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Warren Buffett and Pope Benedict: Soulmates?

Maybe not on everything, but some say they preach the same [socialist] economic gospel -- that the wealthy should shoulder more or society's economic burdens, as Buffett put it in a recent Times Op-Ed -- and that they're "both dead wrong," according to The Hoover Institution's Richard Epstein:

The Pope was on his way to recession-torn Spainto lead the Roman Catholic Churchs weeklong celebration of World Youth Daywhen he denounced those nameless persons who put "profits before people." He told journalists, "The economy cannot be measured by the maximum profit but by the common good. The economy cannot function only with mercantile self-regulation but needs an ethical reason in order to work for man." Standing alone, these words mirror the refrains of countless Spanish socialists, whose relations with the Pope have soured in recent years. Their shared premises help explain why Spain finds itself in such a sorry state.Denouncing those who put profits before people may stir the masses, but it is a wickedly deformed foundation for social policy. Profits, like losses, do not exist in the abstract. Corporations, as such, do not experience gains or losses. Those gains and losses are passed on to real people, like shareholders, consumers, workers, and suppliers. It is possible to imagine a world without profits. Yet the disappearance of profits means that investors will be unable to realize a return on either their capital or labor. Structure a system that puts people before profits, and both capital and labor will dry up. The scarcity of private investment capital will force the public sector to first raise and allocate capital and labor, though it has no idea how these resources should be deployed to help the people, writ large. A set of ill-conceived public investments will not provide useful goods and services for consumers (who are, after all, people), nor will it provide sustainable wages for workers (who are also people). Poor investment decisions will lead to a massive constriction in social output that harms all people equally.The proper response to these difficulties is to treat profits as an accurate measure of the cost of capital, rewarded to those individuals and firms who supply some desirable mix of goods, services, and jobs that people, acting individually and not collectively, want for themselves. The genius of Adam Smith, whose musings on the invisible hand are too often derided, was to realize that private markets (supported, to be sure, by suitable public infrastructure) will do better than a command and control system in satisfying the individuals wants and needs.The Pope offers no serious answer to Smiths point when he talks about "the ethical need to work for man" and the "common good." In both of these cases, he treats a collection of diverse individuals as though they form part of some harmonious whole. "Man" in the Popes formulation is a grammatical singular but a social collective. The "common good" speaks of some aggregate benefit to a community that is not securely tethered to the successes and failures of the particular individuals within the collectivity.

H/T RNS daily Roundup

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Epstein must get his theological and spiritual advice from none other than "Fr." Robert Sirico. Claptrap is claptrap.

Be careful, jimmy mac, if you defend the common good, they'll label you a socialist etc.

Why are Catholics so uncharitable online?

Bender... Jimmy, Bob and I get riled up when we read 'Structure a system that puts people before profits, and both capital and labor will dry up.' Does the Hoover Insitute make a profit? nah nada..pays big saleries out of big endowment.. go west young man go west. Why do your mentors publish stuff that un charitably gets us riled up?

So if someone disagrees with us, we automatically question the validity of his orders/vocational calling?I thought that's what they tried to do to the Jesuits in Latin America.

Jeff Landry, what the heck are you talking about? Try sticking to the topic instead of playing the troll.

I'm referring to this, Mr. Gibson:"Epstein must get his theological and spiritual advice from none other than Fr. Robert Sirico."In particular the scare quotes around Fr., indicating some doubt on the part of Jimmy Mac about Fr. Sirico's ordination.I believe, by any measure, that's sticking to the topic.

And as a regular reader of this blog and the magazine, I resent the implication of "trolling" from a contributor.

Richard Epstein has given the usual bs even to the phd level which means piled high and deep. Generalities and falsehoods are compounded with nothing but preaching remaining. I guess Jesus should have bought more property and dined with the rich man and thrown Lazarus to the wolves and retracted his dictum than a rich person would find it difficult to enter heaven. . The message of Jesus is clear and certain. The pope did not speak against the Captitalist system. Benedict is right on this one. So good for him and us. He spoke about profits being the end all of all activity. If one shares and helps it is different than one who hoards and condemns the poor and downtrodden.

Ah, yes, that's sticking to the topic. Bravo. Stirring your resentment does not seem to be a tough task, as I cannot recall you not in high dudgeon. But to be clear, I was not implying you are a troll. I called you a troll. I wouldn't want there to be any misunderstandings.

"Stirring your resentment does not seem to be a tough task, as I cannot recall you not in high dudgeon. "And I'm never disappointed in your lack of professional courtesy. But lesson learned, Mr. Gibson: one your posts, make sure we attack the right people, huh? Otherwise we might just be in "high dudgeon."

Jeff, I try to respond with greater courtesy than showed by the offender, and again that's not hard to do in your case. In any event, back to the topic at hand...I'm not sure who I was attacking in this post. It seems to me the criticism from Epstein underscores the difficulty of putting the Pope or the Church in easy political categories. The Hoover post has generated a good deal of discussion (troll-less) around the Interwebs because it seems to challenge us.

"In any event, back to the topic at handIm not sure who I was attacking in this post."Mr. Gibson -Did you bother to read my first resopnse to your assertion? I was not asserting that YOU or YOUR POST attacked anyone. I was expressing dismay (harmless I thought, not meant to be trolling) at the first comment in RESPONSE to your post: the one questioning Fr. Sirico's standing as a priest. My response was that I find it curious that when someone disagrees with "us", i.e. "Jimmy Mac" and the disagreer is a priest, we must question his vocation. Since conservatives did this same thing to Jesuits in Latin America, as I note, I found this curious. So, you see, if you had bothered to understand my response, you would see that my comment is in no way, shape, or form directed at you or your post. Indeed, I found Epstein's case against the Pope to be a weak one, based in part on a cribbed quote from the Pope's statements.As for courtesy- as I stated I am a frequent commenter on posts here, and some have noted my courtesy in disagreeing with them.

Give it a rest, Jeff. You know what you're doing. I repeat: No trolling allowed.

Only in some twisted world is objecting to a critical, inflammatory comment on a post be considered "trolling."And only in a strange world would someone objecting to a critical comment be castigated as the offender.

Bender: you presume that I am a Catholic. My Catholicism is extremely narrowed: not Roman and not American. Call me a Horn and Hardart Catholic.

I do not doubt R. Sirico's ordination, but I do question his priesthood. I knew him LONG before he "poped" and know him for what he is.

My own personal conclusions are as follows:* The Holy Father surely is right to talk about our individual and collective responsibility to humanity* The Holy Father doesn't prescribe a particular economic/political system for realizing those responsibilities, hopes and dreams (which, to my mind, go deeper than the "individual's wants and needs" that Epstein refers to)* Free-market economies give us a flawed way to at least partially fulfill those responsibilities, hopes and dreams* All of the alternatives so far that have been tried to free-market economies - certainly including socialism - are much worse solutions than a free-market economy for fulfilling those responsibilities. Epstein astutely points out cogent reasons why socialism is worse.* Again, this is me sharing my personal opinion: I am not ready to declare the free-market economy a failed experiment because it only partially fulfills our greatest and deepest needs, and because of its evident flaws. I hope that we can continue to search for the best/most optimal arrangement of private and public entities and interactions (which certainly include such features as taxation, regulation, and central bank operations) to enable humanity to reach its potential - which in my view is achieved by aiming Godward.

@Jim Pauwels (8/24, 4:50 pm) Thanks for your thoughtful reflections. I agree with much of what you say---particularly the first two points.As for free-market economies, obviously we could have an extensive discussion about what defines "free-market economies". It's not my intent to open that discussion.Rather, I just want to observe that many of the most successful economies over the past century have been "social-democratic" societies. By that I mean they have 1) a significant part of their economy that is capitalistic, 2) a significant social welfare state that moderates the often harsh results of capitalism, and 3) a constitutional politics that guarantees certain basic rights to citizens/residents and allows for democratic transfer of power from one party to another.

I like the way he tries to tether the common good to the successes and failures of individuals within the collectivity. IE--if I am poor, it must be my fault and I don't deserve to appeal to the common good. Well, a few thousand well connected individuals in the finance "industry" cost the world half its wealth in 2008. Ergo, must be the fault of all the people who lost the value of their IRA's, or who saw the value of their home cut in half. These people, including myself, had no choice about whether or not to belong to a free market economy. And capitalism is inherintly unstable, with dozens of recessions and recession/depressions since the founding of our country. Somehow, we have to have a way to tether in a rampant beast that offers so much to so few and so little to so many.

Not that he needs me too, but I can vouch for Jeff's politeness towards me when we have disagreed. For what it's worth, I understand that moderating forums such as this can take an enormous amount of patience, but I'm puzzled why it seems the nastiest comments often come from contributors themselves--the ones uniquely charged with reducing the nastiness quotient. Only a minority, to be sure, and only a minority of the time, but I don't see the same level of vitriol coming from moderators of other forums (or even from regular commenters here). I think it keeps people away, or at least keeps them from commenting (and hurts the Commonweal coffers!), which is a shame. Ok, thanks for letting me get that off my chest, now, to the task at hand.The economy cannot be measured by the maximum profit but by the common good. The economy cannot function only with mercantile self-regulation but needs an ethical reason in order to work for man."Im not familiar with Epstein, but I think he misinterprets the Pope when he so vehemently objects to these words. For me, the key phrase is the last one"needs an ethical reason in order to work for man." I don't think the Pope is saying profits are inherently unethical, just observing that man can do unethical things in search of profit, and thus capitalism pre-supposes a moral order. I don't think this idea is anything new or, indeed, anything controversial.

Bender: you presume that I am a Catholic._______________You miss my point entirely. Your degree of Catholicism is irrelevant. The point of the comment (actually a direct quote of the title of the recent posting) was to say ENOUGH with the demonization and hostility and rancor and animus and utter lack of charity (which sadly was rampant in that posting that was calling for greater civility). ENOUGH.And enough with the "they made us do it" nonsense, Ed. Quit blaming others and own up to your own lack of civility. No one makes you or anyone spew bile. That is your own freely made choice.

Jim P. ==What is your idea of a socialist government? When would you call a government a socialist one? What would define it as such? I find it very difficult to follow conservative' "anti-socialist" arguments because I never know just what "socialist" means to them.Would any of you other conservatives like to define the term? As I understand the term it is not synonymous with "Marxism", though both assert that government must assist in significant ways persons who are poor. Marxism claims the ownership of the means of production, but socialists do not necessarily make that claim, though some socialists do demand the government ownership of some means of production.Here's the Merriam-Webster first definition:1 : any of various economic and political theories advocating collective or governmental ownership and administration of the means of production and distribution of goods

Ann Olivier 08/24/2011 - 6:43 pm:

Jim P. ==What is your idea of a socialist government? When would you call a government a socialist one? What would define it as such?I find it very difficult to follow conservative anti-socialist arguments because I never know just what socialist means to them.Would any of you other conservatives like to define the term?Heres the Merriam-Webster first definition:1 : any of various economic and political theories advocating collective or governmental ownership and administration of the means of production and distribution of goods

I'm not a conservative - more of a political nonbeliever - but I'd guess that dictionary definition is pretty good for your purpose. The socialist flaw would be to cripple trading - which people do instinctively - in the service of a state religion of economic egalitarianism. There are, of course, multiple serious problems with the state digging down too deep into the control of individual lives. The key word there is "too". Most states inevitably control people's daily behavior and even, to some extent, their thinking. The tricky thing is to draw the limit at a safe point beyond which the possibility of individuals' regaining lost control is only minimal. Conservatives rightly mistrust planners and politicians who feel that people ought not, as a general principle, to be trusted to make their own decisions.

David S. --It seems that you object to socialism's controlling "people's daily behavior and even, to some extent to their thinking". I don't see how the dictionary definition implies that that will happen. What do you see as the necessary connection between controlling means of production and goods and the controlling of behavior and thinking? I doan't know of any socialists who would recommend such control, so I wonder how you get from controlling means of production and goods to the controls of behavior and thought.In other words I don't see any connection between the latter controls and socialism as defined.

Ann Olivier 08/25/2011 - 12:55 am subscriberDavid S. It seems that you object to socialisms controlling peoples daily behavior and even, to some extent to their thinking.

No, Ann. I didn't say that. I said all states do that. The question is other.

Once again the Hoover Institute in its Incoherent Majesty. Regulation and taxation are not socialism. Socialism is state ownership of the means of production.Regulation is the regulation of risk, not the arbitrary intrusive hand of the nation state. Profits are not distributed to everyone. But they are distributed to the holders of capital after the barest possible minimum has been distributed to anyone else. THIS is the nature of the invisible hand. Regulation is necessary because it is in the nature of capitalism for capitalists to try to distribute risk away from themselves.Profits are the cost of capital, but the cost of capital is whatever the capitalist can get the market to bear.His most telling quote is this one:

The genius of Adam Smith, whose musings on the invisible hand are too often derided, was to realize that private markets (supported, to be sure, by suitable public infrastructure) will do better than a command and control system in satisfying the individuals wants and needs.

Epstein does say that Smith believes in a "suitable private infrastructure" (which is more than many "followers" of Smith will admit). But by doing the sleight of hand where he equates taxes and regulation with socialism, he shows that the suitable public infrastructure is one that protects capital from the people and puts it first.[Someone is going to ask me where Epstein talks about taxes and regulations. I will say that when he quotes Benedict:

The economy cannot be measured by the maximum profit but by the common good. The economy cannot function only with mercantile self-regulation but needs an ethical reason in order to work for man.

and the says that Benedict's "words mirror the refrains of countless Spanish socialists", which Benedict is not and has never done, he is equating the mechanisms of regulation and taxation, which are the form that political intervention does in fact take in all modern capitalist societies, with socialism.]

Economics produces dogmas that often have less empirical support than the most incredible faith claims, and I think this Hoover essay underscores that: Epstein is arguing for the inviolable sanctity of a doctrine of libertarian policies, chiefly because that is the "right" thing to do. (Though he also believes it to be the most efficacious, an arguable point, to say the least.) But Benedict (and Buffett) are arguing for an ethical and humanist and pastoral approach -- believing, I'm sure, and with some reason, that such an approach would be best for society and the economy. But neither the Pope nor the Oracle are being legalistic, it seems to me, or prescriptive. Yet another paradox, perhaps.

"But Benedict (and Buffett) are arguing for an ethical and humanist and pastoral approach "Benedict, perhaps, but Buffett is not exactly an objective participant.http://www.theatlantic.com/business/archive/2011/08/thinking-about-taxes... of course there is the suggestion/criticism that nothing keeps Mr. Buffett from writing as large a check as he wants to the IRS, and/or if he thinks he should pay his (federal and state) estate taxes upon his death instead of avoiding it by giving all his fortune to a tax-exempt foundation.

Does an ethical, humanist, pastoral approach allow for a risk-adjusted competitive rate of return or does it mandate some fraction of the market rate? Presumably no one wants to bankrupt companies but, even short of that, how does the common good benefit if a less than competitve rate of return discourages investment? An economic slowdown, which of course also gravely damages the wellbeing of needy consumers, will cause problems that even Joe Biden and all his stimulus money will not be able to solve.Too often the answer from the left is that profits should be Less but no one will specify a minimum floor other than bankruptcy. Its the inverse of Samuel Gompers demand for labor: More. When there is no rule involved the stage is set for the entry of organized interests rather than the needy and the inevitable result is a power struggle.BTW, in his writings Epstein clearly opposes monopoly profits and far from endorsing selfishness vigorously endorses philanthropy. Hes a principled market-oriented and not a business-oriented advocate, unlike a good portion of the supporters of intrusive government regulation and investment policies. These faithfully produce ever new variants of our familiar crony capitalism despite assurances that our experts guarantee that this time all will be different and that careful moral discernment, not political considerations, will guide our leaders decisions.P.S. If you want to see how fast a human being can talk over an extended period of time, watch one of Epstein's podcasts.

"... how does the common good benefit if a less than competitve rate of return discourages investment?"The most competitive rate of return, which is what the investor goes for, may include relatively high regulations and taxes. Competitive rates exist in a context."BTW, in his writings Epstein clearly opposes monopoly profits and far from endorsing selfishness vigorously endorses philanthropy. Hes a principled market-oriented and not a business-oriented advocate, unlike a good portion of the supporters of intrusive government regulation and investment policies. These faithfully produce ever new variants of our familiar crony capitalism despite assurances that our experts guarantee that this time all will be different and that careful moral discernment, not political considerations, will guide our leaders decisions."So the attempt to oppose the crony capitalism of the capitalists (that was also pointed out by Adam Smith) through regulation reproduces a different kind of crony capitalism? And are you deducing from this that regulation is therefore bad? Is that what you are saying? And what do you mean about a difference between "market oriented" and "business oriented"?

Pro-market advocates favor a free market and competition with minimal government intervention. Pro-business advocates favor the welfare of selected players within the economy, with government support if need be, e.g. Whats good for General Motors is good for America. For GM substitute windmills, ehtanol or whatever is the favored industry of the moment.Paul Ryan is more pro-market, Romney more pro-business.For more on the distinction:http://www.city-journal.org/2011/eon0616lz.htmlIts an old distinction which Vladimir Ilyich Lenin knew quite well and which he thought he could exploit:Capitalists will sell us the rope with which we will hang them

"Pro-market advocates favor a free market and competition with minimal government intervention."The flaw with this is that these people believe that minimal government intervention guarantees a free market and competition.

"The flaw with this is that these people believe that minimal government intervention guarantees a free market and competition."I don't think that's completely accurate, or at least a crude over-simplification. Natural monopolies will always occur as monopolization is a "natural" part of the cycle. But I think most free market advocates also think the market will also disfavor the monopoly. Epstein has written some interesting anti-trust articles you should look into as I'm not doing his theory any favors.

The Tablet reports that Croation bishops have taken a strong stand against some revised legislation which they think would adversely affect workers. Hmm. Somehow they don't sound at all like their brother American bishops."Church condemns business deregulation25 August 2011"Croatia's Catholic Church has condemned government-backed legal changes, which have introduced sweeping deregulation in employee rights and protections. ""Church institutions have warned that efforts are necessary to regulate relations in the commerce sector and protect workers from exhaustion, the arbitrariness of unscrupulous employers and especially the ruthlessness of big business, which is not interested in respecting the dignity of Croatian workers or protecting Croatian national interests," said the Bishops' Conference's Justice and Peace Commission. In particular the Commission said deregulation would damage family life when the national birthrate was already declining. The Commission was reacting to July amendments to Croatia's Commerce Act, scrapping previous limits on Sunday opening and overtime work."'

Hey Ann- The USCCB's Labor Day statement this year very strongly supports workers, including the unequivocal right of public and private workers to unionize. http://www.usccb.org/about/domestic-social-development/upload/Labor-Day-...

Thanks, Irene. Glad to hear they're sounding like the 1930's bishops again. Now if only they will come out and tell Congress in no uncertain terms that it has a right and duty to regulate commerce when it fails to protect or injures workers, consumers, and the public at large.

I just wanted to mention Larry Powell, the minister in Fresno, who says he's goit enough money to do fine, gave up a huge chunk of salary to help educatinal services there.I wonder how many of our free market folks would do the same instead of whining about big government.

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About the Author

David Gibson is a national reporter for Religion News Service and author of The Coming Catholic Church (HarperOne) and The Rule of Benedict (HarperOne). He blogs at dotCommonweal.