How the ‘A-Team’ Redeems Modern Economics
by Jennifer Roback Morse, Ph.D.
a review of the book, Redeeming Economics: Rediscovering the Missing Element by John D. Mueller. This review was originally published at Family in America.
John Mueller’s Redeeming Economics is an impressive achievement, really three books in one. Mueller rewrites the history of economics in the first book. In the second book, Mueller expands the concerns of economics in the light of his historical reinterpretation. The third book proposes and critiques public policies through the lens of the theory developed in book two. Readers of The Family in America will probably be most interested in book three. But Mueller’s most lasting contribution to the well-being of the American family may well be book two. His expansion of the concerns of economics has the potential to give economists as well as social conservatives the analytical tools needed to defend the family on its own terms, rather than as a special case of a contract.
The scope of Mueller’s intellectual ambition in this book is truly astonishing, as is the scope of the research involved in all three of his projects. The combination of these three books creates an edifice Mueller calls “neoscholastic economics.” As the real challenge for this book will
be to get people to read all three “books,” I trust this review will convey a sense of why people should invest the time needed to read, absorb, and promote this important book.
Book 1: Rewriting the History of Economics
Modern scholars tend to believe that discipline of economics began with Adam Smith. However, this a-historical reading of the subject is corrected by Mueller, who insists that we have to bring on the entire “A-Team” to really grasp the history of economics: not just Adam Smith, but also Aristotle, Augustine, and Aquinas. In this respect, Mueller stands with no less an authority than Joseph Schumpeter, author of the twentieth century’s most comprehensive history of economics. Schumpeter argues that the real founders of modern economics were the “scholastic doctors” of the Middle Ages. These natural law philosophers had worked out all the elements of economic analysis; Smith simply coordinated them. Schumpeter further claims that “The Wealth of Nations does not contain a single analytic idea, principle or method that was entirely new in 1776,” and Mueller fully agrees. Most modern economists, who instinctively venerate both Smith and Schumpeter, are innocent of Schumpeter’s somewhat heretical views on Smith.
Mueller believes that the questions the scholastics raised reveal their sophistication. Aquinas’s theory had four elements: production, exchange, distribution, and consumption. Smith dropped consumption and distribution, leaving only production and exchange as the proper domain of economics. According to Mueller, Smith appealed to his contemporaries because he over-simplified Aquinas’s synthesis of Aristotle and Augustine. Aristotle argued that every community follows some principle in distributing its common goods, some principle that defines what the Greek philosopher considers “distributive justice.” Augustine expanded this theory by adding to it a theory of “personal distribution.” Each person decides “to whom” or “for whom” he is distributing his goods. Humans always act with some person in mind, even if it is only the actor himself. We give to people we love; we sell to or exchange with people we don’t.
Smith’s famous declaration about the butcher and the baker acting solely out of self-interest eliminates Augustine’s theory of distribution. Smith’s contention that everything is done out of some redefined self-interest collapses a real and valuable distinction between gifts and exchanges. Mueller claims that Augustine’s theory of distribution could have shown why the butcher and the baker give their wares to their own children, and sell them to everyone else.
Book 2: Expanding the Concerns of Economic Theory
This historical analysis sets the stage for Mueller’s own contribution. He redefines economics as “the science of human providence—personal, domestic and political—for oneself and other persons, using scarce means that have alternative uses.” He offers an outline of a theory of how people divide their goods between gifts and personal consumption. The theory of distribution is a theory of gifts to people one cares for, crimes against people one has no regard for, and exchanges with everyone else. Mueller calls this “neoscholastic economics.”
He introduces a simple problem, adapted from neoclassical economist Philip Wicksteed. Neoclassical analysis often begins with Robinson Crusoe, alone on his island, allocating scarce resources with no companions or relationships. By contrast, Wicksteed invites us to consider the problem of a mother, a person “loaded with social relationships and complications.” The “mother’s problem” is to explain the behavior of the typical mother (circa 1910) in her home as she tries to maximize the value of her family’s resources. How might she allocate a single scarce commodity—milk—among alternative uses? “In the usual routine, milk may be wanted for the baby, for the other children, for a pudding, for tea or coffee, and for the cat.” According to Mueller, neoclassical economic theory could provide the solution in the special case in which all the milk was for her own use. She should begin with the most urgent use—that is, the use with the highest marginal utility—and as the urgency of this need is diminished by the application of milk, continue to the next most urgent, and so on. But, Mueller continues: