Monday, October 05, 2009

Economics for Leprechauns and Unicorns

Let's make a couple of clarifications with respect to Boethius' lastest post.

First of all, the is/ought gap I was talking about in this post is referring to Catholic Social Doctrine. Catholic Social Doctrine is primarily (but not exclusively) associated with a set of papal encyclicals starting with Rerum Novarum by Pope Leo XIII (and Boethius conveniently linked to). This is not the same thing Christian doctrine in general, Christian exhortations such as the commandment to love one's enemies, or Christian foreign policy.

Second, the is/ought gap is not about "goals" as much as premises. CSD often tries to instruct us on the proper social and economic relations in situations that are only vaguely recognizable to most of us.

If I had to reduce this to one example, I'd pick the "priority of labor over capital," a catchphrase of both the Catholic Left and the secular Left as well. First of all, it's fundamentally mistaken to think that the disparagement of capital is the way to meet basic human needs. But more than that, to a substantial extent the priority of labor over capital is a logical non sequitur. There is not necessarily any "they" who doles some goodies for labor and some for capital (and who is also subject to moral instruction from popes).

This is especially revealing in the context of the modern industrial welfare state. If the place where we arbitrarily choose between labor and capital is foreign for us, the modern welfare state plainly is not. Not every nation with a social-service apparatus is the same of course, but there's enough commonality to treat it as one phenomenon. But in spite of being a tangible reality for most of us, the social encyclicals speak of the welfare state only in vague terms. This leaves the field open for the Catholic Left to identify the expansion of the welfare state as the "Catholic" solution for modern social relations. Whatever may be said for that (and those of us on the Right are skeptical), the world that describes is a much more boring place than the one that actually exists.


Boethius said...

I don't follow how 'labor taking priority over capital' is a non-sequitur. I believe that this simply means that raw materials become capital by the application of human labor, which in turn opens up new fields of labor. Part of the difficulty in the examples that you use in the linked posts on Poland stem from using only service sector jobs in referring to labor, and the equation of capital with paper money. Service jobs don't produce capital in the way that mining, manufacturing and such do. Last of all, I think that the Poles who escape to the UK to 'make money' and bring it home are gambling on the stability of the relative currencies. In the long run, isn't the better strategy for Poland to free up the manufacturing base and encourage entrepreneurship at home? I realize that as long as the pound and the zloty or Euro are roughly stable that taking pounds out of the UK and sticking them into the Polish economy will work. But it seems to me to be an ephemeral solution, like so many ephemeral solutions we are dealing with in the US today. We can 'pump liquidity' into the banks and hope to pull it out before inflation hits; but then we might not, and even if we do, if all manufacturing is going on in China, the Chinese eventually win; we flip the burgers for them. So labor takes priority over capital especially when we speak of capital-producing labor, imho.

Boethius said...

This article might be relevant to the ideas I've posted in the previous comment:

Koz said...

First of all, there is an unspoken contradiction in this analysis and its implications as it is usually taken in practice.

If we argue that capital is actually the fruit of labor (and to some extent it obviously is), then pecuniary return on capital is actually compensation for labor as well.

As a practical matter, the Left invokes the priority of labor to mean just the opposite. Ie, that return on capital is at the expense of compensation for labor and therefore illegitimate (or should be discouraged and minimized at least).

As this applies to Poland, most young Poles would like to work close to their families, but there is no manufacturing base to "free up", that's the point. It's an occupational hazard of being a Communist country for four decades. As a secondary cause, Polish culture is highly educated, but tends toward the literary. There's not much of a merchant culture like in the US or UK.

In either case, lack of capital base in Poland has had and continues to have substantial human costs as well as economic ones.