Favorite Books of 2019 – Theology, Economics, and Order

The next two books on my “Favorites of 2019” cover economics in different ways. The first uses theology to critique and inform the rational choice model, and the second builds on the New Institutional School of Economics to describe social orders.

Aquinas and the Market: Toward a Humane Economy – Mary Hirschfeld

Those even slightly familiar with the field of economics can find it fairly easy to lament the philosophical or theological critic whose work, often devoid of nuance, betrays their inexperience in the field. Dr. Mary L. Hirschfeld (Phds in Economics and Theology) provides a refreshing informed economic and theological critique of mainstream economics or the rational choice model. Her main argument asserts that economics, even positive economics, is not value-neutral, but “tacitly grounded in its own metaphysics” and therefore has its own vision of the good life. However, instead of eschewing its insights or denying the good of economic progress, she develops an approach to economics that recognizes the power of incentives and “the role of markets in promoting genuine human flourishing” while using insights from Thomas Aquinas to make us more conscious about the ends we are seeking.

A particular strength in her overall argument comes from her ability to present other arguments in their strongest forms. Her critiques of rational choice models and homo-economicus are not simplistic skewerings. Hirschfeld actually spends time debunking lay-level critiques of rational choice models and homo-economicus before building her own critique. Also refreshingly, Hirschfeld points out that economists, especially ones that identify themselves as positive economists, often share similar values but “the argument is about how best to realize those values”. In doing both of these things, she prevents readers that may disagree with her from dismissing her outright because of a mischaracterization of position or motives.

While most authors that cover the ethics or theological implications of economics specialize in one field, Hirschfeld provides a real gem with her expertise in both fields. Even for the reader that views religion with skepticism, Hirschfeld’s attempt to grapple with significant questions should prove worthwhile to everyone.

Violence and Social Orders: A Conceptual Framework for Interpreting Recorded Human History – Douglas North, John Joseph Wallis, Barry Weingast

I am definitely a late-comer to this book but thoroughly enjoyed exploring their conceptual framework of open and limited access orders. North, Wallis, and Weingast (NWW) build on a background of New Institutional Economics and explore social orders and “how societies make the transition from one social order to the other.” Their framework identifies three orders in human history, foraging, limited access or natural states, and open access orders and focuses on the latter two. The basic patterns for these orders are as follows

Open Access Pattern (from pg. 11)

1. Political and Economic Development
2. Economies that experience much less negative economic growth
3. Rich and Vibrant Civil Societies with lots of organizations
4. Bigger, more decentralized governments
5. Widespread impersonal social relationships, including rule of law, secure property rights, fairness, and equality…

Limited Access Patterns (from pg. 12)

1. Slow-growing economies vulnerable to shocks
2. Polities without generalized consent of the governed
3. Relatively small numbers of organizations.
4. Smaller and more centralized governments
5. A predominance of social relationships organized along personal lines, including privileges, social hierarchies, laws that are enforced unequally…

While neither set of characteristics appear particularly innovative, their deeper framework provides a useful tool in analyzing the behavior of states and what specific policy decisions would do in different orders. In other words, instead of recommending an institutional innovation such as secure property rights to every country, they analyze how such a recommendation and implementation would play out based on the institutional structure of a specific order. So while their descriptions of open access orders may sound familiar to the goals of some Washington Consensus recommendations, the NWW framework would suggest that many recommendations would not produce the desired results. Institutional history and context matter.

Another highlight comes from their analysis of the emergence of specific institutions, such as property rights. One tedious, but important chapter covers British land reform over hundreds of years, showing specific and often accidental adjustments in land ownership over time. In the case of Britain, these incremental reforms ultimately resulted in secure property rights. NWW emphasize, however, that this situation was not inevitable, nor is the development of any social order. Their description of institutional and organizational development is more akin to an unguided evolutionary process than one of intentional engineering.

This work covers a lot and will surely include some analysis you find objectionable, but I think the overall framework is worth learning from. This book is especially helpful if you are reading, or are planning to read the new Acemoglu and Robinson book, The Narrow Corridor. While both come from an institutionalist background, there are plenty of differences to contrast.

The companion book of case studies is also a worthwhile read,