Published November 7, 2011
Lecture presented by John D. Mueller, Lehrman Institute Fellow in Economics at the Ethics and Public Policy Center, to the John Locke Foundation in Raleigh, NC. Text and video of Mr. Mueller’s presentation can be found here.
I’d like to thank the John Locke Foundation for its gracious invitation to deliver this lecture. And I’d also like to thank the other co-sponsors who made it possible: Chris Wolfe at the Thomas International Center, whose work I have long admired, and Douglas Minson at the Intercollegiate Studies Institute (ISI). I have participated in many of ISI’s valuable programs, and ISI Books recently published my book, Redeeming Economics: Rediscovering the Missing Element.2 As I will explain, the original element missing from modern economics is the one that describes our interpersonal relations.
I am addressing three different audiences today here in the Triangle. Though I plan to cover much of the same ground, I’m modifying the talk for the interests of each audience and will use a different title when they are published.
This afternoon at the University of North Carolina at Chapel Hill, I’ll discuss “The Astonishing Relevance of (Neo-) Scholastic Economics to Diagnosing and Curing the Washington Economic Mess.” For my lecture tonight at Duke University, where the journal History of Political Economy is published, I have chosen the title, “Why Abandoning HoPE (History of Political Economy) Has Proven a Mistake.” But here at the John Locke Foundation, I would like to pose and answer the question, “Were John Locke and the Founders ‘Lockeans’—or Scholastics?”
Of course, this requires me to explain what it means to be a Scholastic and a Lockean. To answer this question, I’d like to accomplish two things.
First, I’d like to offer “a brief, structural history of economics,” to explain how the logical and mathematical structures of scholastic, classical, and neoclassical economics differ. This review will show that the most important element of the original scholastic economics—final distribution (which comprises Augustine’s theory of personal distribution—gifts and their opposite, crimes—and Aristotle’s theory of distributive justice)—has been missing since its deliberate omission by Adam Smith. Unlike the scholastic theory of utility, which Smith also dropped, final distribution has not yet been generally readopted, even though it is necessary to solve several major problems with today’s neoclassical economics. In tracing this outline of the history of economics, I will explain why Joseph Schumpeter and Paul Sigmund were correct to view John Locke (1632-1704) as what Schumpeter called a “Protestant or laic scholastic.”
Second, I’d like to illustrate one problem resulting from omitting the scholastic theory of distribution, with an empirical test offered by Steven D. Levitt and John J. Donohue III’s famous claim that legalizing abortion in the 1970s must have reduced crime rates starting in the 1990s. I’ll show that omission of Augustine’s ‘personal distribution function’ requires circular logic, which caused Levitt and Donohue to adopt arbitrary assumptions and ignore the strong contemporaneous inverse relation between rates of ‘economic fatherhood’ and homicide, which squarely contradicts their conclusions.
I’ll conclude by predicting that in coming decades neoscholastic economists, building on the original scholastic outline, will supersede neoclassical economists for exactly the same reason the latter supplanted classical economists starting the in 1870s: having one more indispensable explanatory element, their theory will be both more comprehensive and empirically more accurate.3
1. A Brief, Structural History of Economics
Economic theory has been taught continuously at the highest university level since the mid-thirteenth century, when it was first fully integrated within the scholastic natural law. Yet we must begin with two simple but widely overlooked facts: First, the logical and mathematical structures of scholastic, classical, and neoclassical economics differ fundamentally. Second, few economists today are aware of these differences, in large measure because American university economics departments, led by the University of Chicago in 1972, abolished the requirement that students of economics master its history before being granted a degree.4 This requires a brief, structural history of economics.
That’s the usual order in our action. But as Augustine first explained, the logical order is different in our planning. First we choose For Whom we intend to provide; next What to provide as means for those persons.5 Finally, as Aquinas would later elaborate, we choose How to provide the chosen means, as described by Aristotle’s theories of production (always) and exchange (almost always). Thus economics is essentially a theory of providence: it describes how we provide for ourselves and the other persons we love, using scarce means that have alternate uses.
Scholastic ‘AAA’6 economics (c.1250-1776) began when Thomas Aquinas first integrated the four elements of production, exchange, distribution, and consumption, all drawn from Aristotle and Augustine, into an outline of personal, domestic, and political economy, both positive and normative, within the natural law.6 The scholastic economic system is comprehensive, logically complete, mathematical, and empirically verifiable. It was taught at the highest university level for more than five centuries by every major Catholic and (after the Reformation) Protestant economic thinker—notably Lutheran Samuel von Pufendorf, whose work was used by Adam Smith’s own teacher to teach Smith economics, and was also highly recommended by Alexander Hamilton, who penned two-thirds of the Federalist.7 And as we’ll see, Locke was another ‘Protestant scholastic’ whose economic and political theories were derived from that tradition.
Classical economics (1776-1871) began two or three generations after Locke when Adam Smith cut the four elements to two, trying to explain specialized production (which he called “division of labor”) by production and exchange alone. Smith and his classical followers like David Ricardo undoubtedly advanced those two elements. But Smith also dropped Augustine’s theory of utility (which is necessary to describe consumption) and replaced Augustine’s theory of personal distribution (gifts and their opposite, crimes) as well as Aristotle’s theory of domestic and political distributive justice with the mere (often false) assumption that “every individual…intends only his own gain,” as Smith put it in his famous “invisible hand” passage in the Wealth of Nations.8
Neoclassical economics (1871-c.2000) began when three economists dissatisfied with the practical failure of Smith’s classical outline (William Stanley Jevons 1871 in England, Carl Menger 1871 in Austria, and Leon Walras 1874 in Switzerland) independently but almost simultaneously reinvented Augustine’s theory of utility, starting its reintegration with the theories of production and exchange.9 They abandoned Smith’s revised outline mostly for three related reasons: without the theory of utility classical economists were unable to answer some important questions (for example, why goods that can’t be reproduced with labor have value); made predictions about others that turned out to be spectacularly wrong (notably the “iron law of wages,” which predicted that rising population would prevent rising living standards); and directly fostered Karl Marx’s disastrously erroneous economic analysis. Though schools of neoclassical economics have since multiplied, all are derived from these three.
Neoscholastic economics (c.2000—). In my book,I predict that Neoscholastic economics will revolutionize economics once again in coming decades by replacing its lost cornerstone, the theory of distribution: simply because, as with the theory of utility, including the element does a far better job of empirical description.
Thus Adam Smith’s chief significance lay not in what he added to, but rather subtracted from economics. As Joseph Schumpeter demonstrated in his History of Economic Analysis, “The fact is that the Wealth of Nations does not contain a single analytic idea, principle or method that was entirely new in 1776.”11 The facts about the development of economics seem to indicate that a re-evaluation is overdue and quite likely for both Augustine and Adam Smith, particularly since Smith essentially “de-Augustinized” economic theory to its detriment.
Though far from exhaustive, this brief structural history of economics explains why scholastic economics contained four, classical only two, and neoclassical economics three basic elements: Neoclassical economists restored one element dropped by Smith, utility, but not the other, final distribution.
To go a bit deeper, let me first explain the structure of scholastic economics, then an example of the problems in today’s neoclassical economics that are due to its failure to restore the most important element.
Positive scholastic theory. To explain the Two Great Commandments,12 Augustine had started from Aristotle’s definition of love—willing some good to some person13—but drew an implication that Aristotle had not: every person always acts for the sake of some person(s). For example, when I say, “I love vanilla ice cream,” I really mean that I love myself and use (consume) vanilla ice cream (in preference, say, to strawberry ice cream or Brussels sprouts) to express that love. Augustine also introduced the important distinction between “private” goods like bread, which inherently only one person at a time can consume, and “public” goods (like a performance in an ancient amphitheater, a modern radio or television broadcast, national defense, or enforcement of justice) which (at least within certain limits) many people can simultaneously enjoy because they are not “diminished by being shared.”14
In other words, Augustine’s crucial insight is that we humans always act on two scales of value or preference—one for persons as ends and the other for other things as means: personal love and utility, respectively. Moreover, we express our preferences for persons with two kinds of external acts. Since man is a social creature, Augustine noted, “human society is knit together by transactions of giving and receiving.”15 But these outwardly similar transactions may be of two essentially different kinds, he added: “sale or gift.”16 Generally speaking, we give our wealth without compensation to people we particularly love,17 and sell it to people we don’t, in order to provide for those we do love.18 Since it’s always possible to avoid depriving others of their own goods, this is the bare minimum of love expressed as benevolence or goodwill and the measure of what Aristotle called justice in exchange.19 But our positive self-love is expressed by the utility of the goods we provide ourselves, and our positive love of others with beneficence: gifts. Hate or malevolence is expressed by the opposite of a gift: maleficence or crime.
The image on the cover of my book is Gustave Dore’s engraving, “Arrival of the Good Samaritan at the Inn,” because transcending nationality and religion, the parable illustrates all the possible economic transactions we can have with our fellow man, as described by Augustine: the robbers beating a man and leaving him for dead illustrate crime; the priest and Levite who passed him by illustrate indifference; the innkeeper’s bargain with the Samaritan illustrates justice in exchange; and finally, the Samaritan’s devotion of time and money to restore the beaten man to life illustrates a gift. Crime, indifference, just exchange, and gift: this is the range of possible economic transactions.
The social analog to personal gifts is what Aristotle called distributive justice20, which amounts to a collective gift: it’s the formula social communities like a family or nation under a single government necessarily use to distribute their common (jointly owned) goods. Both a personal gift and distributive justice are a kind of “transfer payment”; both are determined by the geometric proportion that matches distributive shares with the relative significance of persons sharing in the distribution; and both are practically limited by the fact of scarcity.
That’s “positive” scholastic economics in a nutshell: describing what is, not necessarily what ought to be.
B. Normative” scholastic theory. We naturally love ourselves, Augustine pointed out. All other moral rules are derived from the Two Great Commandments because these measure the degree to which our love is “ordinate”: rightly ordered.21 If a good were sufficiently abundant we could and should share it equally with everyone else. But with such goods as time and money, which are “diminished by being shared”22 (i.e., scarce), this is impossible. Therefore “loving your neighbor as yourself” can’t always mean equally with yourself: “Since you cannot do good to all,” Augustine concluded, “you are to pay special regard to those who, by the accidents of time, place, or circumstances, are brought into closer connection with you.”23
Aquinas extended Augustine’s insight to Aristotle’s corresponding analysis of all communities: Common goods are necessary to the existence of both families and governments. But the fact of scarcity requires that most common goods be owned by families, not governments, because of the two advantages noted by Aristotle (greater social peace and productivity) and the third added by Aquinas (greater order).24
Political distributive justice and/or justice in exchange are violated by what Aristotle described as, and James Madison later termed, “faction.” Each faction has an ideology, which Hannah Arendt succinctly defined as a world-view that requires its adherents to create a “fictitious world” that distorts reality to the advantage of its members.25 For example, Karl Marx’s collectivist ideology collapsed all justice to distributive justice, as if all goods were both common and political; Smith’s individualist ideology collapsed justice to justice in exchange, as if all goods were personal, private, and never given or shared.
Where does John Locke stand within this history? Let me answer that in two ways—first regarding Locke’s natural law philosophy and then his economic theory.
As Paul Sigmund of Princeton University noted in a book published in 2006, “The literature on Locke, most of it published during the last fifty years, is enormous. The Princeton library lists more than 950 books written by or about him, 171 since 1990. It is a rich literature, which examines not only his political thinking but also his ideas on religion, economics, ethics, epistemology and more recently race and gender.” (I met Professor Sigmund at Princeton University while I was one of the first crop of fellows in the Princeton’s James Madison Program in 2001-2.)
The more recent intense scholarly interest in and debate about Locke’s political theory—what one participant has called the “Locke industry”—which has produced hundreds of books relating to his work since 1950, can be linked to the rise of intellectual movements on the right and the left that saw liberalism as exemplified by Locke as the enemy. In the 1950s and early 1960s, two Locke scholars in particular, Leo Strauss on the right and C. B. McPherson on the left, wrote critical, and flawed, interpretations of his political theory that were both widely accepted and vigorously attacked. In 1953 Strauss, a charismatic German emigre professor at the University of Chicago, published Natural Right and History, an interpretation of the Western political thought that categorized its principal representatives either of “natural right,” a belief, typified by Plato’s political thought, in transcendent universal values accessible to only the few , or of “natural rights,” represented by Hobbes, based on the individual pursuit of security and pleasure. Challenging the [then] conventional view that Locke wrote against Hobbes and drawing on his own earlier book Persecution and the Art of Writing (1952), Strauss argued that Locke, like many past writers who feared persecution, was committed to a hedonistic individualism (“the joyless quest for joy”) that would ultimately lead to the nihilism of Nietzsche and modern totalitarianism.26
Similarly, Sigmund observed, “In a series of articles in the 1950s and in The Political Theory of Possessive Individualism (1962), C.B. McPherson of the University of Toronto attacked the Second Treatise from the left, interpreting it as the ideological justification for emerging capitalism. Locke’s theory, he argued, justified the removal of traditional moral limits on property accumulation and contained a contradictory understanding of human nature that both assumed natural equality in justifying government by consent and natural inequality in identifying property holding with rationality and political rights. Thus, while all are presumed to have consented to government, usually tacitly, only property holders give express consent and only they actually participate in government by electing representatives, thus avoiding a potential conflict between majority rule and the propery rights of the minority. He also cited a hitherto-unnoticed passage about the right to ‘the turfs my servant has cut’ (Second Treatise 28) to argue that Locke was a defender of wage labor. McPherson’s interpretation struck a responsive chord, in his case among 1960s radicals who took it up as part of their rejection of modern liberal capitalism.”27
Though Locke came under fire from many other quarters, these are the most prominent and influential. For example, the view of Locke by a leading Jesuit intellectual, John Courtney Murray, “has certain resemblances to that of Strauss (although for Strauss, the contrast was with Plato rather than Aquinas) in identifying Lockean liberalism with atomistic individualism leading to nihilism and totalitarianism,” which helps “explain the support for the Straussian view in a number of Catholic universities in succeeding years.”28
Yet as Sigmund noted, the critique from neither the right nor the left has worn well, because both ignore Locke’s conscious continuation of the scholastic tradition in which he was educated. “Strauss’s case was challenged in 1954, when Locke’s early Essays on the Law of Nature were translated and published. While the essays argued that we derived our understanding of natural law from reflection on sense experience, a view Locke shares with St. Thomas Aquinas (whom he quotes in Essay 1, probably borrowing the quotation from Hooker), they described a theologically based natural law theory that rejected Hobbesian self-interest as the basis of moral obligation.”
As I have already mentioned, Joseph Schumpeter’s History of Economic Analysis was also published in 1954, and highlighted the seminal role of the scholastics in integrating the elements of economics analysis, as well as Locke’s development of this tradition. As Schumpeter observed, “the group of writers whom we shall call Philosophers of Natural Law…were of the same professional type as the scholastics and they went about the same task by the same method, in much the same spirit—so much so, in fact, that the best way of characterizing them is to call them Protestant (or laical) scholastics.”29
Similarly, historian of philosophy Etienne Gilson regarded Locke’s “empiricism” as a healthy reaction to the prevailing philosophy of Rene Descartes. “In point of fact, the main responsibility for the spreading of materialism through the whole of the eighteenth century does not rest with Voltaire, and still less with Locke, but with Descartes.”30 In The Unity of Philosophical Experience, Gilson argued that “all attempts to deal with philosophical problems from the point of view, or with the method, of any other discipline will inevitably result in the destruction of philosophy itself.”31 Illustrating this principle, Descartes conceived his new philosophy “as a department of universal mathematics,”32 which “unlike the old [scholastic] one, would always go, not from things to ideas, but from ideas to things.”33 “[Descartes] had assumed the heavy task of giving a mathematical demonstration of the spirituality of the soul. The better to do it, he had begun by turning the old scholastic soul as the form of the body into a disembodied mind.” In the process, “Descartes had succeeded in convincing the greatest minds of his time, that scholastic philosophy had completely failed to prove the existence of God and the spirituality of the soul.”34 Yet “after destroying our natural belief in the existence of the world, Descartes’ mathematicism was to destroy our natural belief in physical causality.”35
Then “Locke began to threaten Cartesianism with the same ruin it had brought upon scholasticism.”36 But while overturning the Cartesian philosophy, Locke was turning the understanding of human nature back right-side up, according to Gilson. “By profession a physician, [Locke] naturally advocated what he himself once called ‘a historical, plain method;’37 that is to say, a method of observation and of description, chiefly dealing with ‘particular matters of fact,’ since such facts ‘are the undoubted foundations on which our civil and natural knowledge is built.'”38 Unlike Descartes’ Locke’s metaphysics “is very careful not to let its meta lose sight of its physics,” Gilson remarked.39 “External material things are the objects of sensation, and the operations of our mind within are the objects of reflection. And ‘such are to me,’ Locke concludes, the only originals from whence all our ideas take their beginnings.”40 On this point, Gilson noted, Locke’s answer to Descartes and his followers “is identically the same as that which had already been given by St. Thomas Aquinas, in the thirteenth century, to those who made man ‘altogether passive in the business of thinking.'”41
McPherson’s critique of Locke from the left failed for similar reasons— particularly ignorance of the scholastic philosophy and economic theory. McPherson also presumed the validity of Marxian theory, which as I noted earlier depends on Adam Smith’s erroneous “labor theory of value”—actually, a theory of production which claimed that all value is derived from labor alone, so that property owners’ contribution is necessarily exploitation of workers.
“Locke ‘justified’ private property from everyone’s right to his own person, which includes the right to one’s labor, which includes the right to the results of one’s labor,” Schumpeter noted. But “this argument has nothing whatever to do with a labor theory of value.”42
It is true that Locke seems to have exaggerated the contribution of workers to production, when he said (in Chapter V, 39 of the Second Treatise), that “of the products of the earth useful to the life of men, nine-tenths are the effect of labour; nay, if we will rightly estimate things as they come to our use, . . . we shall find that in most of them ninety-nine hundredths are wholly to be put to the account of labour.”43
But Locke wrote two centuries before reasonably accurate national income statistics or the theory of marginal productivity, which explained labor and property compensation before taxes and transfer payments. And he wrote three centuries before John W. Kendrick was able to quantify the relative contributions of tangible and intangible human and nonhuman capital, to show that workers’ “human capital” consistently contributes some three-fifths to two-thirds the value of total output, with the rest attributable to intangible and tangible nonhuman capital including natural resources.44
Despite this exaggeration, of worker’s contribution to production and income, Locke’s economic theory included labor, productive property, and natural resources, without reducing other factors to labor alone, like Smith. Locke’s essentially scholastic view is captured in his brief summary, “Nature gives the first of these, viz. paternal power to parents for the benefit of their children during their minority, to supply their want of ability and understanding how to manage their property. (By property I must be understood here, as in other places, to mean that property which men have in their persons as well as goods.) Voluntary agreement gives the second, viz. political power to governors for the benefit of their subjects, to secure them in the possession and use of their properties.”45 This makes it apparent that Locke differed from Adam Smith’s later classical outline, not only by maintaining the multifactor scholastic theory of production, but also its theory of distributive justice in marriage, family, and government.
“So, is Locke an individualist or a collectivist, a free enterprise conservative or a socialist?” Sigmund asked.46 He offered this judicious summary:
Thanks to the vast scholarship on Locke over the last half century and to the availability of so many original sources, we probably know more about Locke’s thinking than about the thought of any other great political philosopher. A review of the literature demonstrates that there is such a thing as progress in understanding of the classic texts of the history of political thought. In the last fifty years we have learned that Locke was not a covert Hobbesian or an apologist for unrestrained accumulation of property. The arguments that he was a hedonist, materialist, atomistic individualist, collectivist, deist, secularist, advocate of majority tyranny, and naive believer in human perfectibility have been refuted. His views on women and race have been seen as more nuanced than at first appears; distinctions have been made between his original intentions and later interpretations that invoke his name; and many disagreements of the past have given way to a new scholarly consensus because of access to new sources. We have a greater understanding of the continuities and discontinuities with the past represented in his thought, viewing him neither as the central figure in the quasi-Hegelian march of liberalism through history nor as the subverter of the Western tradition. More recently Locke scholarship has made us aware that Locke’s religiously based belief in the possibility of understanding, by the use of reason, God’s intentions for human moral conduct, individually and politically, provides a unity to his political thought, which modern secular commentators had seen as fully of contradictions.47
In contrast to the premise of Adam Smith’s classical and today’s neoclassical economic theory, expressed by Adam Smith in the Wealth of Nations with his assumption that “every individual . . . intends only his own gain,”48 “Neoscholastic” economics differs from neoclassical economics chiefly in retaining Augustine and Aristotle’s theory of gifts (and their opposite, crimes) as well as exchanges. This also makes the neoscholastic theory much more accurate.
The neoscholastic model is a powerful tool of analysis at every level: personal, domestic, and political. Because of the audience, I have spent much time on explaining why John Locke is best viewed as what Schumpeter called a “Protestant or laical scholastic.” But lest it be thought that (Neo-) Scholastic economics has only historical or abstract interest, let me deal in summary fashion with two practical applications that I treat at greater length in my book.
For example, updating scholastic theory refutes the famous claim by economist Steven D. Levitt, featured in Freakonomics, that the U.S. Supreme Court’s legalization of abortion in 1973 caused the crime rate to fall 15-20 years later, by eliminating potential criminals.49
In fact, there is a 90% current inverse relation between economic fatherhood and homicide. Legalizing abortion raised crime rates immediately and with a lag.
In the realm of political economy, I will also focus here on the Founders’ “theory of American public choice,” which is implicit throughout the history of American political economy. It has three basic premises: As James Madison put them, first, that “[j]ustice is the end of government”;50 second, that “different interests necessarily exist in different classes of citizens”;51 and third, that “the most common and durable source of factions, has been the various and unequal distribution of property”52—defining “property” broadly to include so-called “human capital”: “as a man is said to have a right to his property, he may be equally said to have a property in his rights.”53
Meanwhile, in Federalist Nos. 31 and 34, Hamilton effectively extended Augustine’s distinction between public and private goods, to further distinguish true public goods, which benefit all citizens equally, from what we might call “quasi-public goods,” which benefit many but not all citizens.54
Combining Madison’s development of Aristotle’s theory of faction with Hamilton’s distinction between true public goods and quasi-public goods, the theory of American political distributive justice implies that true public goods should be financed by equiproportional taxation of income from all sources of property, but quasi-public goods by taxation on the class of citizens that benefits.
The American National Election Studies (ANES) have surveyed American voters’ economic and demographic characteristics, the issues they consider most important, and their voting in national elections, since 1948 or 1952, depending on the question.55 The data confirm that the Democratic Party attracts voters whose income (before taxes andtransfer payments) is disproportionately labor compensation—the return on their investment in “human capital.” The Republican Party, on the other hand, attracts voters whose income is disproportionately property compensation—the return on investment in nonhuman capital. The family incomes of Independent voters, meanwhile, have been between those of Republican and Democratic voters.
The same chart indicates why, even though the dominant faction in each major party is constantly lobbying for preferential treatment—for labor compensation in the Democratic Party and for property compensation in the Republican Party—the failure of such policies to win voter approval has forced both parties’ leaderships repeatedly back toward policies that treat labor and property income alike.
Democratic vs. Republican partisan self-identification parallels the shares of labor vs. property compensation in voter family income before taxes and transfer payments. Yet partisan economic programs do not result from a kind of osmosis. Instead, they are initiated primarily by candidates for president, since the holder of that office will be at the same time the nation’s chief executive and (if an effective president) the undisputed leader of a major political party. The ANES data reflect the importance of this dual role if we view shifts in partisan allegiance over time and policies initiated by pivotal presidents. Pivotal presidential elections typically are won by small majorities or pluralities (e.g., Lincoln, Kennedy, Reagan), while successful first terms are rewarded by a step-change in voter partisan allegiance beginning with that president’s reelection.
Thus, at the start of the twenty-first century about 50% of American voters identified themselves as Democrats, about 40% as Republicans, and about 10% as Independents, and the latter identified themselves slightly more with Democratic than Republican positions on economic issues (while being more secular than either as measured by the rate of religious worship). Our empirical comparison therefore strongly rejects the predictions of the libertarian neoclassical theory of public choice (that voters’ interests should vary randomly and be unrelated to partisan ideology). At the same time, it confirms three important hypotheses of the Founders’ theory of American public choice: first, that voters’ interests and opinions vary systematically with the shares of labor and property compensation in family income; second, that voters respond positively to economic policies that treat labor and property income equally, notwithstanding the extreme reluctance of the dominant factions in both the Democratic and Republican parties to offer such policies; and finally, that the president, as the only official elected by a national majority of voters, plays a decisive role in the delicate balance of American political power, and presidents have achieved greatest political success by proposing and enacting such policies.
Conclusion. As historian of economics Henry William Spiegel noted of the “marginal revolution” that ended classical and launched neoclassical economics in the 1870s, “Outsiders ranked prominently among the pioneers of marginal analysis because its discovery required a perspective that the experts did not necessarily possess.”56 I don’t underestimate the time or effort it will take. But I predict that in coming decades, economists who understand the “human approach to economic behavior” of Aristotle, Augustine, and Aquinas will find full employment rewriting the neoclassical “economic approach to human behavior.”
John D. Mueller is the Lehrman Institute Fellow in Economics at the Ethics and Public Policy Center.
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1. Mueller (2010).
2. Other than Viner (1978), few academic economists so far have recognized the systematic differences between classical, neoclassical, and neoscholastic economics. An important recent exception is Aguirre, 2006; see also Aguirre, 2004. Also deserving special mention for insights drawn from scholastic theory are Worland (1967), Chafuen (1986), Chafuen (1993), Morse (2001), Piedra (2004) and Yuengert (2004). Aguirre and Morse have begun the necessary rewriting of the neoclassical economic theory of the family. Though similarly inspired by scholastic theory, Mueller (1996) was still formally neoclassical. Warning to theologians: “neoscholastic” has nearly opposite meanings in theology and economics. In 19th and 20th Century theology it essentially meant equating Aquinas with Aristotle and removing, Augustine’s fundamental insight that all persons (human or divine) are motivated by love for some person(s), and all personal love is expressed with a gift. In 21st Century economics “neoscholastic” theory restores that insight to its central role.
3. This change culminated a long campaign that George J. Stigler had started in 1955. “In 1972, he [Stigler] successfully proposed that the history of thought requirement be dropped at Chicago. Most other economics departments later followed suit…At the same meeting Stigler unsuccessfully proposed that the economic history requirement also be dropped.” Leeson (1997), endnote 62. Leeson (1997) was subsequently incorporated into Leeson (2001). In his campaign for the change, Stigler rejected Aquinas’ view that a scientist is defined by whether he understands his subject rather than having a degree. Stigler claimed instead that every science is continuously defined by a self-governing elite calling themselves scientists. From this sociological definition, Stigler said it was obvious that “one need not read in the history of economics-that is, past economics-to master present economics.” Instead, “the young theorist…will assume…that all that is valid in earlier work is present-in purer and more elegant form-in the modern theory,” and that “the history of the discipline is best left to those underendowed for fully professional work at the modern level.” But as the text indicates, the young economist who assumed this would be underendowed for fully professional work because he wouldn’t know his subject. (Stigler, 1969, reprinted in Stigler, 1982, p. 107).
4. Among prominent modern economists, only Jacob Viner (1978) seems correctly to have identified Augustine’s main technical contribution to economic theory, distinguishing separate scales of preference for persons (love and justice) and non-persons (utility), and both of these from the absolute metaphysical scale of being: Augustine deals “simultaneously with three scales of value, relating to order of nature, utility, and justice.” Viner (1978), p. 55.
5. In his otherwise magisterial History of Economics Analysis, Schumpeter (1954) incorrectly wrote that Augustine “[n]ever went into economic problems” (p. 72) and Aquinas’ economics was “strictly Aristotelian.” (p. 93). As we’ll see, Aquinas not only combined Aristotle’s contributions with but also subordinated them to Augustine’s, in both “positive” or descriptive and “normative” or prescriptive theory.
6. On Augustine’s theory of personal distribution, see Augustine (396/397) and Augustine (395/396), cited below; Aristotle’s social distribution (distributive justice): Ethics V,3 in Aristotle 1954 (350 BC); Augustine’s theory of utility (consumption): City of God XI,16 in Augustine 1984 (413-426-427); Aristotle’s theory of production of people and property: Politics I,4 in Aristotle 1962 [c. 350 BC]; Aristotle’s justice in exchange (equilibrium): Ethics V,5. In Aquinas, three of these four elements (the distribution function, the utility function, and the equilibrium conditions) are described (and the production function implied) in Aquinas 1993 [1271-1272]. Personal distribution: Book V Lectures IV-IX, pp. 293-318; social distribution: p. 294; the “equilibrium conditions”: pp. 294-296 and pp. 297-299, the “utility function” and analysis of money, pp. 312-315. The production function is described in his commentary on Aristotle’s Politics I, 1-3: Aquinas 2007 [1271-1272]. The same analysis is also scattered throughout his Summa theologiae in Aquinas 1981 [1271-1272], especially in his commentary on the seventh commandment.
7. According to Ross (1995, pp. 53-4), Adam Smith’s teacher Frances Hutcheson taught him from an annotated edition of Pufendorf (1991 ). As with Aquinas and the earlier scholastics, Pufendorf’s Protestant version of the natural law contains all four basic elements of economic theory, organized according to personal, domestic and political economy, and integrating prescriptive with descriptive theory by the Two Great Commandments. Personal distribution, Pufendorf, (1991 ), pp. 64-67; social and political distribution, ibid., p. 32 and pp. 61-63; utility, ibid. pp. 94-96; production of and by human and nonhuman factors, ibid., pp. 84-89; society organized around family household, ibid., pp. 120-131; justice in exchange or equilibrium equating product values and factor compensation, ibid., p. 31 and pp. 94-95. The Two Great Commandments integrating description and prescription. Ibid., 11-12. The fact that Pufendorf was a Lutheran who wrote a critical history of the Catholic Church and that his theories were taught at the Calvinist University of Glasgow demonstrates that the scholastic outline of economic theory was broadly known and accepted. Pufendorf was widely read in the American colonies and recommended by Hamilton (1775). Hamilton had penned two-thirds of the Federalist papers and as first Treasury Secretary would reject Smith’s specific economic advice in the Wealth of Nations to the United States (Smith (1966 ), Book II, Ch. 5); Hamilton (1791).
8. Smith (1966 ), Bk. IV Ch. 2; Vol. 2, p. 35.
9. Jevons (1871); Menger (1871); Walras (1874).
10. Schumpeter (1954), p. 184.
11. “You shall love…God with all your heart…” (Deut. 6:5) and “love your neighbor as yourself” (Lev. 19:18).
12. Aristotle (1932 [335-322 B.C.]), p. 2, p. 4, pp. 102-103.
13. Augustine (395-396), viii, 19, p. 146. Private goods are now sometimes called “rival” goods. The formulation “diminished by being shared” is from Augustine (396/397), I, 2.
14. Augustine (397), p. 398.
15. Augustine (395/396), p. 131.
16. To be more precise, love with both benevolence and beneficence.
17. Or rather, love only with benevolence but not beneficence.
18. Aristotle 1954 [c. 350 BC], V, v; pp. 117-122.
19. Aristotle 1954 [c. 350 BC], V, iii; pp. 112-114.
20. For example, the first three commandments of the Decalogue specify in greater detail how we should love God and the others how we should love of our neighbor; the rest of the natural law proceeds in turn from the Decalogue: all as a matter of reason, not just faith.
21. Augustine (396/397), I, 1.
22. Augustine (396/397), I, 28.
23. “If the responsibility for looking after property is distributed over many individuals, this will not lead to mutual recriminations; on the contrary, with every man busy with his own, there will be increased production all round,” Aristotle (1962 [c. 350 BC]), p. 63. Aquinas listed these two and added a third, greater order resulting from the efficient use of specialized knowledge: peace (“a more peaceful state is ensured to man if each one is contented with his own”); productivity (“every man is more careful to procure what is for himself alone than that which is common to many or all”); order (“human affairs are conducted in more orderly fashion if each man is charged with taking care of some particular thing himself, whereas there would be confusion if everyone had to look after any one thing indeterminately”), Aquinas 1981 [1271-1272], II-II Q66 A2.
24. Arendt (1967), p. 438.
25. Sigmund, P.E. (2006), xxvi-xxvii.
26. Sigmund, P.E. (2006), xxx.
27. Sigmund, P.E. (2006), xxxvi-xxxvii.
28. Schumpeter, J. (1954), 116.
29. Gilson, E. (1999 ), 138.
30. Gilson, E. (1999 ), 95.
31. Gilson, E. (1999 ), 121.
32. Gilson, E. (1999 ), 122.
33. Gilson, E. (1999 ), 135.
34. Gilson, E. (1999 ), 157.
35. Gilson, E. (1999 ), 137.
36. Gilson continues: “The parallel is so striking that I beg leave to quote Locke’s text in full: ‘The infinited eternal God is certainly the cause of all things, the fountain of all being and power. But because all being is from Him, can there be nothing but God himself? Or because all power originated in Him, can there be nothing of it communicated to his creatures? This is to set very narrow bounds on the power of God, and by pretending to extend it, takes it away.'” Gilson, E. (1999 ), 132n [Gilson’s note: J. Locke, Essay concerning Human Understanding, bk. 1, chap. 1, introd., no. 2, ed. J.A. St. John, 2 vols. (London, 1877), vol. 1, p. 129].
37. [Gilson’s note: J. Locke, On the Conduct of the Understanding, 13; cf. 25; in ibid. vol. 1, pp. 55 and 76-77.] Gilson continued: “His ambition was therefore to follow a moderate Empiricism; for even in his Empiricism Locke was a moderate. As he saw it, the problem came back to the steering of a middle course between two opposite errors. Some men lose the improvement they should make of matters of fact, by merely crowding them into their memories instead of lodging them in their understandings; others, on the contrary, having no patience with facts, ‘are apt to draw general conclusions and raise axioms from every particular they meet with.'” Gilson, E. (1999 ), 132n. “Locke’s own ideal was to shun both [errors], and that he did to the best of his ability. His celebrated Essay Concerning Human Understanding, published in the year 1690, remains a remarkable example of what can be done by a man who takes hints from carefully gathered material, and carries them to his intellect to be judged.” Gilson, E. (1999 ), 133.
38. Gilson (1952), 41.
39. Gilson, E. (1999 ), 134.
40. Gilson, E. (1999 ), 172. “In order to account for the possibility of abstract knowledge, Aristotle and St. Thomas [Aquinas] had conceived an elaborate scheme, according to which things themselves were credited with virtually intelligible forms, which the human soul was supposed to abstract from things by its active intellect, and to know by its possible intellect. The self-expression of an intellect thus made pregnant with a natural form was the concept: that which is conceived by, and is born of, a human intellect, when it is impregnated with things.” Gilson, E. (1999 ), 62.
41. Schumpeter, J. (1954), 120.
42. Locke, J. (1764 [1689)]. Accessed from http://oll.libertyfund.org/title/222/16269 on 2011-11-18
43. Kendrick, J.W. (1976) and Kendrick, J.W. (1994).
44. Locke, J. (1988 ). Second Treatise, XV, 173: Sigmund, P.E. (2006), 94.
45. Sigmund, P.E. (2006), xxvi.
46. Sigmund, P.E. (2006), xxxviii.
47. Smith, A. (1966 , Smith, Wealth of Nations, IV.ii.9, accessed on 19 September 2009
48. from http://www.econlib.org/library/Smith/smWN13.html#IV.2.9.
49. Donohue and Levitt 2001, 379-420 (cited hereafter as QJE). Earlier versions had been widely circulated, including Donohue and Levitt 1999 and Donohue and Levitt 2000 (hereafter cited as NBER). Levitt further promoted the claim in Levitt and Dubner (2005), pp. 117-144.
50. Madison, J. (1788), p. 271.
51. Madison, J. (1788), p. 270.
52. Madison, J. (1787), p. 44.
53. Madison, J. (1792).
54. Among true public goods, for which government is instituted, Hamilton, A. (1788) listed “the duties of superintending the national defence, and of securing the public peace against foreign or domestic violence” (p. 151), Accessed from http://oll.libertyfund.org/title/788/108619/2274086 on 2009-09-11 In Hamilton (1788a) he added also what might be called “quasi-public goods,” which benefit many but not all classes of citizens equally: “the encouragement of agriculture and manufactures.” Such public and quasi-public goods “will comprehend almost all the objects of state expenditure. ” ibid, 165, Accessed from http://oll.libertyfund.org/title/788/108625/2274123 on 2009-09-11
55. American National Election Studies (ANES), Stanford University and the University of Michigan, with funding by the National Science Foundation, http://www.electionstudies.org/, retrieved 4 September 2009.
56. Spiegel (1971), p. 507.