[1] One of my concerns about Economy of Grace is that most people who read it will probably not know economics or economic history, and will be persuaded by the avalanche of theological arguments that, among other things, private property is unnatural and contrary to God’s ordering of the universe, profits are the result of workers being paid less than they are worth, global capitalism is the cause of poverty in the underdeveloped world, and, in the author’s words, “capitalism is prone to recurrent crises, crises that can be stopped only by the external, nonmarket intervention of government.”
[2] In the first half of the last century the economist Joseph Schumpeter predicted the downfall of capitalism, not because of inherent weaknesses, but because of its very success in creating economies so strong that more people in a society will be freed from the need to labor mightily just to survive. Some people thus freed will become an intellectual elite that will be actively hostile to the very system that makes their ivory-tower existence possible. This book provides strong evidence that Schumpeter was correct.
[3] Tanner presents the interior life of the Holy Trinity, a life of mutual infinite, unconditional self-giving love, as the model on which all human interaction, including economic activities, should be conducted. The economist, in sharp contrast, begins by looking at the actual condition of the world, and makes the following observations:
All individuals and societies have wants.
Individuals and societies use resources (natural, physical capital, and human) to satisfy these wants.
Wants are unlimited and resources are limited.
Individuals and society must therefore choose what wants to satisfy and what resources to employ to satisfy them.
[4] Every society must answer three basic questions: 1) What will we produce? 2) How will we produce it? 3) For whom will it be produced? In all of human history, societies have found just three ways to answer these questions: Tradition, central planning and control, and the free market. This reviewer is very much a free-market economist, because he thinks the evidence is strong that the free market provides the best environment for satisfying wants under the constraint of scarcity. I will demonstrate what I believe and why I believe it with two examples:
[5] 1) In 1991 The Catholic Archbishop of Panama asked if the market economy didn’t “weigh most heavily on the poor.” Argentine economist Juan Carlos de Pablos responded: “It is immoral to work outside the market system because this hurts the poor.”
[6] 2) In the old U.S.S.R. farm workers labored on huge collective farms whose output was sold in price-controlled markets, and the proceeds shared by all. When they had finished the day’s work on the collective farm, each worker was allowed an acre or two on which to grow whatever they wished, and to sell it in a free market for whatever they could get. These small plots were three percent of all cultivated land, but they produced 30 percent of total output.
[7] I have not made any comments on whether people’s wants are “good” or “bad”; that is outside the domain of the economist as “observer of behavior,” not judge (those small farm plots in the U.S.S.R. produced 70 percent of all Soviet potatoes-think “vodka”). One basic postulate of modern, free-market economics, is that the value of a good or service is “subjective,” i.e., that it depends on the ability of the good or service to satisfy wants, and wants (e.g., to watch Everybody Loves Raymond, to read Playboy, to go to church on Sunday and/or Wednesday, or just to be left alone) vary from individual to individual. If, in a free market, you believe that too many people want the “wrong” things, you are free to try to convince them to align their beliefs and behavior with yours.
[8] I tell my economics students that there is no economics in Heaven, because the Infinite Resource, God Himself, will satisfy all of our wants. I believe economists, like everyone else, can be challenged by thinkers like Tanner to examine our own hierarchy or wants, but I also believe that the economist has something to offer to the theologian. To once again quote de Pablo, speaking this time to a Bishop from Peru: “We can tell you how to make an economy work, you tell us how to make man act morally within it.” The American Catholic Bishops and other Christian social-action advocates (including Tanner) have frequently advocated government-imposed policies whose secondary effects would be devastating to the economy. My goal, in the marketplace of ideas, is to convince my students and Schumpeter’s intellectual elite that while good intentions are nice, and might occasionally even be useful, they are a poor substitute for understanding how a modern economy functions.
[9] About ten years ago I spoke to the Memphis Ministerial Association, presenting the basic economic principles I have discussed here. When I finished, a member of the Association told me privately: “My heart disagrees with almost everything you said, but my head tells me you’re right.” She could not have given me a better compliment. I hope that Tanner, others engaged in the great political and economic debates of the day, and I, can attain and maintain a proper balance between heart and head.