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07/04/2009

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GMartinez

At a more pedestrian level, we all engage in this kind of activity when, say, we hire our unemployed neighbor as a handyman, or when we patronize a friend's business. Perhaps we would have gotten a better bang-for-buck ratio from someone else, but ...

A skeptic might answer that the strengthened relationship makes up for the lost dollars, so that the transfer of value is a transfer of equivalencies, even though not all the terms are monetary. I wonder what Dr. Zamagni would answer.

In any case, whether the Economy of Communion project goes beyond the canonical model of microeconomics is not the issue. The prevailing ethos is that every exchange should be financially beneficial. Simply getting people to realize that social ties are good for business ("putting social capital in the utility function") would be a gigantic contribution.

From an economic perspective, social ties are beneficial because they are causes, signals, and consequences of trust. Insofar as we lack perfect information about the past, the present, and the future, we need to trust. Social ties lower transaction costs.

Social ties, however, are a long-term investment. Consumerism is not very good at valuing long-term investments. The "payback" timeframe on social investments is uncertain. Consumerism is not very good at deferring gratification to an uncertain future and from an uncertain source.

John D. Mueller

The basic idea in reciprocity seems to be that it combines elements of exchange and gift in variable rather than fixed, e.g. all-or-nothing proportions. Part of the gift to the friend hired as a handyman may be passing over the higher cost of the transaction to oneself in silence. The difficulty economists have in understanding this technically is that, unlike the scholastic economic theory that Benedict XVI uses throughout both Deus caritas est and Caritas in veritate, neoclassical economics omits the element of distribution properly so called: personal gifts (or their opposite, crimes) and distributive justice, which can be viewed as a collective gift. Instead modern economics treats all gifts as disguised production, exchange or consumption, and following Adam Smith treats "distribution" as merely a redefinition of compensation, e.g. labor or property income. Reintegrating the element of distribution requires (in fact, defines) a "neoscholastic" approach--a task especially for Catholic lay economists, which should be encouraged by the pope's encyclicals.

J Mundell

I found the comments by GMartinez to be especially interesting for me, being an owner of an 'Economy of Communion' business. Here is my perspective. There are many times that we in the EoC may choose to do things because they are the 'right' thing to do, and are what the Gospel calls us to do: to love as God loves.

So, we may hire an unemployed neighbor or buy something from someone we know (just as GMartinez suggests); this is not done because we 'expect' an equivalent exchange at the present moment, or to even 'gain' through a relationship that will somehow 'benefit' us at some future point in time. But, we do it as a conscious choice in the hope that it will lead to a relationship of growing trust and mutual love.

This mutual love, as we Catholic's believe, can have the potential for allowing a supernatural relationship to grow, the kind that Jesus talks about: "Where two or three are gathered in my name (i.e., in my teaching...'love one another as I have loved you'), there am I in the midst of them." This, for us, is the ultimate goal of all of our economic actions: The desire to bring back Jesus into the world (through the operation of the business and ultimately through the economy) so that it is He who gives us light and directs our economic actions and decisions. This is part of the transformation that can take place, creating a "new heavens and new earth" that the Gospel talks about.

However, we always have to remember that there is a 'secret' to embracing this kind of 'attitude' that leads to the unity that Jesus prayed for ('Father, may they all be one..'): finding and loving Jesus Crucified and Forsaken in those moments or choices or times when the 'love given' is not returned, and we face the very real difficulties in our daily business life.

This is all very 'flowery' language, one you would expect from theologians rather than from a Harvard MBA class, but what is the 'bottomline' in business? Can businesses really survive and be successful operating in this non-typical Wall Street kind of way?

Our answer to these qustions with our 'real' experience of living this 'spirituality of communion' within the workplace is simply this: Yes! And why is this? Because we (the EoC business owners)never receive an 'equivalent' exchange! Instead, we receive an overflowing surplus of God's Providence, returning our contributions or equivalents many times over (i.e., the 100-fold as the Gospel says) in situations and circumstances completely unrelated to our actions, or, at times, directly as a result of our desire just to 'love' without expectation. Practically speaking, this has resulted in the successful operation of many of the EoC businesses: both with reasonable profits and long-term sustainability, much better than the average rate of normal 'startup' operations.

So, I would say, that in an Economy of Communion, when practiced and lived fully by the business owner, the exchange is never 'equal' (even when you count the value of relationships that are nurtured and brought ahead), but always on the 'plus' side from a Providential standpoint. And, it comes at a cost: embracing suffering (the cross). But, we are not left alone, because the Gospel message is true, even in business: "Give, and gifts will be given to you: a good measure, packed together, shaken down and overflowing, will be poured into your lap."
(Lk 6:38)

We thank God for those moments He shares with us as we go ahead in building this new economy modeled on the life of the Trinity.


GMartinez

I suspect that the reason that behaving in business the way J Mundell describes – the way we behave in marriage or friendship – requires so much “'flowery' language” is that we are brainwashed to think that it is not only realistic, but good, that there be a divide between business and friendship (“my heart is for my family; my brain is for my business,” says the boxing manager in Cinderella Man).

The real target, the real mission field, is not economics professors. It is business professors. Dr. Mueller should redirect his attack: go after the MBA programs.

GMartinez

I have a question for Dr. Mueller: it would seem to me that distributive justice is not a kind of gift, precisely because it is justice. Am I misunderstanding something?

I would add to Dr. Mueller's characterization that neoclassical economics _either_ sees gifts as disguised exchange or as pure waste.

However, and this was my point, if gifts are disguised exchange, they are "very effectively disguised." The "return" may or may not happen in a convenient way or in a convenient timeframe; it may or may not come from the same person. J Mundell's very illuminating description of what motivates an EoC business is very helpful.

My point was that the fratricidal debate between Catholic economists, neoclassical or neoscholastic, is beside the point. Accepting an economy of communion requires a dramatic expansion of the set of goods that one values, a huge increase in the virtue of patience, a drastic acceptance of uncertainty and unknowability, and a jarring openness to faith and hope. Any neoclassical economist can write a little equation that “captures” that.

But the human being so described is radically different from the human being of the business school. The way an EoC business produces profits is radically different from what one would be taught in a Corporate Finance class. The “return on investment” may very well be bountiful beyond measure, but it will be what you need, not what you want. That return is the fruit of not seeking the return, but of seeking the Kingdom of Heaven and its justice (and all the rest will be added unto you).

To vary the metaphor: there is a great deal of give and take in marriage or in friendship. Friends and spouse give to each other, not because it was given to them, but because that’s what a loving friend or spouse does. Love and friendship will wither and die if they start counting (you gave me this, I gave you that). But it will also wither and die (barring exceptional circumstances) if either of them feels like one is putting in a lot more than the other.

John D. Mueller

Sorry for the delay in responding. Both J Mundell and Gabriel Martinez raise excellent points.

J Mundell is certainly right that even in business some goods like God's grace are abundant, and even increased by being shared. St. Augustine was the first to describe these as "public" goods. But the same is not true of what he called "private" goods, which are "diminished by being shared," i.e. scarce. For example, we can't both eat the same piece of bread. In such cases our love for others is expressed with a gift that necessarily reduces our own resources. So J Mundell is equally right to consider the Cross the quintessential example of sacrificial love. It is literally true that no one has greater love than to lay down his life for his friends.

Dr. Martinez directed a question to me about justice. As Pope Benedict XVI reminds us in Caritas in veritate (para. 35), justice has two aspects: commutative justice (or justice in exchange), and distributive justice. I described the latter as a "collective gift" because it is the analog to a personal gift for distributing any community's common goods. Both involve a "transfer payment" rather than compensation for services; both are determined by the "geometric ratio" equating the relative significance of the persons and their distributive shares; and both are limited by the fact of scarcity. We don't give gifts equally to everyone in the world because we can't (or rather, we could do it only once).

Justice in exchange is the "minimum measure" (para. 6) of loving one's neighbor, because anything less would be the opposite of a gift: a crime.

In both Deus caritas est and Caritas in veritate, Benedict XVI used the scholastic economic theory, which contains four elements: production, exchange, distribution, and consumption. Adam Smith's classical economics sought to chop this to two elements, production and exchange. Since its rediscovery of Augustine's theory of utility (which describes consumption) around 1871, neoclassical economics has taught only three elements.

Gabe, I agree it would be wonderful for business schools to improve their curricula. But the problem really begins with the economics departments, of which the B-schools are purely derivative. You teach undergraduates at a Catholic university. How do you teach this? Does modern neoclassical economics teach anything about personal gifts or distributive justice, which the pope emphasized in Caritas in veritate? And if not, isn't there a huge hole in the curriculum? The laborers are few, but the harvest is great--perhaps even a hundredfold!

(I'm afraid I'm just Mr., not Dr. When I was in college I had no idea I'd make my living as an economist, and since then our family has had three kids to put through college. But like you I try to distribute my scarce resources where they'll do the most good.)

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