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Richard Epstein takes on papal economics
Religion & Liberty Online

Richard Epstein takes on papal economics

by Kishore Jayabalan • August 24, 2011

Noted NYU law professor and free-market advocate Richard Epstein has written a provocative piece titled “How is Warren Buffett like the Pope? They are both dead wrong on economics.” Here’s the money quote:

The great advantage of competition in markets is that it exhausts all gains from trade, which thus allows individuals to attain higher levels of welfare. These win/win propositions may not reach the perfect endpoint, but they will avoid the woes that are now consuming once prosperous economies. Understanding the win/win concept would have taken the Pope away from his false condemnation of markets. It might have led him to examine more closely Spain’s profligate policies, where high guaranteed public benefits and extensive workplace regulation have led to an unholy mix of soaring public debt and an unemployment rate of 20 percent. It is a tragic irony that papal economics mimic those of the Church’s socialist opponents. The Pope’s powerful but misdirected words will only complicate the task of meaningful fiscal and regulatory reform in Spain and the rest of Europe. False claims for social justice come at a very high price.

I blogged about Pope Benedict’s comments last week, and while I don’t disagree with Epstein’s main point, I wonder if he actually means to deny the importance of ethics in economics. The Pope wasn’t saying that there should be no fiscal or regulatory reform, but that such reform must consider future, and not merely present, well-being, which is actually the impetus for policies such as liberalizing labor markets. And unlike Warren Buffett, the Pope wasn’t calling for higher taxes on the rich.

In short, the Pope was making a larger ethical argument that can certainly include the much-needed reforms Epstein cites. Since the Pope isn’t an economist and doesn’t pretend to be one, we should listen to his moral teachings and try to incorporate them with sound economics, rather than disparage them as economically damaging. It is true that while Catholic social teaching stresses the importance and necessity of profits, far too many Catholic and other religious leaders neglect how profits are actually made and distributed – which Epstein briefly and usefully describes – and in this sense, it is far too easy for moralists to pit profits versus people. It would make more sense to try to relate how profit maximization can and often does contribute to the common good, but it can’t do so without ethical men and women who won’t lie, cheat and steal.

I’d like to think that both the Pope and Richard Epstein are right.

Kishore Jayabalan

Kishore Jayabalan

Kishore Jayabalan is director of Istituto Acton, the Acton Institute's Rome office. Formerly, he worked for the Vatican's Pontifical Council for Justice and Peace as the lead policy analyst on sustainable development and arms control. Kishore Jayabalan earned a B.A. in political science and economics from the University of Michigan, Ann Arbor. In college, he was executive editor of The Michigan Review and an economic policy intern for the U.S. Chamber of Commerce. He worked as an international economist for the Bureau of Labor Statistics in Washington, D.C. and then graduated with an M.A. in political science from the University of Toronto. While in Toronto, Kishore interned in the university's Newman Centre, which led to his appointment to the Permanent Observer Mission of the Holy See to the United Nations in New York. Two years later, he returned to Rome to work for the Pontifical Council for Justice and Peace as the Holy See's lead policy analyst on sustainable development and arms control. As director of Istituto Acton, Kishore organizes the institute's educational and outreach efforts in Rome and throughout Europe.

Posted in Business and Society, News and Events, Public Policy, VaticanTagged Benedict, catholic social teaching, Economic liberalism, economics, europe, free-market, pope, pope benedict xvi, Richard Epstein, spain, Warren Buffett

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