Republished with permission of the author.
Aquinas and the Market can best be described as a tragedy in two acts. The curtain rises at Harvard University, where Professor Hirschfeld studied economics because it “felt like a science,” unlike “the other humanistic disciplines I had dabbled in as an undergraduate.”[1] Thinking that she was going to make contact with reality (or the truth), which is the purpose of science, Professor Hirschfeld discovered that “economics in the 1980s was obsessed with sophisticated mathematical models, often seeming to prize mathematical cleverness over generating insights into how the world actually works.”[2]
Worse still, this mathematical cleverness was based on metaphysical assumptions about human nature which were crudely materialistic, like the cost benefit calculus proposed by Nobel Prize winner Gary Becker, who described the sacrament of holy matrimony, “according to the economic approach,” as a decision that gets made “when the utility expected from marriage exceeds that expected from remaining single or from additional search for a more suitable mate.”[3]
As John Cardinal Newman once said, economics has a tendency to take over all other academic disciplines, but it especially loves to displace theology as the queen of the sciences, which is what Becker does when his all-encompassing economic calculus devalues marriage as just another contract which “a married person terminates. . . when the utility anticipated from becoming single or marrying someone else exceeds the loss in utility from separation, including losses due to physical separation from one’s children, division of joint assets, legal fees, and so forth.”[4]
Economics, as practiced at Harvard, is obsessed with creating “sophisticated mathematical models” which rarely if ever make contact with the real world of economic exchange. Hirschfield is at her best when she deals with the real world. Her analysis of the 2008 financial collapse gives a clear explanation of what happens when financial speculation loses contact with reality, whose concrete manifestation was “the asset bubble around housing” which began when banks began “selling of their mortgages to third parties,”[5] eliminating the possibility of default:
A second layer of abstraction was introduced when mortgages began to be bundled together and sold as securities to the investment market. Now individuals could buy bonds that were backed by these bundles of mortgages. The assets were deemed to be even safer because the income flowing from a bundle of mortgages would not be severely affected if a few of the mortgages defaulted.
Taken together, these financial innovations gave issuing lenders a large incentive to generate ever more mortgages, with a notorious decline in standards. The easy availability of mortgages, in turn, bid up housing prices, and the resulting bubble embellished the sense that mortgage-backed securities were a safe investment, because even if there were defaults, the underlying housing assets would be valuable.
The speculative bubble still would not have been as catastrophic if there were not yet still another level of abstraction added, in the form of a further financial innovation that allowed investors to bet on whether these mortgage-backed securities would rise or fall in value. These financial instruments, known as derivatives, because they are financial instruments drawn around the behavior of other financial instruments, created the staggering tower of paper that threatened to destroy the global financial system in September and October 2008. Each step of increasing abstraction increased the likelihood of destabilization because the assets involved were so far removed from the very real human activity of buying a house. The people investing in the various tranches of the mortgage-backed securities were looking only at risks and returns, not at the question of whether a particular family could afford a $400,000 house on an income of $30,000.[6]
Hirschfeld turns to Aquinas for help in referring financial transactions back to the “real economic values they are meant to represent.”[7] To say that Aquinas had something to say about credit default swaps is ludicrous. That being said, Aquinas most certainly would have condemned “NINJA” (No income, no job, [no] Assets) loans, but to connect that condemnation to the obsession in economics departments with “sophisticated mathematical models” which are unreal, is a considerable stretch whose only common denominator is criminal activity. Professor Becker’s utilitarian calculus of human behavior is crudely materialistic, but it touches the real world by providing a profound understanding of the criminal behavior regnant on Wall Street:
Students exposed to Nobel laureate economist Gary Becker’s analysis of crime as an exercise in weighing out costs and benefits come away thinking that one should commit a “crime” if the expected benefits of doing so outweigh the expected costs (including some probability of jail time).[8]
Economics, as practiced at institutions like Harvard University, is the science of making money, something Aristotle denigrated as “chresmatistics” because money in his day was gold. If economics is simply the science of how to acquire money, then Harvard should offer courses in looting, theft, and insider trading.
Harvard is especially qualified to teach these courses because during the 1990s, after the collapse of the Soviet Union, a swarm of Harvard economics professors, led by Harvard President Lawrence Summer’s protégé Andrei Schleifer, then head of the Harvard Institute for International Development, descended on Russia like a cloud of locusts and looted the economy, violating every covenant they had made with the US State Department and forcing Summer’s resignation. In an article entitled “The Harvard Boys Do Russia,” The Nation described how a Jewish cabal led by Summers and Schleifer engaged in a “rapid, corrupt privatization [which] transferred state assets to insiders at fire-sale prices, fostering oligarchic capitalism, hyperinflation, and widespread poverty in Russia.”[9] A lengthy investigative article, “How Harvard Lost Russia” by David McClintick, which appeared in the January 2006 issue of Institutional Investor, explained how “favoritism by Summers (including forewarning Shleifer about rules and efforts to shield him), led to the largest fines in Harvard’s history, Summers departure on February 21, 2006, and the subsequent dissolution of HIID.”[10]
In spite of its emphasis on the delusion known as the “rational choice model” taught in its classrooms, Harvard was the best place to study real world economics, because capitalism, which is the theoretical basis of economics in the English speaking world, began as the looting operation known as the Reformation and has been involved in looting ever since. The leveraged buyouts of the 1980s are another example of looting masquerading as economics. Since that time, criminal behavior has been the hidden grammar of real-world economics, which is the science of looting, theft, and insider trading.
For some reason Hirschfeld found “rational choice model” lacking, perhaps because of her conversion to Catholicism, which gave her a new way of looking at what Thomas Carlyle called “the dismal science.” Appalled at the amorality of economics as taught at Harvard, Hirschfeld decided to get a second Ph.D., this time in theology at Notre Dame University:
I had expressed my frustration at having gone through a profound conversion yet finding myself stuck in a job aimed at bolstering a view of life I was no longer committed to. Angela came up to me after our session and asked what I would do if I won the lottery. My answer was unhesitating: I would study theology. She said, “There you go.” And so I did. Within a week I had an application in at Notre Dame. I sold my house, gave up tenure (and my corner office), and went back to school.[11]
Hirschfeld’s conversion to Catholicism led her to St. Thomas Aquinas, who led Hirschfeld to question Capitalism from a Catholic perspective because:
You cannot serve both God and money (Mt 6:24). The biblical warning points to a paradox underlying Western culture. Rooted in a Judeo-Christian tradition rife with admonitions to avoid excessive materialism and to practice economic justice, the Western world nonetheless has given rise to the set of institutions we might loosely refer to as capitalism. The expanding reach of markets, first within the nation-states of Western Europe and North America and then throughout the world through the process of globalization, has allowed billions of people to enjoy improved standards of living, longer life spans, and better education. Yet capitalism continues to be subject to critiques reflecting the; biblical admonitions. Does it promote a culture that is excessively materialistic? Does it depend on or even deepen the problems of poverty’ and economic injustice? Nor are such critiques the sole province of religious believers. Secular and even atheist voices have raised them. Nonetheless, the tension between the Christian suspicion of excessive wealth and greed and the workings of the global market economy particularly demands a theological response.[12]
When she arrived at Notre Dame, Hirschfeld learned that a Catholic economist was a quant with a heart of gold who agonized over mud puddles in Africa while celebrating the failed globalism Thomas Friedman promoted in The Lexus and the Olive Tree.[13] Hirschfeld did not make contact with Catholic economics when she arrived at Notre Dame because that discipline never existed there, nor, judging from the index of her book, did she make contact with Notre Dame economics professor Philip Mirowski, author of More Heat Than Light, one of the few significant books to come out of that university, and the best explanation of how economics became pseudo-physics over the course of the 19th century. Mirowski got sidelined after Notre Dame went full-frontal econometric in July 2003, creating the Department of Economics and Econometrics (often abbreviated as ECOE) as part of a reorganization of its previous single economics department. “This split addressed tensions between mainstream/neoclassical approaches (emphasizing rigorous quantitative work, including econometrics) and more heterodox or policy-oriented perspectives,” but it did not propose a Catholic alternative to either school.
That decision doomed the study of economics at Notre Dame and doomed Hirschfeld’s project of joining Harvard’s version of economic “science” and Notre Dame’s version of “theology.” As I documented in my book Logos Rising: A History of Ultimate Reality, Rev. Theodore Hesburgh in collaboration with an Irish physicist by the name of Ernan McMullin strangled Thomism in its cradle in the New World over the course of the 1960s and replaced it with an eclectic mish-mash inspired by an obscure Yale professor by the name of Wilfrid Sellars. The decision to downgrade Thomism to an antiquarian curiosity for medievalists doomed any serious philosophical thought after McMullin’s protégé Mike Loux took over the philosophy department. After losing the privileged status which it attained after Notre Dame implemented Pope Leo XII’s encyclical Aeterni Patris as the core of its philosophy program in 1953, Thomism lost its influence in theology as well, rendering any theological analysis of capitalism, which is another word for economics in the English-speaking world, impossible. If she knew that “Capitalism, is state-sponsored usury,[14] Hirschfeld could have made better use of Aquinas, who has significant things to say about a perennial problem that is still with us. Unfortunately, Hirschfield never defines this and other crucial terms because capitalism did not exist when Thomas wrote his summae. Even if it did, Aquinas never aspired to be an economist. Others have built on his philosophical foundation, but Hirschfeld doesn’t mention them because the main issue plaguing the science of economics is ethnocentrism. Believe it or not, non-English speaking Catholics have had significant things to say about economics in the eight centuries which have intervened between the death of Aquinas in 1274 and 2013, the year in which Professor Hirschfeld received her Ph.D. in moral theology from Notre Dame. You would not know this, however, from reading Aquinas and the Market.
Missing from Hirschfeld’s book is any mention of St. Bernardine of Siena (1380–1444) or St. Antonino of Florence (1389–1459), who “produced systematic treatises on contracts, usury, value, price, and business ethics. [and] refined ideas on the just price (often aligned with market forces under conditions of free exchange, absent fraud or monopoly) and analyzed trade, profit, and entrepreneurship”[15] shortly after the emergence of the money economy in the Italian city states, which produced the most advanced economic thinking of their day. If Germans like Fuggers of Augsburg wanted to learn economic principles and techniques like double entry bookkeeping, they had to go to Venice, where they enrolled in the Fondaco dei Tedeschi.
Three centuries later, Dominican and Jesuit theologians like Francisco de Vitoria, founder of the School of Salamanca in Spain, along with Domingo de Soto, Martín de Azpilcueta, who developed an early version of the quantity theory of money/monetarism, Luis de Molina, Francisco Suárez, and lesser lights like Juan de Lugo and Tomás de Mercado,[16] adapted Thomistic principles to the new realities of global trade, colonization, inflation from American silver, banking, and international relations.[17]
Three centuries later, Bishop Wilhelm Emmanuel Freiherr von Ketteler, ordinary of the Diocese of Mainz, inaugurated the modern era of Catholic economics with the publication of his seminal book on the workers’ question Die Arbeiterfrage und das Christenthum in 1864, three years before Karl Marx’s magnum opus Das Kapital appeared.
Following the unification of the German principalities in 1871, Bismarck inaugurated the Kulturkampf in an attempt to make Enlightenment Prussian Protestantism of the sort popularized by G.W.F. Hegel and Immanuel Kant normative for all Germans, especially German Catholics. Eventually Bishop von Ketteler persuaded Bismarck to abandon the Kulturkampf and ameliorate the plight of German workers by implementing health insurance and an old age pension. These measures staunched the hemorrhaging of German labor to America and paved the way for Germany’s first Wirschaftswunder. By 1910, Germany had surpassed England in every metric of economic production. This led Winston Churchill and Lord Gray to lure the Kaiser into a war, which wasn’t completed until 1945. Germany’s defeat enabled the most ruthless form of social engineering in human history. American social engineering erased Germany’s contribution to economics from the academic mind. Germany still has not recovered, nor has the science of economics.
Culminating in Rerum Novarum, Pope Leo XIII’s encyclical on the workers’ question, which was inspired by Bishop von Ketteler, most of the significant thinking in the field of Catholic economics was published in German during the period between Germany’s unification in 1871 under Prussian auspices and the end of World War II, when the United States occupation army deliberately destroyed German economic thinking by plundering its libraries and removing German thought from the curricula of universities in the Anglosphere.
The most significant text in this regard was Heinrich Pesch, S.J.’s Lehrbuch der Nationaloekonomie, a book which Rupert Ederer, his main acolyte in the United States, called a Summa Economica, in an obvious reference the Summae of St. Thomas Aquinas. It took Ederer years to compile a complete original text of Pesch’s Lehrbuch, largely because of the Allies’ deliberate destruction of German libraries. Ederer then dedicated the rest of his life to translating Pesch’s Lehrbuch into English. That translation is now available from Mellon Press for $1,300, an exorbitant price which will guarantee further suppression of Pesch’s thought.
Not one of these already mentioned Catholic economists, from St. Bernardine of Siena to Heinrich Pesch, covering a period of seven centuries, is mentioned in a book which Hirschfeld describes as an attempt to bring the Catholic faith to bear on economic issues. Hirschfeld is not to blame. She is a victim of the transformation of scholarship into social engineering which took place after the defeat of Germany in World War II. That defeat led to the deliberate and literal destruction of seminal texts like Pesch’s Lehrbuch, but more importantly it has completely erased any knowledge of Catholic economic thought from two of the most prestigious universities in the United States, one of which claims to be Catholic.
In its stead, bright young graduate students like Professor Hirschfeld became adept at manipulating categories of the mind like the “rational choice model,” which have at best a tenuous connection with economic realities, but the illusion that this model made these adepts privy to the future allowed them to become professors or, more importantly, policy wonks in the Washington bureaucracy, which imposed their fantasies on the rest of us in the name of economic “science.”
The high-water mark of the delusion that economists could know a future which existed only in the mind of God was the Black-Scholes Equation, which led to the creation of Long Term Capital Management, which was to usher in a millennium of no risk profits for the Wall Street oligarchs. Nassim Nicholas Taleb exposed the collapse of this fantasy in his seminal 2007 book The Black Swan: The Impact of the Highly Improbable as an example of the “ludic fallacy,” which he described as “the error of treating real-world uncertainty based on mathematical models like the structured, Gaussian randomness of games or casino probabilities.”[18] That error led to the collapse of Long Term Capital Management because an unanticipated event like the 1998 Russian financial crisis, which Taleb describes as a “Black Swan,” cannot be anticipated by mathematical models divorced from unpredictable real world events.
Hirschfeld’s confusion derives from her inadequate understanding of the distinction between practical reason, which is by definition normative because it seeks the good, and physics, which is by definition descriptive because it seeks the truth. Economists, she tells us, “have a distinctive conception of practical reason” which distinguishes “between positive and normative economics, arguing that their models are neutral with respect to philosophical, metaphysical, theological, or any other set of concerns or values a person might have.”[19] The distinction between “positive and normative” economics is really a distinction between economics as practical reason and economics as pseudo-physics. The dominant branch of economics in the English-speaking world isn’t economics at all. It is soothsaying or astrology. Instead of hiring gypsies to staff its econometric program, Notre Dame and Harvard hire quants who specialize in pseudo-physics.
Astrology, unfortunately, is not a science, even if it is taught in economics courses at Harvard and Notre Dame. Economics is a science based on practical reason, which explains how to achieve the good. One of the main shortcomings of Aquinas and the Market is Hirschfeld’s equivocal use of the term “practical reason,” which ranges from Dewey’s understanding of pragmatism to what Aquinas would have called prudential carnalis without coming to the proper definition of the term or its application to economics.
The Black-Scholes Equation ignored reality, which invariably involves “rare, high-impact events that dominate outcomes in financial markets.” It fostered instead “overconfidence in predictions and risk management,” which could have been avoided if those predictions were made in light of economic realities and the fundamental principles that Pesch articulated at the beginning of his Lehrbuch.
Economics, according to Pesch, is a practical science, part of what Kant called practical reason, which means that its purpose is to achieve the good, rather than the truth, which is the goal of pure reason.[20] It is not the same as pure reason, whose goal is ascertaining the truth, based on metaphysics, mathematics, and physics, which allows astronomers to predict natural events like solar eclipses with absolute accuracy. Practical reason begins with ethics, which is the science of how the individual achieves the good. It culminates in politics, which is the science of how the state achieves the good. The science of how the household (or city state or national economy) achieves the good is economics, a term which derives from nomos, meaning “law” and oikos, the Greek word for household. The ultimate goal of economics is the good of the whole nation. Each person should benefit from the economy according to his own participation in it, but that remuneration finds its lower limit in the living wage.[21]
The “economic principle” (minimum input with maximum output) consists simply in the application of a universal law of practical reason in the exchange of goods and services. Since it is part of practical reason, economics cannot contradict ethics. Actions which are immoral are ultimately self-defeating from an economic point of view, because in cheating a fellow member of the national economy, the exploiter may enrich himself, but he does so at the expense of the economy as a whole. Economics cannot be an instinct, “self-interest,” or a passion because if it were it would not be reason. Furthermore, there is always:
a danger that these spontaneous natural drives can become dominant in human endeavor and lead to unrestrained covetousness. It is the continuing task of human reason and of the moral law which regulates all human ambition and action, to guard the instincts and instinctive life against straying from man’s natural purpose and from going beyond the limits of moderation as called for by reason and morality. Man has higher goals than the greatest possible amount of pleasure for the individual involved; and, therefore, he also has a higher norm in his economic activity than maximizing the individual sense of pleasure and minimizing individual pain! Human reason and conscience, love for justice and a sense of community provide powerful “mainsprings,” more exalted motives and incentives for acting in this area where people work out their material welfare, and these are more important than all of the impulses of our natural instincts.[22]
Economics is a science, but it is not a science like physics: “The future here cannot be predicted with anything like the certitude with which the astronomers can tell us about future eclipses of the sun and moon.”[23] Rather, ethics is to economics what mathematics is to physics:
The physicist takes over propositions from mathematics without ceasing to be a physicist. The very nature of the formal object of his science forces the economist to take into account truths of juridical, technical and natural sciences. Why should ethics be an exception to this rule? . . . economics. . . is an ethical science in the sense that we regard all of the sciences that deal with free human actions as ethical sciences. Therefore, it must have due regard for the moral law governing free human actions. But that does not make it a branch of ethics as such. It has its own formal object: the proper economic arrangement and direction of human actions and institutions. . . . their purposeful direction with reference to the material general welfare of the nation.[24]
Because it is part of practical reason, economics can’t dispense with the “ought.” Economics deals with what is economically good and proper:
economics deals with the performance of the person acting as a rational, free, moral being as influenced by various needs which call for satisfaction, albeit in the face of a limitation of the material goods and labor capacities available for satisfying those wants, and in competition with persons who have similar needs for the means to satisfy those wants.[25]
Because economics is a branch of practical reason and because it exists to achieve the good, the conclusions of a sound economics “must remain in harmony with the moral law.”[26] Nowhere else does the golden rule “Do unto others as you would have them do unto you” apply more than in economics, and this is so because the golden rule involves a transaction. Similarly, “man does not economize in isolation [like Robinson Crusoe] but in the framework of society. . . . The material object of economics . . . the economic life of a politically unified nation.” To abstract the interests of one party from that transaction and make them the norm of economic activity, as the Florentine oligarchs did, is a recipe for economic decline:
Economics is not entitled to present what is morally impossible as scientifically established truth, any more than it can propose what is physically impossible. Gladstone’s saying that what is morally false cannot be politically correct applies equally in the area of economics.
Economics is not “the science of how to increase wealth in whatever way possible. If that were the case, it would have to include among its methods also deception, theft, and the plunder of conquered people. But where can you find an economist who has the gall to propose that?”[27] Looters can accomplish their goals only at the expense of a sound economy because “the economy” refers to the sum total of the kinds of human transactions which are directly related to realizing the material side of human welfare.[28]
The prime danger for any state has always been to reduce the science of economics to the interests of the rich and powerful. Without decent remuneration for work, any economy is doomed to fail. This is why James Carney calls the living wage the “flywheel” of the economy:
Without it there is no consumer spending or savings that provide the investment for those things which produce necessaries that are in fact the bulk of production. The rich invest in speculative things, in riches and luxuries, which do not sustain or make the economy grow. In fact, luxuries become more expensive, relatively, in a stagnant economy, so even the rich are worse off, absolutely, if not relatively to the poorer classes.[29]
Florence in particular, and northern Italy in general, stood at the center of unprecedented economic development for over two centuries, but mixed in with that economic development were practices that were wrongheaded, self-defeating from an economic perspective, and clearly immoral. Just because certain policies enabled the magnates to become rich did not mean that they were economically sound. The populo grosso would learn this lesson the hard way, in the expensive school of experience. When they ignored the voice of the popolo minuto, they cut themselves off from lessons in economics that they needed to learn to stave off the collapse of the system which made them rich. They needed to learn that:
Economic policy embraces the endeavor of the state, using the means available to the entire community, to bring about and safeguard the fulfillment of the economic process—the process of providing material goods for the nation in a manner which corresponds to the national welfare.[30]
Economic policy which benefits one class at the expense of another is a form of looting, not economic development. Cheating the worker out of a living wage is self-defeating behavior for any polity, but once the oligarchs of Florence regained power in the wake of Ciompi rebellion, they made driving down wages, which was in their interest but not in the interest of Florence, the cornerstone of domestic economic policy. This ensured the demise of the Florentine republic, whose oligarchs did not understand that labor is the source of all value. The fundamental unit of all economic life is the transaction. In any transaction, the stronger party will invariably be tempted to take advantage of the weaker.
Because there was no science of economics at the time of the Ciompi rebellion, there was no sense that the ultimate goal of economics is the good of the whole nation.[31] As a result, men judged the rightness of economic decisions from the perspective of their own self-interest and did not understand that the unhindered pursuit of self-interest in the economic sphere leads to the collapse of economic exchange, as it had during the end of the Roman Empire, and as it would for centuries into the future.
The growing preoccupation with usury on the part of churchmen in the Middle Ages was in a certain sense misplaced. Usury was symptomatic of deeper ills. The poor needed to borrow money because they were not being paid a living wage. In spite of the unprecedented wealth which accrued in Florence during the course of the 14th and 15th centuries, prosperity among the merchant class was accompanied by “peasant poverty and proletarian destitution” because “the new aristocracy of money [chose] to withdraw their capital from industry and trade and invest it, from motives of security and social prestige” rather than pay a decent wage to the people who had earned that money for them.[32] Thus, they cut their own throats because they failed to see that the net result of low wages is economic decline for the entire economy, which is to say for the rich as well. There is no economy without people. High wages cause an increase in population, and an increasing population is “the decisive indicator that a country is prospering.”[33] Conversely, “the meager subsistence of the working poor is the natural indicator that things are in a state of stagnation, and when the poor are suffering want, this indicates that a nation is going into reverse.”[34] When the state ignores the well-being of the worker, economic decline follows. If a worker does not earn a wage that allows him to support his family, this means the end of the “machine” which turns money into value. It means the end of the economy, because:
Without continuing, exhaustive, and orderly work, mankind cannot survive; the world of nature will not be brought to subjection; and development and progress will not take place, either for the individual, or for nations, or for the entire human race.[35]
The history of economics is prone, perhaps more than most disciplines, to the falsifications of Whig history, particularly when dealing with the question of usury. In the economic version of Whig history, the Church is blamed for hindering economic progress by not accepting usury. Parkes claims that “within the Church alone could have been found the men who might have evolved a reasonable theory of usury,” without understanding that “a reasonable theory of usury” is a contradiction in terms every bit as much as “a reasonable theory of adultery” would be. “Unfortunately,” Parkes continues:
The Church made the whole profession disreputable, attached a stigma to every kind of business loan, destroyed all attempts to put the profession on the rational basis on which it could have rendered immense services to the community, and by adding to the normal risks of the profession excommunication . . . justified the usurer in increasing his charges. Further, since the usurer was but human, he naturally retaliated on the society which ostracized and outlawed him by employing every device discoverable to outwit his enemies and ensnare his debtors. Hostility accentuated his avarice and finally produced the finest example history offers of the principle that it is better to be hanged for a sheep than a lamb.[36]
Parkes defends the pagan position as more reasonable:
Roman society . . . was not interested in the morals of the question or the eternal salvation of the merchant. It . . . left it to the intelligence of each to look after his own interests. Further, Roman law recognized an absolute right to the possession of property, and to unlimited freedom of contract, two ideas which were not present in the custom of the Germanic societies which formed so large a proportion of the membership of Christendom.[37]
Parkes goes on to claim that “the absoluteness of the prohibition [against usury] corresponded so little to the needs of a developing society that it doomed itself to sterility,”[38] reversing, unconsciously albeit, Aristotle’s warning that money is sterile. Similarly, De Roover claims that “The practical result of the usury prohibition, intended to protect the borrower, was to raise the cost of borrowing. To this extent the Church’s legislation on usury may have retarded economic growth.”[39]
Both de Roover and Parkes are wrong. It wasn’t the Church that hindered economic development; it was low wages, moral decay, magic, and paganism, rampant in northern Italy during the 15th century, which hindered economic development. “The wise and the well to do” found common cause with sodomites, Jews and bankers who profited from the status quo and gave their full support to the culture of profit maximization and usury that we now call capitalism. The corruption of morals hindered the emergence of economic science in Florence during the course of the 14th and 15th centuries, not the prohibition against usury. Since economics is inextricably bound up with ethics, this should come as no surprise. Moral decline, not obscurantist views on usury, postponed the emergence of economics as a science. The decline of morals in the 15th century led to a confusion between genuine economic advance and avarice which has perdured to this day. The term capitalism is evidence of this confusion. In contemporary parlance, it refers to both rationalized avarice and legitimate economic science.
Taking her cue from Parkes and de Roover, Hirschfeld sabotages her own project by denigrating Aquinas’s understanding of usury, claiming that he:
wrote centuries before the crucial insights that markets could produce order out of the uncoordinated choices of millions or billions of people. As already noted, that Aquinas was engaging with a very different economy than ours is a good reason for not appealing to him directly on questions about just wages or the licitness of usury.[40]
Pace, Professor Hirschfeld, usury is a sin whose essence has not changed over the past eight centuries, any more than the essence of the of sin of adultery has changed. Her claim that time has rendered Aquinas obsolete is a crude form of modernism which she bases on obsolete concepts she learned at Harvard and Notre Dame.
Like many converts, Hirschfeld dragged categories and presuppositions from her former life into her new life as a Catholic unaware of the baggage they bring with them. The best example of this is her uncritical use of the term “markets,” which she endows with a false sense of agency which Karl Marx denounced as “fetishism,” or more precisely “commodity fetishism”[41] (or Warenfetischismus), a term he borrowed from anthropology where objects are believed to possess magical or autonomous powers independent of their makers. When she tells us that “markets . . . produce order,” she turns an inanimate object into what Karl Marx would call a “fetish.”
The most significant fetish of all is money, especially when it is understood as synonymous with gold. Shylock gave expression to this delusion when he told Antonio that his ducats, legal tender in the Venetian republic, could copulate faster than Laban’s ewes and rams. Shylock was referring to interest bearing capital, which seems to “breed” money autonomously. Antonio contradicted Shylock by exposing the money fetish and referring to Shylock’s usurious loans as “breed of barren metal.”[42]
Like Shylock, who turns money into a fetish by claiming that his ducats can copulate, Hirschfeld turns the market into a fetish, which is to say something that has the power to act. Markets, according to Hirschfeld not only have agency, “markets are unjust.”[43] Not only can markets act, they can also commit sins. Continuing in this vein, Hirschfeld tells us that the market “allows us to specialize in the areas of our particular expertise and then share the fruits of our labors with others.”[44] Markets cannot allow us to share anything. The market is a place where buyers and sellers, who do have agency, come together to act. As soon as human action is involved, the principles of practical reason either hold sway over the buyers’ and seller’s actions or they do not. Money, the main fetish in a capitalist economy, acquires agency through usury, as Shylock pointed out. Capitalism becomes as a result “state sponsored usury.” Labor, not markets, is the only source of value. Any economics which refuses to be normative becomes not “positive” or “descriptive”; it becomes necessarily pseudo-physics, as Mirowski pointed out in More Heat Than Light.
Hirschfeld is correct when she claims that the point of separating positive from normative economics is to “insulate economic practice from ethical critiques.”[45] Separated from its base in ethics as the source of its foundational principles, economics necessarily becomes pseudo-physics which purports to study human behavior “that can be modeled mathematically.”[46] Pseudo-physics economics “is based on the claim that it successfully generates empirically substantiated predictions about human behavior.”[47]
The collapse of the Black-Scholes Equation which dragged down Long Term Capital Management proved that claim false. The real point of pseudo-physics capitalist economics is to de-certify morality as utopian interference in the mechanism of markets so that the rich usurers can amass wealth and retain their ill-gotten gains.
The Jew Bill Ackman, is a prime example of what I’m talking about. His multi-million dollar donations allowed him to take over Harvard and fire Claudine Gay because she refused to crack down on protests against the Israeli genocide in Gaza. This was the final nail in the coffin of free speech at Harvard, but the funeral began with the takeover of Harvard’s economics department by turning economics into an amoral pseudo-physics which contradicted the nature of economics as a branch of practical reason and allowed the usurers to keep their ill-gotten gains and use that money to take over our government, our universities, and our ability to think.
In bending her knee to the idols she was taught to worship at Harvard, Hirschfeld joined the venerable tradition of scholarly Catholic inferiority complex at Notre Dame which began in earnest in 1953 when Theodore Hesburgh became that university’s president. Hesburgh’s goal in life was to turn Notre Dame into Harvard on the St. Joseph River by promoting WASP crusades like universal contraception at the behest of John D. Rockefeller, 3rd, whose Population Council funded a series of secret conferences at Notre Dame from 1962 to 1965. Harvard rewarded Hesburgh by putting him on their Board of Overseers in 1990.
Judge John Noonan followed in Hesburgh’s footsteps by writing a typically aspirational piece of what passes for scholarship at Notre Dame. His book Contraception: A History of Its Treatment by the Catholic Theologians and Canonists, which was first published by the Belknap Press of Harvard University Press, in 1965, the same year in which the Rockefeller-funded contraception conferences concluded, urged the Catholic Church to abandon its teaching on contraception based on a previous book which claimed that the Church had already abandoned its position on usury. The Church ignored his invitation in the first instance and belied his claim in the second when John Finnis, also on the faculty at Notre Dame told me over breakfast at Peg’s restaurant that Vix Pervenit, Pope Benedict XIV’s condemnation of usury was in spite of John Noonan’s efforts, still magisterial teaching.
Hirschfeld ends her book by telling us that “Aquinas seems well suited as a starting point for how to think about a genuinely humane economy”[48] but only after dismissing Aquinas’s understanding of usury as hopelessly outdated:
Although Aquinas’s understanding of money mirrors the one developed by modern-day economists, his further reflections on artificial wealth are not so easily reconciled. He seems to curtail the role of the market mechanism in arguing that prices should be just.33 And he rules out lending at interest in his doctrines on usury. Such doctrines have led the historian of economic thought, Mark Blaug, to argue that the medieval scholastics play no essential role in the development of economic thought. A cursory glance at Aquinas’s doctrine on, say, usury suggests that such dismissals are justified. His remarks about usury are rooted in a premodern setting and can sound naive to those who appreciate the role that complex financial transactions play in promoting economic growth. Theological efforts to evaluate the soundness of Aquinas’s strictures against usury are confronted with the daunting task of untangling both the scholastic teachings on usury and the vast economic literature on the unresolved questions about the nature of capital and interest and then to somehow correlate the results. Not surprisingly, no consensus on the question of how to apply Aquinas’s specific doctrines on usury to modern financial institutions has been achieved.[49]
Pace, Professor Hirschfeld, “complex financial transactions” involving usury do not promote economic growth, as you yourself pointed out in your description of the crash of 2008. Before concluding, we need to contemplate the magnitude of institutional failure that allowed Harvard University Press to publish this book. Not one professor at the Harvard school of economics or the Notre Dame theology department, nor one editor at Harvard University Press, was aware of the eight-centuries long tradition of Catholic Thomist economic thought that was conspicuous by its absence from a book which purported to bring Thomism to bear on economic thinking. Not one professor at Notre Dame mentioned Notre Dame Professor Philip Mirowski’s book More Heat Than Light, as the classic explication of how economics became pseudo-physics. Not one professor or one editor corrected Hirschfeld’s misunderstanding of practical reason. Not one professor or one editor mentioned the German Catholic school of economic thought which began with Bishop von Ketteler’s book on the worker question, culminating in Rerum Novarum, which inaugurated Catholic Social Teaching, which presumably has things to say about the interface between ethics and economics which is the thesis of Professor Hirschfeld’s book. Heinrich Pesch’s Lehrbuch der Nationaloekonomie is the crowning achievement of that tradition.
I am not blaming Professor Hirschfeld for the fact that Aquinas and the Market omits any mention of eight centuries of German, Italian, and Spanish Catholic economic thought. I am blaming Notre Dame. That Professor Hirschfeld never heard of Heinrich Pesch is understandable. Her ignorance on matters like this is why she decided to get a degree in moral philosophy from Notre Dame. That no one at Notre Dame mentioned the aforementioned Catholic schools of Thomistic economics to Hirschfeld during her years of graduate study there is an inexcusable dereliction of duty on the part of a university which calls itself Catholic. Aquinas and the Market indicates that the ghost of Judge Noonan still haunts the Notre Dame theology department long after his death.
[1] Hirschfeld, Aquinas and the Market (Cambridge: Harvard University Press), p. viii.
[2] Hirschfeld, Aquinas and the Market p. viii
[3] Hirschfeld, Aquinas and the Market p. x
[4] Hirschfeld, Aquinas and the Market p. x
[5] Hirschfeld, Aquinas and the Market p. 157
[6] Hirschfeld, Aquinas and the Market p. 157-8.
[7] Hirschfeld, Aquinas and the Market p. 159
[8] Hirschfeld, Aquinas and the Market p. x
[9] Grok.
[10] Grok
[11] Hirschfeld, Aquinas and the Market p. xiii
[12] Hirschfeld, Aquinas and the Market p. 1
[13] I attended the lead up to the Friedman symposium, in which Catholic Worker Margie Pfeil complained about Notre Dame students showering in potable water.
[14] According to Heinrich Pesch’s Lehrbuch der Nationaloekonomie. Cf. E. Michael Jones, Barren Metal: A History of Capitalism as the Conflict between Labor and Usury.
[15] Grok
[16] plato.stanford.edu
[17] Wikipedia, School of Salamanca.
[18] stat.berkeley.edu
[19] Hirschfeld, Aquinas and the Market p. 36
[20] The following passage can be found in Barren Metal, pp. 62-8.
[21] Heinrich Pesch, Lehrbuch der Nationalökonomie, Translated and edited by Rupert J. Ederer, (Lewiston, NY: Edwin Mullen Press, 2002), Volume I, Book 1, p. 15. The word “economy” (from the Greek, oikos and nomos) was already found in Xenophon, and it referred to sound management of the household. It uses these in a manner which assures the well-being of the house and its members.
[22] Pesch, Lehrbuch, I, 1, p. 17.
[23] Pesch, Lehrbuch, I, 1, p. 117.
[24] Pesch, Lehrbuch, I, 2, pp. 307-8.
[25] Pesch, Lehrbuch, I, 1, p. 17.
[26] Pesch, Lehrbuch, I, 2, p. 304.
[27] Pesch, Lehrbuch, I, 2, p. 304. Pesch wrote that sentence before the rise of Milton Friedman and the Chicago School of Economics.
[28] Pesch, Lehrbuch, I, 1, p. 13.
[29] Culture Wars, November 2010.
[30] Pesch, Lehrbuch, I, 1, p. 222.
[31] Or, in this instance, city-state.
[32] Luzzato, p. 145.
[33] Pesch, Lehrbuch, II, 1, p. 152.
[34] Pesch, Lehrbuch, II, 1, p. 151.
[35] Pesch, Lehrbuch, II, 1, p. 12.
[36] James Parkes, The Jew in the Medieval Community (New York: Hermon Press, 1976), p. 298.
[37] Parkes, p. 301.
[38] Parkes, p. 301.
[39] Raymond de Roover, San Bernardino of Siena and Sant’Antonino of Florence: The Two Great Economic Thinkers of the Middle Ages (Boston: Baker Library, Harvard Graduate School of Business Administration, 1967), p. 38.
[40] Hirschfeld, Aquinas and the Market p. 28
[41] Karl Marx, Das Kapital (Capital, Volume 1, 1867), in Section 4 of Chapter 1 (“The Fetishism of Commodities and the Secret Thereof”).
[42] The phrase “a breed of barren metal” appears in Act 1, Scene 3 of The Merchant of Venice.
[43] Hirschfeld, p. 34.
[44] Hirschfeld, Aquinas and the Market p. 33
[45] Hirschfeld, Aquinas and the Market p. 43
[46] Hirschfeld, Aquinas and the Market p. 37
[47] Hirschfeld, Aquinas and the Market p. 43
[48] Hirschfeld, Aquinas and the Market p. 217
[49] Hirschfeld, p. 133.
