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The Church and the Market: A Catholic Defense of the Free Economy (Studies in Ethics and Economics)

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I have been waiting for this book for many years. As an economist and an orthodox Catholic, I have been concerned at how many of my fellow Catholics, with little if any background in economics, have dismissed the free-market while advancing policies that can only lead to economic ruin. This is a travesty, I've always thought. In philosophy, in medical ethics, and in many other disciplines Catholics have been some of the best thinkers; in economics, on the other hand, the situation is too embarrassing to behold.

What Dr. Woods has done here is to show that so many of the Catholic arguments against the free market are rather like many of the Protestant arguments against Catholicism: they're often based on ignorance and misunderstandings. He then proceeds to lay out one of the strongest and most overwhelming cases for the free market I have ever read - and I have read a lot of them.

I just finished Woods's book an hour ago and signed on to write my review. I was sorry to see the review below (which has since been placed above this one, apparently). At no time does Woods's book contend that economic efficiency is the supreme value; in (as I recall) chapter one Woods expressly dismisses that idea, and in fact criticizes the Chicago School of economics for at times holding that very position.

The Church and the Market often deals with issues that by and large have not been taken up by the popes at all. Thus the chapter on money and banking discusses the gold standard, the moral dimension of fiat currency, the moral implications of fractional-reserve banking, the moral aspects of inflation, etc. Here Woods shows Catholics that a good grasp of economics can help them render better moral judgments. He also corrects the errors of Fr. Coughlin, who is still admired by some people but whose grasp of monetary economics was disastrously poor.

I wonder if the critic above read the whole book, since it explicitly answers the very clichés that are sprinkled throughout that review. This is disappointing; I hoped Woods's book, so carefully and persuasively argued, would force opponents of Austrian economics to stop and think. Instead, at least in this one case, it has succeeded only in making them repeat the same ill-informed charges they did before he wrote his book. That is the kind of ignorance against which this important -- and beautifully written -- book is directed.

Your work is not wasted, Dr. Woods, believe me. Many of us have been waiting for this book for a long time. Pay no attention to those who call you disobedient (or whatever it is they'll call you). You have done the Church an important service, as did the scholastics who showed that the best of secular thought could be reconciled with the teaching of the Church.

Professor Thomas Woods is an interesting author: a traditionalist Catholic who is also a supporter of the free market economy. In this book, he presents a Catholic case for the free enterprise system, employing the economics of Ludwig von Mises and Murray Rothbard (neither of whom was religious, much less Catholic.)

It's well known that the Roman Catholic Church has never been a particularly strong supporter of capitalism. Many popes have stressed the benefits of private property and opposed extreme versions of socialism, but have not realized the positive benefits of Capitalism. In the past, teachers in the Catholic Church haven't understood the functioning of economic laws. The always-paradoxical John Paul II, while having a better understanding of the markets processes, supports large-scale government intervention in the economy. In addition, many Catholics believe that the church's advocacy of the mixed economy is dogma, thus putting Catholic supporters of free enterprise on the same level as those who advocate women priests and the like.

Prof. Woods thus has a lot of work to do. He first shows the autonomous nature of economic reasoning. Churchmen are entitled to instruct the faithful on their duties to their fellow man, but lay Catholics are free to make an independent appraisal of the effectiveness of any given plan. For example, if a churchman tells his flock to help the needy, that's all well and good; if he tells them that the only way to improve the lot of the poor is through minimum wage laws, labor unions, foreign aid and the like, he is making a judgment about how economic laws work. Woods argues that, from the Catholic perspective, there is no reason to believe that the pope is infallible in his economic prescriptions. Prof. Woods discusses a large number of subjects, including usury, wages, prices, banking and foreign aid.

My one concern is whether all of Catholic economic teaching fits neatly into Prof. Woods' approach. Many popes taught in a rather dogmatic way about the need for various interventions in the economy. One example is the support for laws mandating the closing of stores on Sunday (as well as giving workers the day off). If popes who advocated these things had been Misesian praxeologists, I doubt they would have come to different conclusions.

The book ends with a strong critique of distributism, which seeks a larger distribution of private property in the hands of workers. Chesteron and Belloc, among others, advocated distributism. Many traditionally minded Catholics see distributism as a "third way" between capitalism and socialism. But as Prof. Woods points out, the only institution which has the power to redistribute property on a massive scale is the state.

Let me note from the outset that I've gotten to know Professor Woods by means of emails we've exchanged after I've read some of his articles; I have reviewed a couple of his other books for Amazon as well.

I read The Church and the Market late last year and loved it. Woods has a gift for explaining complicated things in ways that can easily be understood. Woods anticipates more arguments against the free market than I could have come up with in 20 years and demolishes them all, without invective or a sneer.

This is an extremely learned book, and written in clear and engaging prose. Woods takes a consistently pro-freedom position in his discussion of wages, antitrust, the welfare state, banking, foreign aid, etc.

At the same time, he addresses some of the Catholic hostility to the market, and poses some interesting questions. His argument goes something like this: certain papal statements call for a "living wage" (for example) because they believe such recommendations will make workers better off. But what if such a policy (whether enforced by law or by ecclesiastical urging is irrelevant) will make workers worse off? (Woods gives many reasons that this would be the case, including the fact that fewer workers would be employed.)

Leave aside your objection that Woods' economic analysis is wrong, and that, say, a $50 minimum wage would actually be a great thing. The question is this. Let's say Woods is right, which is certainly possible. Let's say this approach would indeed make workers worse off. Is a Catholic free to say so? If not, why not?

Note that Woods isn't saying the Church is not allowed to speak on economic matters. He is saying that some of the economic assumptions behind the bishops' statements on the economy are faulty, and that the resulting moral analysis is necessarily faulty as well.

It would be something else if Church leaders were to admit that the policies they recommend would surely make people worse off, but that justice requires that they be instituted anyway. That would be one thing. But these policies are being recommended on the express assumption that they will help people. But what if they won't? What then?

That is an interesting and good question, though many Catholics are embarrassing themselves by claiming Woods has no right to ask it. Playing right into the Protestant caricature of Catholicism, they insist that free discussion on such matters is not allowed (a fact that would have been very interesting to medieval scholars, who wrote about and debated just about every philosophical and theological issue you can name). They acknowledge none of the careful distinctions Woods makes, and some of the dafter ones go so far as to say he's dissenting from official teaching simply in pointing out reality. What a nightmare.

As for N. Ravitch, below, he's Professor Norman Ravitch, who 1) hates the Catholic Church (do a Google search on him) and 2) makes a habit of reviewing books he hasn't read. (Check out his review of George Weigel's book God's Choice, for example.) The point of Woods's book is to ADDRESS anti-market statements by Church figures; Ravitch, apparently going only on the brief description above, assumes Woods' book just ignores them. No one who even owned a copy, much less actually read it, could have mischaracterized it so completely.

Paragraph 347 of the Catholic Church's "Compendium of the Social Doctrine of the Church" says: "The free market is an institution of social importance because of its capacity to guarantee effective results in the production of goods and services. Historically, it has shown itself able to initiate and sustain economic development over long periods." It goes on to say: ""the free market is the most efficient instrument for utilizing resources and effectively responding to needs".[726] The Church's social doctrine appreciates the secure advantages that the mechanisms of the free market offer, making it possible as they do to utilize resources better and facilitating the exchange of products. These mechanisms "above all ... give central place to the person's desires and preferences, which, in a contract, meet the desires and preferences of another person".[727]

A truly competitive market is an effective instrument for attaining important objectives of justice." (footnotes reference Pope John Paul II, Encyclical Letter "Centesimus Annus".)

If I stopped here, I would have effectively summarized what Dr. Woods has acheived in this book, taking what the Catholic Church actually teaches & putting it out there.

As I have studied what the Catholic Church actually teaches about the free market & capitalism, I have seen a great disconnect between what the Catholic Church actually teaches & what the "Social Justice" crowd claims it teaches. Unfortunately, the "Social Justice" gang are the ones who get most of the attention. & the media has a tendency to cherry pick & misrepresent what the Church teaches to uphold it's attack on capitalism.

That is why this book is such an eye opener. & why it is so important to be read. Tom Woods takes what the Church actually teaches & shows how to apply it in an authentically Catholic way. He has actually read what the Church teaches, I doubt that most of the "social justice" gang have. In fact, I am fairly sure that they would deny that the quotes I started this out with were authentically Catholic. I've seen it before. That is why I can be so sure.

Woods is not afraid to look at what some of the great minds of Catholic thought (Aquinas, Belloc, Chesterton)have said & debate their views on the economy. He definitely holds his own against them.

I have to admit that I found out about this book from Tom Woods himself after reviewing another1 of his books on my blog. & I am thankful that he did tell me about it.

I heartily recommend this book. It shoots down the socialist & mercantilist views that are often passed off as Catholic teaching. This book, & the Austrian School of Economics are the best means, in my opinion, of rightly applying the Catholic Church's social teachings in the area of the economy.

Thank you Dr. Woods.

This book explains how all Christians, but especially Catholics, don't need to be uncomfortable with free markets. It illustrates that if you want social justice, one ought to work for economic liberty.

For the Catholic, it also illustrates the boundaries of the magisterium by exploring historic developments in the magisterium's teachings.

In this magnificent book, Prof Woods has bridged the supposed gap between religion and free market economics. They are not at odds, but in perfect harmony. Tho Woods writes from a Catholic perspective, this is a book for all persons of faith who struggle with the various political machinations of our times. Through the lens of his faith and the Austrian school of economics, Woods defends and upholds the individual... it is he/she that counts, it is the family that counts, and it is honesty (sound money) that counts. He shows that there is such a thing as economic law, and when such laws are violated, the natural workings of the market(the market being us as individuals... acting) are distorted and result in ends that are wholly at odds with persons who value God, family, and liberty.
He deftly tackles the idea of a central bank, welfare, distributism, price controls, capital and labor, etc. His understanding of economics, history, and religion is deep, and the purpose for writing this book has at least been fulfilled for me.....the complete synthesizing of religion, economics, and liberty. Well done Professor!

**Note, I am LDS and we as latter-day saints have a grand tradition of defending the constitution, liberty, and free enterprise. Highly recommended to my LDS friends.

As the author of the first Politically Incorrect Guide, Thomas Woods became known as a traditionalist Catholic who aimed to link Austrian economics with the teaching of the Church.

In "The Church and the Market: A Catholic Defense of the Free Economy", Woods aims to use Catholic teaching to argue that free markets are consistent with the teachings of the Magisterium and that government intervention is not. He uses the Church's teaching of the sanctity of private property to condemn government plans to redistribute wealth that have been seen as ethical by Popes since Leo XIII addressed the issue of the condition of workers with "Rerum Novarum" in 1891. Based on this sanctity of private property he argues against foreign aid and the welfare state, both of which he shows very well to have made poverty worse and prevented development. Woods also offers a strong critique of traditional Catholic "distributivism" which he shows completely unenforceable in large communities and certain to reduce the living standards of the vast majority. He also shows that the centralised governments of the twentieth century are quite unique in the history of Western civilisation and that in the Middle Ages kings had not the power to even tax like governments do now.

Whilst the thesis of the book is clear and logical even to a non-Catholic like me, the book still does not really gel. There is too little detailed study of the direct teachings of Jesus from the New Testament, so that one feels from reading the book that Woods does not utilise his knowledge of Church and biblical teaching to the fullest.

There are also some contradictions and way-too-common mistakes. For instance, Woods does not contrast his support for community-based agriculture with his opposition to distributivism sufficiently to be clear. He also fails to realise that extreme savings rates can produce the same problems regarding fertility as a large welfare state because the individual is relying on himself/herself rather than children to support his/her old age. Related (because savings are obviously most useful if interest is paid thereon) is his failure to consider that Pope Benedict XIV condemned usury as recently as 1745 in one of the first papal encyclicals. The significant negative correlation between savings and fertility in developed nations today is something economists generally do not grasp. It has also made me me personally more sympathetic to religious condemnation of usury.

All in all, even if written in a too-light tone, "The Church and the Market: A Catholic Defense of the Free Economy" offers some very sound arguments.

THE CHURCH AND THE MARKET - A Catholic Defense of the Free Market by Thomas
E. Woods Jr. (Lanham: Lexington Books, 2005). ISBN 0-7391-1036-5. The author
analyzes Catholic social teachings in light of Austrian economics, ala Murray
Rothbard and Ludwig von Mises. He argues that since the popes have been not
granted any special insight into the discipline of economics, it is therefore
appropriate to critique the Church's socialist/interventionsist policies. "Those of us
within the Church who advocate the Austrian approach to economics are not
demanding that the popes preach Austrian [free market] economics from the Chair
of St. Peter. ... We ... claim that ... what we teach is not only not antagonistic to,
but in fact is profoundly compatible with, orthodox Catholicism" (p. 215). If you
want to find out whether or not the Church's moral teachings could lead to an
endorsement of voluntaryism and a denouncement of government action, then read
this book.

This book's title is deceptive in that it suggests the author is going to examine the place of capitalism within formal Catholic social thought. Sadly, Dr. Woods foregos the opportunity to examine the teachings of the social magisterium in favor of the standard bromides of the Austrian school. Admitting at the outset that he's no intention of bringing up the pronouncements of the popes throughout the ages, he instead nitpicks about the sorts of things which have traditionally annoyed Austrians. In most things, Woods follows the lead of others, contributing nothing himself in the way of original analysis. He acknowledges his intellectual debt to Murray Rothbard in the introduction and, later on, draws on Rothbard's arguments concerning the 16th century scholastics, some of whom wrote opinions in accord with Austrianism. Unfortunately, a few 16th century theologians does not the Church make and it's of course silly to even think that these men, grounded as they were in the thought of the Angelic Doctor, would in any way endorse the bastard children of the Enlightenment. It would be the equivalent of saying that the popes are Austrian because they view private property as a pillar of society.

According to Rothbard, the error of Thomists and all classical natural-law theorists is that they viewed the state as a "major locus of virtuous action". Elsewhere, Rothbard defines the state as a monopolistic criminal enterprise. Each of these views is well outside of the social magisterium; no where will you find a pope who rejects the validity of the state since it holds authority by the will of God. St. Paul addresses the state in Romans 13, not the all-powerful market, and he does not fall on the side of Murray Rothbard. The errors of the non-Catholic Rothbard on political issues are not enough to persuade Woods that he's suspect as an authority in economics. He clings instead all the more tightly to the luminaries of Austrianism in a book ostensibly dedicated to Catholic social teaching on economic concerns. Modern Catholic intellectuals and popes have always recognized the interdependence between the economic and political frameworks. What one holds regarding the proper constitution of a society has ramifications in the economic sphere. Rothbard's political views are inseparable from his economic theory since the state exists solely to destroy the fruits of the market (cf. Man, Economy & State).
The irony is that Dr. Woods continues to defend the compatibility of Austrianism and Catholicism, despite the repeated condemnations of economic liberalism by popes like Pius XI, to whom Woods appeals against the errors and confusion which have plagued the post-conciliar Church (cf. The Great Façade; the phrase "cafeteria Catholic" comes to mind). Here, Pius XI addresses Woods and his ilk in his encyclical letter Ubi Arcano Dei:
"Many believe in or claim that they believe in and hold fast to Catholic doctrine on such questions as social authority, the right of owning private property, on the relations between capital and labor, on the rights of the laboring man, on the relations between Church and State, religion and country, on the relations between the different social classes, on international relations, on the rights of the Holy See and the prerogatives of the Roman Pontiff and the Episcopate, on the social rights of Jesus Christ, Who is the Creator, Redeemer, and Lord not only of individuals but of nations. In spite of these protestations, they speak, write, and, what is more, act as if it were not necessary any longer to follow, or that they did not remain still in full force, the teachings and solemn pronouncements which may be found in so many documents of the Holy See, and particularly in those written by Leo XIII, Pius X, and Benedict XV. There is a species of moral, legal, and social modernism which We condemn, no less decidedly than We condemn theological modernism."

Liberalism takes many forms. In our own day, most faithful Catholics assume it is primarily concerned with corruptions of human sexuality. In fact, the popes remind the faithful that liberalism appears under varied guises.

Dr. Woods evinces a poor philosophical foundation and he is easily taken in by all sorts of Austrian assumptions. For example, Ludwig von Mises, critical inspiration to Rothbard and other Austrians, claims in his work Human Action that praxeology "is the science of every kind of human action," rejecting any claim that his new science, heretofore unknown to the doctors of the Church, is not limited to those actions which lead to an improvement in man's material well-being. This claim of course is fundamentally at odds with St. Thomas and Catholicism at both a natural and theological level. From a Thomistic perspective, one wonders how anyone can have a perfect science of all human action that does not weigh good or bad actions. This is true whether it's philosophical ethics or evangelical precepts. The error of the past, says Mises, is that philosophers like Aristotle sought to explain human action by notions of good or bad, just or unjust, or even worse, the miraculous "interference" of a Deity. Instead, human actions are not ordered by objective valuations, but rather by the dictates of the market. Virtue and vice are subjective notions which have no place in economics. If a man is to "succeed" says Mises, he must adjust his actions to economic law. In his intro to Human Action, he uses the example of a man who wants frequent sexual intercourse: if he's going to get it, he's going to have to know economics. Austrian economics, not Chicago-style. Elsewhere, he quips that "simple faith and economic rationalism cannot dwell together. It is unthinkable that priests should govern entrepreneurs." Meaning, the Church has no business at all talking about the market. The social magisterium is just so many opinions which may or may not be the correct way to establish a just and felicitous social order. Rothbardians would go further and say that the Church can be ignored without moral peril whenever She posits the notion of a common good that the state is obligated to safeguard.

Woods argues that economics is not a species of ethics but is instead a pure science studied in the same way that physics is by physicists. As St. Thomas says in his commentary on Aristotle's Ethics, "external goods that are used purposively by men have a moral consideration." It's precisely this ethical cast that Mises and other Austrians have sought to remove from the discipline of economics. The Church has claimed the right to decide the moral lights which should guide Christians in formulating a just economic order. The author does not meditate upon the question of whether there is a moral calculus in the laws which the state passes to regulate the exchange of goods or in relations between labor and capital. How can he? His mentor Rothbard had already taught that the state was criminal by nature, so it follows that its decrees are only the threats of violence made by a monopolistic crime syndicate. Rothbard took Mises to his logical conclusion, deciding that the market would necessarily find the most humane and efficient way to secure corporate goods with the state tagging along as an unwanted parasite. The author uses the same line of thought in his discussion on safety regulations. The market will always do a better job of implementing safety in the workplace than any public regulation because it is rational. If an objective moral evil exists in the social order, it cannot be addressed by the state. The market is infallible and will eventually solve any problem, whether it takes days or decades. Positive laws to remedy or palliate a condition are by definition always worse than doing nothing. It's kind of like a doctor telling his patient to fore go any treatment since death will eventually cure his illness.

Woods wants us to accept that economics is a value-free science, a set of observations about the way things work in a world marred by scarcity. At the same time, he can't help dipping into moral considerations (e.g, p. 47), predicating moral or immoral of certain economic choices. In addition, he favorably quotes the Jesuit Mariana, who calls any ruler "wicked" who sets a price by edict. Mises and Rothbard of course also resorted to various moral arguments when discoursing on economics; their gift for moralistic psychologizing has been picked up by anarchists like Hans Hoppe at UNLV. The question is then: whose morals guide the discussion? Are they Catholic? Do they reflect the mind of the Church in her magisterium and liturgy (cf. The Feast of Christ the King)? The Divine Liturgy of St. John Chrysostom, used by Byzantine Catholics, is very un-Rothbardian: the priest prays for the good of the civil authorities and the armed forces. It's hard to be a Greek Catholic and a Rothbardian anarcho-capitalist. Biblical passages like 1 Peter 2:13 become problematic at best, candidates for expunging at worst. To be deep in Austrianism is to cease to be Catholic.

At the very least, we can dispense with the pretension that economics is just a pure science about the way things are. This claim can also be found in fields like sociology and psychology. It's foolish to predicate pure value-neutrality of the political science, but the Economic Man is a powerful myth, so it happens that the whole science of economics gets a pass when it does this very thing. The Austrian School is a marginal school at best (no pun intended), with Noble Laureates and scholars coming from other schools like Chicago. The variety of theories would suggest that economics is a science in an equivocal sense only.

Woods has repeatedly shown that he's out of his depth in tackling the question of the Church and the market. For those who accept his thesis, think more carefully about it after reading Rothbard and Mises. Both authors have good insights and much of what they write is reasonable when they discuss the minutiae, but this book is nothing more than an Austrian primer. Woods limits much of his effort to sniping at individuals like Belloc. Heinrich Pesch gets two whole pages even though he's hugely influential in 20th century Catholic social thought. One senses that Woods is really only interested in regurgitating standard Austrian fare. We don't need this book for that purpose since many others have already been written.

A concise but potent antidote to Austrian ideology is the recently released Compendium of the Social Doctrine of the Church. Unlike this book, it actually delves into the heart of the Church's teaching on economic, political and cultural issues. Citations are copious and far ranging and, alas, authoritative.

Woods believes that he has found, in discussions of the relationship that exists between the just price and the market price of goods in the writings of various minor 16th century Spanish Scholastics,support for the Austrian,libertarian view of market exchange as always being just because either the buyer or seller, considering a particular market exchange, is in a position " to take it or leave it".Unfortunately,Woods has not done his homework..

Albert the Great,Aquinas's instructor and teacher,stated the position of the great 13th century Scholastics very clearly in his Commentary on the Sentences(Commentary Sentences,IV,16,46:638)-the just price is that price ",,,which the goods sold can be valued at according to the estimation of the market at the time of the sale".However,there were a number of qualifications with respect to the normal conditions existing in the market under which exchange would take place.Normal means that there was no compulsion,coersion,or uncertainty that would give excessive bargaining power or strength to either the buyer or seller.Unfortunately,while Austrians talk about uncertainty,no Austrian economist or theoretician has ever integrated their talk about uncertainty (as opposed to risk)into their theory.The Catholic Church,basing its concerns on the existence of the great uncertainty that existed throughout the Middle Ages(and which still exists today due to constant technological and financial innovation and change taking place under conditions of partial and incomplete information)correctly incorporated a perspective that incorporated within it the lemon problem view of modern economics(note that this excludes both von Mises and Rothbard who reject such standard mainstream analysis)that demonstrates that the seller generally has much more knowledge about the product or service than the buyer.This automatically creates bargaining power that leads to an unjust exchange.The Church today,as it did in the 13th Century,would judge any kind of lemon exchange to be immoral and the selling price unjust.

Similar problems occur in Woods' presentation when we leave microeconomics and turn to macroeconomics.Woods rejects the Church's position on the rate of interest,usury laws,and speculation,citing von Mises and Rothbard.Unfortunately,this position is only correct if there is no uncertainty/ignorance about the future impacting the provision of capital goods(investment in plants,factories,machinery,tools,equipment)over time.Again,Austrians talk about uncertainty and ignorance but have no theory explaining its impact on the macro economy.Keynes had this to say about the position of the Scholastics and Medieval Church on the rate of interest and usury laws:" I was brought up to believe that the attitude of the Medieval Church to the rate of interest was inherently absurd...But I now read these discussions as an honest intellectual effort to keep separate what the classical theory has inextricably confused together,namely,the rate of interest and the marginal efficiency of capital.For it now seems clear that the disquisitions of the schoolmen were directed towards the elucidation of a formula which should allow the schedule of the marginal efficiency of capital to be high,whilst using rule and custom and the moral law to keep down the rate of interest"(Keynes,1936,General Theory,pp.351-352).Keynes's further discussions note that Adam Smith likewise favored a modified position very similar to that of the Catholic Church .In fact,Smith's views ,presented on pp.290-340 of The Wealth of Nations[See Modern Library(Cannan)edition] and summarized on pp.339-340,are much more critical of BOTH neoclassical and Austrian approaches than was Keynes himself in this discussion in the GT.Smith supports the standard Catholic position that loans made to speculators will result in the savings being"....wasted and destroyed...".Even Keynes did not go quite so far as this although he realized speculation was a major problem impacting the macoeconomy because it inevitably creates a bubble,which leads to a mania,which leads to a panic ,which leads to a crash,which leads to an economic downturn negatively impacting large numbers of consumers and producers .See chapter 12 of the General Theory.

In summary,Woods relies far,far too heavily on von Mises, Rothbard ,and minor 16th century Spanish Scholastics while ignoring Adam Smith,John Maynard Keynes,and the great 13th century Scholastics.Woods needs to completely revise his book in order to give a more balanced presentation of Catholic economic thought and an assessment of its policy value.The present volume falls a long way short of close to accomplishing this goal.