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The Church and the Market: A Catholic Defense of the Free Economy (Studies in Ethics and Economics) Paperback – March, 2005
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Should be required reading for any university or seminary course in social sciences that is supposed to be grounded in Catholic social teaching. Woods puts his case with such rigor and lucidity that there is probably no other text that is more effective in supporting a discussion of the application of the Church's social teaching to specific economic issues. (Economic Affairs)
Woods' book is a welcome antidote to the various combinations of economic incompetence and self-righteous posturing - "liberation theology," New Deal welfarism, social democratic interventionism, distributism - that too often masquerade as the only "authentic" interpretations of Catholic social teaching. Every Catholic - and especially every Catholic bishop - ought to consider its arguments before speaking out on economic policy. (Edward Feser, Visiting Assistant Professor, Department of Philosophy, Loyola Marymount University)
Thomas Woods uses the unique perspective of the Austrian School of Economics to present a clear, compelling, and uncompromising argument that the moral teachings of the Catholic Church are completely compatible with free market capitalism. Arguing that faith should be coupled with the best of secular science in policy advocacy, Woods also shows that some elements of Catholic social doctrine are the unfortunate result of factual error rather than the application of moral principle. (Samuel Bostaph, Emeritus Professor of Economics, University of Dallas)
Finally, someone who truly understands the science of economics has given us the most thorough examination of Catholic Social Teaching yet available. I highly recommend . . . to all desiring to see the Catholic Church's role in the economic realm in a proper light. It should be required reading for priests, bishops, and seminarians, as well as clerics of other denominations, as a remedy for the socialism that has crept into religious circles over the past century. (William R. Luckey, Chairman and Professor, Political Science and Economics Department, Christendom College)
A fine contribution to the debate concerning the possible and the proper reconciliation of Catholic social doctrine with free-market economics. Professor Woods finds an interesting niche in such a complex and uneven discussion…the author writes with splendid clarity, succeeding in explaining not-so-simple economic questions in very simple terms. (Christian Social Thought)
The Church and the Market is an essential tool for the Catholic free-market intellectual who is fighting the pro-state biases that too often set the terms for economic discussions of modern Catholic social teaching. From welfare and wage policies to distributist demagoguery, Woods speaks classical liberal truth to today's dominant modernist authorities, challenging them to accept at least a modicum of economic rigor into their analyses. As a result, he provides an important contribution toward defining the correct context of Catholic social teaching for the next century. (Christopher Westley, Assistant Professor of Economics, Jacksonville State University)
Woods' coverage of a vast terrain (economics, history, theology, philosophy, and politics) is concise, but not breezy.... The best writing draws attention to itself only after it has been read. If the reader reflects on the human source of his literary delight, he may feel a debt of gratitude such as I felt after reading each of Woods' chapters. Woods' firm literary hand assures the reader that he is not in over his head and delivers a work that, for all its learning, goes down smoothly. (Anthony Flood, www.LewRockwell.com)
Woods' central message, that sound moral statements about economic issues have to be grounded in sound economics is to my mind incontrovertible. And, in the main, Woods brings this message home with well-reasoned and well-presented analysis. Both the message and the analysis deserve careful reflection. (Homiletic & Pastoral Review)
Woods is an all-too-rare Catholic writer, one who is well versed in both Church doctrine and free-market economics.... The Church and the Market is a valuable book. (Crisis)
A person with no interest at all in Catholic social thinking can still benefit from [The Church and the Market]. The author writes with splendid clarity, succeeding in explaining not-so-simple economic questions in very simple terms.... A fine contribution to the debate concerning the possible and proper reconciliation of Catholic social doctrine with free-market economic (Journal of Markets & Morality)
From the Back Cover
"A fine contribution to the debate concerning the possible and the proper reconciliation of Catholic social doctrine with free-market economics. Professor Woods finds an interesting niche in such a complex and uneven discussion the author writes with splendid clarity, succeeding in explaining not-so-simple economic questions in very simple terms."CHRISTIAN SOCIAL THOUGHT
"Finally, someone who truly understands the science of economics has given us the most thorough examination of Catholic Social Teaching yet available. I highly recommend . . . to all desiring to see the Catholic Church's role in the economic realm in a proper light. It should be required reading for priests, bishops, and seminarians, as well as clerics of other denominations, as a remedy for the socialism that has crept into religious circles over the past century."William R. Luckey, Chairman and Professor, Political Science and Economics Department, Christendom College
"Thomas Woods uses the unique perspective of the Austrian School of Economics to present a clear, compelling, and uncompromising argument that the moral teachings of the Catholic Church are completely compatible with free market capitalism. Arguing that faith should be coupled with the best of secular science in policy advocacy, Woods also shows that some elements of Catholic social doctrine are the unfortunate result of factual error rather than the application of moral principle."Samuel Bostaph, Chairman and Associate Professor, Economics Department, University of Dallas
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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.
From the start Woods’ acknowledges that a number of Papal documents present a dim view of uncontrolled free markets, warning that such a system as leads to exploitation, insecurity and hinders the flourishing of a just society. Woods’ response, and from which the rest of his book flows, is to claim that he agrees with the Papal ideals of Catholic social teaching but that the Popes have nevertheless misunderstood basic economics. Economics, according to Woods, is a cold, hard science that is governed by unchangeable laws. Only Austrian economists acknowledge this and thus only Austrian economics can ‘work’ if society is to prosper and thereby bring Catholic social teaching to fruition. As the Popes’ basic assumptions on economics have been wrong, their teaching on how best to bring about a just society is also mistaken.
When you work for an institute that considers Somalia to be doing just fine, I’m not convinced you’ve properly understood what the Popes were aiming for.
Woods is wrong to claim that economics is a ‘value-free’ science. Even if we do consider economics to be a science, Woods adopts a tactic of blurring theory and implementation, claiming that we do not judge the validity of scientific theories based on ethics. No, but the Church manifestly does judge the ethical implementation of scientific theories on a great variety of issues ranging from embryonic stem cell research to nuclear weapons, and thus Woods desire to see policies enacted is firmly within the realm of ethics. Woods attempt to claim that Austrian economics, while being value-free, is based on the ethical principle of liberty of the individual also falls flat. That Woods uses a quote from the odious Walter Bloch, defender of every low-life scum imaginable in the name of ‘liberty’, rather proves this point.
Woods devotes several chapters to fleshing out basic Austrian principles. Some of this, such as his lengthy criticism of fractional-reserve banking and call to return to the gold standard, is not unique to Austrian thought and has little to do with Catholic teaching. His robust defence of usury (in which he noticeably fails to denounce the predatory practice of payday lending that has ruined so many on the breadline) and his attack on the minimum wage are topics that Catholic social teaching has much to say on, and it is the precisely the exploitation that results from such practices that is condemned in a number of Papal encyclicals.
Despite stressing the importance of the individual, it is ironic that Woods entire defence of the compatibility of free-market economics with Catholic teaching is based on a utilitarian argument that it benefits a sizeable group of people. No consideration is given to the individual poor who are left behind. For example, while making some valid criticisms of the welfare state, his solution to the poor is merely that they should rely on their family to look after them. Ignoring the fact that many individuals must move great distances to find work, what if their family is also poor? All Woods can do is denounce them as being lazy and not especially poor. His advocacy of the removal of any safety-net, combined with some almost sociopathic views on child labour, is in line with the principles of Social Darwinism rather than Catholicism.
Woods repeatedly claims that critics of Austrian economics misunderstand it. The opposite is true; they understand it very well and criticize it for the right reasons. Woods, on the other hand, seems at times to deliberately misrepresent his critics. He sarcastically dismisses those who want decent conditions for workers claiming that the complaints will not end (‘who would not want five hour lunch breaks, the services of a masseuse, and an office with a view of Niagara Falls?’) and absurdly claims that those defending workers’ rights want everyone to live a life of millionaire luxury. He repeatedly falls into the slippery slope fallacy, arguing those who favour legislation to protect workers and the poor differ only in minor degree to socialists, and that the authoritarian State is ready to seize control if given a legislative inch.
In many ways Woods' encapsulates the problem of libertarianism in that, while it may find itself on the right side on some issues, the workings of society cannot fit neatly into an absolutist, one-size-fits-all dogma. The evidence, both historical and contemporary, both in the USA and abroad, firmly demonstrates that unregulated markets lead to an exploitative and detrimental environment for workers and consumers. Woods cannot rebut this and instead falls into advocating utilitarianism at the expense of individuals or simply dismissing the problem. Pope Leo XIII and his successors denounced the Dickensian society Woods wants to create. After reading this book my sympathy and agreement remains with Rome.