The intersection of economics and ethics should be an area of fruitful study and inquiry, one in which we develop new tools for living freer, more prosperous, more fulfilled lives. One such attempt to think in this space and develop an outlook somehow manages to be incorrect in almost every, single particular. I spent several weeks trying to figure out how the gentlemen at New Polity have been able to err so systematically about economics and a vision for a “Catholic” economic order based on “virtue and community instead of the individual and self-interest.”

New Polity, a Catholic Utopian political project set up in the brambles of Steubenville, Ohio, “aims to deconstruct the keywords and categories of liberalism and reconstruct them according to the logic of Christianity.” Their podcast is a humorous, warm, and somewhat grave exposition of their economic worldview. It is even inspiring, if one can get past a few trifling details, such as that their philosophical history is missing pieces, their account of standard economics is “idiosyncratic”, and their empirical claims are misleading.

Nonetheless, they speak with a Catholic vocabulary, which is alluring, and they are obviously good people of upright heart and good humor. But as for their actual ideas, they are a dangerous siren song for disaffected Christians, offering a retreat from reality in the name of virtue. I worry deeply about their project, not only because I think they make important mistakes, but it seems as though they lack any sufficiently strong challengers to make them sharper and more useful and less wrong. After many hours of listening to their podcasts and reading some of the general New Polity articles, I have boiled down their insights into six core ideas (six, the number of the working man!), all of which are mistaken to various significant degrees.

I am going to be pretty harsh here, so let me reiterate. Marc Barnes and Jacob Imam are really, wonderful people. Totally sincere in what they say and without any desire except for all good things to be subsumed within that Great Good from which all good things first flowed – also jokes. Their joke game is better than mine. I made a New Year’s Resolution to be funnier, and it hasn’t really worked out. But Marc Barnes has been writing witty Catholic blog posts since like 2010, and his music rocks. In fact, listening to his album should be top priority for you, dear reader, right after you read this essay.

I will send this essay to Jacob and Marc, so that they have a chance to respond, and if they feel I am misrepresenting their claims, I want to be able to correct myself. And sorry in advance to all the other folks at New Polity whom I am overlooking, like Andrew, I just only really listened to the episodes that had Marc and Jacob on them, so I’m focusing on them. Ultimately though, my goal is not merely to critique. I am deeply devoted to the line of inquiry that connects morality and economics. I teach a course on each, and I believe getting the fundamentals right and sharing those with others will improve their lives and ultimate happiness by giving us more options on how to improve our society. Getting the fundamentals wrong makes all further inquiry vain. And being too cavalier about the prescriptions frustrates the goal of the good life. I want the New Polity project to be successful and true and beautiful!

Idea number one.

• The Medieval notion of the just price is based upon the buyer and seller trying to fulfill each other’s individual needs within a personal virtuous transaction.

According to New Polity, the just price concerns individual needs, the needs of the seller to cover costs and take care of his own affairs, and the needs of buyer to secure what is necessary for his livelihood and affairs. For a price to be just, the seller doesn’t sell for more than he needs, and the buyer pays at least enough to cover costs and take care of the seller. In this story the purpose of bargaining and market transactions is not to get the best deal for oneself, but to find out what the other person needs at an individual level and exchange with respect to those individual needs.

Descriptively, this is not how medieval people set prices, nor was this vision of the just price a common theological prescription or the only one at the time. I don’t know where they get their particular version of this idea. The provenance of this idiosyncratic definition seems to be their own creation, based upon the values of localism, conversationism (a term I just made up), and an assumption of abundance, and moral concerns about profit.

Indicative of the wider thinking of New Polity, here we enter a mental land which valorizes medieval Europe for capacities it didn’t have, in this case, that the seller and buyer of item knew each other and thus were more likely sell items at a price that was pleasant for that individual. And even if they didn’t do this in practice, Jacob and Marc claim (or perhaps assume) that a specifically personal transaction was the gold standard of economic action held by the best thinkers of the day.

And speaking of best thinkers of the day, let’s hit up Saint Albert the Great for his explanation of the just price to see if this is true.

“Money is a quantity that measures a common quality of all things, that quality is found in the use and the need of the community; thus, money is able to be a common measure for all things, which compare things among other items of a certain value,” [1] (translation mine, but it’s not exactly literal because the Latin here makes for terrible English).

“However, the just price is the one which according to the estimation of the market of that particular time is able to be had for the thing sold,” [2] (translation mine).

Notice the emphasis on community, estimation, and contingencies of the market! Albert thought the going market price was the just price. It is shocking to me, too. And should give us pause that the early 13^th century already had people, brilliant outliers, perhaps, who were quite advanced, or if you don’t like the value-laden term, “modern” in their economic analysis. Both of these statements of Albert contradict core New Polity principles. Albert thinks 1) Money was founded to allow people who don’t know each other to trade, i.e. it concerns “alienation,” (This is not an idea found in the medieval corpus, as far as I know. Aristotle says the purpose of money is to serve a common measure for diverse objects, allowing us to compare houses to shoes in terms of cost, and that is what Albert is building off of). 2) While value of an item is based upon the production costs and what need the buyer has for it, Albert admits that value is also contingent upon market circumstances that occur beyond the individuals making the transaction. It’s relative to time and place, not merely costs of production and needs of the individual.

“Okay, one example! Sure, Sebastian…” Fine, I say. Let’s turn then to the OG fat cat of Catholic philosophy Saint Thomas. While Thomas’ views on the just price are less clear and more contested than Albert’s [3], even he admits that selling high when there is scarcity is justified, even if new shipments will reduce the price shortly. He considers the case of a merchant who knows that a new shipment of some good is coming which will cause a future price drop.

“Whence a vendor who sells according to the price he finds in the market it seems does not act contrary to justice, if he does not reveal that which is coming. However, if he should reveal this information or lower his prices, it would be an abundance of virtue, although it should seem outside of the duty of justice,” [4] (translation mine).

This is not something New Polity would admit into their “Christian economy”. For them, to speak of the justice of selling at a significantly higher price than the costs of production would be nonsensical. But Aquinas, although he shares many of the concerns of New Polity, is decidedly not in their camp, though he shares their concern in other places about a rupture in economics between what is natural and what is good.

So Albert conceived the just price as something practically equivalent to the equilibrium price of supply and demand, and Thomas while more circumspect, still connects the idea of exchange to scarcity. Such views of market exchange were developed further throughout the Middle Ages, by other thinkers, thinkers who have similar theological and moral concerns as our New Polity friends. The fact that medieval philosophers and theologians shared views strikingly similar to the mainstream economics profession should call into question some the revisionist economic thinking that has crept into much Catholic social philosophy recently, especially this so-called “postliberal” stuff which purports to be inspired by a medieval ideal.

Thus, I think the definition of the just price offered by our New Polity friends merely presents some pious fiction based upon wishful thinking for a world motivated by a theology of personal encounter and easy liberality due to a lack of scarcity. But in the words of economist Armen Alchian, “Since the discouraging fiasco in the Garden of Eden, all the world has been a place conspicuous in its scarcity of resources, contributing heavily to an abundance of various sorrows and sins,” [5].

Amidst the glorification of medieval thought, sometimes stylized facts worm their way in. And that brings us to idea number two.

• Using mechanisms for determining price and value dehumanize us by removing the need for personal virtue from our account of the good society.

They are worried a lot by alienation, by external mechanisms that we can’t shape dominating our lives, and humans losing our capacity for virtue as we lose our autonomy within the greater system.

(My baser self says, “When I raised concerns like this in college, I was a wise and humane thinker, boldly questioning the trajectory of society, but when New Polity raises this concern, they are foolish luddites who rely on armchair philosophy and ignore empirical reality.”)

I no longer get the intuitions behind this claim. In my collegiate youth, I made it because I didn’t understand what half the words in the sentence really meant. In truth, I can’t really remember why I thought that, and I don’t know how to reconstruct that mind-space. I didn’t know what different types of mechanisms were, or why they mattered. I didn’t know what society was, or how to think about autonomy, or how they actually functioned. I was, frankly, an idiot. But why do these gentlemen make this claim? What does it mean to them?

First of all, taken at face value, the original claim is absurd, even bargaining and bartering is a mechanism. Courts are a mechanism. Letter writing is a mechanism for communication. So what does Marc mean? Can anyone explain what they are talking about? Well, everyone admits that producers need to cover their costs and total upkeep, so whatever method we use to figure and calculate that is a mechanism. Is there something dehumanizing about counting and accounting? Math-phobic theologians and social philosophers have always had a vendetta against Plato’s injunction to learn Geometry, even more so are they suspicious of accounting and economic models. This, of course, makes them poor judges of the use and abuse of models. Far easier is it to dehumanize and dismiss the mathematicians, than to learn their occult crafts. I am not saying that Jacob and Marc are making this error here. I frankly don’t know what they’re doing.

What I do know is that complex societies require supra-personal mechanisms to function and any honest and consistent attempt to function without them would put one back into a time before laws had to be written down.

Although, like a Spanish Man-of-War, NP makes a broadside attack against all mechanism, I suppose I should address their blasting about the “mechanisms” for price setting and the “mechanisms” for determining value.

Since Saint Albert and Saint Thomas and subsequent scholastic philosophers believe that aggregate behavior and relative scarcity can produce a just price, they never adopt a hard line against market mechanisms for prices the way New Polity does. New Polity is deeply worried that market failures and injustices are strong indicators that the majority of modern exchange is in fact morally deficient, that these are caused by “mechanistic” as opposed to “personalist” systems. They have never produced a sustained argument for this position as far as I know, but they suggest it very often.

In related news, error number three.

• Arbitrage is exploitation. Interest is exploitation.

Arbitrage is not only NOT exploitation, it is oftentimes truly praiseworthy. Arbitrage creates value by moving goods from where there is less desire for them to places where there is more desire for them, until the costs are equal. This allows more people to partake in the good than otherwise would be free too. A flea market or garage sale where you sell old items is a type of arbitrage. Pawn shops deal in arbitrage. The distant merchant who buys low and sells high is only able to do such a thing because the low cost represents a low value placed on the item locally, and the profit he makes represents the high value placed on the item in some other location. As goods become more evenly dispersed, arbitrage opportunities close. If you look at the world today, most goods that travel well, like cell phones and spices cost the same everywhere precisely because there are no arbitrage opportunities left. This is great! It means that the price reflects the something very close to the average production cost everywhere and allows for the maximum number of people to benefit from that item. In general, this is a very good thing, Marc!

Let’s take it back to Aquinas’ example of the merchant who knows a new shipment of some good that he sells is about to hit the market. That merchant will try to sell as much as he can right now before the price drops. Notice that in Aquinas’ account it is implied that lower prices are good for the consumers, and the merchant’s desire to sell at the current price before the supply increases is not considered to be unjust. In a word, Aquinas does not assume these normal economic actions and reactions to be morally unjust. This brings us to arbitrage. The merchant who brings the new goods to market commits the good action of creating lower prices by increasing supply in a constrained market. If lowering one’s prices in anticipation of new goods coming to market was virtuous on the part of the original merchant, how much more praiseworthy is it that the new merchant is bringing the goods themselves to market?

The low price means that even the poorer person can obtain this good, so he or she may use it for their good and the good of their family, friends, community etc. If you care for this relatively poorer person being able to make use of goods, then arbitrage is generally praiseworthy!

But according to New Polity’s episode on prices, “A merchant starts with money, buys a product, sells the product and then is left with additional money… that is not okay.”

Consider 1780s France. Each county and duchy had its own import and export duties. This diminished arbitrage opportunity forced production to stay local. It was a localist dream! Except for the constant grain shortages, high prices, and local monopolies, which led to conspiracies that the crown was secretly hoarding grain, to civil unrest, and to guillotines… you get the picture. It’s one example, but I think it is salient and instructive. Allowing money and goods to flow to where they are most needed is generally helpful to people in their own estimation.

Marc might say that a merchant’s profit is not good for the merchant. But it is for the people he sells to. There is no one wronged here. And while Marc may want to object that the merchant’s disposition is bad for wanting to make a profit, I simply observe that the profit is only possible because of a service provided, and thus is not unjust.

Once I am granted the good of arbitrage, I will be able to make the basic story of interest sensible to the theologically scrupulous. Hint: it’s arbitrage across time instead of space.

• A Paraphrase: “Mises says that the economy must be based upon self-interest and scarcity. Hobbes says that the state must be based upon violence and scarcity, therefore our modern liberal state is based upon an anthropology of self-interest and violence to neighbor through the profit motive.”

To what shall I compare this mistake? Or what fallacy can we call it? The theorist-phenomenon fallacy, I will call it, a terrible fallacy. Watching what the economy actually does is how one should judge the economy. Knowledge of the economy comes from the senses, descriptions of what people do, not from philosophical works.

Error number four is very typical of over-blogged, post-empirical post-liberals, and so it is unfair to pick on Marc and Jacob for this one. New Polity combines a normal lack of economic insight with studious Catholic infatuation with the history of ideas. For example, while Locke and Hobbes are important thinkers and theorists of political economy, their effect on the actual workings of our society approaches zero. Yet, when it comes to understanding economic theory, our New Polity hosts and writers put great weight on these philosophers as representative examples of what “capitalism” is all about.

• Most businesses are monopolistic in price setting.

Empirically not true. Really what is happening here Marc and Jacob are just crying in frustration that we don’t live in a society where people are negotiating prices all the time. They do not like (attempted) equilibrium pricing. They feel they are powerless to oppose it. Ironically, one of the key texts for helping write this article, I purchased off Amazon… after negotiating for a better price from the private seller.

And furthermore, negotiation on prices is constant in our society, if one cares to look for it.

When New Polity describes the economy, the businesses they list are frequently big name consumer facing tech companies and other vogue villains, as though that is where all the value is in the economy. It’s a skewed picture.

(Unrelated: I tried to negotiate for a better price on YouTube Premium, and they didn’t get back to me. So I go without, because $12/month is just egregious!)

• Putting money in index funds is unchristian and selfish.

By far New Polity’s take with the worst consequences for the individual, for families, and the common good is this one. But explaining why this claim is wrong in a way that is succinct and capable of moving the needle for Marc and Jacob is hard. Their two main concerns are lack of personal connection and lack of capital autonomy. Let’s take these objections one at a time.

Because index funds are impersonal your investments are not tied to investing in something or someone you know. This means that your money is not being used to benefit your community, but rather a diffuse unknown group of persons. Thus, investments become divorced from personal charity, so the thinking goes. I don’t think this is a very strong objection. Like the objection to mechanism before it, it’s too broad. If I accept it, then I wind up committed to all sorts of bizarre notions that forbid me from doing things that generally and systematically produce good, even if I don’t see it or know the people who benefit from it.

The other objection to blind investing complains that when one loses control over what one’s money is going towards, one is enabling some evils in society by providing material cooperation with evildoers or bad businesses which are not making the world a better place. At some margin, this is certainly true. But is indexing morally problematic? Is the financial sector mostly bad? I am not so cavalier.

What I will say is this, we should presume that most businesses provide positive value to society. The value businesses provide would not exist without investors and lenders, and so, on average, index funds are creating a lot of value – for individuals through returns, for businesses through financing their projects, for consumers by enabling those businesses to arbitrage opportunities, and for society as a whole through the growth in capital and consumer goods, which make this cycle of growth possible in the first place. Are they entrenching incumbents? Or buoying the size and inefficiencies of big businesses? Perhaps! It’s an empirical question I’d like to know more about.

But even though I think normal index funds are good, I do like value investing. Well, I like the idea of it. Matt Levine, my current and only heartthrob for finance news, has been tracking the growth of ESG investing (environment, sustainability, governance), that is, the growing number of investors who don’t only want shareholder value maximized by the company but are also interested and agitate for reforms in other non-pecuniary areas. Why would they do this? Because they are indexed! Investors own parts of lots of companies, and if one company is going around doing something bad for society or government stability or human reproduction or the environment or something, then that company is a liability to the entire portfolio of the world by making it less sustainable. Hence the recent story Matt wrote today about the shareholder complaint lodged against Facebook. A possible moral is that indexing allows us as a society to internalize the costs of the bad things all the companies do, because “bad things” makes the world worse and more volatile. Not that money isn’t being made off of vice, surely lots of dough is rolling in because of the intemperance, ignorance, and general failings of human nature. The world can still hum along despite quite a bit of vice, but when it gets too destructive, finance sometimes can step in to take the longer view. It’s a weird world.

Is there a problem in the amount of money in index funds? Are there supply-side bottlenecks throughout our economy? Should we have a more “venture-capitally” world? Probably. I don’t know. It’s worth investigating. But any investigation into these problems is going to be a very empirical data-heavy endeavor far removed from armchair opining on John Locke. I will take a long bet that our world could be so much better and greater than it is today. But I think the innovations which will improve the current state of affairs will build from and transform the good that is already present, especially fundamental insights of mainstream economic theory, rather than some new “opt-in” polity born from whole cloth.

Conclusion

I think New Polity can do great things and create an inspiring message of how to be a Catholic in the modern economy. Right now, they are stuck in a scrupulous theological mode, which corrupts all the interesting analysis by lacing it with mistaken empirical claims, sloppy arguments, historical fiction, and missing engagement with the actual existing economics profession. Grace builds on nature. They are all grace with not enough substance. I don’t think it would take much for them to break out of the silly presumptions common in their Catholic milieu; they just need to learn how to think like “bad economists” as well as “bad Catholics.”

[1] Kaye, 68. Albert 334b.
Sic ergo dicimus, quod si fiat mensuratio artificialium secundum esse suae speciei, non mensurantur omnia numismate, sed domus domo et sic de aliis. Si autem mensurantur quantum ad hoc accidens ipsorum, quod est appretiabile esse, secundum quod veniunt in usum et utilitatem communitatis, sic possunt habere omnia mensuram, quae sit certissimi pretii inter alia, quia hoc est dispositio mensurae.

I was successfully harassed, so I put the Latin in here, thanks Joe!

[2] Kaye, 76. Justum autem pretium est, quod secundum aestimationem fori illius temporis potest valere res vendita.

[3] Kaye, 96.

[4] Kaye, 97. Unde venditor qui vendit rem secundum pretium quod invenit non videter contra justitiam faere, si quod futurum est non exponat. Si tamen exponeret vel de pretio subtrahet, abundatiatoris esset virtutis; quamvis ad hoc non videatur teneri ex justitiae debito.

[5] Alchian, 1. This was written in English.

References

Joel Kaye, Economy and Nature in the Fourteenth Century: Money, Market Exchange, and the Emergence of Scientific Thought. 1998. The footnotes are mostly in Latin.

Armen Alchian, Universal Economics. 2011.

McConnell Brue and Flynn, economics, 2016. It’s the AP book I teach out of.

Marginal Revolution University. A great website for watching economics videos and learning the subject.