Pope Benedict XVI calls for "the redistribution of wealth"--a blow to Free Market Theology?

[BB2]

Another example of our Church over reaching!! As an American Catholic, I would support limiting on the RCC by way of Tax Deduction removals as punishment… Openly Pressuring Socio Economic opinions as subtle dogma on Sovereign Nations. I’m sure I’ll get flack for this…well shocker…I’m used to it…I don’t care!! I CARE for our Church but at times, Rome needs the burned fingers to learn. This is such a case. Peace out!!

I agree that the Catholic Church sometimes “oversteps” its boundaries by speaking on issues of law, media, economics, and so on and so forth. But what the Pope has said recently is perfectly in line with the views held by the overwhelming majority of economists.

 

[exnihilo]

By “serious economist”, I mean an economist with good academic credentials whose views are also widely supported by the rest of academia and empirical studies. To purport that economists are being “controlled by government money” is just a conspiracy theory. In the grand scheme of things, the statistics don’t lie; economics is also a science. Virtually all economists agree that free-markets do not work and a government is required to ensure that market failures are adequately addressed. And Catholic social teaching, if we want to go down that route, agrees. Some Catholics are quick to point out that the Catechism derides Communism yet deliberately overlook the simultaneous fact that the Catechism also derides laissez-faire economic policies:

So a serious economist is one whose views agree with a majority or a very large (as defined by you) group? How would you know who fulfills this requirement? Does that mean whoever writes for the New York Time is a serious economist and those who dont aren’t?

Regarding academia it tends to self-reinforce itself like most systems. The current thought is taught to the next generation of teachers. You get good grades in school by repeating back what your professor tells you.

It is not a conspiracy theory to say that people are motivated by their patron. That is basic human nature. Would you take as true the scientific research of tobacco company scientists? I doubt it. An economist who argues against the Fed is unlikely to later be hired by that organziation.

“The Church has rejected the totalitarian and atheistic ideologies associated in modem times with “communism” or “socialism.” She has likewise refused to accept, in the practice of “capitalism,” individualism and the absolute primacy of the law of the marketplace over human labor” (CCC, Pt. III, 2425)

The Church has rejected certain doctrines. If I take the words at face value here it has merely refused to accept individualism and the primacy of the marketplace. The language here does not suggest the same treatment of these disparate ideas. I do not accept individualism or the primacy of the market myself as the primary goal of humanity. But I do believe, and think the evidence makes the case, that the best economic system is very limited government. Under that system I can amass wealth with which to practice charity. I as a Christian should not rely on the market to determine what I do.

It amounts to economic heresy to argue for a market with no government ensuring that the economy is for the people rather than the people for the economy. Even Adam Smith, Milton Friedman, Friedrich Hayek, and all the other “saints” of economics recognized the limits of what a free-market can do.

To be clear there are limits to what the market can do. It is not a panacea. What it can do is create the most wealth for the most people. Friedman believed the government should control money. That makes the rest of what he advocated in terms of limited government fairly pointless. Hayek wasn’t a von Mises or a Rothbard. But both of them put forth good arguments for very little government. And really what matters is the arguments not the men.

 

[davidjh]

Anyone who thinks Socialism is Christian and Capitalism evil, is all wrong. First of all, you can’t force someone to be charitable. If a government takes my money to give to a program, it is not my free will, and thus not charity. Second, who thinks they are going to give the money to something YOU believe in? Maybe it is their view of charity, like free condoms to all. Government should stay out of people’s way, and leave charity to an individual to decide. Capitalism in the U.S. has created more generous donors than all the rest of the socialist world combined. And the more money taken by the increasingly socialist government is less money I have to give to Church or charity. And we all know government wastes 90% of what they get.

 

[Abu]

BB2 #31
Virtually all economists agree that free-markets do not work and a government is required to ensure that market failures are adequately addressed.
And Catholic social teaching, if we want to go down that route, agrees. Some Catholics are quick to point out that the Catechism derides Communism yet deliberately overlook the simultaneous fact that the Catechism also derides laissez-faire economic policies:

Catholic social teaching condemns Communism, Socialism and the Welfare State.
No Catholic papal social teaching refers to “laissez-faire”, which is a term coined by a school of economics – the “Physiocrats”.

Not only has free enterprise raised the welfare of untold millions out of poverty, but is emphatically affirmed by Bl John Paul II:
Centesimus Annus, 42, 1991:
‘If by “capitalism” is meant an economic system which recognizes the fundamental and positive role of business, the market, private property and the resulting responsibility for the means of production, as well as free human creativity in the economic sector, then the answer is certainly in the affirmative, even though it would perhaps be more appropriate to speak of a “business economy”, “market economy” or simply “free economy”.’

While Bl John Paul II dislikes the Marxist term “capitalism”, the Holy Father prefers a “business economy”, “market economy” or simply “free economy”.

and Pope Benedict XVI:
“Society does not have to protect itself from the market, as if the development of the latter were ipso facto to entail the death of authentically human relations…Therefore it is not the instrument that must be called to account, but individuals, their moral conscience and their personal and social responsibility.” (Caritas in Veritate, Benedict XVI, 2009, #36).

 

[Abu]

Bartolome Casas #1, 18/12/11:
As I see it, proponents of Free Market Theology teach that Jesus Christ was born, lived, and died on the Cross in liberate people from Big Government, in order to make people free to earn as much money as possible by personal work, by the management of the work of others, and by passive investment of capital, with little or no taxation on those earnings, with no legal mandate on the wealthy to do anything for the poor.

False again.

Especially as free enterprise economic development started in the great Catholic monastic estates of the ninth century, and a solid basis of economic Catholic thought developed from the fourteenth century. In the fifteenth century the Late Scholastics who were Thomists (followers of St Thomas) “writing and teaching at the University of Salamanca in Spain, sought to explain the full range of human action and social; organization.” They “observed the existence of economic law, inexorable forces of cause and effect that operate very much as other natural laws. Over the course of several generations, they discovered and explained the laws of supply and demand, the cause of inflation, the operation of foreign exchange rates, and the subjective nature of economic value…” For these reasons Joseph Schumpeter applauded them as the first real economists. (Thomas E Woods Jr, The Church And The Market, Lexington Books, 2005, p 8).

Far from the fantasy that free enterprise is a “theology” the science operates under the rule of law within the system of democracy. That’s why we have laws to seek and punish those who steal, cheat, swindle, and worse crimes, and against monopolies. That’s why we have the Catholic Church to guide us – She who invented charity in the West. It’s time to face reality.

Dr Alejandro Chafuen clarifies that economics “is the study of the formal implications that can be deduced from the fact that human beings act purposively…economic science is value-free. It analyses cause and effect relationships that, if true, are scientific….(but) only human acts can be judged morally.
“Every scientific law that is a true statement is a natural law, something that human beings can understand but cannot alter. It is always useful for human beings to understand cause-and-effect relationships.” (Christians For Freedom, Dr Alejandro Chafuen, Ignatius 1986, p 33-38).

Fr James V Schall, S.J., in *Does Catholicism Still Exist?, *Alba House 1994, p 184-185, accurately assesses the need for free enterprise:
“Since the Catholic Church wants poverty confronted, since She wants this confrontation to be done justly and with the interest and cooperation of the workers and the poor, She has had to acknowledge, as did the socialist systems themselves, that there are certain ways that must be employed if mankind is to meet its economic problems. These ways can be known and imitated, but they must include a juridical system, profit, enterprise, knowledge, exchange, a market, voluntary organisations, a relatively independent economy, private property, and respect for work and excellence.”

 

[BB2]

Catholic social teaching condemns Communism, Socialism and the Welfare State.
No Catholic papal social teaching refers to “laissez-faire”, which is a term coined by a school of economics – the “Physiocrats”.

Not only has free enterprise raised the welfare of untold millions out of poverty, but is emphatically affirmed by Bl John Paul II:

I never denied that free enterprise raised the welfare of many out of poverty. Who are you speaking to exactly?

 

[BB2]

Especially as free enterprise economic development started in the great Catholic monastic estates of the ninth century, and a solid basis of economic Catholic thought developed from the fourteenth century. In the fifteenth century the Late Scholastics who were Thomists (followers of St Thomas) “writing and teaching at the University of Salamanca in Spain, sought to explain the full range of human action and social; organization.” They “observed the existence of economic law, inexorable forces of cause and effect that operate very much as other natural laws. Over the course of several generations, they discovered and explained the laws of supply and demand, the cause of inflation, the operation of foreign exchange rates, and the subjective nature of economic value…” For these reasons Joseph Schumpeter applauded them as the first real economists. (Thomas E Woods Jr, The Church And The Market, Lexington Books, 2005, p 8).

Simply quoting long extracts doesn’t make you appear intelligent. Thomas E. Woods is not an orthodox economist. He is part of the heterodox school of economics called the Austrian School. Resorting to him is like me resorting to schismatic female priests and concluding that the Catholic Church accepts female priests.

The majority of the Austrian School’s theories have been debunked and no economist worthy of his/her title gives an ounce of consideration to what they have to say. Many Austrians are also Catholic, so it is no surprise that they will try and attribute Capitalism as being Catholic in origin, even though this is historical revisionism in its finest form:

Woods is a convert to the Roman Catholic Church and author of The Church and the Market: A Catholic Defense of the Free Economy.

Source:
lewrockwell.com/orig6/flood1.html
en.wikipedia.org/wiki/Thomas_Woods

The Catholic Church has for a long time rejected usury, i.e. charging interest on loans, which is ironic in light of the the Austrian School’s recommendation of higher rates of interest to promote economic stability. Capitalism actually has its origins in deism (Adam Smith, for instance, was a deist). David Hume was also a deist, but many speculate he was a closet atheist. Capitalism then intermingled with Protestantism eventually. Calvin was one of the first to show the ridiculousness behind usury laws. It took several hundred years before the Catholic Church started “promoting” a free-market enterprise. St. Thomas Aquinas was a supporter of feudalism, as he believed the establishment of hierarchy only came from God himself and was similar to the way angels in Heaven have different levels of authority.

If you want a serious economist, try John Maynard Keynes, Milton Friedman, Joseph Stiglitz, Paul Krugman, Amartya Sen, Greg Mankiw, Robert Lucas, John Nash, etc. Please don’t kid us with that naive stuff and try and pass it off as being something economists take seriously.

 

[Abu]

BB2 #37
The Catholic Church has for a long time rejected usury, i.e. charging interest on loans

False, like the failure to acknowledge the reality of the Catholic origin of free enterprise.

Scripture, the Fathers of the Church, the decrees of councils and popes condemn the taking of interest on loans to the poor and the greed of usurers, but say nothing about the charging of interest in general.

With free enterprise as developed by the Late Scholastics, the Church defined what is meant by usury. Session X of the Fifth Lateran Council (1515) gave its exact meaning: “For that is the real meaning of usury: when, from its use, a thing which produces nothing is applied to the acquiring of gain and profit without any work, any expense or any risk.”

Consequently, as loaning money did involve loss of profit to the lender and further risk of loss from delay in returning the money loaned, this did justify interest that is just and justifiable.

While the Sacred Scriptures condemn greed and wrong use of wealth, commerce or merchants are not condemned. St Augustine stated that price was not only of the seller’s costs but of the buyer’s desire for the item sold. The first examples of free enterprise appeared in the great Catholic monasteries, about the ninth century. (John Gilchrist, The Church and Economic Activity in the Middle Ages, St Martin’s Press1969, I; cf. op. cit (Stark) p xii, 55-58).

The fact is that Catholic philosophy and theology, based on reason and faith, enabled the birth of free enterprise. From the great monastic estates in the ninth century, immense increases in agricultural productivity grew from “such significant innovations as the switch to horses, the heavy moldboard plow, and the three-field system” away from subsistence agriculture to specialised crops and products, sold at a profit to initiate a cash economy. “As their incomes continued to mount, this led many monasteries to become banks, lending to the nobility.” The Victory of Reason, Rodney Stark, Random House, 2005, p 58].

 

[exnihilo]

Simply quoting long extracts doesn’t make you appear intelligent. Thomas E. Woods is not an orthodox economist. He is part of the heterodox school of economics called the Austrian School. Resorting to him is like me resorting to schismatic female priests and concluding that the Catholic Church accepts female priests.

I’m sorry but that is a terrible analogy and a terrible way of looking at knowledge. You seem to think that agreeing with everyone else is what makes something true. If these orthodox economists are so smart how come they did not see the various bubbles that led to this depression and their solutions have all failed?

The majority of the Austrian School’s theories have been debunked and no economist worthy of his/her title gives an ounce of consideration to what they have to say.

Debunked? So you define debunked as predicting the housing bubble, the collapse, and the lack of recovery promoted by the ‘orthodox’ economists?

If you want a serious economist, try John Maynard Keynes, Milton Friedman, Joseph Stiglitz, Paul Krugman, Amartya Sen, Greg Mankiw, Robert Lucas, John Nash, etc. Please don’t kid us with that naive stuff and try and pass it off as being something economists take seriously.

Keynes theories are terrible. It boils down to if the government just spends money then you’ll have prosperity. Friedman was in many ways a free market advocate but thought the root of the economy, the money system, should be controlled. If you like constant inflation to monetize government spending which crowds out private investment then he’s great. Again he ultimately is a guy advocating government spending us into prosperity. Krugman is only known because he writes in the New York Times and is consistently wrong in everything he predicts and says. He actually believes destroying stuff in order to rebuild is a way to achieve prosperity.

 

[Abu]

BB2 #37
Thomas E. Woods is not an orthodox economist. He is part of the heterodox school of economics called the Austrian School. Resorting to him is like me resorting to schismatic female priests and concluding that the Catholic Church accepts female priests.

As exnihilo (#39) has seen, the analogy is actually gross for

1. There is no such thing as “an orthodox economist” – there are schools of economists of which the Austrian school is one of several, and while the Late Scholastics discovered and explained the laws of supply and demand, the cause of inflation, the operation of foreign exchange rates, and the subjective nature of economic value, for these reasons, Joseph Schumpeter applauded them as the first real economists. How the principles are applied enables the results of the application to be assessed as good, bad or indifferent.
2. The science of Economics, and the schools therein, cannot be compared to the infallibility of the Catholic Church when teaching doctrine on faith or morals which includes the perpetual maleness of the priesthood.

For interested readers, the unfortunate reference to “serious” economists is naïve, as though that makes their theories right in practice – many are seriously wrong. One of those, often in error, has been highlighted again recently – John Maynard Keynes – in *The Madness of Lord Keynes *by Samuel Gregg on 12.19.11.

To be fair to Keynes, he expressed doubts at the end of his life about what he had helped unleash. In 1946, Keynes told the British economist Sir Henry Clay, “I find myself more and more relying for a solution of our problems on the invisible hand which I tried to eject from economic thinking twenty years ago.”
[John Maynard Keynes – Career Timeline]](John Maynard Keynes – Career Timeline])

Hayek records Keynes as criticizing that same year the monetary policies then being developed by some of Keynes’s most prominent disciples. “They are just fools,” Keynes reportedly insisted. “You know, my ideas were frightfully important in the 1930s.… But you can trust me, Hayek, my ideas have become dated.” Six weeks later, Keynes was dead.
spectator.org/archives/2011/12/19/the-madness-of-lord-keynes

 

[BB2]

I’m sorry but that is a terrible analogy and a terrible way of looking at knowledge. You seem to think that agreeing with everyone else is what makes something true.

As I’ve mentioned previously, in the natural sciences, if you’re findings are backed by empirical facts that can be repeated by other scientists, then your finding is correct. A scientist can’t just come up and spout his “theory” that the atom doesn’t exist. Science doesn’t work that way. It is not a free-for-all where everyone’s opinions has equal weight.

It’s hypocritical to overlook the importance of orthodoxy, yet - I presume - prefer a doctor who is medically accredited by a good university. You need to ask yourself why you don’t resort to men selling “alternative medicine”, if not for the fact that their “medicine” has not gone through rigorous scientific tests.

It is the same with economics. If you’re finding is not backed by statistics, or empirical data, then it is cast aside and it is “anathema”. Austrian School economics is based on a priori logic - the ridiculous belief that we can deduce economic laws from thin air; the ridiculous assumption that human beings are “born” knowing economics.

The irony is that at one point in history, Austrian was “mainstream”. The socialist calculation debate of von Mises, marginalism from Menger, subjective theory of value, et al., were all absorbed into the mainstream. When Austrian economists started to deny that involuntary employment exists, that negative externalities do not occur and that a gold standard does not allow for monetary flexibility, they lost their way. To reiterate, no one cares about what they have to say anymore. Their opinions are not important. Some economists don’t even know who they are! If you want to go to a man on the street selling snake oil, that is certainly your right . I prefer the doctors accredited by a good university.

Keynes theories are terrible. It boils down to if the government just spends money then you’ll have prosperity.

Keynes’ prescriptions were marginally incorrect. Not his theories. And this is a strawman. Keynes never said that if government just spends money that you’ll have prosperity. Keynes said that when private-sector demand falls, it is up to the government to “plug the gap”. In essence, public policy is predicated on this simple fact - when private-sector demand falls, the government should stimulate the economy by fiscal policy or monetary policy.

Other economists built upon the framework that Keynes left after he passed away. No one is 100% correct, but it is universally agreed that Keynes revolutionized economics. Isaac Newton was wrong on gravity by modern standards, but that doesn’t mean he wasn’t an important figure in the realm of scientific development. It is not so much what Keynes said that was important, but more so the legacy he left in the realm of the history of economic thought. Rephrasing the famous quote about Plato, “all modern economic policy is a footnote to John Maynard Keynes”.

 

[BB2]

If these orthodox economists are so smart how come they did not see the various bubbles that led to this depression and their solutions have all failed?

Oh, I forgot to address this. I’m going to take a wild guess and assume you watch Peter Schiff’s videos. Peter Schiff is a perma-bear. He always predicts that an economic downturn is going to happen. Even a broken clock is right twice a day, so to think Peter Schiff is some kind of economic “prophet” who gets his predictions right whilst the experts get it wrong is laughable.

Economics is not astrology. Economists do not exist for the purpose of predicting the future. That is not what economics is about. Now. . .some economists in the realm of public policy made a false prediction. That doesn’t take away their findings or importance. Irving Fisher once remarked, just before the Great Depression, that “stock prices have reached what looks like a permanently high plateau”. He was nonetheless a great economist. He just made a bad call. Human beings are fallible.

But if correct predictions are what you are after, Ben Bernanke predicted with complete accuracy that a financial crisis was imminent. We know this from the fact that at a closed press briefing, he told this to Representative Spencer Bachus. Bachus then profited enormously by short-selling the entire market. Few months later, he made somewhere in the region of $15,000 to $50,000. That is why, if you listen to the news, Congress is thinking about implementing the “STOCK Act”. But let’s not get sidetracked. Ben Bernanke predicted the crisis with complete accuracy. He just can’t say it to the entire world because it would be a self-fulfilling prophecy, and would bring systemic risks to the U.S. economy. That doesn’t stop Ron Paul and his followers from bashing him at every hearing.

 

[BB2]

As exnihilo (#39) has seen, the analogy is actually gross for

1. There is no such thing as “an orthodox economist” – there are schools of economists of which the Austrian school is one of several, and while the Late Scholastics discovered and explained the laws of supply and demand, the cause of inflation, the operation of foreign exchange rates, and the subjective nature of economic value, for these reasons, Joseph Schumpeter applauded them as the first real economists. How the principles are applied enables the results of the application to be assessed as good, bad or indifferent.

First things first, be honest with yourself. Do you honestly follow Austrian economics because you believe their findings, or do you follow Austrian economics because it just so happens that Catholics have a significant presence there? You need to ask yourself that question instead of repeating the same mantra over and over again. It’s boring, but at the same time quite humorous.

Inflation was not developed by the Late Scholastics. If we want to go down that route, then we might as well call all economics as pagan in origin, due to Aristotle’s allusions to what would eventually become economics. Inflation is actually a relatively new concept in the history of economic thought. Karl Marx, despite studying Capitalism all his life, makes no reference to inflation. David Hume and David Ricardo only allude to inflation, at best. Most of contemporary understanding of inflation comes from John Maynard Keynes and those who succeeded him. You can view the attitude of Austrian economics from this excerpt:

The Austrian School of economics is a heterodox school of economic thought. . . .] Critics argue that Austrian economics generally lacks scientific rigor, rejects the scientific method, and rejects the use of empirical data.[9][11][87] Thomas Mayer has argued that Austrian economists have advocated a rejection of scientific methods which involve directly using empirical data in the development of (falsifiable) theories; application of empirical data is fundamental to the scientific method.

en.wikipedia.org/wiki/Austrian_economics#Criticisms

And yes, there is orthodox economics and heterodox economics. Marxist economics, for example, is heterodox. Marxist economics - especially on the issue of the labour-theory of value - is not supported by empirical studies or even general economic philosophy. I reiterate again - you resorting to heterodox economists is like me going to a female priest and concluding what she has to say is orthodox Catholicism.

The reason we have “economic schools” is not so much on theory as it is on policy. A Keynesian is likely to promote fiscal policy; a monetarist is likely to promote monetary policy; a neoclassical is likely to promote concentration on exogenous shocks.

 

[BB2]

False, like the failure to acknowledge the reality of the Catholic origin of free enterprise.

Scripture, the Fathers of the Church, the decrees of councils and popes condemn the taking of interest on loans to the poor and the greed of usurers, but say nothing about the charging of interest in general.

Yes, they do. .

Any amount of interest was deemed as usury. St. Anselm of Canterbury regarded charging interest as theft. St. Thomas Aquinas believed usury was wrong because it was “double charging”, and that time was not a commodity that it could be charged. To believe that the Catholic Church actually looked upon interest favourably is historical revisionism. I’m not even sure why I’m responding to such a claim, because it is frankly ridiculous and lies along the same veracity as the claim that the world is flat.

The Fifth Lateran Council defined usury as:

"when, from its use, a thing which produces nothing is applied to the acquiring of gain and profit without any work, any expense or any risk” (Session X)

By this account therefore, using a savings account that has interest is sinful. This statement applies to much of interest gained on savings, because of the fact that money left in a savings account is generally not used for anything - as economists note, full employment does not exist and savings =/= investment.

…] In the Catholic Church and in Protestant ones, the story was the same. Prohibitions of interest slowly but inexorably were cast aside under the pressure exerted by economic reality and changing theology, and the word usury itself, once applied to all interest, came to be associated only with interest levels that were clearly excessive and exploitative. (Under current Canadian law, only interest rates of 60 per cent and higher are considered usurious.) In the area of moneylending as in so many others, religion gradually made its peace with the modern world.

 

[exnihilo]

It is the same with economics. If you’re finding is not backed by statistics, or empirical data, then it is cast aside and it is “anathema”. Austrian School economics is based on a priori logic - the ridiculous belief that we can deduce economic laws from thin air; the ridiculous assumption that human beings are “born” knowing economics.

I think a more accurate way to explain Austrian economics is that it does not attempt to pass itself off as a natural science like other economic schools. It recognizes that human beings are complex creatures and thus any economy is going to be exceptionally complicated. It does not fret over creating models of economics based on this understanding.

I dont understand your claim that the Austrian school assumes human beings are born knowing economics? No one is born knowing Keynesian economics. It must be drilled into your head for many semesters at a university before you get it. What the Austrian school teaches at that people have basic economic motivations and knowledge of that.

To reiterate, no one cares about what they have to say anymore. Their opinions are not important. Some economists don’t even know who they are! If you want to go to a man on the street selling snake oil, that is certainly your right . I prefer the doctors accredited by a good university.

The Austrian school has become quite popular among non-economists. I would argue people care far more about this system than any other. To be sure in the universities it is ignored. But universities are a self reinforcing system and hold onto old ideas for far too long. If you want to work for the Fed you had better be a Keynesian and you had better get a degree from a university that teaches his economics. If your university wants to be well regarded you better have students working for the Fed.

Keynes’ prescriptions were marginally incorrect. Not his theories. And this is a strawman. Keynes never said that if government just spends money that you’ll have prosperity. Keynes said that when private-sector demand falls, it is up to the government to “plug the gap”. In essence, public policy is predicated on this simple fact - when private-sector demand falls, the government should stimulate the economy by fiscal policy or monetary policy.

I boiled down Keynes to its essence. A more detailed explanation is when there is a depression the government should borrow money from the private sector (and thus crowd out private investment) in order to spend or it should monetize increased spending by inflating the currency thus making everyone actually poorer.

Other economists built upon the framework that Keynes left after he passed away. No one is 100% correct, but it is universally agreed that Keynes revolutionized economics. Isaac Newton was wrong on gravity by modern standards, but that doesn’t mean he wasn’t an important figure in the realm of scientific development. It is not so much what Keynes said that was important, but more so the legacy he left in the realm of the history of economic thought. Rephrasing the famous quote about Plato, “all modern economic policy is a footnote to John Maynard Keynes”.

Keynes revolutionized government. The result of Keynes theory was government gone wild. We’ve gotten much bigger government. But it has not ended depressions. It has not ended unemployment. It has not ended bank collapses. It has not ended any bad economic outcome.

Economics is not astrology. Economists do not exist for the purpose of predicting the future. That is not what economics is about. Now. . .some economists in the realm of public policy made a false prediction. That doesn’t take away their findings or importance. Irving Fisher once remarked, just before the Great Depression, that “stock prices have reached what looks like a permanently high plateau”. He was nonetheless a great economist. He just made a bad call. Human beings are fallible.

If economics can not predict the future then what good are they? Going back to your likening of economics to medicine if your doctor cant in any way predict the outcome of your treatment what good is he? Of course the difference in economists and doctors is that at least the doctor might say his treatment has an 80% chance of working but a 20% chance of killing you. The orthodox economist never tells you the odds his treatment works because he has insufficient evidence to have any knowledge of that. Economics is more akin to voodoo. But at least the Austrian school is not passing itself of as guaranteed medical treatments.

 

[BB2]

I think a more accurate way to explain Austrian economics is that it does not attempt to pass itself off as a natural science like other economic schools. It recognizes that human beings are complex creatures and thus any economy is going to be exceptionally complicated. It does not fret over creating models of economics based on this understanding.

I dont understand your claim that the Austrian school assumes human beings are born knowing economics? No one is born knowing Keynesian economics. It must be drilled into your head for many semesters at a university before you get it. What the Austrian school teaches at that people have basic economic motivations and knowledge of that.

Mainstream economics does not consider itself a natural science, but a social science. It is nonetheless still a science, only with the added complexity of human volition and individuality. Sociology, a social science, also uses statistics. So does psychology. Economics is not different.

I have actually been an Austrian, so I know its pitfalls and it is why I left ultimately and have never looked back . Austrian economics suggests that human beings know economics “a priori”. In other words, Austrian economists believe that human beings are born with economic knowledge that can be deduced without reference to statistics. If you want to read more about this, type in Google, “Ludwig von Mises and praxeology”. It is a very weird belief, and perhaps one of the most embarrassing stains on the entire Austrian paradigm as a whole.

The Austrian school has become quite popular among non-economists. I would argue people care far more about this system than any other. To be sure in the universities it is ignored. But universities are a self reinforcing system and hold onto old ideas for far too long. If you want to work for the Fed you had better be a Keynesian and you had better get a degree from a university that teaches his economics. If your university wants to be well regarded you better have students working for the Fed.

The Austrian School is popular amongst non-economists because it is very simple. It does not use maths or economic jargon. Simply because something is simple does not make it correct. We live in a very complex economy today, and as such requires theories that take into account the complexity at play.

Austrian economics is inadequate at explaining the systemic risks that can be wrought by derivatives on an entire economy. Austrian economics is inadequate at using game theory to explain why menu costs incur aggregate demand externalities on competitors in a monopolistically competitive market. Austrian economics is inadequate at explaining the impact of exogenous shocks. The Average Joe does not care about “derivatives”, “aggregate demand externalities” or “exogenous shocks”. That’s why Austrian economics is so satisfying to the Average Joe - it reduces the complexity of the economy to a simple, “Blame the Fed”.

I boiled down Keynes to its essence. A more detailed explanation is when there is a depression the government should borrow money from the private sector (and thus crowd out private investment) in order to spend or it should monetize increased spending by inflating the currency thus making everyone actually poorer.

Borrowing from the private sector doesn’t crowd out investment if the private sector isn’t going to invest anyway. After all - that’s the whole point of why Keynes said the government should borrow . The government should borrow and subsequently invest because the private sector is not investing.

Keynes revolutionized government. The result of Keynes theory was government gone wild. We’ve gotten much bigger government. But it has not ended depressions. It has not ended unemployment. It has not ended bank collapses. It has not ended any bad economic outcome.

“Wild government” is a matter of politics and not economics. Keynes was not a politician. This is of course where fiscal conservatism comes in, but most fiscal conservatives are not even Austrian (they are generally supply-side economists). It is important to acknowledge that there are also “Conservative Keynesians”. Unlike Austrian economics where virtually everyone is an anarchist/“libertarian”, there is political disparity within the Keynesian paradigm.

We have never had a Depression since the Great Depression. This is a fact . In addition, Keynes never said that unemployment would be eliminated. He said it could be reduced. He pessimistically remarked that full employment could be achieved either by “accident or design”. It was something that would always be bound within a Capitalist system, which he said was an “outstanding fault of economic society”. Within economics today, there is contention if full employment can ever be achieved over periods of time. Monetarists believe in the “natural rate of unemployment”, whilst other economists such as Post-Keynesian Hyman Minsky believe it is possible to achieve full employment. As a sidenote, Hyman Minsky is also considered to be a heterodox economist. He is not mainstream.

 

[Yerusalyim]

My respect for Pope Benedict just keeps growing.

This is a challenging message for many - including many Catholics - but it is consistent with the Gospel.

No, the bible talks about people voluntarily supporting the poor, which I do. The bible does NOT call for the redistribution of wealth by force. Remember, some of that money is going to go to causes no Catholic can support.

 

[Betyourlife]

Placing central planning over individual initiative is against the very nature of our God given free will. Government is a beast that enslaves us through regulation and taxation. The anti-Christ will work his unspeakable crimes through a one world government which is socialisms logical end.

 

[Abu]

BB2 #42
Ben Bernanke predicted the crisis with complete accuracy

This is Bernanke’s record:
May 2007: as the housing collapse hit the economy – “We do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system.” [Bloomberg TV May 17, 2007].

By mid-March 2008, Bear Stearns was collapsing and the Fed chose to bail it out, by buying Bear Stearns and handing it to JP Morgan. In August 2008, Paulson and Bernanke claimed that apart from a possible bailout of Fannie and Freddie, the economic fundamentals were sound. [Associated Press, “Paulson Backs Bush Comment About Wall Street’s ‘Hangover,’ ” August 10, 2008.

Rather clueless.

**Millionaires in America, April 29, 2011 by Mark W. Hendrickson
“The fact, though, that last year’s increase of millionaires is attributable to stock-market gains is troublesome. Federal Reserve Chairman Ben Bernanke stated that today’s higher stock prices show that his QE2 policy of inflating the monetary base has been successful.
visionandvalues.org/2011/04/millionaires-in-america/

Inflation: Food, Fuel, and the Fed
May 9, 2011 | by Mark W. Hendrickson
“…the Federal Reserve’s QE2 policy of creating more money has been called into question. Asked if the Fed bore some responsibility for these vexing price increases, Fed Chairman Ben Bernanke essentially replied, “It’s not our fault.”
"The Fed has flooded the financial system with newly created money, and the inevitable result of a lot more money bidding for approximately the same supply of goods is markedly higher prices. Indeed, for Bernanke to deny partial responsibility for higher prices is more than disingenuous, since the Fed’s stated goal last September was for prices to rise more rapidly. Does the Fed now regret getting what it wished and aimed for?

“The solution to the problem of soaring prices of food and fuel lies in Washington. If Congress, the president, and the bureaucracies would restore free markets in food and fuel markets, prices would come down. If Bernanke and the Fed would quit expanding the supply of Federal Reserve Notes, upward pressure on prices would be diminished. It’s that simple, economically. Whether Washington’s frequent perverse, wealth-destroying policies can be reversed politically is another matter.”
visionandvalues.org/2011/05/inflation-food-fuel-and-the-fed/

Heads in the sand really don’t help.

 

[Abu]

BB2 #43:
Keynes said that when private-sector demand falls, it is up to the government to “plug the gap”. In essence, public policy is predicated on this simple fact - when private-sector demand falls, the government should stimulate the economy by fiscal policy or monetary policy.

That’s one of Keynes many errors. We’ve seen his own admission of gigantic errors (post #40).

Federal finagling as shown ad infinitum.
July 19, 2010: Of the world’s biggest economies, only the U.S., Britain and Italy are still contracting. All three are big stimulators, (The Keynesian idiocy) though Gordon Brown and Silvio Berlusconi can’t compete with Obama’s $800 billion fiasco… The president has borrowed more money to spend to less effect than anybody on the planet. (July, 2010). Unlike America, France and Germany had no government stimulus worth speaking of.
jewishworldreview.com/0710/steyn071910.php3

Inflation was not developed by the Late Scholastics. If we want to go down that route, then we might as well call all economics as pagan in origin, due to Aristotle’s allusions to what would eventually become economics. Inflation is actually a relatively new concept in the history of economic thought.

Where ignorance is bliss ‘tis folly to be wise.

“Scholasticism may not be ascribed to one religious order alone.
“With the foundation of the Society of Jesus in 1540, Jesuit thinkers such as…Juan de Mariana (1535-1624)…made significant contributions.
“The last chapter of Mariana’s book on inflation deals with the ultimate cause of currency debasement, i.e., public spending.
“The Medieval Schoolmen also studied the effect that an increase in the money supply (or a process of currency debasement) has on prices. This portion of their analysis is of great interest to many modern authors.” [The *School of Salamanca Readings in Spanish Monetary Theory, 1544-1605 (Oxford: Clarendon Press, 1952) by Majorie Grice-Hutchinson devotes special attention to this topic].
[References in *Christians For Freedom, Dr Alejandro Chafuen, Ignatius, 1986, p 24, 70, 75].