SPEAKERS
Dr. Mark Hansen, Professor Watson, Rolando Rivas

Rolando Rivas 00:02
Welcome to Conversatio the Belmont Abbey college podcasts. We focused on the way of formation and transformation by exploring topics that will challenge us and form an enlightened so that each of us reflects God’s image in an ever more palpable and transparent way. I’m Rolando Rivas, Associate Vice President here at Belmont Abbey College. And I’m excited to welcome Michael Watson and Mark Hanson, two of our esteemed faculty here at Belmont Abbey College. Gentlemen, thanks for joining us.

Professor Watson 00:31
Hello, I’m Professor Michael spinner Watson. I’m an economist. I went to graduate school at George Mason University, my research interests, our economic history, monetary history, a Catholic social thought and its relationship with economics and Polish history.

Dr. Mark Hansen 00:53
Not bad. I’m Dr. Hanson. First year teaching at the Abbey I guess I’m also an economist, I teach mostly in the international economics, international finance, international development, sort of economic development, Catholic social thought, a lot of International and Area, which is from my background from haven’t been an academic for that long. worked mostly in Latin America and in Eastern Europe, and some in Spain, in Italy, as well as Austria, been 15 years kind of outside of the US and now teaching here. A lot of that brings both Catholicism and economics to the table in an international way in the department. So

Rolando Rivas 01:41
great. Great, thanks. Thanks for the brief introduction there. So tell me a little bit. So we’re trying to talk today about economics and the Catholic perspective. So is economics something you think about all the time? I mean, you teach economics? Do you ever go a day without thinking about economics?

Dr. Mark Hansen 01:59
Not anymore? Now that I teach it every day?

Professor Watson 02:06
Definitely not. Even when I’m not teaching, my brain is still doing economics because economics is its it? People think it’s just buying and selling. But economics is a social science. And it’s so there’s an economic way of thinking about the world. So perhaps we can start this conversation off by defining what is the economic science? Sound? Good, Mark? Yeah, sure. We offer that. So most, when when most people hear economics, they think it’s business, I actually got into a rather heated debate with a lawyer once about this about that economics is just business like, No, it’s not just business. Economics is a social science. And we’ve actually been invading other social science, sometimes, with many frustrated with much frustration. So for instance, I’m doing a lot of reading and writing on the origins of money in Mesopotamia at the moment. And in there, you’ll see that economic theory helps interpret what’s taking place and some people are Marxist. That’s a different way of look, that’s a different economic theory. Others don’t have the background to maybe think deeply about some of these topics, but they still get into it. And so half of my job is just going through and like saying, Well, they didn’t get the cause and effect, right. I don’t like where I’m going with this. Can we just scratch the last thing? Go back. We got a stretch. Hole, I’m getting lost in that hole.

Dr. Mark Hansen 03:34
Yeah, just keep going. I mean, he’s getting at, I think, in fact, I’ll just interpret him for you. Economic way of thinking that he’s bringing to the table in his in his study of history and encountering other people who don’t necessarily understand that way of thinking. If I were to begin in a tenant backup, it’s kind of an ambiguous term, because it’s gone through multiple iterations is the word that comes to mind. But it’s multiple sort of different attempts to define what economic theory is, since the beginning. Economics got a pretty bad reputation early on amongst other disciplines, because the original sort of classical period of economics defined it as those studying man as he pursues his self interest. And self interest was defined principally in terms of egoism. And that really wasn’t the case. It was really a study of basically self interest in a very abstract category of basically says, Look, when you enter into a market exchange, you’re not entering into a relationship of gift giving, you’re talking about giving something in order to get something you’re paying somebody to you in order to get something and if you’re doing that, for some other purpose, you might give the guy extra money or whatever, but that’s not what we’re talking about. And it begins by looking at that. And so you have to begin by looking at human behavior in relation to that prices and getting the most out of his exchange because people can really don’t like to pay more for.

Rolando Rivas 05:06
And catholicon. Things begin with start sort of checks and money and things like that it wasn’t there somewhere else.

Dr. Mark Hansen 05:21
I would say I mean, the Benedictines are more known for the beginning of sort of productive uses of the monastic farms and really sort of managing a household or a state of monastic estate, I think it really means to take off with Franciscans and Dominicans, and the late Middle Ages, and they’re the ones who sort of begin looking at price theory and, and things like that.

Professor Watson 05:48
Talking about the economic sounds were much more focused on the thought there. And so you’ll see like the school at the School of Salamanca is very much involved in developing economic theory. And even before Thomas Aquinas, you’ll have different monks writing on this. And there’s big disagreement. It’s not like they’re agreeing all with St. Thomas Aquinas or something like that. You have monks who argue for that adjust prices of fixed price, you have monks who argue that there’s a range and then you have other monks, who, specifically within school of Salamanca, a couple of them would argue that there’s no, the just price is the market wage.

Dr. Mark Hansen 06:25
Yeah, so that goes back before the period I was talking about, I was talking about more about when formal economic science sort of begins, that was still part of moral theology. And so they’re talking about basically, what really makes an exchange just for Franciscans and Dominicans, and monks and scholastics thinking about it is everything that’s not force or fraud, right? And then the free play of prices. Okay. All right. And they slowly hammered that theory out. And by the end of the Middle Ages, they really do come up with look, supply and demand are these forces that prices indicate to somebody so Aquinas has the thing where look, if a ship is coming any boat it actually from Cicero, if a ship is coming, and it knows, to an area that has famine, right, and there’s a really high price in that area, and that’s why he’s going there, because he’s going to make a lot of profit. Does he have to tell everybody that has a whole bunch of other chips behind him? It says, No, he doesn’t have to. That’s if he did. So he might lower the price, and then you wouldn’t have the corrective force of all those people bringing goods that way. But that didn’t develop into a very formalized version of economics until much later. So, which is the period I started getting NAFTA?

Professor Watson 07:39
You know, for a definition of economics, I think the first thing I want you to ask yourself is, well, the way I approach it is the first axiom or the first premise we should begin with is that human beings act. An action implies choice. If we’re making choices, that implies scarcity, it means you can’t have everything you want a choice means there’s an opportunity cost, an opportunity cost is something is that there’s, that is the next best thing foregone everything, every choice you make, you’ve given up something else. That’s it, there are trade offs everywhere. That’s the basic insight from economics, that’s the starting point. And that you can go all sorts of places you can do, you know, there’s economics, a crime. There’s labor, economics, there’s macro economics. And we really get into all sorts of different the, you know, the trade offs are everywhere. So economic theory ends up going everywhere, I guess, is where I put it.

Dr. Mark Hansen 08:36
I think we’re gonna keep touching on the theme of Catholicism and economics. I think that’s,

Rolando Rivas 08:41
yeah, definitely. I mean, that’s a big part of what we wanted to talk about, like, sort of,

Dr. Mark Hansen 08:45
let me join in on that one there, because what he defined as a particularly instrumental rationality is to act rationally means to choose between sort of different scarce goods. And basically, it’s mankind trained to use different means for ends that he has in mind. But, but that is not necessarily what you would hear in say, philosophy departments about or Catholic theology about what rational means, right? It’s, it’s a subset. It’s the sort of mankind acting rationally in the pursuit of sort of using means and ends, not really necessarily discussing the ends, which is a lot more of what Catholic theology and philosophy we’ll be discussing is what ends are good for men, right? But that opens this door for massive debates within one that was in orthodox economic but heterodox people and then also a lot of other disciplines criticizing economics for defining rationality in such a limited fashion. But it was done that way for a very specific reason. It was trained to narrow down the field of study here and get, so we’re going to be an independent discipline, we’re not going to talk about how mankind discovers what his tastes and preferences and ideal ends are what he values, ultimately, because that’s going to be in some other subject, be it psychology, sociology, or philosophy and those things, right. And each of those things was a way of separating it off from science. And it’s really did over the course of, say, since Adam Smith widdle its way down to a very specific thing that you want to study is how is mankind like, allocating his resources to different objectives. And he tends to do that in a specific pattern, and react in predictable ways to prices when that happens? I don’t want to absorb the whole conversation. So

Professor Watson 10:41
yeah, I mean, that rational points very important, because a lot of people definition I understand. And I use in economics, I say rational I mean, their cause and effect relationships and human beings have able to have the ability to hypothesize about those cause and effect relationship. We use means to achieve ends cause effect means ends. So economics doesn’t ask the question about what ends we should be pursuing. It doesn’t ask what is the ultimate end? That’s really philosophy and ethics. But of course, the goal is to bring about an integration at some point. I would call economics. And that’s the goal, right? Columnist doesn’t really have an understanding of Beatitude, or Salvation as an ultimate end, it’s simply, we have this cause and effect framework. And so II class all classes, I’ll talk about cause effect. And we have this idea of ultimate end. And that can I take it right out of Thomas Aquinas, as the attitude or the face to face vision with God. So society to call that utility for some reason,

Dr. Mark Hansen 11:46
because of the early influences. Jeremy Bentham many utilitarian movement, which had a much more boiled down version of what we’re seeking happiness, that was where the ego is, and it falls back into what I said earlier about it. But one of the things that they wanted to do with doing that is, other fortunately, or unfortunately, depending on how you’re looking at economic science, they’re trying to make a field where human behavior is more and more predictable, right? So when you’re looking at prices change, how is the guy going to react, we want it to be more like a science, a science like physics, or any of the other ones where something reacts and happen so that you get economists comparing some of the behavior that they’re studying, to things like the rock pyrite, pyrite has properties where if you get it into the certain temperature range, all the molecules react, and they will form a perfect cube, or people tend in that direction. And Termites will build the nest and bees will build their nest with incredible mathematical properties. So one of the things that economics is doing is you look at the behavior of how human beings react to certain things, and then see that they actually end up with an order that wasn’t intended by them, it was actually just the property of their common reaction based on their common behavior. And that goes a certain length, right? It goes to, so the price goes up, and supply goes up, because people see the price going up, and they wanted to get more money and the price goes down, people want to buy more, and they end up kind of meeting in the middle, and then it comes, that meeting in the middle of supply and demand are always adjusting to each other. That kind of behavior is something that you want to analyze, it begins to sort of break down when you get more complicated. But also that brings it back to the idea of Catholic encountering Catholic thought is because when it begins to break down in terms of more complicated behaviors, you start asking questions about how do all human beings behave in precisely this fashion? Are there no other influences here? And that’s where it gets highly academic, which I’ll probably avoid, because that’s really get tons of criticisms of economics for by people who frequently haven’t read a lot of the, what economists have tried to done, have done to try to establish this. And they’ve dealt with a lot of questions that philosophers deal with, but they tend not to read each other’s books. So if I’m getting at like, what is it? First of all, the relationship between Catholic Catholicism and economics and then also in a personal life? Like, are you the same as a physicist, like for a physicist, because how Catholicism doesn’t really enter into your physics except as a spirit of wonder which can happen here too, but because we’re dealing with human beings who are slightly more complicated, and there’s other aspects of them. We have a limited piece of looking at human behavior, but it tends to be, as Michael said, a very valuable piece of how humans interact in all sorts of questions when they’re trying to pursue different ends and use different means but it gets fuzzy and complicated and you get people winning Nobel Prizes for making it fuzzier.

Professor Watson 14:59
Right So there’s a tension between economics or maybe it’s economists and Catholic social thought or the Catholic Church or and that that tension. There’s many forms of that tension. And one of the tensions that I think concerns me is that there are those in Catholic social thought who don’t treat economic science seriously. What I mean by that is, someone will say we need a just wage and the economist responses, okay. But in equilibrium, the wage is equal to something called marginal revenue product of labor. Now, before we get into that, right, what is Mr. That’s idea is that if the wage is too high, the firm is taking a loss on you. Wages too low, they’re making a profit on you, right? And so when you have the you have folks who say we need to pay just wages for the family and stuff like that, well, do you want firms to take, hire people at a loss. And if we have that throughout the entire economy, that just means growth is not going to occur, or we’re going to just not let wages allocate resources, because prices will allocate resources and wages or price, wages should allocate resources. And one of the things that I have and I’m curious what your thoughts are on this is that we have kind of two spheres, we have the economic sphere where or that what some economists have called the Cadillac optics, or in the Cadillac TIG sphere is going to be market exchange, buying and selling prices, coordinate wages, coordinate, interest rates, coordinate, supply, and demand. And then we have another portion of the family, the church, say, organizations that have a comment in the market, when we buy and sell when I buy from someone, I don’t have a common den with that person, my I’m buying something from them, because I want to support my family, they want my money to support their own family and themselves. So we have disparate ends, but we recognize in this exchange, we help each other, pursue our are desperate ends. But then we move over to the more than what the gift is, is that I make money, I bring it to my family, I support the family, in a sense, I’m gifting my earnings to my family. There are no prices, there are no wages there is of coordinating the family or say a nonprofit, or the church is much different. I hopefully it is much different, because I’m sure there are families. And I’m sure I have seen this in some institutions where there seems to be more interested in making money than in the common ends that they’re pursuing. So you have like the family, then to the family would be what fidelity procreation, love companionship, things like that, right? And the market produces stuff for those societies. You want to go and you want to respond to that? No, not yet. Not yet. Okay, so you want to keep me okay. And the danger is that we’ll take the the dangerous the judge, how we judge the family how, or if we rather, the way the family operates, if we just have a family operates and assume that’s how the market is supposed to operate. Right? The market is about the provision is about provision of goods and services. So that we can help our societies survive. It’s it’s providing us things to give to those, those societies.

Dr. Mark Hansen 18:16
Yeah, there’s a lot of the criticism of the market that you’re getting is other versions of distribution or other versions of relationships trying to be, why doesn’t the market work more like, say the family, right? Or why doesn’t society work? More like a very small community where we can just sort of redistribute the goods or the apostles redistribute the goods? Why can it work like that? Well, that’s when you begin to get the difficulties of human behavior. And it’s more scientific that doesn’t work like that, because there’s not everybody living in a small community, it’s a lot of unknown people interacting in ways that they, then you’re not going to know everybody in the world. And it’s in

Professor Watson 18:58
prices get around that, because prices give us the knowledge we need to know about relative scarcities in the world, right? Where it’s in the family, you can just look at open your fridge, okay? Or do you think, do I want my kids to learn to be a martial artists? Or do I want them to learn how to sing? I

Dr. Mark Hansen 19:15
also you run into this problem, though, where you can’t have the same relationship between rulers and their people, as you do between father and mother and their children, right? Their father and mother know, frequently what’s best for their children, maybe not always, but they know a whole lot more. Then the government does about individuals, and you begin to talk about freedom and those things and the connections between freedom. And so if you have the typical images of a governor or sort of a president, and I wouldn’t say President in this case of when they go when the government tends to view itself as the great father of the people, you’re talking about great dictatorships and things like this. So this is something where the market contributes to supporting More or less free societies and democratic institutions in the great extent. And you get that in Catholic social thought, but then you get people from a more Marxist ideas, trying to say that look, actually, we’re going to run this on this sort of government knows best model, or you get even people in the church thinking they should return to some other model similar. And economics does have something to say, which is actually look, it’s gotten much more complicated than that. And that tends to actually end up in pretty disastrous circumstances. Yeah, so

Professor Watson 20:33
I remember someone once said, The family kind of works like socialism, right? There’s no trade or anything like that everything’s owned, commonly, you father and mom run it. And then some people want to take the ethics of the family like, and then take that way of cooperating to say the whole market should work like that, which is absolutely crazy. Because the complexity of knowledge is so vast, in order to do that, you’d have to have so much data, you wouldn’t know what to do with in prices, just capture all that data and make decision making so much simpler. And that’s that’s that, anyhow, that’s

Dr. Mark Hansen 21:07
what I said. So we’ve kind of touched on a, you’re gonna get a quick, I

Rolando Rivas 21:12
was gonna say, well, that’s interesting. And it’s making me think about, you know, what’s happening in the world today? I mean, how do you apply some of this thinking to like, the issues of the day? Does Catholicism does the Catholic economic ideas can influence better for what’s going on the world today, like inflation? That’s sort of off the charts. And you’ve got things happening in the world that are upsetting the economies all over the world with the things that are happening overseas that are impacting here? I mean, what is the Catholic economics economist think about in terms of to address those kinds of challenges?

Professor Watson 21:48
You know, what Mark, Mark works at a lot of international organizations, I think we should talk about foreign aid on this. On the Catholic Church. There’s that encyclical Progressio right. Below Populorum Progressio. Right. So that’s that one kind of endorses foreign aid and a lot of Catholics have been so let’s, let’s help, let’s help, let’s help. But it’s easy to have a heart for the poor, but it’s not so easy to have a mind for the poor. And at least for my study of foreign aid, is we have done a lot of harm. There’s you know, there are the moral questions, we have foreign aid going out there supporting abortion and all these other things. But it’s also we are systematically damaging those economies, I think Haiti is the example everyone seems to give I mean, Mark is just laugh because it’s such a disaster of a case. I mean, how could you mess it up more? We took a country that one of the poorest countries, it’s the poorest country, and it

Dr. Mark Hansen 22:42
produced a lot of rice and peanuts. Yeah. And we progressively dumped rice and peanuts on them and just destroyed all their farming industry. But,

Professor Watson 22:50
you know, we give them free rice and free peanuts. And so they stopped farming. And now they’re, it’s a country totally dependent on foreign aid. If you take away the foreign aid, I think they would starve to death.

Dr. Mark Hansen 23:02
And there’s this principle where you get into it. And it’s something that I’m going to try and get back directly to that point. But I want to weave back there a little bit, which is great. The Catholic Church is sort of endorsement of aid and charity, comes with the principle of subsidiarity, which is actually you’re supposed to allow that other you’re only supposed to intervene and help to the extent that the other people or persons cannot help themselves, right. So they’re supposed to build up the local institutions, which is generally not what happens, right? The spirit of giving is one where you want to see yourself as the generous hero. And that’s actually frequently used and all the sort of sure commercials giving is, look, there’s this poor crying child, but actually the poor, they’re not children, and they’re not crying frequently. They’re working hard. And you’re supposed to help them differently than dumping stuff on him. Right, right. You’re not Prometheus, but coming down and getting fired. Right, right. But when you start looking at that, you see you start looking at a myriad of other institutions you might help with, and one of the, like, getting rule of law in countries and these things, and there’s all the development forces are working on things like that, but they tend to do it very top down and not subsidiarity, but they also tend to ignore certain aspects of I would say, just bring a bring democracy in name only or, you know, just change your laws. Right. When Catholicism and I think this is kind of where, at least in my opinion, Catholicism does a good job of influencing sort of economic thought about this is first of all, it’s not going to be top down because it doesn’t work that way. It doesn’t help them on a different spiritual basis or productive basis, their psychological health, being proud of what they do. But in addition to that, there’s things like when looking, let’s say, it’s a lot easier to look at it in terms of the sort of foreign aid impositions on other countries. But when we turn back to our own countries, and you start looking at, I would say, the influence of the passionate pursuit of wealth in a culture, which is something that church consistently warns about right. Throughout the encyclicals is saying, Well, if that ends up being the principal goal, what you’re going to get is something similar to you have people pursuing the say, the wealth maximization ideal, which some people may not necessarily even want to pursue it that much. But they have to now because they got a few guys who are really into it. And if you don’t also run the race, then you get drifted out. And that’s when you begin to get this significant chunk of sort of inequality. And some people were building up massive businesses, which may not be, you know, optimal form, right? It may be very efficient, but maybe a whole series of smaller and medium sized businesses might actually be more productive. And economics can analyze that and come up with it. It doesn’t have to be that you trace everything to the bigger institutions that we know about, you look inside the factory, or you look inside a massive company, and you think it’s very efficient. But it’s when there’s, that’s easier to look at, because it’s all connected. But when you start looking at the market as a whole, you can get lots of different businesses that because they’re smaller concerns, they use resources more efficiently. There’s a lot of questions to judge, that can be judged both scientifically, but also with a sort of an infused spirit of Catholic thinking, which would be look, these different businesses are operating with different motives, you can bring those other things into that. They’re not operating with different motives, they’ll pursue profit, but the extent of their pursuit, well, one

Professor Watson 27:06
doesn’t actually have to say they pursue profit, and you simply that the market, the profit loss mechanism, means that those firms that are profitable, survive and expand and or expand, you don’t have to, and the firm’s that take losses slowly or very quickly disappear. It doesn’t you can have very altruistic goals

Dr. Mark Hansen 27:25
to the internet international question then. So if that’s the case, do you think over the long term that capitalism has to capitalism, distinguish it from market society just a little bit, but we won’t get technical about it? Does it have a tendency to create bigger and bigger businesses?

Professor Watson 27:41
No, not necessarily. I mean, you’ll have those rise to the top. But because as as, as an institution gets larger, it becomes less adaptive. And we’ve seen this with Sears, we’ve seen that with Montgomery Ward, we’re going to see one day with Amazon, they’re going to fall apart, and they’re gonna be replaced by some entrepreneur who sees an opportunity grabs it goes with it. And then we’ll all be

Dr. Mark Hansen 28:08
get bought out by Amazon. Amazon’s a question, Amazon

Professor Watson 28:11
can try doing that. And yeah, but you can only try it so far.

Dr. Mark Hansen 28:15
But this is the that’s the thing. And so most over the history, you can look at these big companies that have risen and fallen. And the argument all on one side is frequently look at these businesses, they grow, and they get all this money, and then they influence democracy. And in fact, that does happen, at least partially. And it leads a lot of theorists I think, to jump in and look at a place like Russia, Ukraine, where oligarchs are ruling their countries for a long time. And they say, look, then they influence they own the media companies too. And they create sort of this disinformation world where they control not only the government in the media, and it’s kind of a plutocracy of wealthy PA, if, if that doesn’t happen necessarily, as long as the market can remain competitive in which is part of the system. As companies tend to get undermined.

Professor Watson 29:02
We have to protect free entry into the marketplace. And those corporate corporations or firms, it’s in their interest to establish monopolies but monopolies are not stable over time, unless you got the state coming in and providing some type of privilege. Some will bring up utilities and things like that, but you can make utilities competitive in Illinois, you can choose whatever you don’t want Duke energies there’s only one company here you can choose whatever you want up there.

Dr. Mark Hansen 29:24
But don’t companies actually then even Democratic representative government there’s I’m just playing devil’s advocate a little bit to draw the point and so we can crush it but or mitigate it. Don’t big companies then influence government and who gets elected and through their donations and they hold on to power that way? So isn’t it more likely that they’ll squeeze out people by government means

Professor Watson 29:48
a you know what a great example of this is the beer industry before Carter? We had an oligopoly in the beer industry, totally provided by the government and Carter, one of the good things he did, was he deregulated the beer industry. Now you have a plethora of different beers, right? We would not we would all be drinking Miller Lite once in a while, like I like drinking an old man can as well, you know, sometimes they call it, but I like trying to have having variety and different things to try. So yes, the state can get involved and do that. And you can they can lobby it. It does take democracy and some government institutions and a willingness I think of people to protect free entry.

Dr. Mark Hansen 30:32
Or this is a big image of the point that as you can see, that happened not only in J beer, but the energy industry for the longest time everybody’s talked about oil is, you know, dictates American policy. Not really, there’s a lot of other influences around the country. And then you get corn and ethanol, and then you get other energies. And they’re battling it out currently, the interesting dead

Professor Watson 30:54
weed out in the market, but they ended badly and over in Washington, DC. And that’s a problem like the sugar industry in the United States. Sugar in the United States is two to three times the price of the rest of world because the beat lobby is so effective. Yeah,

Dr. Mark Hansen 31:07
let’s not get into the to the details of that become sorted. Actually.

Professor Watson 31:11
A bit a little. So back to foreign aid really quick, because it was something I actually wanted to discuss there as well, we can

Dr. Mark Hansen 31:17
be wrapped this point off. Okay, but because if you’re looking at it then so I drifted away from the foreign side of it back into the country, which is weird, because my background is international, I should have gone with that. But I wanted to stick it back there only because you can see what happens when it goes wrong. Right? As they influence the government, then they begin to sort of have this process of the market competitiveness congealing. And then that’s where you end up, congealing around, basically having the government intervene, intervene and basically kill off competition, so that you get a whole elite have locked down society. And then all those things that we complaining about now, with Facebook, and all the other media controlling information, you get that in Ukraine, and Russia is sort of the totalitarian media structure disinformation, but you get shades of it here, right. But it’s a competitive shades, right? We have different media, you have Fox News, and you have MSNBC. And then you have and the relative degree of that it’s, it’s messy, but it’s certainly a bit better.

Rolando Rivas 32:20
It’s freer, but not quite completely a free market, like you’re saying that the they have influence over the decisions that are made the in Washington DC, essentially,

Dr. Mark Hansen 32:29
when that’s where so as a Catholic economist, I think when you’re looking at that, that stuff, there’s even if they satisfied the whole problem, right? Of saying, look, let’s say those guys and oligarchs kept everybody’s material interest in mind, right? Would that be enough for mankind’s sort of psychological and spiritual motivations? Probably not, it would break out. And then that edge that Catholicism can give you in the understanding of the human person can give you a further insight beyond perhaps What’s some of the very, very sort of more limited versions of economics, which stretch it down to just simple wealth maximization. That’s not necessarily going to be the only thing. And it’s not, it’s just what everybody encounters when they, when they want to criticize economics. Most people just open up a one on one textbook and then criticize one on one economics but don’t read further on in it, which I think is where it begins to get interesting and encounters Catholic social thought it doesn’t really and it’s one on one version, because when I teach one on one you’re teaching, minimum wage supply and demand and those basic things before getting into an interesting conversation. As if

Professor Watson 33:37
you can’t have that interesting conversation. So you have a knowledge of the basics. And

Dr. Mark Hansen 33:42
it takes quite a while to build up. How much has economics actually achieved in terms of understanding of what are its limitations and its its limitations that it actually started to begin to encounter, philosophy and theology. So you

Professor Watson 33:55
brought up Catholic as a Catholic economist and as a Catholic economist, I tend to like to start in the Catechism right, I find it to be clear, precise, and correct. And one of the things though, sometimes I wish the church would listen to its own catechism. So for instance, in the Catechism, it says, On connotative justice, that without commutative justice, there is no other justice. There no other justice is possible, something of that sort. And commutative, justice is, at minimum, its property rights, paying your bills, debt, paying your debts, etc. And when we get into I’m going back to the foreign aid thing is, when we talk about foreign aid, most of the third world doesn’t own they don’t people don’t know if they own the property that they’re on. There are no secure property rights. And so while we’re talking about, hey, let’s give all this money out there, the Catholic Church should be looking at its own catechism we should be saying, Look, right here it says that they need commutative justice. And I think a lot of people assume Oh, of course, commutative. Justice exists. They’re like, No, that’s the one thing that doesn’t exist for it before we can really talk about distributive justice, social justice, whatever else You got to get the basics down and the basics are commutative justice. So

Dr. Mark Hansen 35:05
when you get back to that, so what is it that we were talking about with the competitive market is basically there are rules of law and things that order and structure and ethics that structure it in the US. And it’s, and in Europe that are historical cultural features, that don’t necessarily exist a lot of countries. In fact, it’s the primary reason why exchange isn’t the same. But then you get that back to the foreign aid thing. If you’re sending money over there, I know the World Bank has had, so I don’t want to damage them any further. But anyway, they their their dealings with Nigeria had been disastrous, right, they sent 400 million or something like that 400 billion, and it disappears into Nigeria. It was meant for building roads, and it’s gone. Well, they did it again. gone again, and was surprised by but you get things like, way instead of having people focus on institutions, and basically creating modern states there, which is a dangerous proposition on the part of colonialism, Lenin said you could step in and do it. But to do it with subsidiarity would be a much more patient labor. You’re talking about being not having the patience to deal with actually helping another country means basically sending them a check, right. And not exporting some of the good things that say Western culture has developed, it has used other things for bad things, but the Western culture has developed certain institutions that don’t necessarily need to be perfectly copied. They can be adapted to local things. But that is something that I think the market system and the things that make it work and make it not like Russia, or Ukraine or China are the things that are sort of more or less valuable fruits of culture that do go back to the Christianization of Europe and the ethics that installed them that became law that became institutions and had a significant influence on it. To even recognize that, I think is actually a very Catholic Social point to try to trace this back historically, and into the other fields as to how they structure and shape economics and economics, we talked about it. So the market system is just transferable, without necessarily thinking of all the other things that make it work in Western society. And that’s I think, work ethic, social thought, can jump in and say, Look, actually, it’s not. We’ve had experiments in just transferring democracy and transferring institutions, and they generally fail. And they generally cause havoc in other countries. So you know, we invade and do regime change, or whatever. And then you say, Here’s your new institutions believe and Bill, you build roads or whatever. And then yet, it still doesn’t work like that. So part of the reason for not working is because people forgot about this other cultural inheritance that goes into this, that shapes and structures. The way Western men behaves in the market. So here’s my take. And Michael, it is true, that mankind mostly behaves in a certain manner, which economics wants him to say, look, he behaves in this precise manner. What is the extent to which economics is analyzed Western men? And then said that that’s how all men behave?

Professor Watson 38:41
So I think I got a pretty easy answer, because it depends if you’re coming from a neoclassical Chicago viewpoint, and I’m not going to it’s in economics, we there’s this tension, of homework economics are not homework, because homework economic is his economic man, maximizing self profit or profit or pleasure, whatever you want to call it. However, the school of thought I come from the Austrian School, mostly, we don’t, we don’t make that assumption. So we assume that we see action actually is a choice choices of scarcity. And whether we’re in pursuit of heavenly ends, or bass and whatever you want to call them. We will use means to achieve those things. So the monks here are going to be savvy businessman, but they’re going to be just about and they’re going to use the fruits of their labor to support this college. Right, and not own anything, not even the cloth on their back. So that’s gonna be my response to that. But I think he had a question, London, or we can talk about

Rolando Rivas 39:45
it. Well, we’ve got Yeah, I was gonna say we’ve only got about a few more minutes and that was to try to try to bring all this thought around to maybe what should we do about inflation would cause the inflation and how do we get out of that and the technical I mean, is that a is it a A question that we can explore.

Professor Watson 40:02
Yeah, unfortunately, the answer is, you may not like my answer, but the answer is this. So we have inflation, there are two reasons why you’d have inflation like this is either, we’ve had a massive supply shock, which means the supply curve has moved to the left, which means that we have less stuff. And this is partly going to be part because of in this is COVID, its COVID has reduced our productive capacity as a result in all these supply chain issues. So that’s definitely going to increase prices. On the other hand, we increase the money supply drastically in reverse and the budget deficit drastically in response to COVID. And so there’s a lot more money floating around here. And so the Federal Reserve has an impossible task, they have to make an estimate, they have to make a guess, at how much this increase in prices is a result of supply factors, you know,

Dr. Mark Hansen 40:54
Federal Reserve just had a paper from San Francisco that says about 3% to three but 3.5 percentage due to the government spending of the inflation so so that becomes a manageable if that’s true all

Professor Watson 41:07
up there, Mark. But so it but if it’s a supply factor, than the Federal Reserve shouldn’t do anything. They should just let entrepreneurs see those high prices and pursue profits and manage to figure out new ways of production solving those issues, because profits mean, they’ve solved the issue. Right. The other on the other side, if it’s a monetary issue, that is we’ve increased the money supply with a budget deficits have spent more money to the economy than the Federal Reserve needs to increase interest rates or allow interest rates to increase. And so yes, if if what Mark, you just said, if that’s the case, then they should be looking to add interest rates around three and three and a half percent, half

Dr. Mark Hansen 41:42
and half. So what do they have to do beyond that? To go to the government and say, Hey, you guys need to stop. Okay, so this is spending, this is

Professor Watson 41:51
another issue, right? So if the monetary authorities, the Federal Reserve, the fiscal authority is the government, government spends money, you know, as a budget surplus budget deficit, we’ve been running massive budget deficits, the Federal Reserve increases the money supply, or it could theoretically decrease my spine. We haven’t done that a long time over any significant in any significant way. But the thing is, is that when the federal is when this when the when we’re running budget deficits, and we’re keep running budget deficits, if that ends up resulting in inflation, then the monetary authority has to respond. And essentially as the monetary authority, the Federal Reserve monetize the debt, by buying treasuries,

Dr. Mark Hansen 42:36
I’m going to keep it nice and tight for econ purposes. Okay, plug econ go for areas that with the supply issue, just let it let it be that to saying that Biden shouldn’t just call a council of the greatest businessman and decide how to absolutely not buy anything from the knockdown because

Professor Watson 42:53
they’re probably not the ones who are going to fix it, entrepreneurs are going to be the ones who fix it other entrepreneurs, folks who have, who have different solutions, you know, innovation, where this

Dr. Mark Hansen 43:01
becomes something where you can look at that, and start talking about the way in which if he does, it’s much easier for people to see, and it happens in presidential things all the time. The President candidate has to give a statement of his plan, right. But that’s a whole problem in economics wants to say, look, he shouldn’t be offering a plan, actually, in many, in many cases, right? If you offer a plan, what it means is you’re going to call the people that you think are the best in the wisest. And they’re going to impose some solution from the top down, that they come up with, and which frequently results in power being given to those that particular group of guys to get their plan done. So they need to manage the resources in order to get it done. Which means they need to take control over certain parts of the economy. And it begins to go in that direction, which is the direction of the oligarchic rule and boundaries that we’ve mentioned. And so somebody says in an economist, leave it up to the people to do the planning that Miguel says so you don’t have a plan. And you’re like, well, actually, there’s a whole detail there. Now. That’s the official statement of ICANN. However, there are many plan rotations in this. And the lines of thinking are where I think a thought ism can enter into subsidiarity and all these other things and bring principles into this that actually will help. All this on kind of a somewhat superficial level. But that’s, you know, economics is down there. And it has certain things to say about this, Catholicism can insert itself in each and every practical question.

Professor Watson 44:36
I mean, even when it comes to say, what’s going on with Russia and Ukraine, we’re having an energy crisis now in Western Europe that’s coming up. America could solve that if we just let our entrepreneurs ship natural gas to Germany, and Europe, right. And if we allow that to occur, of course. So we’re restricting that and and that’s probably not the greatest solution because that means folks aren’t gonna be able to warm their homes and Germany’s talking about rationing, get natural gas right now.

Dr. Mark Hansen 45:03
Well, we made that decision, right they Biden’s council or multiple different presidents have had the council and basically, we need to shift to more green energies, there’s only way there’s only two ways to get off oil and one of which is stop importing it by producing our own or there is basically finding out some alternative solution, he has shown his deliberate hesitance because the whole idea of if they want to do the alternative, yeah, don’t want us to do that. Because that’ll return us to have more Trump policies and things like this. And you’re like, okay, so they deliberately want that, but they’ve called the Council of energy people around. And that’s the instinct of petitioners talk to somebody with a real single plan, get it in my hands, get it in front of me, it’s a risk to just leave it to the market and these things. And I think there’s, that’s a debate between government and economics. But at every level, the idea is that Catholicism will have something to say about it. The full statement of a theoretical relationship between Catholic social thought and Catholicism and economics is one of those things where as you can see, as it gets progressively more complicated, it begins to encounter Catholic thought. But it doesn’t do so at the very basics at the very basics, the market works the way it works. Supply and demand are forces that have to be dealt with. And economics has a lot to say about that. But then you start pushing it into the practical applications where it encounters the complexity of the world. And that’s where you meet Catholicism and other disciplines. And you have to talk about that. So that’s why basically one on one economic stays out of that fray until people can enter into it and get it more complicated.

Professor Watson 46:45
Well, your point on government planning versus market planning, the government going to bunch of energy experts say Hey, what should we do? Maybe there are some scenarios where we have to do that. But one of the great things about the market is that because of that profit and loss mechanism, those planners that are just entrepreneurs coming up with different plans of how to do things, and solving problems will be rewarded for their productivity, and those who can’t figure it out, will be selected out in government institutions. There’s no selection mechanism to automatically sort out, Hey, you’re who’s doing your due, you’re being productive. You’re being unproductive.

Dr. Mark Hansen 47:19
I’ll do one more at that Mises. Just, if you notice, the main times when governments do this is during warfare, is precisely because they want to shift it over to a more military model. We need to get this done faster than we think the market will do it. Let’s get it planned out. But a military model is precisely not a democratic model. And so it has to be it’s shift over and that direct.

Professor Watson 47:43
And also we’re talking about, we’re talking about guns and tanks, and average person doesn’t need that. I mean, I remember that was supposedly the the 50s I think it was in Poland, the Secretary General of the Communist Party. He was an actual general during the war, World War Two. And he was informed. Suppose this is stories, I don’t know how true it is. But us told the Polish people want toilet paper, they didn’t have enough produced toilet paper in Poland used newspaper. And he said, You know, that’s Bourgeois. So that’s another thing do you want to leave in the hands of exile really, and government to the production of things that we take for granted? Right? I prefer markets to do that, because now we have different all these different types of toilet paper, which is not doesn’t make me a worse person doesn’t cut

Dr. Mark Hansen 48:30
this last? I think the Polish guy wanted to leave it in the hands of the people. Yes. Anyway, I think it does give us a slight, there’s this. I don’t know, we have like one or no time left. That gets, you have this reflection on economics and its relation to government and policy, and then you have its reflection on its relation as a science. And there’s a lot of questions on both of those of how its applied. And how is it how is it a science? Exactly? Those things have not really been fully pinned down as answers. And I think the difficulty of being a Catholic economist is that when you start reading through a lot of that sort of the philosophic philosophy of science behind economics, and the economics of it in its application started getting more complicated than I think, some of both econ and philosophy professors would think it is, and you would look at it and be like, Okay, it’s not quite a science is a science, but it’s not quite like physics. At that margin of definition, what is the exact difference hasn’t been fully, it keeps getting debated. And then when you get to applications, how well does this theory, then engage the rest of the world’s complexity, and that’s on both counts. There’s discussions of philosophy of science, and philosophy is doing that. And then there’s the discussions of the application and how well it applies to the world and that’s where Catholicism enters into it again, in You can see that basically Catholicism enters into for discussion where it gets most complicated, which makes it very hard for you told me not to tap the table.

Professor Watson 50:10
You know, one thing that gets me a podcast frustrated, I’ve seen this in some Catholics who they judge an economic theory based on its conclusions, not on the reasoning of how it got to the conclusion. And so I’ve seen this with my fellow economists, a Catholics, they will, like they will like particular, economists like particular economic theories, not because there’s sound or not, but because the comes to conclusion they like,

Dr. Mark Hansen 50:36
and it’s kind of, well,

Professor Watson 50:39
yeah, but that’s interesting reasoning. And then they’ll say, oh, this other theory, which came to conclusion I don’t like isn’t, isn’t compatible of Catholic social thought or something of this ordinates? Well, did you look at the reason because it may not, it may be that the solution you want isn’t a possibility. That’s also what economic those kind of sorts of possibilities,

Dr. Mark Hansen 50:58
that’s just a plug for taking the engagement between the two very seriously, it has to be something that you don’t just come out with your conclusions first. Treat it like any other science or any philosophy, we’re actually listening to the other thing and following all the threads through into a discussion is where you’re gonna get results. You’re not gonna get results by saying I know what it already means.

Professor Watson 51:19
And we can disagree. Right? This is a matter of a lot of this is a matter of prudence. Well, not. A lot of this, we can disagree. We can have disagreement. It’s not. The Catholic Church doesn’t demand that we agree and every little that we have to all be in agreement. There is a room for discussion, because we are science. Anyhow, that’s all.

Rolando Rivas 51:38
Great. Thanks very much. You guys. Appreciate it. Thanks for all your insights. And I want to also thank our audience for joining us if you enjoyed Conversatio please subscribe and tell your friends Conversatio is available through Spotify, Apple and Google podcast. Until next time, God Bless