Summer 2006 | Volume 16 | Number 3 Religion Inside this issue Keating Trust and Entrepreneurship • Morse Defending the Weak • Miller The Dividends of Social Capital • In the Liberal Tradition &Liberty Anders Chydenius • Sirico Fairness in the Market The Economy of Trust: An Interview with Kenneth Arrow Photo:with permission from Tony Hall Photo:with Tony permission from

A Journal of Religion, Economics, and Culture Editor’s Note

the teaching about weights and meas- pends upon? I’ll let you read Professor ures in the Gospel. Being honest in Arrow’s answer for yourself. measurement is the right thing to do in Our own Michael Miller, Acton’s direc- itself, but it also makes possible easy tor of programs, takes up the same ques- trade and free exchange; imagine the tion by revisiting an important book impossibility of having to verify that by Francis Fukuyama on the role of “so- every package contains the indicated cial capital” in economic development. weight of flour, or sugar, or salt. Our Fukuyama’s book is not new, but his ar- “Double-Edged Sword” this issue comes gument remains novel and important: from Rolf Geyling’s submission to the Without trust, markets don’t work well. Acton homiletics contest. And finally, I might draw your attention Do you have to be good to do well? The From the perspective of economics, not to our review of John C. Maxwell’s book relationship between virtue and worldly Scripture, we address some of these There’s No Such Thing as “Business” Ethics. success is one that is often discussed at same questions with Professor Kenneth Maxwell is one of the more popular au- our Acton events. Parents and teachers Arrow in our interview. For me, as a one thors in the field of business ethics try to inculcate good habits in their chil- time graduate economics student who which, judging by the number of new ti- dren and students, not only as an end in read Professor Arrow’s work, it was a tles in the bookstores, is a booming mar- itself, but also in the hope that doing thrill to interview him—and an honor ket. He makes the argument that ethics good in the spheres of character and for R&L to have a Nobel laureate in our in business is not terribly different from morality will lead to doing well in the pages. Professor Arrow shows how the ordinary ethics in everyday life. Doing worlds of work, entrepreneurship, and existence of markets at all, let alone their good is just plain good—for our souls, commerce. efficient functioning, depends upon a and for the economy. fundamental honesty and trust amongst In this issue of Religion & Liberty, we take buyers and sellers. The market needs look at that question from various points morality. And does the market encour- of view. Our biblical feature examines age or discourage the morality it de- Editorial Board Contents

Publisher: Rev. Robert A. Sirico The Economy of Trust: Kenneth Arrow...... 3 Executive Editor: John Couretas Trust and Entrepreneurship: Raymond J. Keating...... 4 Editor: Rev. Raymond J. de Souza Second-Career Clergy and Parish Business: An Interview with Jonathan Englert...... 6 Managing Editor: David Michael Phelps Acton FAQ ...... 7 Typesetting and Layout: Leslie Yarhouse The Dividends of Social Capital: Michael Miller...... 8 The Acton Institute for the Study of Religion and Liberty promotes a free so- ciety characterized by individual liberty and sustained by religious principles. Double-Edged Sword ...... 9 Letters and requests should be directed to: Religion & Liberty; Acton Institute; Defending the Weak and the Idol of Equality: Jennifer 161 Ottawa Ave., NW, Suite 301; Grand Rapids, MI 49503. For archived is- Roback Morse...... 10 sues or to subscribe, please visit www.acton.org/publicat/randl. The views of the authors expressed in Religion & Liberty are not necessarily In the Liberal Tradition: Anders Chydenius...... 14 those of the Acton Institute. Column: Rev. Robert A. Sirico...... 15 Book Review...... 16 © 2006 Acton Institute for the Study of Religion and Liberty.

2 Religion&Liberty The Economy of Trust An Interview with Kenneth Arrow

Kenneth Arrow

Kenneth Arrow of Stanford won the Nobel may have private information about dan- So there are two aspects to this relation- Memorial Prize for Economics in 1972, gers unknown to the insurer, there is said ship. One relates to deep concern for oth- and has served as president of both the to be “moral hazard” or “adverse selec- ers, and therefore touches upon the ends American Economic Association and the tion,” phrases in the last forty years that of economic activity. The other relates to International Economic Association. In have been imported into economic analy- the means of economic activity—the mar- 2004, he was awarded the National Medal sis from insurance literature. ket. Morality plays a functional role in the for Science, the United States’ highest operation of the economic system. There are various ways of handling these award for scientific achievement. A pio- cases. One of them is the existence of neer in the fields of social choice and wel- morality. It turns out that to a considerable fare economics, Professor Arrow has also “To get markets that extent, people spontaneously do avoid written in the fields of philosophy and taking excessive advantage of their inside work, you have to ethics. He was invited to participate in the information, their private information. preliminary consultations during the draft- keep the other person Part of it is an understanding that even ing of Centesimus Annus, and later the Pon- though I would gain by cheating, it would from trying to cheat tifical Academy of Social Sciences. He re- bring down the market if everybody did it. cently spoke with our editor, Father de you at every moment. Of course, there can be a problem if one Souza, in Rome. person says, “Well, if I did it, nobody will So morality is closely ______notice.” But then, if each person feels the related to the workings same way the whole thing breaks down. What can the world of religion and ethics con- Part of this behavior, though, is morality— of the market.” tribute to economics? the person doesn’t cheat because he thinks The market has deficiencies of a kind for it’s the wrong thing to do. To get markets Could it be argued that a certain amount of which ethics is a remedy. For example, the that work, you have to keep the other per- virtue of a basic kind—being honest, honoring world is really filled with private informa- son from trying to cheat you at every mo- contracts, providing accurate information—is tion. There is inside information on prod- ment. So morality is closely related to the required for a market to work? Is it a danger ucts and in contracts. In these situations, workings of the market. that prosperity can sometimes weaken those there is a very strong possibility of one per- virtues? To become prosperous you need to be The other point, of course, is that people son using this information to take advan- virtuous, but then does prosperity erode the do have aims in life, and not just the grand tage of the other. If this happens frequent- foundations of virtue? achievement of material gains. They’re ly, a market may not exist at all because concerned about others. This concern is I don’t know if it’s so much prosperity as the buyers know that they don’t know the result of moral codes, which are devel- the prospect of prosperity that’s danger- certain things, and that the sellers can ex- oped and adopted through religion or ous. When you see a large potential per- ploit them. Therefore, it’s not so much that through inculcation by other ethical sonal gain, you may tend to feel that your there are potential unfair gains, but that sources. Certainly family relationships are virtue stands in the way. Now there is al- such uncertainties about private informa- marked by sacrifice. People are engaged in ways the question of whether you can get tion can make the market inefficient. In these relationships, and therefore, they de- away with something or can cut corners. fact, if the problem is pronounced, the vote their energies to acquire goods, not You may find the pursuit of the material market may not exist at all. This is a situa- for the purpose of using them themselves, goods becomes an end in itself. But if tion that is studied particularly in insur- but for others. you’re a chess nut, you can also be a fa- ance contracts; when the person insured continued on pg 12

Summer 20062005 | Volume 1615 | Number 31 3 Trust and Entrepreneurship by Raymond J. Keating Getty Images

When it comes to business and the econo- neurs and investors need to trust that their my, the word trust has two—and to some property will be protected and that they “Businesses have to be people diametrically opposed—meanings. will have at least a shot at returns com- able to trust con- mensurate with their risk taking. Without Trust as a virtue in the marketplace means sumers.... If entrepre- having confidence in the honesty, reliabili- such trust, an economy stagnates. ty, and integrity of market players. It These foundational issues rely on whether neurs and businesses speaks volumes about our free enterprise we can trust government in its actions and produce goods and serv- system that a stranger can walk into a its self-restraint. Can we count on the gov- ices in honest fashion, small business, for example, that he has ernment to protect private property; main- never patronized before, and yet generally tain the currency; limit tax and regulatory they should not expect trust that he will be served well, dealt with burdens; enforce contracts; prosecute to be sued.” fairly, and will walk out the door with a fraud; and leave production, price, and product that does what it is supposed to do. profit matters to competition and ultimate- offer the best quality at the lowest price But trust also refers to a business organiza- ly consumer decisions in the marketplace? mean losses and eventually going out of tion whereby a group of trustees control Indeed, it is most often when government business. The free-market system of incen- one or more corporations. Trusts emerged fails to do its basic jobs, or reaches far be- tives and competition fosters trust in busi- in the latter half of the nineteenth centu- yond its core duties, that the economy fal- ness among consumers. ry, and were accused of assorted market ters. Weak property protections or the But we often do not think about the fact abuses, with antitrust laws emerging in re- government actually usurping private that trust must flow in the opposite direc- sponse. Ironically, trusts came to signify, in property, runaway inflation, destructive tion as well. Businesses have to be able to popular terms at least, big bad business levels of taxation or regulation, rampant trust consumers. What does this mean? breaking trust (in the first sense) in the crime, price controls, all rank as violations Today, it’s largely about abuse of the legal marketplace. of trust by the government that under- system. If entrepreneurs and businesses The virtue of trust is critical in a free-mar- mine a market economy. Unfortunately, produce goods and services in an honest ket economy, including for the risk taking since government is guided so often not by fashion, they should not expect to be sued. —that is, entrepreneurship and invest- principle but instead by politics, power, Yet that most certainly is not the reality for ment—that drives economic growth for- and pandering to various interests, politi- American businesses. Trust has been bro- ward. High degrees of trust must exist in cians often do break that trust. ken in recent times, as lawyers have un- the economic system, in the government, Fortunately, the private sector operates justly brought frivolous lawsuits against in businesses, and in consumers. under a different set of incentives. No mat- honest businesses, with the courts shame- fully allowing such lawsuits to proceed The entrepreneur needs to have trust in ter what one’s ultimate motivation is, con- sideration must be given to others. In and the government sometimes even par- capitalism itself. While no outcome is ticipating as a litigant, as when various guaranteed and the risks are formidable, order to meet one’s own needs and desires, one must first provide a good or service de- local governments brought lawsuits the entrepreneur must trust that he will against gun manufacturers. have a fair opportunity to pitch to in- manded by others. Failure to meet or cre- vestors and sell to consumers. Entrepre- ate new demands, to be efficient, and to According to Towers Perrin-Tillinghast,

4 Religion&Liberty Trust and Entrepreneurship

underpin society itself. No doubt, the rise should understand the sinful aspects of of secularism and spread of relativism have human nature, which are not suspended had their effects. in government, but instead often are em- A rejection of God also means a rejection powered through acquisition and concen- of his commandments, including the com- tration of power and by spending other mandment “You shall not steal” (Exodus people’s money. When it comes to trust 20:15). Martin Luther offered the follow- and the government, big is bad. ing explanation regarding this command- This brings us back to big in the market, ment: “We are to fear and love God, so namely, trusts. Were they really bad? An that we neither take our neighbors’ money understanding of how the economy actu- or property … but instead help them to ally works and market developments in improve and protect their property and in- the nineteenth century tell a different tale come.” With God and the moral impera- about trusts than what many commonly U.S. tort costs hit $260 billion in 2004. This tive wiped away, however, this view can believe today. equated to 2.22 percent of the GDP, com- be easily replaced by the cynicism of what In his massive 1996 tome Capitalism: A pared to tort costs equaling 0.62 percent of one can get away with without being Treatise on Economics, George Reisman ex- the GDP in 1950. That’s a 348 percent ex- caught by the customer, boss, shop owner, plained that given the limitations of corpo- plosion in tort costs as a share of the GDP. cashier, cop, or prosecutor. rate law at the time, trusts were the means And these costs do not include litigation Meanwhile, the phrase “I’ll sue” has for accomplishing mergers. What were the avoidance costs, ranging from unnecessary grown so commonplace that few seem to actual results? Reisman notes that “the and duplicative medical tests ordered by think twice about hauling others into trusts played a major role in improving the doctors as a defense against possible mal- court. St. Paul reprimanded members of efficiency of the economic system, and practice allegations, to the disappearance the church at Corinth for bringing lawsuits thus in raising the general standard of liv- of certain products or whole industries against each other (1 Corinthians 6:7). As ing… The era of the trusts was the era of from the marketplace because of high for responding to lawsuits, Jesus declared: America’s most rapid economic progress product liability costs. “If anyone wants to sue you and take and the transformation of the country into In a June 1, 2006, story about small busi- away your tunic, let him have your cloak the world’s foremost industrial producer nesses being the target of unsavory also” (Matthew 5:40). This does not mean and economic power.” lawyers, the New York Times noted: that we must suffer all abuses, but that So, the trusts of the nineteenth century ac- lawsuits should be the rare exception and Litigation costs for small businesses tually did not break trust in the market- forgiveness the rule. can prove disastrous, if not fatal, be- place. Instead, they were rather fantastic cause the companies survive on thin For many, the answers to receding lines of examples of entrepreneurs who served profit margins and lack the infrastruc- faith are expanding lines of government. consumers well. A sober assessment of ture to handle lawsuits, according to But government action is not enough to their impact points to fulfillment of the the Small Business Administration. An secure trust. Eventually the required gov- trust placed in entrepreneurs. average civil case can cost $50,000 to ernment enforcement in a society of lost In the end, Jesus instructs: “Trust in God” $100,000 to litigate through to a trial, trust would lead to a police-regulatory according to an October study con- (John 14:1). From that trust comes a love state, governmental abuse, and the loss of ducted by the Klemm Analysis Group and respect for our fellow man that creates freedom. Even many Christians, however, for the association. the trust necessary for us to fulfill our go down the path of seeing big govern- work, our callings, in this life. Lawsuit abuse most certainly represents a ment as the answer to so many problems breakdown of trust in the marketplace. that come with a loss of trust. Yet, the Raymond J. Keating is an economist, a colum- nist for Newsday on Long Island, and also When trust is shaken, we ultimately must psalmist wisely warns: “Put not your trust writes for OrthodoxyToday.org. take a look at the morals and values that in princes” (Psalm 146:3). Christians

Summer 2006 | Volume 16 | Number 3 5 Second-Career Clergy and Parish Business An Interview with Jonathan Englert Getty Images

In the 2002–2003 academic year, the jour- reer. And one component of a successful business of a parish? nalist Jonathan Englert followed five sem- career was, for him, time management. He There are practical steps that they take. At inarians through one year of seminary. used to tell me that having the corporate seminary, they don’t take Parish Business Their stories are told in Englert’s new career gave him the ability to handle the Management 101. But they do have fre- book, The Collar: A Year of Striving and Faith diverse stresses that he knew he was going quent, usually weekly, meetings or semi- inside a Catholic Seminary, published in April to be encountering as a priest. And it also nars in which people come from outside of by Houghton Mifflin. In a phone inter- was going to equip him with the ability to the seminary, people who are involved in view, Jonathan Englert spoke with R&L manage the parish finances and other ministry of some form. Sometimes they’re managing editor, David Phelps about the parish issues that come up that most priests, sometimes they’re nuns who run relationship between business sense and priests are going to have to handle. programs at parishes, and sometimes the needs of parish life. But do they make good priests? I would they’re lay people who run finance pro- ______say yes. Being a good business person is grams in parishes. So they encounter peo- The seminary in The Collar is what’s called a not necessarily essential to being a good ple who are bringing their life experience second-career seminary, a seminary for men priest, but it definitely gives them an edge or their work experience in parishes to the who have come to their vocation later in life. in certain areas. You have to remember, seminary so that they can get a sense of Some of the seminarians featured in the work, there is a strong managerial function in what they’re going to face. like the retired marketing executive Jim Pember- today’s priest. That wasn’t always the case. But I think you’re focusing on something ton, come from significant careers in the business Most priests now have to oversee large that is very important: the managerial as- world. What are these men looking for in the parish staffs and take up the slack to run pect of priesthood is going to become a lot priesthood, and do they make good priests? various programs. And that managerial as- more important as the numbers decline, pect is obviously well informed by having I think that at the center of that question is because the priest is going to have to man- had a corporate career where they were in age these large staffs that are going to be a mystery, right? What are they looking charge of large staffs and various projects. for? One of the reasons I called this book taking up a lot of the slack. Jim Pemberton The Collar was because of the sense of these How do seminarians prepare to address the definitely felt it’s better to be a good man- men being collared, being brought to a profession, being brought to this new life, and not always willingly. It’s something The Collar that they sometimes struggle with. [But ultimately,] I think they are looking to serve. Jim Pemberton is a good exam- by Jonathan Englert ple. He knows that he has all of this expe- Houghton Mifflin rience—life experience, but specifically 320 pp. Hardcover $25.95 business experience. He has four decades of working in a corporate environment, ISBN 0-618-25146-4 working on deadlines, working on large logistical planning, having a successful ca-

6 Religion&Liberty Acton FAQ “Being a good business person is not necessarily How does Acton communicate its ideas to the essential to being a good world? priest, but it definitely As a research and educational institution, the Acton Institute has always held gives them an edge in that its advancement of a “free and virtuous society” must reach the widest pos- certain areas. You have sible audience to be effective. You don’t change the world by shutting yourself to remember, there is a up in an ivory tower. strong managerial func- You may think of Acton’s research, publication, and communications efforts as tion in today’s priest.” a spectrum that, on the one side, starts with serious, well respected academic work and, at the other, reaches into the popular media of newspaper com- mentaries, talk radio, and online media such as Web sites, blogs, and podcasts. ager than a micro-manager. He came from Video will be an increasingly important tool for Acton in the future. business. He thought that if a young guy All of Acton’s intellectual work is based on the firm foundation built by the in- came into the priesthood, for example, stitute’s research department and its flagship publication, The Journal of Markets who didn’t have this business background, & Morality. Other communication vehicles include books, monographs, policy he might feel obliged to do everything, to run every aspect and be totally in control papers, Religion & Liberty, the Acton Notes monthly bulletin, and the weekly on- of every aspect of the parish work, even line Acton News & Commentary newsletter. Acton understands its various audi- though it would be beyond his expertise. ences, and reaches them where they are. And Jim used to say, “Well, as a manager Why is this important? Because the “war of ideas” on religious, economic, and with all this experience, I know that there social issues is waged on many fronts. And very often, media such as television are things beyond my expertise. I know and film produce the most lasting changes in popular opinion and cultural at- that there are things that people are going titudes. That’s why left-liberal types like Michael Moore and Al Gore are in the to do better than I can, and those people documentary film business today. should be in those positions to do those things.” His idea was that if in his parish he Writing in 1949, the economist F. A. Hayek pointed out that socialism was a had a parishioner who wanted to get more movement launched by an elite group of intellectuals who worked on newspa- active in the church, a CFO or an account- pers and journals and communicated through speeches to convince the masses ant for example, he’s probably going to of the need for their program. “The character of the process by which the views want to tap him for some fairly important of the intellectuals influence the politics of tomorrow is therefore of much more role in dealing with the parish’s finances. than academic interest,” Hayek said. He saw that [his managerial experience] Today, the ideas that advance freedom—or hin- gave him the ability to screen people, to fig- der it—are advanced globally and instanta- ure out where they’re going to do the best neously with the latest information work so that he would be free to get to the hospital, say Mass, and hear confessions. technologies. Acton is working to ensure that its message, needed now more than ever, will be heard in that raucous market- place of ideas.

Kris Alan Mauren Executive Director

Author Jonathan Englert

Summer 2006 | Volume 16 | Number 3 7 The Dividends of Social Capital by Michael Miller

Why have so many countries been unable which explains their large private sectors while not explicit, Smith presupposed a to fully adopt a market economy? The an- and much of their economic prosperity. Christian society of shared values as the swer is complex, but there are certain basic France, Italy, and Latin America on the foundation of the market economy. His fa- conditions that must be met for an econo- other hand are “familistic” societies where mous butcher, baker, and brewer example, my to become free and prosperous. Two trust outside of kinship is quite low. A meant to illustrate division of labor and the that are non-negotiable are private proper- country without a high degree of social positive power of self interest, only works, ty and the rule of law. Without these a capital finds it more difficult to collaborate of course, if the butcher knows that the market cannot exist. An educated work- and organize complex enterprises. Where baker is not a scoundrel. If the baker is not force, low taxes, and minimal regulation trust is lacking, the cost of doing business to be trusted, the cost of doing business in- are also helpful. increases and opportunities are lost. creases. The butcher has to hire a lawyer to make sure that a contract is right, spend But there is another element that is crucial Fukuyama argues that while the neo- extra time and money reviewing the order, but often overlooked—it is what has been classical model of economics is generally and possibly appeal to the legal authorities called “social capital,” specifically the exis- correct, it ignores the importance of for recourse. tence of trust. Francis Fukuyama makes culture—and I would add religion and a this case in his 1995 book Trust: The Social proper vision of the person. But while All of these are what economists call trans- Virtues and the Creation of Prosperity. modern economists often miss this area, action costs. The higher the transaction the classical economists from the late costs, the higher the cost of doing business. Why are trust and social capital so impor- Spanish scholastics in the fifteenth and six- But there are other losses that are hard to tant for economic success? In a modern teenth centuries to Adam Smith under- measure but no less real. Low trust and economy based on ideas, organization, and stood that a market was composed of higher transaction costs mean more lost technology, a key element is human inter- human persons acting together. The opportunities altogether. Widespread en- action—and here trust is essential. If a cul- scholastic theologians and philosophers de- trepreneurship cannot flourish in a society ture places importance on virtues that help veloped modern market price theory in the where trust is lacking because the risk is create prosperity—honesty, fairness, per- context of ethics and moral theology, and increased. sonal responsibility, the importance of hard work, and respect for law—it creates an at- mosphere of trust, which engenders spon- taneous and voluntary collaboration and Trust: The Social Virtues and creates the conditions where business and The Creation of Prosperity entrepreneurship can flourish. If these virtues are not esteemed, or if trust exists only within familial or tribe relationships, by Francis Fukuyama it is difficult to organize and create busi- Free Press nesses, and there is a greater need for the state to organize and maintain order. 480 pp. Paperback $16.00 Fukuyama gives the U.S., Germany, and ISBN 0-684-82525-2 Japan as examples of high trust societies,

8 Religion&Liberty Ten years ago Fukuyama warned that an increasingly individualist and litigious Double-Edged Sword: America would weaken its long-term eco- nomic possibilities. A sustainable free mar- The Power of the Word ket cannot rest on an ethical framework that makes truth relative and exalts indi- vidualism. A society composed of “eco- nomic man” who cares for nothing but Deuteronomy 25:13–16 himself and his own consumption cannot long support a free economy. Strong fami- “You shall not have in your bag two kinds of weights, a large and a small. You shall not have lies and a network of voluntary social rela- in your house two kinds of measures, a large and a small. A full and just weight you shall have, tionships such as churches and service or- ganizations are needed to maintain the a full and just measure you shall have; that your days may be prolonged in the land which the social and organizational fabric of the free LORD your God gives you. For all who do such things, all who act dishonestly, are an abomi- society. nation to the LORD your God.” Deuteronomy 25:13–16

Many view America as an individualist This instruction is found in a large section of legislation given to the people of Israel as country, but as Fukuyama (and Tocqueville part of the covenant God initiated with them. In Deuteronomy, a code of behavior is before him) correctly points out, this is his- torically incorrect. While they are anti-sta- set forth that articulates the nation’s distinct tist, they are in fact more communal and relationship with God. It is among such collaborative than the French, Italians, or Yet interspersed between these laws dealing Canadians, engaging in more voluntary as- [detestable] company sociations and private charities. America is with major issues, we find several regula- that the law places a land of entrepreneurship and private en- tions regarding what would be considered one who cheats an- terprise not because it is composed of rather commonplace occurrences. This par- atomistic individuals but because of Amer- other out of a few ticular instruction deals with the basic flow icans’ propensity to trust one another to cents in business.ess solve their problems and not to rely on the of commerce. In the world of Deuteronomy, state to do it for them. An individualist and most every transaction in the marketplace relativist America would not long be a involved using balancing scales with standardized weights to measure out quantities of prosperous one. goods for buying or selling. It could be very easy to increase profit margins surrepti- Social capital is also important for business tiously by altering the weight of one’s stones, using a heavier stone to get more for one’s ethics. A culture that values the social money when buying and a lighter stone to give customers less for theirs. Obviously this virtues results in decreased infringements is not ethical, but one might question how much might be gained by such a practice as because there are entire networks of rela- tionships and shared values that frown on the fraudulent stones had to be close enough to the standard weight to convince the such behavior, creating an atmosphere of other party that the transaction was legitimate. The gains per transaction probably positive peer influence, which is more ef- amounted to a very incidental amount, making this the kind of offense that would give fective than the law—an outside authority. rise to some head-shaking with the acknowledgement that, while wrong, it is not that Fukuyama has a powerful argument that big a deal, as many might have done it. requires our attention. Those cultures with high levels of trust have an economic ad- But it is important for us not to rationalize such infractions, because Scripture assigns vantage. In other words, economies benefit them gravity. Verse 16 does not say: “It’s not that big a deal”; instead it says: “all who if the market can rely on the virtue of its do such things, all who act dishonestly, are an abomination to the Lord your God.” This participants. is strong language—an abomination? There are other practices in Deuteronomy that are Michael Miller is the director of programs at the described as abominable, practices with a more readily identifiable detestable nature Acton Institute. such as sorcery, idolatry, and offering children in pagan rites. It is among such compa- ny that the law places one who cheats another out of a few cents in business. Such an action is an abomination to God, it is repugnant to him and an insult to his character if one names his name, yet engages in this practice. —A submission by Rolf Geyling.

Summer 2006 | Volume 16 | Number 3 9 Defending the Weak and the Idol of Equality by Jennifer Roback Morse

Jennifer Roback Morse The Acton Institute has begun a series of lec- creates deep and subtle problems. While our survival. If we are lucky, we live long tures—eight in Rome and one in Poland—cele- the state is a necessary institution, it is a enough that we again need the assistance brating the fifteenth anniversary of Centes- limited institution, incapable of solving of others just to manage our basic bodily imus Annus, Pope John Paul II’s landmark every human problem. By replacing God needs. In between, all of us get sick some social encyclical. The lecture series started in Oc- with the state, socialists will almost cer- of the time and temporarily need help. tober of 2005 and will continue through 2007. tainly over-empower the state and take Any of us could get a bump on the head For the next year, Religion & Liberty will fea- even its legitimate functions to illegitimate that would render us permanently depen- ture excerpts from these conference lectures. extremes. dant on others. The following is taken from Catholic Social In Leo XIII’s words from Rerum Novarum, The progression from infancy to adulthood Teaching on the Economy and the Family: “Let it be laid down in the first place that a is not some freak occurrence that could be an alternative to the modern welfare state, condition of human existence must be somehow eliminated by proper social en- delivered on January 21, 2006, at the Pontifical borne with, namely that in civil society the gineering. This is the story of every human North American College in Rome. lowest cannot be made equal with the life. Aging, accidents, and illness can never highest.” Leo understood that creating be eliminated either. Yet our modern People unfamiliar with Catholic social economic equality was a fool’s errand. teaching may be surprised to learn that the While it is true that some forms of in- church has consistently condemned social- “The church’s alternative equality are unjustified, a certain amount ism. The Catholic Church has never em- of inequality is inevitable and even justi- to the idolatry of equali- braced “equality” the way socialism has. fied. By making equality the summum ty is the defense of the The church is not indifferent to the poor. bonum of society, socialists take the noble Rather, the church proposes an alternative weak.” ideal of compassion for the poor and twist principle for helping them. Instead of it into a form of idolatry. “make everyone equal” as a guiding prem- world, it is safe to say, is profoundly un- ise, the church proposes “defend the The church’s alternative to the idolatry of comfortable with weakness and depend- weak” as the appropriate posture toward equality is the defense of the weak. As ence. We fear it in ourselves. We tend to the poor. These approaches have different John Paul said in Centesimus Annus, “Leo distance ourselves from it in others. factual foundations and distinct policy im- XIII is repeating an elementary principle of plications, especially with regard to soci- sound political organization, namely, the Jesus told us, “The poor you will always ety’s most basic institution, the family. more that individuals are defenseless with- have with you.” It is not possible to elim- in a given society, the more they require inate completely all differences in the ma- Beginning with Leo XIII and continuing the care and concern of others, and in par- terial conditions of every person in society, until John Paul II, the church has consis- ticular the intervention of government au- as the socialists propose. At the same time, tently condemned socialism. Leo XIII real- thority.” the continued existence of the weak de- ized that the godlessness of socialism is not mands a continual response from the an incidental flaw in an otherwise noble Focusing on the weak is realistic in a way Christian. ideal. Godlessness is at the core of the ide- that focusing on inequality is not. All of us ology because socialism created idols out begin our lives as helpless infants, com- It is now abundantly clear that “defend the of the state and the idea of equality. This pletely dependent on the care of others for weak” is a very different ethical mandate

10 Religion&Liberty Defending the Weak and the Idol of Equality

political equality is the drive to make men Catholic social teaching insists on support- and women equal. This essentially political ing the family, economically and political- impulse has poisoned relationships be- ly. Catholic social teaching defends the tween men and women inside the family family as a pre-political reality independ- and in the public square. Modern women ent of the state and with claims against the believe they do not need husbands for fi- state. In Centesimus Annus, John Paul reiter- nancial support or any other kind of help. ates this point, originally made by Pope Young parents seem surprised to find that Leo XIII in Rerum Novarum. “ mothers and fathers are not truly inter- He (Leo XIII) frequently insists on nec- changeable. Society is on the verge of essary limits to the state’s intervention claiming that gender is an irrelevant cate- and on its instrumental character, inas- gory for marriage, for child-rearing, or much as the family and society are even for sex itself. In other words, there prior to the state, and inasmuch as the from “create equality.” For equality is not a are voices in our modern culture trying to state exists in order to protect their stand-alone objective that always and convince us that we ought to be indifferent rights and not stifle them. everywhere legitimately takes priority. as to whether we prefer a same-sex partner The ethical principle of defending the weak Equality requires a referent. The political to an opposite-sex partner. This is truly places distinct demands upon us as individ- system must make some judgments about equality gone out of control. uals and as a society. The Catholic vision who must be equal to whom, for what respects the family as the great pre-political purposes, and in what contexts. “Throughout the world social institution, and marriage as the most As the socialist impulse has unfolded where equality has been basic unit of social cooperation. The family throughout the industrialized world, many made into an idol, power- can accommodate the inherent inequali- people have been necessarily excluded ties across the generations and across the from its concern with equality. The young ful political forces operate sexes. Inside the family, the strong are nat- cannot be made economically equal to the to completely exclude urally inclined to take care of the weak. old, so the young are excluded from the these people from the By contrast, the state plants itself firmly labor market. The non-voting immigrants against the organic reality of the family. need not be made equal to the native-born most basic protections of The state demands the right to redefine the citizens. family in the name of equality. Equality for The Catholic vision of the family sees men Even more chillingly, the physically weak women means unlimited legal entitlement and women as complementary to each and incapacitated can never be made equal to abortion. Marriage equality has come to other, not as competitors with each other. to the strong. Throughout the world, mean any combination of adults, partici- Marriage is inherently a gender-based in- where equality has been made into an idol, pating in any form of sexual activity, for stitution, because it helps men and women powerful political forces operate to com- any length of time, with or without the bridge the natural differences between pletely exclude these people from the most possibility of begetting children. them. Marriage is the school and house- basic protections of law. In the Nether- hold of love. Within the household, men Equality for adults means misery for the lands, “voluntary” euthanasia—which is and women learn to help each other, to co- weak. It is time to abandon the quest for not always voluntary—relieves society of operate with each other, and to under- equality. Defending the weak should be the ill and the old. And of course, the in- stand each other. This is a very different vi- our guiding Christian principle. fant in the womb has been excluded in sion than the image of husbands and wives many secularized countries from any legal Jennifer Roback Morse, Ph.D. is a senior fellow at each other’s throats, in competition for protections whatsoever. in economics at the Acton Institute. She can be dominance and power inside their own contacted through her Web site, www.jen- One of the most destructive applications of homes. nifer-roback-morse.com.

Summer 2006 | Volume 16 | Number 3 11 Arrow interview continued from page 3

ments; they are not meaningless state- ments, but just one-sided or incomplete. For example, some of the claims of eco- nomics about motivation, if correct, are applicable in other fields, and that was al- ready pointed out when the utility theo- ries were being developed in the 1880’s and 1890’s.

We see, by the way, that today psychology is invading economics—the whole field of behavioral economics. I believe that sociol- ogy should play more of a role in econom- ics than it does. The way people behave in economics is partly influenced by how other people behave. It’s easy to point out examples, but it’s not so easy to construct natic about playing chess in a way that gets ods of economic growth any country has a broad theory. in the way of doing good deeds. ever experienced. They were pursuing ma- terial goods very, very vigorously. The pur- You raise a different question when you Beyond a certain point, material goods can suit of material goods may have very little ask if things like metaphysics, theology, be symbols of success, but they can’t really to do with satisfaction. and moral philosophy play a role. Now improve your life very much. Yet some- you’re coming to the question of the realm how these things have a way of becoming On the other hand, divorce shows up as a of value versus the realm of description. necessities. This is a real phenomenon. A big negative factor in measuring happi- It’s clear there are value questions of how number of psychologists and economists ness. Material possessions play a role in one “ought to act” that are not going to be influenced by them have been arguing happiness, I think, but it’s just a role. answered by a description of how people that happiness, whatever it may mean, is The danger of excessive reliance on the do it. Economics is not going to answer all relative to a previous standard of living. market, excessive perception of the mar- that question because it can’t answer it. It’s Relatively speaking, if you ask people, ket, is that it will obscure these other, just a logically different thing. what they need to be thoroughly happy or clearly more fundamental courses of hap- how much income they need to really be We draw on religious sources about how piness or unhappiness. If you spend all thoroughly satisfied in an economic sense, one should act. We used to have, in the your time at this instead of building up they will typically answer 20 percent more Middle Ages, very elaborate regulations of your relationships, there can be a real price than they’ve got now. commerce—what was permissible com- to pay. mercial behavior and what is not permissi- So while it’s hard to define these terms and A temptation of any academic discipline—espe- ble commercial behavior—derived from some economists don’t like to make com- cially in the social sciences, but also in the natu- parisons to which they can’t give definite ral sciences—is to explain more than the disci- meaning, the typical thing you find is that “Material possessions play pline is competent to do. Are there areas of eco- rich people are happy and poor people not nomics today that you think are overstepping its all that much less happy. If you compare a role in happiness, I limits? And then, to what degree does the world countries, the average happiness in poor think, but it’s just a of metaphysics, philosophy, and theology point countries is the same as that in rich coun- out that there are areas beyond the market, be- tries. (I’m not talking about extremely role.... The danger of yond economic analysis? poor countries.) excessive reliance on Well, I think you’re asking two quite dif- One of the most striking things to me is the market ... is that it ferent questions. One is the use of eco- some surveys [that measure happiness] nomic explanations for things that you will obscure these other, that were done in Japan every few years, think of as part of other social science and, if I remember the dates, the answers more fundamental fields. It’s true that economists do have in 1958 to 1988 were roughly the same. If something to say about other fields. Here courses of happiness or you draw the curves relating happiness to the problem is that you get one-sided income, you could not tell them apart. unhappiness.“ views—namely the economic perspective Now that was one of the most rapid peri- alone. You are not getting irrelevant state-

12 Religion&Liberty can be achieved by using intermediate in- you institutionalize that? How do you get “Religion calls for a sense stitutions. people to take these general beliefs and translate them into their own actions? For instance, we have such institutions for of responsibility to the And that’s why collective actions of all lev- distributing resources—what we call char- els play a role. other, which the mar- itable groups. But such institutions also ket, in principle, doesn’t exist for agitation to bring matters to the Like most economists, I find the market a public concern, changing people’s values. I very powerful instrument for achieving ef- have.... Those values think the church is playing this major role ficiency. We’re not wasting things. We’re have to come from else- in dissemination of these values and judg- not wasting resources. So whatever gets ments and forming a focal point for them. there, gets there. Nevertheless, there are a where, and this is what lot of limitations. For instance, there are Your Jewish faith has a rich tradition of moral intrinsic limitations like the kinds I is emphasized by Christ- consideration, both moral philosophy and sketched out earlier because of the exis- moral theology, and a very sophisticated Biblical ian and Jewish thought tence of private information. vision of what the economic life of the Chosen about the economy.” People would look like. For someone who is at Religion calls for a sense of responsibility the very peak of his field in economics, what les- to the other, which the market, in princi- sons have you picked up from nearly twenty ple, doesn’t have. In fact, the markets do the laws on usury, the apparent prohibi- years of frequent contact with Christians, and have it because they need fairness and ef- tion on interest, [etc.] And the same thing particularly Catholics, thinking about these ficiency to some extent. Yet the logic of is happening in Islamic law now, according things? markets means that such considerations to things I’ve read. There is the so-called have to be modeled as totally self-regard- Well, I’ve been really concerned about Islamic banking, which claims not to ing, and people are not totally self-regard- ethical questions for a long time. I general- charge interest—but does, as had hap- ing. It’s helpful to model them in that way, ly try to write things I feel sure about. As I pened in the Christian world also. I’m not going to deny that; but it’s not the get older, I’m a little more speculative and set of values by which you want to live. Does social analysis today neglect the question of start to stimulate other people to think Those values have to come from else- the intermediate, private charity collective action more about it. I think one of the critical where, and this is what is emphasized by through churches, through families—these things is the idea of what’s called tzedakah, Christian and Jewish thought about the kinds of transactions that are not strictly speak- loosely translated as charity. It’s the idea of economy. ing private and not for state? responsibility for the welfare of others. Of I don’t want to say this is a void field, but I course, then the problem comes, how do think the tendency when anyone thinks of a policy is that either individuals should do it for themselves or the state should do it. I’m struck by the fact that there are a num- ber of situations where the policy expert doesn’t understand that there are other in- stitutions. There are many cases where these other institutions are probably supe- rior, because the state has constraints on its actions, even the ideal state, leaving aside corruption and things like that. The state has to treat people in some uniform way. You don’t want the state to start making too many distinctions or the potential for corruption or unfairness arises. So you have rules. Well, these rules tend to be broad and not very applicable to particu- lars. They don’t take account of the indi- vidual case. In a way, you don’t want them to, but that means that their effectiveness is reduced and something more flexible

Spring 2006 | Volume 16 | Number 3 13 In the Liberal Tradition

Anders Chydenius [1729–1803]

“The more opportunities there are in a Society for some persons to live upon the toil of others, and the less those “Every individual spontaneously tries to others may enjoy the fruits of their work themselves, the find the place and the trade in which he more is diligence killed, the former become insolent, the can best increase National gain, if laws latter despairing, and both negligent.” do not prevent him from doing so.” Known as the Adam Smith of the North, Anders Chydenius laid out his economic prescription for mercantilist [Sweden- Finland] in The National Gain in 1765, suggesting a concept of nent of freedom and enterprise—Chydenius was a renaissance spontaneous order eleven years before Adam Smith in The man in the Age of Enlightenment, careful to root his ideas on Wealth of Nations: “Every individual spontaneously tries to find human dignity in divine providence. Chydenius asked: the place and the trade in which he can best increase National Would the Great Master, who adorns the valley with flowers gain, if laws do not prevent him from doing so.” and covers the cliff itself with grass and mosses, exhibit such a

For Chydenius, freedom and diligence were the foundations of great mistake in man, his masterpiece, that man should not be an economically prosperous nation; direction from the govern- able to enrich the globe with as many inhabitants as it can sup- ment only gummed up the gears of a natural system of human port? That would be a mean thought even in a Pagan, but blas- interaction. phemy in a Christian, when reading the Almighty’s precept: ‘Be fruitful, multiply and fill the earth.’ Thus the wealth of a Nation consists in the multitude of The National Gain, written originally for the Stockholm Diet in products or, rather, in their 1765–66, caused Chydenius’s own party to exclude him from value; but the multitude of future representation. Chydenius retreated into his parish products depends on two work until 1778 where once again he challenged the Diet with chief causes, namely, the his advocacy for workers’ rights, later set down in a letter to the number of workmen and Royal Economic Society: their diligence. Nature The Creator only put people to work, but did not stipulate the will produce both, type of work each of them should do. Stealing was the only when she is left un- thing that the Almighty prohibited, but no target was set for trammeled … If either diligence, how far it was allowed to go or what sort of things is lacking, the fault such diligence produced. He did not tie anyone to the plough should be sought in nor did He tie anyone to trade guilds but merely when and the laws of the Nation, hardly, however, where each one perceived how best to make a living where he in any want of laws, but in the impediments that are put in the could better himself. way of Nature.

Pastor, politician, writer, doctor, scholar, scientist, experimenter in plant and animal husbandry, economist, musician, propo-

14 Religion&Liberty Rev. Robert A. Sirico

Fairness in the Market

How, in a market setting, can you be high-price items have very low value when considered in a assured that you are getting a good moral sense. But the job of the market is not to provide an ob- deal? We all know people who dis- jective measure of moral worth, but merely to produce and al- trust every price, believe that most locate demanding goods and services with an eye to efficiency. business people are concealing some- The price provides us a signal to conserve resources. We waste thing important, and have a vague suspicion that every enter- resources that are low in price, while we conserve resources prise is a racket. that are high in price. We don’t often think about the extent to These people might have a bias, but they do serve a market which our lives are managed with such signals in mind. But if function. Business must always be aware that its promotionals you travel to less developed countries, you find that what and marketing plans must be balanced against the need to in- Americans routinely toss out sells for a very high price in poor spire trust always. It is a business asset like no other, and those countries. who foster it thrive, while those who do not lose out. Does this make Americans wasteful or even immoral, as many But we need to be aware that the price of goods on the market commentators claim? Not as a general rule. What is conserva- is not fixed by some eternal law but rather by fluctuations tion and what is waste can only be measured by the price sys- based on supply and demand. There is nothing in the structure tem in a market setting. As economies develop, the prices of of the universe that makes paper towels pennies a piece, dish necessities fall, provided the system is working as it should. towels a dollar, and linen tea cloths as high as fifty dollars. These prices are a result of the item’s relative scarcity and its re- “The market economy is driven by dy- lationship to the intensity of consumer interest. namic change and innovation...it be- What is a good deal? It is the point at which buyer and seller comes all the more important, then, that agree and exchange property titles. That is all. That is why the our sense of what is right and true be medieval theorists who looked into this matter concluded that fixed with an eye to eternal concerns.” the “just price” and the “just wage” are identical to the market wage provided there has been no force or fraud and good faith is being shown by all parties. Actually the Bible is filled with stories that involve fluctuating prices. I’m thinking of the parables of the laborers in the vine- Consider what the old classical economists termed the “dia- yard, the pearl of great price, and the treasure in the field. All mond-water paradox.” Why does water, which is necessary for involve surprising turns of events reflected in price changes. life, sell for so much less than a diamond, which is not neces- sary? It has to do with their relative abundance, for the situa- The market economy is driven by dynamic change and inno- tion would be completely reversed in a desert where water is vation, and this can sometimes be destabilizing to our way of hard to come by. life. It becomes all the more important, then, that our sense of what is right and true be fixed with an eye to eternal concerns. To be sure, we make a grave error if we conflate the value of It is morality that is our Rock of Gibraltar in a changing world. something with its price. Some goods and services of infinite value sell for a very low price (I’m thinking here of some books Rev. Robert A. Sirico is president of the Acton Institute for the Study of prayers I’ve found in thrift stores for pennies!) while some of Religion and Liberty in Grand Rapids, Michigan.

Summer 2006 | Volume 16 | Number 3 15 Reviews

There’s No Such Thing as “Business” Ethics By John C. Maxwell • Warner Faith, New York, NY, 2003 160 pp. • $14.95 Review by Sarah Salb

The wave of recent corporate scan- success. He substantiates his point by showing how the long- dals has spurred an increased inter- lasting profitable companies do follow strong ethical standards. est in business ethics. As illegal and Synovus, for example, is ranked in the top ten of the 100 Best unethical behavior is exposed in Companies to Work For in America and has had one of the high- the business world, society has demanded reform. est stock returns on the New York Stock Exchange in the past two decades. In contrast, those that compromise on ethical standards In his book, There’s No Such Thing as “Business” Ethics, John C. often lose out on the long run, as exemplified by the Enron case. Maxwell firmly contends that there is no difference between busi- The company demanded that profits be shown every year by ness ethics and general moral behavior. “There’s no such thing as booking future revenue immediately, and thus needed to keep business ethics,” writes Maxwell, “there’s only ethics. People try booking more deals each year to maintain gains. to use one set of ethics for their professional life, another for their spiritual life, and still another at home with their family… If you The concentration on ethics in an organization needs to be gen- desire to be ethical, you live it by one standard across the board.” uine and not watered down. When companies implement busi- He believes that people behave unethically because of the con- ness ethics courses solely for external purposes, to avoid or miti- venience and the desire to win no matter the cost. In addition, gate legal persecution, they are ineffective in establishing true in- people rationalize their choices with relativism by choosing their tegrity in the workplace. Maxwell also claims that five factors un- own ethical standards to guide their behavior. dermine the Golden Rule and can cause ethical violations: pres- sure, pleasure, power, pride, and priorities. He then suggests a To guide the ethical mindset and establish an “integrity guide- rule that goes above and beyond the call of duty of the Golden line,” Maxwell stresses the Golden Rule, a principle rooted in Rule—the Platinum Rule. This principle obliges one to go the many diverse cultures, ranging from Judaism to Zoroastrianism: extra mile in dealing with others. Maxwell exemplifies the Plat- one should not do onto others what they would not want done inum Rule with an occurrence during the 1964 Winter Olympic to themselves. Maxwell believes that people need to have firm Games. Italy’s driver for the two-man bobsled competition, Euge- ethical principles guiding their personal lives and shaping their nio Monti, donated a bolt from his sled to Tony Nash of the com- characters, and must translate this behavior into all other aspects peting British team, though it cost his team a medal. of their lives as well. Maxwell reiterates his underlying message at the end of the book. Part of the beauty of the Golden Rule is its simplicity and univer- He writes, “Those who go for the Golden Rule not only have a sality. It applies to anyone, in any given circumstance. Maxwell chance to achieve monetary wealth, but also to receive other ben- explains how the rule is intuitively correct, since no one wishes efits that money can’t buy.” Although slightly repetitive and sim- to be treated worse than he treats others. By valuing others and plistic, the book is direct and straightforward with a clear mes- treating others the way you want to be treated, everyone wins. sage. Since Maxwell includes a number of thought-provoking The Golden Rule not only gives direction and guides business en- questions after each chapter providing the reader with a chance deavors, but also builds character and helps one lead a more pro- to reflect on the chapter’s content and apply its principles, There’s ductive life. It is essential that ethical standards be absolute in No Such Thing as “Business” Ethics might prove useful as a spring- order to foster a sense of integrity and responsibility. board for discussions of business ethics. Using numerous examples, Maxwell tries to convince the reader Sarah Salb is a recent graduate of the CUNY honors college at Brooklyn that adhering to the Golden Rule is a necessary component of College.

16 Religion&Liberty