Monday, January 31, 2005

Social Gospel and Basic Economics

Very quick thought, 'cause I'm out the door.

We don't often find ourselves in agreement with the most traditional forms of economic theory. But I was thinking this morning that our theology and basic economic theory may actually have something in common where I thought we diverged the most.

For the economist, "efficiency" is the touchstone. Often the only touchstone. Efficiency is fancy way of saying maximizing revenue and minimizing costs. With efficiency as the be-all, end-all, traditional economists ignore what they call mere "distributional effects." That is, for the traditional economist, total wealth is what matters, not who gets that wealth. This point often infuriates me, as my law and economics professors often dismiss points I make about the "distribution" of benefits among rich and poor on this ground.

But maybe I'm missing at least a little common ground here. One of the "distributional effects" most often "ignored" by economists is whether the economic good goes to ME or to SOMEBODY ELSE. Isn't this something like what we're trying to get people to do when they love their neighbor as themselves? That is, both Social Gospel adherants and traditional economists should be in agreement that someone else finding a $10 bill on the street should be just as good as my finding the $10 bill. If I love my neighbor as myself, her good is my good. I ignore the "distributional effect," that is, whether it goes to her or me.

The big difference, really, in OUTCOME is the special solicitude we accord to the "least of these" in paying strict attention to "distributional effects" in such situations. Of course, secular economists also derive their conclusions from different premises. Ours are faith-based, theirs based on pure secular reasoning. But maybe our conclusions are not quite as polar opposites as I thought.


At 11:04 AM, Blogger DLW said...

I don't know if you're familiar with Economics and the Law, but it is a broad introduction to the different approaches that mix legal and economic studies.

It is true that Chicago law and economics types advocate what is technically called "Kaldor-Hicksean efficiency" that effectively denies the relevance of distribution in wealth-creation.

There are serious problems with this approach, as you can well imagine. And yet, there is a cost in caring about the distributional consequences of any legal change and so it would be nice, ideally, if we could ignore such. But, of course, this would fit better a world where we didn't have poverty in the first place. You know, a world with a BIG program... ;)



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