumism. So there´s no link between “using numberical models” and “thinking like an Austrian capitalist”.

    Anyhow when a Hurricane is happening you can´t blame the man of the weather. Science would try, as you wrote, to look for the causes to predict new hurricanes. With the current crisis is clear that economists should include more human (psicological and moral) factors in their models.

  3. Anodos, That is not in any sense “Aristotelian.” Only sciences of formal relations (the “theoretical” or “speculative” sciences, logic, mathematics, and metaphysics) are advanced by pure logic from self-evident premises; all other sciences, the “practical” sciences are advanced by observation and generalization. Mises merely misunderstood what kind of a science economic science was.

  4. Here’s a great article that echoes many of the points you make here: http://www.imaginativeconservative.org/2011/02/post-prosperity-i-land-of-opportunity.html

  5. Anodos,
    You are not taking the two statements in context.
    The statement about economics being a humane science was related to those who treat economics in the same manner as a physical science. The statement that both the Keynesian and Austrian views of economics is incomplete is related to the fact that they don’t have a proper understanding of human nature and, specifically, its relation to economics. As pointed out in the article, the professional economists blame the consumer when their predictions don’t work out. They argue that any time this happens, the consumer failed to act in accordance with how the science suggested they should.

  6. Alfonso,
    If anything I wrote suggested that I hold economists responsible for being able to predict a natural disaster when making economic predictions, allow me to correct that assertion. My main problem with the prevailing model of the economists is their complete dependence on the highest level of government to provide aid when natural disasters occur. I personally believe that these are precisely the types of situations where higher levels of government possibly should render assistance, but not in they way they do here in the USA – where they come in and take complete control rather than rendering assistance to the local authority who should remain in control.
    It may be true that the Austrian school cannot completely be associated with a purely numerical approach to economics, but their constant insistence that simply removing government interference and allowing the “market” to sort things out suggests that to me. They speak of the “laws” of the free market (with virtually no regulation) as though they are fixed and will always ensure the best outcome for society overall. They also seem to take a very callous attitude toward those who lose their jobs to things like outsourcing.

  7. The main problem I see with economics is that it is very circular in its reasoning in talking about the money supply as something apart from the actual real activity of the people and is descended directly from feudal systems intending to maintain control and possession of the real wealth in the hands of the few. It makes little sense that any country or community can be poor in the sense they are considered poor today by way of their shortage of the currency when, in fact, it is their very existence and their willingness to do work that is their currency. Yes, there are the natural resources around them that vary from one region to the next, but within the community if currency is truly determined by the inputs of the people, then no community should be considered poor. This is what lies at the heart of the evil of the monetary system and the circular arguments of economists who are perfectly willing to go along with the assumption that money is debt and then use manipulation of the bonds as a means to control the so called economy when, in fact, they are well aware that the bonds put people into bondage and that this is the basis for the claim they put on the real money in the system: the labor and goods and services of the people themselves. A truly free system unencumbered by the attempts to gain or maintain control of the population and the resources would look very different and would work along the lines of crediting the actual work inputs as the real currency and not some outside force or commodity or supply of some metal or other. This kind of truly Free Enterprise System that supplies itself with the currency needed to effect transaction of the real goods and services originating from within the community scares the heck out of the descendants of the feudal elites as exemplified by these words from Richard Kotlarz:

    “The significance of Lincoln’s monetary policy did not escape notice in certain European quarters, although from an entirely different perspective. There appeared in The London Times during the Civil War the following from Otto Von Bismarck:

    “If that mischievous financial policy, which had its origin in the North American Republic (the public issue of usury-free currency) should become indurated down to a fixture, then that Government will furnish its own money without cost. It will pay off debts and without a debt. It will have all the money necessary to carry on its commerce. It will become prosperous beyond precedent in history of the civilized governments of the world. The brains and wealth of all countries will go to North America. That government must be destroyed or it will destroy every monarchy on the globe.” “