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Lost in Translation: Pope Francis’ Message on the Economy

Pope Francis’ address to Congress this Thursday will be the first ever by a pope, and many Americans are anxious over what he might say about the global economy. Some expect he will give a rousing indictment of free-market capitalism as the culprit in global poverty, environmental degradation, and human suffering. Supporters of markets, including many Catholics and other Christians, are steeling themselves and continue to plead with the pope to reel in what they argue is a false characterization of market economies.

We don’t yet know what the pope will say, but his remarks on the economy to date give us some indication. His writings have produced strong reactions of support from the left and opposition from those on the right who are worried he has undermined their efforts to promote the common good. Francis does not intend for his message to be so politicized; on his plane ride from Cuba to the US, he rejected the notion that it is “to the left” and insisted that his teaching “is the social doctrine of the Church.” But the friction in interpreting Francis’s application of that doctrine to his diagnosis of what ails the global economy is undoubtedly the source of frustration.

In a new paper, “Pope Francis and the Economy: Evangelii Gaudium, New Institutional Economics, and the Search for Consistency Across Disciplines,” Christopher Koopman and I unpack Pope Francis’ 2013 apostolic exhortation, Evangelii gaudium, (Joy of the Gospel), and find that this frustration is born of a much deeper problem in the world of ideas.

The problem is that we are all stuck in a neoclassical rut. The neoclassical economic model that tends to frame how we talk about economics is a sparse and sterile abstraction from real human economies. It flows from a set of artificial assumptions in which a “utility-maximizing” individual is assumed, perfect information is available to the individual, and some perfect economic equilibrium is achievable. In neoclassical thought, economic activity is not so much observed as it is conformed to a false model of the world.

The pope’s indictment of the failure of economies is in its own way a criticism of the limitations of the neoliberal framework and how that framework views human nature. Three themes that surface in Evangelii gaudium echo the insights of an increasingly relevant economic school, called new institutional economics. The themes are:

  • the mistaken reduction of man to an abstract consumer;
  • a failure to recognize that the values that motivate and inform human action in society will be reflected in the economy; and
  • the false ideology of “economism,” or economics as salvation, which assumes economics is fully explanatory of human behavior.

We can build a bridge between these themes and Francis’s social critiques. New institutional economics offers a reform of neoclassical economics by allowing it “to come to grips and deal with a whole range of issues heretofore beyond its ken,” wrote Douglass North, Nobel Laureate and founder of the school of thought. New institutional economics improves upon neoclassical economics by keeping the principles of scarcity and competition, rejecting the models of perfect information and equilibrium, and adding the critical idea that “institutions matter.” It is economics as if it had to do with real human beings operating in the real world.

The emphasis on institutions is where new institutional economics has the most to contribute to the social thought of Pope Francis. Institutions are the formal and informal “rules of the game”—the values, cultures, norms, rules, constitutions, and laws in which human beings make decisions. An economic school that understands the importance of institutions allows economists to answer the questions that appear to be foremost in the mind of Pope Francis: Why do we observe great wealth and grinding poverty in the same city?  What explains the terrible poverty in nations rich in natural resources and human capital, such as Argentina, Brazil, and India? Why is it that the same economic system the pope attacks for producing greed and ignoring the poor is in fact responsible for dramatic declines in global poverty?

A close reading of Evangelii gaudium, and indeed earlier papal writings, seems to begin at the same point as new institutional economics. Both center on the role of individual action, rooted in the individual’s beliefs, in advancing or preventing the emergence of a peaceful social and economic order. The choices we make and the way we act matter. Our choices go on to form the fabric of human society and the institutions under which we are governed. A society that culturally sanctions theft or nepotism will likely find itself governed under institutions that produce unjust economic outcomes. As Catholic theologian, economist, and Vatican advisor Fr. Martin Schlag has said, “The market is something fragile. It’s something which isn’t just an economic fact . . . but it is an ethical and cultural achievement which needs laws and needs ethics, and needs culture.”

The pope rightly reminds us that we should never be satisfied with the existing social order or indifferent to the needs of the most vulnerable. The remedy proposed by Pope Francis is to live the gospel—to be your brother’s keeper—in all facets of life, whether you are a CEO, financier, politician, employer, or employee. It is only in doing so that social bonds are transformed and a just order may emerge.