Economics and Human Action

When it comes to economics, there is a serious comprehension deficit among Catholics. In order to understand this subject, we must first distinguish between the actions of human beings and the way those actions are perceived by those who study them. The value of any economic theory lies in how well it captures actual human experience — and these theories may vary widely, depending on the writer’s training and powers of objective observation. No evaluation of how an economy works can be valid if the observer is not trained in what to look for and how to analyze what he has observed.

Sadly, many consider themselves experts on economics and political science based on their limited personal experience, without having read or studied any serious work on the subjects. Happily, this is not true of surgery: Very few people try to instruct physicians on how to remove a gall bladder. And yet everyone “knows” about politics and economics, such that the layman considers his view of these subjects as good as, or better than, those who have studied for years.

The economic system is a given, and it is extremely complex. There are billions of transactions of every kind that occur continually each and every day. And not just business transactions: These include any situation where someone acts and another responds. No group of human beings, nor even the world’s most powerful computers, could ever monitor all of these transactions; one would have to be there to witness it, and who could ever do that? The best we can manage is statistics — essentially, a digest of past history, of what occurred a week or a month or two ago (by the time they are gathered). While analyzing statistics can be helpful in telling one what happened, it is useless in explaining why it happened. A true science is based not on “what” but “why” — on cause and effect. And the best way to understand economics as a science is to understand man, not data.

 

Economics begins with the “action axiom”: i.e., man acts. There is no question that this is true, because even to argue with the statement requires you to act. It is true that man also thinks, but we cannot know what he is thinking unless he acts. So if a person says to himself that he is going skiing tomorrow, it means nothing if he does not actually do it. If I come up with a great theory of the nature of the universe, it is useless unless I act — in this case, tell someone either verbally or on paper. We only know about Einstein’s fruitful “thought experiments” because he wrote about them. Blessed Pope John Paul II tells us in The Acting Person that those who only have ideas live in a dream world. Thinking about doing good does not make one good. Thinking about going to France does not get you there. Dreaming up a machine that would be a boon to mankind does not itself help mankind at all.

But admitting that man acts does not explain how man acts. Economics does not delve into the psychological tangles of the mind to discover man’s every motivation, but it does explain his actions to a great degree. Aristotle correctly informs us that all men act for an end or goal. In other words, people do not act for nothing. Your mother may have asked you at one time, “What are you doing?” You may have responded, “Nothing.” But was that really true? Chances are that you were playing, thinking, brooding, stalling to avoid homework or chores, etc. Even an act as innocuous as going to bed has a purpose to the person who does it: He knows that if he does not get sleep he will be miserable the next day, if not dysfunctional.

So, all men act for an end. In addition, all men act for the good. Of course, anyone can see that prisons are full of people who did not act for the good; but, as Aristotle says, men act for either a real good or a perceived good. In other words, even the bad act seemed good to the mind of the actor at the time of the action. Think of the bank robber: His objectively bad actions appear to him as a good solution to his money problems. Later, while on the run, he might come to the realization that his was not really a good choice and turn himself in.

And here, in his shifting priorities, we see another basic element of human action: All human acts are based on “subjective valuation.” If an economist had a nickel for every time some well-meaning Catholic misunderstood or intentionally misinterpreted that term, he could retire. Subjective valuation means that a person’s actions are based on things that he thinks are of value. This in no way denies the existence of objective values, nor does it have anything to do with moral relativism; it simply means that if a person has not internalized those values, he will not act on them. If a guy thinks (rightly or wrongly) that ballet is for sissies, he will never go to one. If I fail to see the value of Catholicism, I will never become a Catholic. So everyone acts on his values. If someone does not do certain things, even things that are perfectly moral and objectively good, it is because he does not value them.

By

Dr. William R. Luckey is Professor of Political Science and Economics at Christendom College and has expertise in Political Philosophy, Business and Economics, and Theology. He is an Adjunct Scholar of the Mises Institute and of the Acton Institute for the Study of Religion and Liberty. Dr. Luckey is also on the advisory board of the Center for Economic Personalism, and is on the Board of Scholars of the Virginia Institute for Public Policy Studies.

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