Thomas E. Woods, Jr. has posted a reply:
…to a paper written by Thomas Storck:
http://www.catholicsocialscientists.org/CSSR/Current/2009/Storck%20-%20Symposium%202.pdf
Mr. Woods’ contention is summarized in the following passage:
“Now if a bishops’ conference proposes an intervention whose promised results cannot occur because it takes no heed of these restraints, we have precisely the problem I identified in my book The Church and the Market: A Catholic Defense of the Free Economy (2005) and that Storck either ignores or thinks cannot arise: a faulty grasp of economic theory – which, to repeat, Storck admits lies beyond the Church’s competence – leads in turn to ill-considered economic proposals that will have the opposite of their intended effect. It is obviously within the realm of possibility that such a thing could occur, and in my own work I have suggested that it in fact has occurred: the advice of the American bishops on the economy has been distinctly unhelpful.” (bold and underline added)
“It is often claimed that there is a conflict between the ethical mandates of Catholic social teaching and the findings of economic science. However, the kind of economic analysis such critics adhere to is either the mainstream neoclassical (including the Chicago School) or the Austrian School, whose modes of economic analysis differ from that
employed by the popes. Using examples from encyclicals, this article shows that the Supreme Pontiffs gave a more prominent place in their
economic thinking to economic power and to institutions such as legal or cultural norms than to market forces. Instances are then given in which economic power is shown to have affected economic outcomes, and alternative schools are proposed as offering a type of economic analysis closer to that used by the popes.” (bold and underline added)
Mr. Woods invokes praxeology as supporting his case.
This post points out a problem with his doing so in the context of a relative judgment of value between ethical norms of justice and incontestable economic laws.
Mr. Woods’ assertion is essentially that the Church makes policy recommendations that contradict the established laws of economics, and that if such recommendations are carried out, they will have consequences that the Church itself would consider undesirable.
Mr. Storck’s reply is that in arriving at its policy recommendations, the Church relies more heavily on its own ethical norms of justice. Storck argues essentially that the Church may judge the enforcement of ethical norms of justice as outweighing the asserted economic consequences of a particular policy of the state. Where ethical norms are judged extremely important, the Church may recommend a policy to remedy it, even if the economic consequence of that policy are demonstrably negative from the Church’s point of view.
I will argue that to be consistent, Mr. Woods must accept Storck’s argument as persuassive, if he agrees with other arguments of a similar nature that have been advanced by scholars he supports.
I will refer to the case of fractional reserve banking, which is a well-known and well-discussed topic among all knowledgeable Austrian scholars. I do not take a position on fractional reserve banking here, but only use it as an illustrative example.
In his essay of 1992 “The Present State of Austrian Economics,” (pages 36 & 39) professor Rothbard rejected the practice of fractional reserve banking on ethical grounds. His argument is that since, in his view, fractional reserve banking is a form of fraud (counterfeiting, embezzlement, etc.), that the practice of fractional reserve banking should be prohibited by the state on the moral/ethical grounds.
Mises, by contrast, argued against a legal prohibition of fractional reserve banking (against government intervention) on the grounds that such a government intervention would produce unintended consequences, viz., further government inverventions—something that from professor Rothbard’s point of view would be considered undesirable:
“…one could suggest that all banks be forced by law to keep against the total amount of money-substitutes (banknotes plus demand deposits) a 100 percent reserve of money…If banks are preserved as privileged establishments subject to special legislative provisions, the tool remains that governments can use for fiscal purposes. Then every restriction imposed upon the issuance of fiduciary media depends upon the government’s and the parliament’s good intentions. They may limit the issuance for periods which are called normal. The restriction will be withdrawn whenever a government deems that an emergency justifies resorting to extraordinary measures. If an administration and the party backing it want to increase expenditure without jeopardizing their popularity through the imposition of higher taxes, they will always be ready to call their impasse an emergency. Recourse to the printing press and to the obsequiousness of bank managers willing to oblige the authorities regulating their conduct of affairs is the foremost means of governments eager to spend money for purposes for which the taxpayers are not ready to pay higher taxes.” (Human Action, 3rd rev. ed., p.443)
Thus, Mises advanced arguments similar to the arguments Woods advances in his discussion with Storck. Woods claims that the policies the Church advocates have unintended consequences which the Church itself considers undesirable. Mises claimed that the policy advocated by Rothbard would have unintended consequences that Rothbard himself considers undesirable—further government intervention into the economy.
But neither the Church nor Rothbard must be swayed by such “utilitarian” arguments, because they judge the enforcement of a set of ethical norms as outweighing the cause and effect consequences being asserted.
Woods makes the following insights:
“those who posture as defenders of Catholic social teaching by and large do not concede that the proposals they implicitly or explicitly advance could have anything but favorable consequences for all. No trade-offs (between higher wages and unemployment, for example) are acknowledged. Naturally, no room for objections can exist when the very possibility of objection is foreclosed by the way the argument is framed:”
“The only answer that appears possible is this: the Church insists that thus-and-so must be done because justice demands it, even though it will make people, particularly those it was designed to help, materially worse off. However, no ecclesiastical document I have ever seen has taken this position.”
This is an excellent point by Woods; a general observation to the effect that arguments advancing an ethical norm as against an economic effect, tend not to acknowledge the economic effect in the same argument in which the ethical norm is advanced.
As a rule, the general correctness of the economic cause and effect analysis might be agreed to in a separate, unrelated discussion, argument, or presentation.
The economic effect resulting from enforcing an ethical norm by means of state policy constitutes an inconvenient fact when presented in the same argument in which the policy is argued for. As such, acknowledgment of the economic consequence is conveniently ignored in the argument for the policy recommendation, and as a rule, only acknowledged in a separate, unrelated discussion.
In the arguments in which legal prohibitions on fractional reserve banking are advanced, as a rule, the idea that one government intervention causes distortions that lead to further government interventions, is not acknowledged in the same argument in which the legal prohibitions are argued for. Though separately, and in an unrelated discussion or presentation, this principle is readily acknowledged.
Mr. Woods expresses understandable frustration that such is the case. But there is no legal requirement that any scholar acknowledge the negative consequences of the course of action he argues for, in the same article or paper in which he argues for that course of action. We are all on our honor in this regard.
The problem Mr. Woods faces is that when ethical phenomena are conceived as to belonging to an altogether separate realm from economic phenomena, there is no commensurate criterion for rationally assessing a judgment of value in which an ethical norm is claimed to outweigh the economic effects of enforcing that norm.
Woods faces the same problem vis-a-vis the ethical norm asserted by the Church, as Mises faced vis-a-vis the ethical norm asserted by Rothbard. How to answer the argument that one person’s ethical norm outweighs a claim that enforcing it has economic consequences that person considers undesirable?
One approach would be to analyze the policy enforcement acts themselves, as opposed to their economic consequences, to see whether there are any consequences of the actual acts themselves. In other words, since policy recommendations can only be effected by a series of interpersonal actions of a specific and definable nature, perhaps there are consequences to these interpersonal interactions that do not arise when such interpersonal actions are not taken.
In short, one approach would be to undertake a praxeological analysis, not of the economic consequences of various actions, but specifically of the interpersonal or “ethical” aspect of various actions. A praxeological analysis of policy enactments that looks at the types of interpersonal interactions necessary to carry out these enactments (and their consequences), rather than an analysis of the market-related consequences of such enactments. Simply stated, a praxeological analysis of interpersonal actions.
If such a science could be constructed, then in additional to the argument from economic consequences, Mr. Woods could advance yet another argument: the interpersonal interactions necessary to carry out policy X themselves entail Y consequences which the Church also considers undesirable. That is, the whole apparatus of compulsion utilized to enact such policies, and/or the actions necessary to sustain it, lead to consequences Y which are considered undesirable by those wanting to utilize and sustain this apparatus.
Such a praxeological science of ethical phenomena does not exist, or at least, is not acknowledged to exist. But this fact is not something entirely outside the realm of Mr. Wood’s influence. Because Mr. Wood’s colleagues have themselves determined that praxeology, the science he invokes in his argument to the Church, is an inappropriate science for addressing the subject matter of ethics (which is precisely the realm the Church invokes as relevant to their policy decisions). Mr. Wood’s colleagues, following professor Rothbard, are generally of the mind that “This procedure [formal praxeological analysis of various human actions] is perfectly proper for the formal science of praxeology, or economic theory, but not necessarily elsewhere.” (The Ethics of Liberty, p.12)
Thus, it is not entirely a coincidence or unrelated matter that Mr. Woods is not able to articulate a decisive argument when his debate partner asserts that ethical norms trump economic consequences. Mr. Woods is unable to advance a praxeological case that ethical norms themselves entail consequences that those advancing them may consider undesirable.
Mr. Woods cites Mises on several occasions. Of course it is a well-known fact that Mises conceived praxeology as a general science of human action, and not just a science of the economic consequences of various actions. Professor Rothard rejected that view, and so at least in the United States, Austrian scholarship was discouraged from the attempt to apply Mises’s theoretical system to other types of human actions such as interpersonal or “ethical” actions.
Instead, the ethical realm of human action has been conceived as one that can only be approached from the aspect of good and bad, fair and unfair, just and unjust. As Mises writes:
“Bewildered, people had to face a new view of society. They learned with stupefaction that there is another aspect from which human action might be viewed than that of good and bad, of fair and unfair, of just and unjust. In the course of social events there prevails a regularity of phenomena to which man must adjust his actions if he wishes to succeed. It is futile to approach social facts with the attitude of a censor who approves or disapproves from the point of view of quite arbitrary standards and subjective judgments of value. One must study the laws of human action and social cooperation as the physicist studies the laws of nature. Human action and social cooperation seen as the object of a science of given relations, no longer a normative discipline of things that ought to be—this was a revolution of tremendous consequences for knowledge and philosophy as well as for social action.” (HA, 3rd rev. ed. p.2)
The answer to the argument from ethical norms is, as Mises writes, a science of given relations. Interpersonal actions are social actions and fall within the purview of formal praxeological analysis. In referring to praxeology in his discussion with the Church, Mr. Woods refers to an existing body of scientific knowledge that can partially address the argument advanced by the Church. But not until praxeology is developed as a more comprehensive science will Mr. Woods be able to invoke praxeology in answer to the ethical arguments contradicting the teachings of economics.