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Making It Work in The Real World

March 1, 2022 | 1,455 words | Economics, Philosophy, Politics

The intellectual tradition to which I subscribe believes in an economics based on virtues such as justice and charity, instead of ‘laws’ like supply and demand.  The earliest guidelines for this preferred system can be found in the Acts of the Apostles, when the first band of followers were said to have shared all they had with one another, according to need.  This is what Thomas Aquinas (1225-1274) identified back in the 13th century as “distributive justice.”

Though he did his best work before capitalism kicked in and really took off, Aquinas had his finger on the pulse from its very beginning.  He was around just as the fabric merchants of Florence were inventing double-entry bookkeeping, which as we know was the single most important development in facilitating the international trade of their goods.

Right from the start Tommy A. could see that economics – especially big-time economics – is a branch of ethics.  Because all human action that proceeds from intellect and will must fall within its province.  (As opposed to “unthinking” actions like combing one’s hair, or scratching one’s beard). Since economic actions can’t help but proceed from intellect and will, they will naturally be subject to the requirements of moral philosophy, aka morality.

When we hear that onerous word ‘morality’ we automatically think of private action, specifically of the sexual variety.  Thou shall not commit adultery, and all that.  But Aquinas understands economic behavior is simply morality as expressed in the public arena.  It’s how a community and an entire country lives out a life of virtue together.  Or not.

 

This points up a key difference between the grand theoretical economics of justice and charity, with what we have now.  Our current economic system (i.e., capitalism) does not address the issue of living an ethical and virtuous life, which it deems outside its purview.  It focuses instead on maximizing productivity.

Now, productivity is surely a good thing.  But it should not be pursued to the exclusion of justice, or while violating justice.  That’s how social inequities are created.  In this vein Aquinas identifies three (3) types of justice:  legal, commutative, and distributive.

 

Legal Justice

This is preeminent among the moral virtues, serving as an analogue to supernatural charity.  That is to say, just as charity orders all man’s private actions toward God, legal justice orders all man’s public actions to the common good.

The idea of a ‘common good’ is a recurring theme in the intellectual tradition to which I subscribe.  Contrary to popular belief, it does not automatically result when individuals single-mindedly pursue their own private ‘good’, as the principle of enlightened self-interest asserts.  

Any civilized society should have the common good as its pre-eminent goal.  This can only be achieved when all citizens – the high and mighty, and the meek and lowly – order their actions to the overall good of the entire community.  That includes the ‘good’ of people we vehemently disagree with, as well as those with whom we get along famously.

 

Commutative Justice

Commutative justice requires ‘equivalency’ in exchange transactions, since neither party in an exchange wishes to suffer a loss.  This implies it is usually possible to determine an objective ‘just price’ of an object with a reasonable degree of accuracy.  Here it may occur to you ‘just price’ is diametrically opposed to our current yardstick of ‘what the market will bear.’  Aquinas is aware of the many variables that can play a role in determining what the just price might be in a given situation: the qualities of the item itself, current supply, current demand, etc.  And he cautions against trying for a greater degree of precision in this area than may be possible.    

That said, there is an objective basis to all exchange transactions that must be obeyed for justice to be served.  A seller may not charge whatever he or she likes, just because the buyer agrees to it.  

Usury

Traditional prohibitions against usury are simply an application of the principle of equivalency.  But this also means that, in certain clearly defined circumstances, a lender may be entitled to a greater return than the amount lent.  If a lender suffers a clearly identifiable loss in making a loan, he may legitimately request a greater amount in return to cover the loss incurred.  But again, the exchange should be governed by objective circumstance, not by the highest rate of interest to which a lender can persuade the borrower to agree.

Distributive Justice

Commutative justice by itself does not take into consideration the various needs, merits, and circumstances of people involved in economic transactions.  But this seeming deficiency is addressed by distributive justice.

Distributive justice is the virtue that directs goods be distributed by those who exercise authority over those goods, employing a proportional equality.  Now there’s as sentence that could stand to be unpacked in much greater detail.  But it boils down to this: Goods ought to be distributed according to the needs, merits, and other circumstances of the people receiving those goods.

The action of distributive justice is more fundamental than that of commutative justice.  Commutative justice requires only mathematical equality.  It carries out the distribution pattern of goods already established.  If this pattern is unjust, commutative justice will simply perpetuate the injustice.

 

This short overview is meant as only the briefest introduction to what Thomas Aquinas has to say on the subject of economics and morality, which he sees as not just linked, but inexorably intertwined.  Such an introduction is necessary because, sadly, his ground-breaking early work in this area has been relegated to the dustbin of history.  Today’s cutting-edge economic theorists don’t give him a first thought, let alone a second one.  Which is our loss, since the fundamental things still apply, even if quite a bit of time has gone by.

There are, however, a handful of relatively obscure academics who recognize Aquinas’s insight when it comes to exchange transactions, and are busy riffing on his favorite themes.  But what good does that do members of the general public, caught up as we are in the daily grind?  

Who pays any attention to an off-the-beaten-path academic, except maybe a few other obscure academics?  Okay, maybe their students listen.  If only for a semester or two, until those students move on to other subjects.  As for breaking out and reaching a wider audience, the writing of these earnest scholars, though admirably detailed, is often a little dry, and difficult for the lay reader to decipher.  Not that the average lay reader is inclined to even try.

While everyone could benefit from familiarizing themselves with some of Aquinas’ thought, the real trick is not so much in getting us commoners to pay attention – it’s the movers and shakers we want tuned in.  For it is they who must turn this idle chatter about justice and charity into action, and make it work in the real world.

In recent decades there have been a few encouraging signs on the path to ‘economic justice.’  Such as the boutique concept known as the triple bottom line, with the three Ps of sustainability.  And the Business Roundtable redefining the purpose of a corporation away from Milton Freidman’s famous proclamation of ‘profitability alone,’ to a broader understanding of how a robust economy must do more than reward stockholders.  It must also strive to meet the intrinsic needs of employees, customers, and the community-at-large.  All these extenuating categories of individuals deserve to be factored into the successful-business equation.

Then there is the flamboyant CEO of asset manager Blackrock throwing his considerable weight around at high-profile international conferences, expounding on how investors and businesses should work alongside government.  According to this wacky crackpot, such counter-cultural cooperation could reduce the need for political leaders to engage in onerous deficit spending to remedy persistent social inequities.

 

 

But let’s face it, such do-gooder stuff remains an uphill battle.  Because humanity’s default inclination has always been toward greed, avarice, and sloth.  Alas, this is often true even among those fortunate few blessed with an extraordinary degree of ambition and drive.  As a general rule, we humans tend to be rather nonchalant, shall we say, in our consideration of anyone outside our immediate circle of acquaintances.  Contributing to the problem is the way the self-actualized among us have been given a green light to power their way to the top, in an enlightened self-interested sort of way.  

Some not-so-pleasant things about human nature have never changed, down through history.  Then again, with a little prodding in the right direction, sometimes some of them do.  This sort of incremental transformation is known in the trade as turning over a new leaf.  If Ebenezer Scrooge can do it, so can you.

 

Robert J. Cavanaugh, Jr

March 1, 2022

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