On April 34, the Lumen Christi Institute at the University of Chicago held its sixth annual conference on economics and Catholic social thought. These conferences bring together high-powered economists with bishops and archbishops and theologians for a day-and-a-half of presentations and discussion. That’s important, very important. Economists need to be enriched by the moral wisdom of the Churchand the Church needs the sober, real-world expertise of modern economic thinking.
The keynote lecture was given by Mary Hirschfeld. A Harvard PhD in economics who, after making a career for herself in technical economics went back to earn a PhD in theology from Notre Dame, Mary’s lecture was pitch-perfect.
She made an important point about economic theory: Formalism is not the same as reductionism. Formalism involves bracketing substantive judgments. At their best, modern economists are agnostics about what people should prefer and seek. Instead, they simply assume we will always maximize our preferencesand model social interactions accordingly.
This leads to formalism. Assuming preferences x, y, and z, economic transactions will tend toward a, b, and c, and so forth. This can frustrate theologians like me. We tend to think the most important question is what to prefer, what to seek. It’s love of God, and others in God that’s most important, not wealth or power or status. And society should be set up to encourage this vision of the good life!
True enough, but when we step back, we can see that it’s useful to have formal analysis of preferences and incentives, which is what economists provide. We need to be reminded of timeless truths: We get more of what we reward; we get less of what we punish. Economists have powerful analytical tools to extend these basic insights and show how our social and economic systems function to encourage and discourage all sorts of preferences.
But that’s not the same a reductionism, which means assuming that people invariably prefer wealth, power, and status. Unfortunately, as many contributors to the conference pointed out, economists adopt a secular, materialist outlook. They assumewrongly, as it turns outthat most people, most of the time prefer to be selfish.
The difference between formalism and reductionism illuminates two very different interpretations of the familiar saying that economics is the “miserable science.” The formalism provides us with sober realism. Our idealist dreams run up against the fact that all of us respond to incentives and disincentives. You can’t transform society by rhetoric alone! But the other sense of miserable is metaphysical. It flows from the tendency of economists to assume the worst about human beingsthat we’re utility maximizing machines, and our utility is exclusively a matter of pleasure.
As Hirschfeld helped me see, the true vocation of economics is formal, not reductive. We need sober realism about how social systems work, and that’s not the same as anthropological pessimism about human motivation.
Hirschfeld offered a second insight that struck me with especial force. It involved a distinction between our preferences for goods that mirror our ultimate good, and a view that sees them as a ladder. It’s a subtle, but important point. Let me explain.
I have a desire to write a book on theological interpretation of the Bible. In fact, I recently signed a contract to do just that. But as the Book of Ecclesiastes reminds us, of the writing of books there is no end. The effort I put into writing that book this summer won’t get me closer to contemplating Godmy true purposeat least not in the way that earning more money will get me closer to my goal of a secure retirement. Making more money is a ladder to financial goals. But my writing of a book is a mirror to my spiritual goals. Insofar as I’m committed to the truth and disciplined in pursuing it, the writing of the book will prepare my soul for contemplation of God. That’s what Hirschfeld means by mirroring.
This distinction is very, very important. Economists almost always assume the ladder approach. People seek higher wages for the sake of higher net worth. But this is rarely true for actual human beings. Most of us seek economic good for the sake of non-economic goods, which involves mirroring.
Let me give an example. After I graduated from college, I didn’t want to depend on my parents in order to pay my rent. I wanted to be economically self-sufficient. This was a significant economic motive for me. But why? As I look back, I can see that the financial self-sufficiency was a mirror of my real goal, which was to achieve adult responsibility, independence, and self-command.
The distinction between ladder and mirror is a powerful one. Each of us should be asking ourselves what our economic decisions are really servingnot as steps in a ladder to the next economic goal, but as a mirror of something higher. We should also be asking the same thing about economic policy. I’m a firm believer in the importance of economic opportunity, but why and toward what larger end?
There’s social scienceand then there’s economics, a discipline that has achieved a remarkable analytical rigor in recent decades. It has a great deal to teach us about how the world works. But as many economists testified during the course of the conference, economic theorizing is only as useful as its assumptions about human motivation. Here theology has a great deal to contribute. For the Church is an expert in what it means to be human. Which is why an annual conference on economics and Catholic social thought is so important.