{"id":6226,"date":"2011-08-23T16:37:35","date_gmt":"2011-08-23T16:37:35","guid":{"rendered":"http:\/\/secularright.org\/SR\/wordpress\/?p=6226"},"modified":"2011-08-23T22:43:01","modified_gmt":"2011-08-23T22:43:01","slug":"social-justice","status":"publish","type":"post","link":"https:\/\/secularright.org\/SR\/wordpress\/social-justice\/","title":{"rendered":"Social Justice?"},"content":{"rendered":"

Cross-posted on the Corner<\/a>:<\/p>\n

Well, here\u2019s<\/a> food for thought (and, I suspect, just a spot of controversy) from the Hoover Institution\u2019s Richard Epstein:<\/p>\n

The terrible economic news from both Europe and the United States has led to much soul-searching on both sides of the Atlantic. How did we get here, and how can we get out of this jam? In my past columns for Hoover\u2019s Defining Ideas, I have insisted that both economies will be able to extricate themselves from their deep slumps only by promptly reversing those policies that have brought them to the brink. A successful and sustainable political order requires stable legal and economic policies that reward innovation, spur growth, and maximize the ability of rich and poor alike to enter into voluntary arrangements. Limited government, low rates of taxation, and strong property rights are the guiding principles.<\/p>\n

Unfortunately, many spiritual and economic leaders are working overtime to push social policy in the exact opposite direction. At the top of the list are two prominent figures: Pope Benedict XVI and financier Warren Buffett.<\/p><\/blockquote>\n

One can only agree. The self-serving, sanctimonious drivel that has long been the stuff of Buffett\u2019s preaching has come under fire around here before, but it\u2019s certainly also worth spending some time looking at what the Pope has been saying. So that\u2019s what Epstein does:<\/p>\n

The Pope was on his way to recession-torn Spain\u2014to lead the Roman Catholic Church\u2019s weeklong celebration of World Youth Day\u2014when he denounced <\/a> those nameless persons who put \u201cprofits before people.\u201d He told journalists, \u201cThe economy cannot be measured by the maximum profit but by the common good. The economy cannot function only with mercantile self-regulation but needs an ethical reason in order to work for man.\u201d Standing alone, these words mirror the refrains of countless Spanish socialists, whose relations with the Pope have soured in recent years. Their shared premises help explain why Spain finds itself in such a sorry state.<\/p>\n

Denouncing those who put \u2018profits before people\u2019 may stir the masses, but it is a wickedly deformed foundation for social policy. Profits, like losses, do not exist in the abstract. Corporations, as such, do not experience gains or losses. Those gains and losses are passed on to real people, like shareholders, consumers, workers, and suppliers. It is possible to imagine a world without profits. Yet the disappearance of profits means that investors will be unable to realize a return on either their capital or labor. Structure a system that puts people before profits, and both capital and labor will dry up. The scarcity of private investment capital will force the public sector to first raise and allocate capital and labor, though it has no idea how these resources should be deployed to help the people, writ large. A set of ill-conceived public investments will not provide useful goods and services for consumers (who are, after all, people), nor will it provide sustainable wages for workers (who are also people). Poor investment decisions will lead to a massive constriction in social output that harms all people equally.<\/p>\n

The proper response to these difficulties is to treat profits as an accurate measure of the cost of capital, rewarded to those individuals and firms who supply some desirable mix of goods, services, and jobs that people, acting individually and not collectively, want for themselves. The genius of Adam Smith, whose musings on the invisible hand are too often derided, was to realize that private markets (supported, to be sure, by suitable public infrastructure) will do better than a command and control system in satisfying the individual\u2019s wants and needs. The Pope offers no serious answer to Smith\u2019s point when he talks about \u201cthe ethical need to work for man\u201d and the \u201ccommon good.\u201d In both of these cases, he treats a collection of diverse individuals as though they form part of some harmonious whole. \u201cMan\u201d in the Pope\u2019s formulation is a grammatical singular but a social collective. The \u201ccommon good\u201d speaks of some aggregate benefit to a community that is not securely tethered to the successes and failures of the particular individuals within the collectivity.<\/p>\n

As a technical matter, it becomes critical to have some reductionist argument that transforms statements about these groups into statements about the individuals who compose them. Ordinary business people understand this intuitively when they speak of win\/win transactions. These are transactions that generate gains to all parties involved in the bargain.That common expression, \u201cwin\/win,\u201d is the distillation of sound economic theory, for the more win\/win transactions a society can generate for its people, the greater its economic prosperity.<\/p>\n

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\u2019s 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\u2019s socialist opponents. The Pope\u2019s 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.<\/p><\/blockquote>\n

Amen (so to speak).<\/p>\n

And what Epstein has to say about Buffett is well worth checking out too.<\/p>\n

Update<\/strong><\/p>\n

In reply to some points <\/a>made by Ramesh Ponnuru on the Corner in response to the above, I added this later post<\/a>:<\/p>\n

Ramesh, viewed in isolation, the Pope\u2019s remarks can be seen as a reflection of the fairly traditional Roman Catholic corporatism that lies, I\u2019d guess, at the base of his economic thinking. That\u2019s a doctrine that is in many respects profoundly antagonistic to classical free -market liberalism, but coming from a pontiff, and, not only that, a pontiff who has spent most of his adult life in a country run on the \u201cRhineland\u201d social market model, it\u2019s far from a surprise.<\/p>\n

The trouble is that you cannot view those remarks in isolation. The Spanish economy is in a mess, thanks primarily to the distortions introduced by the euro and, of course, deep structural problems of the type identified by Richard Epstein. Resolving those problems will be difficult. That\u2019s why a good number of Spain\u2019s indignados (if not \u2014 yet \u2014 the wider electorate) have found it far easier to scapegoat a wicked, if ill-defined \u201ccapitalism.\u201d By saying what he did, where he did, and when he did, Benedict XVI, maybe inadvertently, maybe not, has risked giving that scapegoating a credibility in a constituency that it might not have otherwise reached. That\u2019s a pity.<\/p><\/blockquote>\n","protected":false},"excerpt":{"rendered":"

Cross-posted on the Corner: Well, here\u2019s food for thought (and, I suspect, just a spot of controversy) from the Hoover Institution\u2019s Richard Epstein: The terrible economic news from both Europe and the United States has led to much soul-searching on … Continue reading →<\/span><\/a><\/p>\n","protected":false},"author":64,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_mi_skip_tracking":false},"categories":[746,711],"tags":[624,822,403,16,823],"_links":{"self":[{"href":"https:\/\/secularright.org\/SR\/wordpress\/wp-json\/wp\/v2\/posts\/6226"}],"collection":[{"href":"https:\/\/secularright.org\/SR\/wordpress\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/secularright.org\/SR\/wordpress\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/secularright.org\/SR\/wordpress\/wp-json\/wp\/v2\/users\/64"}],"replies":[{"embeddable":true,"href":"https:\/\/secularright.org\/SR\/wordpress\/wp-json\/wp\/v2\/comments?post=6226"}],"version-history":[{"count":5,"href":"https:\/\/secularright.org\/SR\/wordpress\/wp-json\/wp\/v2\/posts\/6226\/revisions"}],"predecessor-version":[{"id":6238,"href":"https:\/\/secularright.org\/SR\/wordpress\/wp-json\/wp\/v2\/posts\/6226\/revisions\/6238"}],"wp:attachment":[{"href":"https:\/\/secularright.org\/SR\/wordpress\/wp-json\/wp\/v2\/media?parent=6226"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/secularright.org\/SR\/wordpress\/wp-json\/wp\/v2\/categories?post=6226"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/secularright.org\/SR\/wordpress\/wp-json\/wp\/v2\/tags?post=6226"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}