1. 1 Restoring Economic Orthodoxy: Outline of (Neo-) Scholastic Economics John D. Mueller Director, Economics and Ethics Program Ethics and Public Policy Center (www.eppc.org)www.eppc.org President, LBMC LLC (www.lbmcllc.com)www.lbmcllc.com Association of Christian Economists Conference Baylor University, 17 April 2009

2. 2 What is Economics About? Well, what do people do all day?* Order in doing: 1. “Planting and building”: production 2. “Buying and selling”: exchange 3. “Marrying and giving in marriage”: distribution 4. “Eating and drinking”: use (consumption) *Luke 18: 27-28

3. 3 Economics as human providence Order in planning: 1. For whom? 2. What? and 3. How (shall I provide)? 1.For whom: Augustine’s theory of personal gifts/crimes, Aristotle’s social, political distributive justice (distribution) 2.What: Augustine’s theory of utility (consumption) 3.How (a): Aristotle’s theory of production—of and by (i.) people and (ii.) property 4.How (b): Aristotle’s “justice in exchange” (equilibrium)

4. 4 Positive: Augustine’s “Law of the Gift” Premises: 1. All persons motivated by love of some person(s). 2. Love is “willing some good to some person” (Aristotle). 3. We express personal love/hate by our distribution of goods. Descriptive (“positive”):Outer Acts toward: Kind of loveInner Act SelfOthers OrdinateBenevolenceUtilityBeneficence (Gifts) InordinateMalevolenceViceMaleficence (Crime) Prescriptive (“normative”): Two Great Commandments* Standard of benevolence (“goodwill”): negative Golden Rule (“Do not do unto others” = justice in exchange) Standard of beneficence (“doing good”): positive Golden Rule (“Do unto others” = personal gifts, distributive justice) *”Love God…with all your heart” (Lev. 19:18), “neighbor as yourself” (Deut. 6:5)

5. 5 Gifts to others (express love) Crimes against others (express hate) Pure selfishness (assumed by Adam Smith and neoclassical economics)

6. 6 How the Structure of Economics Has Changed (1): Simplified Element Outline DistributionConsumptionProductionExchange Scholastic (Thomas Aquinas) Yes Classical (Adam Smith) No Yes Neoclassical (Jevons, Menger, Walras) NoYes Neoscholastic (Scholastic outline, elements updated) Yes

7. 7 How the Structure of Economics Has Changed (2): Detail Element Outline Distribution (Gifts/crimes & distributive justice) Consumption (type of utility) Production (people/property) Equilibrium (“justice in exchange”) ScholasticYes/YesYes (ordinal)Yes/YesYes Classical No/NoNoYes/No* (*“labor theory”) Yes Neoclassical Austrian (Menger) British (Jevons) Chicago (Schultz) Lausanne (Walras) No/No Yes (mixed) ordinal cardinal ordinal Mixed No**/Yes No*/Yes Yes/Yes No**/Yes (**“stork theory”) Mixed No (Mises) Yes ‘Neoscholastic’Yes/YesYes (ordinal)Yes/YesYes

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12. Divine Economy: The Three Theories of Providence 1. Biblically orthodox natural law: God freely created man as a rational animal though sinning person: free to choose persons as ends, other things as means (AAA’s*) 2. Stoic pantheism: Cosmos one big rational animal, God its immanent soul; man a puppet manipulated by “invisible hand” to “ends... no part of his intention” (Adam Smith) 3. Epicurean materialism: no Creator or providence, only “matter and chance”; man a clever animal choosing means, not ends: reason “slave of the passions” (Hume) Thus the “Choice of 1776”: Created Equal—Or Not? * Aristotle + Augustine, first integrated by Aquinas