Are Economists Basically Immoral? Lessons from Paul Heyne
By Russ McCullough
Questions are not scarce in economics, and the title of this book poses a whopper: “Are Economists Basically Immoral?”1
Spoiler alert, the answer is “no”. However, it is easy to see how economists get a bad rap when the public thinks economics is all about greed and maximizing profit. A book that uses this question for its title was on a Liberty Fund table at a conference I went to during my first year of teaching. It is a collection of papers that Paul Heyne wrote before he died much too young. The title caught my attention.
In graduate school, I often sat in church wondering what God’s objective function is—one of the burdens of being naturally curious and trained in The Economic Way of Thinking2 (another book of Paul Heyne’s). The collection of Heyne’s essays in this book resonated with me in multiple ways and influenced my outlook on the overlap of faith and economics. It changed the way I deliver some content in my principles of economics lectures in a positive way—for example, opening students to the idea that the endowment of resources came from God. In 2018, my colleague and I started a podcast called Faith and Economics3 where each week we dive into the type of content Paul Heyne did. Like Heyne, my passion since teaching my first principles class is to bring economics to the masses. Being a graduate of Concordia Lutheran Seminary, Heyne’s depth of knowledge in biblical doctrine was vast, and therefore he was a unique man to engage both college students and fellow economists alike. Many of Heyne’s works contained in this collection are completely secular, too. I think he exercised prudent judgement in knowing when to bring in faith and when it was better left to another time. Together, these papers touch on issues I hope all students and professors of economics are mindful of as they explore how they can flourish better in the economy they live in.
Economics and Ethics
“Morality has more to do with intentions than with results; so the person who tried to run you down with his car is morally more culpable than the person who actually ran you down but while trying to get to church.” What a great comment! You can almost imagine sitting in a class with Heyne debating an example like this. It clearly sets the stage for how people can get confused by morality and outcomes.
Heyne illustrates this further with another example about hunger. He pushes back on a statement like, “Hunger is an injustice.” As he explains, generally speaking, “no one intends the hunger of other people” and therefore there is no injustice. An individual who goes hungry is the result of a complicated mess of choices that people have made, some of those made by the individual and others external to the hungry person. That outcome is not immoral. A bad outcome could be changed with a change in “the whole web of incentives people face”. This is where economics can help. Economists are trained to think about incentives and unintended consequences. Heyne has a wonderful way of articulating these fuzzy topics throughout his writing.
Paul Heyne was also a pioneer in helping people understand Adam Smith, who is too often misunderstood as a purveyor of capitalist greed. He is one of the earliest writers to highlight the distinction between economic systems and the morality of people participating in those systems. His analogy to a traffic system is great:
- An economic system that successfully coordinates the efforts of millions of people will necessarily work like an urban traffic system: Individuals will pursue their own goals, obeying general rules of the game, in response to the net advantages they perceive in their immediate environment, and adjusting those net advantages in the process so that they more adequately accommodate the diverse wants and abilities of the participants.
Since the outcomes of the impersonal commercial society are from a “complex interplay of mostly impersonal decisions” and are a “varied and unpredictable product of effort and luck”, we are left confused to what degree a different system would have been better. Some people continue to hold out hope that better planning could lead to better outcomes, despite the terrible track record central planning has. Heyne helps people better understand Smith’s insight that the public interest is best served when people have freedom to follow their own self-interests.
While it would appear that we are sacrificing “society” for gains from trade, Paul is quick to emphasize that it is impossible for the government to “extract just outcomes from the economic system” and that efficiency gains from the market system can allow individuals to better foster personal relationships, community, and family. People who attribute materialism, consumerism, and selfishness to capitalism are confusing personal morality with impersonal markets.
Economics and Theology
Before reading this book, I sometimes struggled reconciling my faith and economics. Using reason, I have come to appreciate Christian apologetics, and I think Paul Heyne would have, too. People of all faiths and secular historians agree that there was a man named Jesus who lived on earth. Was this guy a Liar, Lunatic, Legend, or Lord? Christians, of course, support that Jesus Christ was Lord. How then does the Lord, who committed the most unselfish act in human history, reconcile himself with self-interested people? Heyne unpacks the self-interest paradigm in Christian Theology as elegantly as he unpacks it for Adam Smith. He spends time identifying the tension that exists between the New Testament and Homo economicus—the rational, self-interested, economic man of neo-classical economic models.
The Beatitudes of Luke and Matthew, revealing “Blessed are the Poor” (Luke 6:20), certainly seem to contradict the prudent nature of Homo economicus. “Do not lay up for yourselves treasures on earth” (Matthew 6:19) does not appear consistent with a consumption smoothing model and 401K plans. In Acts 2:45, early Christians “sold their possessions and goods and distributed them to all, as any had need”—this certainly sounds like Jesus has a socialist agenda. Heyne tackles all these Biblical truths, arguing that Homo economicus and capitalism are consistent with Biblical principles. At the heart of the matter is the “sweetness of Homo economicus”—he must be a persuasive character because capitalism demands voluntary behavior of people engaged in exchange, while socialism is coercive through government making more choices for individuals and forcing payment through taxes.
The Roman Catholic Church, more specifically the popes who penned the social encyclicals beginning in the late 19th century, is another target of Paul’s writing. I find this educational and entertaining as I was raised Catholic but married a Missouri Synod Lutheran and subsequently became a member of the church and a supporter of the Lutheran Confessions of faith. In several of Heyne’s writings, he critically analyzes the social encyclicals and defends capitalism. Furthermore, he reminds the reader that Homo economicus is alive in all of us—those in the pulpit, those in government, those in elite colleges. His writing about theological topics goes the way of Public Choice Theory in economics. He closes out one paper as follows:
- Impartiality and omniscience have not been granted to any of us, not even to government officials and bishops. We are only human. And the same is true, I think, of Homo economicus. When properly understood, he is merely human.
Heyne’s vocation was teaching economics. Like me, he took personally the comments from people who took economics in college and said, “It was the most boring course I ever had,” or just gave a sigh and a roll of the eyes that told it all. Looking back on my last twenty-five years of teaching, I think we have made some progress on these responses, and I think professors like Paul Heyne were influential in bringing economics to life. He believed in teaching economics through telling stories. He criticized mainstream methods that focused on optimization and problem solving as if the solver had omniscience. His approach was consistent with the Austrian school of thought, focusing more on the process of discovery than the solution. He would agree with Thomas Sowell that there are no solutions for problems, only trade-offs. He highlighted the complexity of economic problems, stating that the focus should be on the “plausible stories” rather than on specific solutions to mathematical problems. Treat every principles class “as if this were the last one” that the student will ever take—because it likely is!
Economic Method and Policy Commentary
As a fan of F. A. Hayek, Paul would lean toward limited government—not based so much on allowing maximum individual freedom, but rather on the claim that the government has no chance of having enough knowledge to make centralized decisions in an effective way. Moving toward market-based solutions like school vouchers that, based on ethical arguments rooted in individual freedom, allow choice for options that best fit a dynamic and “unmanageably complex” economy is the best direction to take economic policy from the status quo. That said, Heyne was not afraid to challenge heavyweights he respected like Milton Friedman and Lionel Robbins on their attitudes towards the “positive only” science of economics. They argued that economists should stick to efficiency and let others debate equity. I think Heyne successfully up-ends an argument of theirs by concluding, “A defense of efficiency is, in any particular case, a defense of some particular distribution of rights.”
Don’t overlook the Policy Commentary section near the end of the book! Here Heyne masterfully works through an explanation of how an economy that is unmanageably complex can “still work quite satisfactorily.” “Not everything that works is managed and our economy is just such a system.” Hayekian and Smithian thought is woven into his words on policy recommendations. It would be fun to see Heyne debate some of the conscious capital scholars and practitioners today. His depth of knowledge in morality, ethics, faith, and economics really makes him one of the best scholars to defend profit maximization as a social good. He shows how Adam Smith’s arguments always relied on:
- … not being misled into supposing that profit maximization is an alternative to such objectives as obeying the law or pursuing humane personnel policies. Business executives will usually find that profit maximization requires law-abiding behavior and diligent attention to the interests of employees. Those who attack the profit maximization criterion by assuming that its acceptance entails disregard for legality or for people are attacking a straw man.
He continues his argument into the standard criticisms of international trade and profit maximization. Should a company be forced or encouraged “to pull out of a racist country?” The unintended consequences may do more harm than good to the oppressed people of that country. “Is that social responsibility or elitism?” Should workplace conditions be the same for Malaysia as they are in the United States? The truth is that people in “desperate poverty do not assign as high a value to occupational safety as do people in the United States.” When firms do not enter a country where expected profits are higher, the people who live there in poverty continue without a job that would greatly help their current condition. As long as the labor exchange is voluntary and transparent about the workplace hazards, global profit maximization fights poverty—it does not create it. Heyne turns out to be quite a prophet in this regard; since Heyne wrote in 1982, the research and data using the Economic Freedom Index of the World by the Fraser Institute strongly supports the argument that global capitalism has reduced global poverty much more than any altruistic aid programs.
Public choice theory is another area that Paul articulated well through his continued support of the often-misunderstood Adam Smith. He contends “that the pursuit of private interest for Smith had to be within the bounds of justice” defined by this qualification. While our institutions currently incentivize a profit-maximizing firm to expend considerable resources on lobbying, it is not “just” for the system to be designed that way. Therefore is not within the bounds of pure capitalism according to Heyne. The claim that profit maximization is socially responsible rests on the assumption that the actions taken are just and legal. However, if business executives wield a great deal of power through special interests, the system created will not create social responsibility but rather laws that favor the few. Rationally ignorant voters will not find participation in political markets in their best interest and will cause democracy to eventually overturn the potential that capitalism offers to create socially desirable outcomes. Heyne writes,
- … a political system is democratic if its laws result from competition between legislators for citizen votes. The basic problem with democracy is that special interests have an enormous advantage in this competition. We are not governed by the will of the majority but by the wills of innumerable minorities.
His clarification of private property within the social system of capitalism is helpful because of his insight that “property rights are rights with respect to other people, and are therefore inescapably social, not private.” These rights combined with rules that state that only voluntary exchange is allowed create a fabulous social phenomenon where individual success “depends on your ability to persuade other people to cooperate” with you. Ultimately, efforts to curb or change the virtue of profit maximization are misplaced. Those efforts should instead be made to create better rules of the game so that the rent seeking benefits of lobbyists and other special interests are reduced, and political markets are made more competitive.
To conclude, Heyne’s collection of essays is provocative and will enlighten the reader with regard to not only what free markets can do for wealth accumulation for the average citizen, but also how Christianity is consistent with free market principles. Heyne’s writing is for both secular and Christian audiences alike. Economic history, theology, teaching economics, the morality and ethics of markets, and the foundations of free market principles to guide policy are all wrapped up in this wonderful collection of papers. Heyne’s intellectual dabbling in both kingdoms helped me become a better economist and will enlighten anyone’s thinking on today’s biggest issues.
 “Are Economists Basically Immoral?” And Other Essays on Economics, Ethics, and Religion, by Paul Heyne. Edited by Edited and with an Introduction by Geoffrey Brennan and A.M.C. Waterman.
 Paul L. Heyne, Peter J. Boettke, and David Prychitko, The Economic Way of Thinking. Pearson Series in Economics. Available at Amazon.com.
 Available online at: https://anchor.fm/faithandeconomics
*Russ McCullough is the Wayne D. Angell Distinguished Chair of Economics at Ottawa University.