The Starting Point for Economic Thought
How we begin a discussion of something often goes a long way to determine the conclusion we arrive at. For example, if we begin a discussion of human sexuality simply by noting the nearly ubiquitous desire of humans for sexual pleasure and our multifarious ways of satisfying that desire, this might well put our discussion on the wrong track and lead to erroneous conclusions. On the other hand, if we were to begin by noting the fact that human sexuality is related to a very important social function, that of continuation of the human race, we might reach very different conclusions. The same is true of a discussion of economics. Today and for a long time the starting point for economic analysis, according to most authors and teachers, is scarcity. This starting point tends to point the discussion in a particular direction. Here is how Paul Samuelson treats the topic.
A situation of scarcity is one in which goods are limited relative to desires. An objective observer would have to agree that, even after two centuries of rapid economic growth, production in the United States is simply not high enough to meet everyone's desires. If you add up all the wants, you quickly find that there are simply not enough goods and services to satisfy even a small fraction of everyone's consumption desires. Our national output would have to be many times larger before the average American could live at the level of the average doctor or big-league baseball player.[note]Paul Samuelson, Microeconomics, 2001, 4.[/note]
I suggest that here we have something like the original sin of mainstream economics. In a way, of course, Samuelson's statement is true. But only in a way, and moreover, as a starting point for thinking about the economy, his statement leads us astray and vitiates the entire enterprise of economics as that is usually conducted.Let us begin by examining Samuelson's assertion carefully."A situation of scarcity is one in which goods are limited relative to desires." In the first place, we can note here that no distinction is made between wants and needs. A desire to "live at the level of the average doctor or big-league baseball player" is apparently no different from a desire to have enough to eat or to provide medical care for a sick child. But can any Christian really think that God gave mankind the capacity and need to use external goods so that we all "could live at the level of the average doctor or big-league baseball player"? It is true that in our efforts to construct a society that serves genuine needs rather than disordered wants we must not be too rigid in deciding what are needs and what merely wants, and ought to allow a generous place for human freedom and choice, nevertheless we surely can say that Samuelson's utter failure even to attempt to distinguish between wants and needs marks his brand of economic analysis as faulty from the start.Secondly, is it really true that most people want to "live at the level of the average doctor or big-league baseball player"? Here we come to the interesting question of the effects of culture on our desires. It may be the case that most Americans wish to live at that level, but why is that? Over fifty years ago Msgr. John Tracy Ellis, in his once famous address, American Catholics and the Intellectual Life, wrote,
From the time when the Duc de Liancourt traveled through the states along the eastern seaboard in the 1790's and wrote one of the earliest books by a foreigner on the new Republic, to the essays of recent observers like Evelyn Waugh, few visitors from abroad have neglected to comment on the American attachment to material goods and the desire to make a fortune as dominant characteristics of our society.[note]Chicago, 1956, 27.[/note]
But are such desires dominant always and everywhere? There is considerable evidence that they are not. If we consider simply modern examples from the Western world, we have Max Weber's testimony about nineteenth century cloth merchants who worked "perhaps five to six [hours] a day, sometimes considerably less," and were satisfied with moderate earnings, "enough to lead a respectable life and in good times to put away a little,"[note]The Protestant Ethic and the Spirit of Capitalism, 66-67.[/note] and former Dutch Prime Minister Ruud Lubbers's statement "that the Dutch are not aiming to maximize gross national product per capita [but] are seeking to attain a high quality of life, a just, participatory and sustainable society [in which] the number of working hours per citizen are rather limited [and] there is more room for all those important aspects of our lives that are not part of our jobs, for which we are not paid and for which there is never enough time."[note]Quoted in Anders Hayden, "Europe's Work-Time Alternatives" in John de Graaf, ed., Take Back Your Time: Fighting Overwork and Time Poverty in America, 2003, 202.[/note] If it is true that most Americans want to "live at the level of the average doctor or big-league baseball player," the reasons are certainly complex, but they definitely include the fact that our entire culture is permeated by the notion that acquisition of material goods is the summit bonus of man's life. This idea is reinforced not just by advertising itself, but by most of the media which concentrates on new gadgets, fancy clothes, expensive vacations and the like. It would seem that Samuelson has simply taken a characteristic of his own culture and assumed it as a constant of human nature.But let us consider another criticism of using scarcity as the starting point of economics. God has given mankind both the need for external goods and the capacity to produce or acquire them. Except in circumstances of drought or other natural disaster, one man has the ability to produce food or other goods which more than satisfy his own needs. If that were not the case, then no one in any civilization would ever have been able to devote his time to works of religion, or learning, or war, or government. But farmers and craftsmen were usually able to provide for themselves with something left over for others. What can we learn from this? We might learn that a possible starting point for economic analysis is the fact that God has given to the human race an ability to provide for its material needs and even something beyond our most basic needs so that we have been able to create high civilizations, works of art, and so on. Instead of scarcity, could we not regard mankind's God-given economic sufficiency as the most basic economic fact? And if we do, then what implications might we draw from that?If we realize that the average man has the capacity to produce more than the bare necessities of his life, the primary economic questions then concern the relationship between the work of primary production and the final consumption of the product, questions such as who owns the means of production, how are those who produce compensated and who decides on the amount of compensation, what goods are produced and how are they allocated to the ultimate consumers. I have written on most of these questions many times, and here I want to take up only one point suggested by our analysis. This is the question of unemployment.If we look at the human race as a whole, or even one particular nation, according to the way of looking at economics suggested here, we see not an unlimited desire for goods and services, but a limited number of genuine human needs, even if it is not possible or desirable to specify these needs exactly. In other words, there is a certain amount of work that must be done to supply the human race with what it needs, and I do not mean simply to survive, but to live in a reasonable human manner, the frugal comfort that Leo XIII spoke of. Beyond that certain amount of work, whatever is produced is superfluous, unnecessary, strictly speaking a waste of time and resources. If all human needs could be supplied by every worker working 8 hours a day, five days a week, then it would be irrational for anyone to work more, except for work that is more in the nature of a hobby than a job. And likewise if we could supply our needs by working 6 hours, four days a week. The point is that if we look upon the economic process as God's provision for supplying mankind with what we require to meet our external needs, then there is a limit on how much work needs to be done, even if this limit can never be specified exactly. Now what does this have to do with unemployment?Unemployment means a mismatch between the number of workers and the number of jobs. But if we look at the economy in the way I suggest here, and think not about the number of jobs but rather about the amount of work that we need, there can never really be a mismatch between the amount of work to be done and the number of workers. Of course certain individuals may be unemployable, because of mental or physical disability, or even because of bad acquired habits. But aside from these comparatively rare instances, God has arranged things so that the amount of work to be done always corresponds more or less with the number of persons available for that work. If our human arrangements, our economic systems, our laws, our tax policies, obscure that God-given harmony between work and workers, we ought to change these human constructs so that they reflect better and more closely the order that God clearly intended. Of course sin, both original and actual, makes this difficult, but surely we can approach it better than we do now.Note, moreover, that the more closely we adhere to this natural relationship between work and worker, the more we can avoid the constant expansions and contractions of capitalist business cycles. Such cycles exist because of the impetus, implicit in capitalism, toward overexpansion of corporations and firms, regardless of the economic needs of society, and they are complicated by the activities of financiers, legal and illegal, who prey upon both the public and the rest of the business establishment and manipulate legal and economic processes to their own advantage.Distributism, on the other hand, is the best economic system by which to achieve this coordination between work and workers which I have been describing. Why is this? Because Distributism simplifies as much as possible that relationship. By encouraging micro-enterprises, operations in which the owner is the sole or chief worker, this relationship between the work to be done and the workers available can be seen more clearly than when this relationship is complicated by many layers of firms whose owners are not involved in the actual work and whose workers are hired and fired according to the expansions and contractions of business cycles. Capitalist firms do not hire workers according to any reasonable estimate of the true economic needs of a society, but rather according to their estimate of whether they can sell their own products, regardless of society’s needs. It is no wonder that under capitalism unemployment is a perennial problem, since there is little or no attempt to match our economic activity to reasonable human need, and thus to the available number of workers.Of course I do not claim there would be perfection under a Distributist economy. Perfection in human affairs has not been possible since the Fall. But I do claim that we humans have unnecessarily complicated much that God has given to us. We have made life on earth much more difficult than it needed to be, even taking into account the Fall and original sin. Distributism is one way of undoing some of that complexity under which evil and oppression can flourish. As Pius XI noted,
At one period there existed a social order which, though by no means perfect in every respect, corresponded nevertheless in a certain measure to right reason according to the needs and conditions of the times."[note]Pius XI, Quadragesimo Anno, no. 97.[/note]
A Distributist economy is the best means of regaining that vanished social order that Pope Pius spoke of and the easiest means of allowing the God-given and natural connection between work and worker to realize itself.
