Economics and purposeful human action

Economics involves the study of purposeful human action. When economists write about “methodological individualism” as being at the basis of their subject, some Christians have a tendency to think that this is problematic: after all, we are called to live in society. However, methodological individualism simply means that it is only the individual that can act purposefully. We should not think of the economy as an abstraction. Economic decisions, outcomes and even complex social structures ultimately arise from the decisions of individuals. If there is dire poverty, oppression and corruption in a country, this does not happen without sinful actions by individuals in the economic sphere. Even if structures of sin exist, whereby the culture is so warped that we find it almost impossible to resist the temptation to sin ourselves (for example, if we simply cannot run our small business without paying a bribe), as St. John Paul II reminded us, such structures of sin always derive from the actions of individuals. That is true even if those actions were historical and interact with the actions of many others.

This post was first published on the website for the book Reclaiming the Piazza III: Communicating Catholic Culture The book and that website are edited by Ronnie Convery, Leonardo Franchi and Jack Valero. 

If economics is about human action, it follows that it is intrinsically linked to ethics. Indeed, all knowledge coheres – a key theme and purpose of the publication of Reclaiming the Piazza III – so we cannot separate economics from disciplines that have ethics at their centre. Economics does, though, have its own domain. You do not need to understand ethics to use economic techniques to price derivatives. You might, though, need to exercise the virtue of prudence to help you understand when you should buy and sell derivatives. And the relationship between economics and ethics is a two-way street. Just as we should not divorce economics from ethics, we should also not believe that we can make ethical judgements that involve complex economic phenomena without a knowledge of the subject of economics. Benedict XVI warned us against this.

Indeed, there have been important Catholic contributions to the subject of economics for precisely this reason – perhaps most notably by the late scholastics, often known as the “School of Salamanca”. For example, we may feel that it is wrong that people are required to pay too large a proportion of their income in rent and seek to control rents directly. However, there is a close-to-unanimous opinion amongst economists that this is a bad idea. The control of rents tends to lead to corruption, it further reduces the supply of and increases the demand for property and the net result is that many people find that they cannot obtain anywhere to live at all. Evidence is more mixed on minimum wages and labour market regulation, but there is certainly evidence that short-cut public policy solutions to the bad treatment of employees and low pay can lengthen periods of unemployment, especially for the young. The discipline of economics can help us understand how we can have a better society. It can also teach us that short cuts can be dangerous.

A Christian approach to economics must rely on sound anthropological assumptions. Two assumptions that are especially important are the imperfectability of the human person and the limits to human knowledge.

Economic outcomes matter to most people greatly. And particular outcomes can be an indication of serious problems in society. Without questioning the good intentions of people who might propose actions that seek to improve economic outcomes (especially for the poor), economics as a technical discipline can help us examine whether such actions will, in fact, do so or will, instead, produce a cure that is worse than the disease. Thus every economic action is an ethical action, but economics can help form the virtue of prudence that informs decisions in the public policy sphere.

A Christian approach to economics must rely on sound anthropological assumptions. Two assumptions that are especially important are the imperfectability of the human person and the limits to human knowledge. As a result of the former problem, we do, of course, see terrible economic outcomes – poverty, oppression, dangerous child labour, and so on.

It is often assumed, and has been proposed explicitly in recent Catholic social teaching, that our imperfectability should lead us to conclude that government regulation of the economy is necessary to rectify the impact of sinful acts in the economic sphere. We should be careful, though. Such regulation may be necessary or desirable; it may improve matters. But we cannot assume that imperfectability does not exist in the sphere of politics too. If businesses are misrepresenting products to consumers, giving the power to regulate such businesses to government officials may improve matters. On the other hand, if the officials are corrupt, it may make matters much worse. The longer tradition of Catholic social teaching is helpful here. It offers us the principle of subsidiarity which proposes that regulation of the economy should take place at lots of different levels in society. Professions, trade associations, unions, exchanges (in the area of finance), can all have a role in creating a rich civic culture which ensures that economic activity is not simply about individuals, businesses and the political sphere. There may also be roles for different layers of government (local, central, etc).

We can all play a part in those institutions of civil society that are closest to economic life to help civilise the economy. But we can also all play a part in creating a more humane economy by acting ethically in everyday economic decision-making. We should be honest in all our dealings; treat people fairly and humanely at work – at whatever level we sit within an organisation; not get involved, insofar as is possible, in economic activities that are intrinsically immoral or close to the line. Indeed, whether we are the customer or the shop assistant, we can make people’s life in the economic sphere more pleasant simply by smiling and being polite. After all, economics is about human action, but much of that human action involves human relationships. Brick by brick, we can reclaim the piazza.


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Author: Philip Booth

Published: 13th December 2021

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© Catholic Social Thought 2020