A few words on praxeology

In his wonderful book, The Church and the Market, Thomas Woods--a fellow Catholic libertarian--makes a very persuasive case that the Church accept free market capitalism as a system fully in accord with Catholic teaching. Woods is a member of the Austrian school of economics, which believes in fundamental and universal laws which undergird the science of economics. Unlike some of the doctrines of the Church--that of the Trinity, or of the Immaculate Conception--which can be known only through Revelation, the laws of economics are comprehensible to man through the use of his reason alone. They can be derived through the study of praxeology: the science of human action. As Murray Rothbard put it: "Praxeology and economics deal with any given ends and with the formal implications of the fact that men have ends and employ means to attain them." (Man, Economy, and State, p. 73)

The nature of economics, then, is such that it is not concerned with ethics. This point requires clarification. After all, certain economic transactions, even in a free market--that is, without the use of or the threat of violence from either party--produce ends which most ethical systems would condemn. It can hardly be ethical, for instance, to hand a child a loaded gun. Whether or not the has exchanged one of his toys with you in the process is irrelevant. We should realize, however, that we condemn this act not as economists but as ethicists. Strictly speaking, to paraphrase Fred Reed, an ethical economist is a contradiction in terms. Praxeology is not the right tool from which to extract morals. This isn't a slight against it; one cannot derive morals from physics either.

With this in mind, Woods argues that just as economists are out of their area of expertise when discussing ethics--although, since free, they may speak on whatever subjects they so choose--the popes, too, are out of their jurisdiction, so to speak, when recommending specific economic policies. The popes may, and should, implore Catholics to give charitably to the poor. But if they prescribe a specific method for achieving a desired end--in this case, the amelioration of poverty--an economist may criticize based on the economic viability of the method prescribed. As Woods puts it: "Any reasonable application of moral law in concrete circumstances must take into account all the facts of those circumstances. Economic law is one of those facts, whether its opponents like it or not." (The Church and the Market, p.30)

To demonstrate by way of example, recent popes have expressed a desire that all workers be paid a "living wage". Now, setting aside the problem with determining the amount which constitutes a living wage, let us all agree that such an end is desirable. However, if the Pope insists that it would be preferable for governments to enforce this living wage, economists may rightfully explain to him the consequences of his action. In fact, they should explain these consequences, since the end result of his policy will be the opposite of that which he intended to achieve. For economics teaches us, plainly, that an increase in wages which cannot be supported by the market will create more unemployment than would have otherwise existed; laid off workers will be the price the market extracts for wages the more fortunate workers receive. If this point seems suspicious, bringing figures into it--chosen arbitrarily of course--may help clarify. If the U.S. Government mandates a minimum wage of $100 per hour, the effect would be massive unemployment; the vast majority of workers are not productive enough to justify such a wage.

I'll have some more thoughts to offer on this topic later. For now, the essential point is that a desire to achieve some end does not give one moral high ground if the obvious economic effects of the attempt to achieve this end can never produce it. The converse holds true as well. An opposition to, say, minimum wage laws, does not mean one is insensitive to the plight of the poor. On the contrary, if the poor will be hurt by such a law, those who would support the poor cannot support it. If me may modify Samuel Johnson's famous maxim, it seems hell is paved with the good intentions of those ignorant of economic law.