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Pope St John Paul II in 1991: His  encyclical “Centesimus Annus” of that year argued that human dignity requires economic freedom (©Grzegorz Galazka/Archivio Grzegorz Galazka/Mondadori Portfolio via Getty Images)

Since the financial crash, many have argued that there is a crisis in economic thinking. Some have called into question the detachment of economics from ethics. Others have criticised the over-formalisation of economics.

It is perhaps worth noting that, whatever problems face the academic discipline of economics, out there in the real world — whether because of or despite economists — things do not look too bad. For example, global poverty has fallen by more than three-quarters since 1980. This is a remarkable achievement; it outstrips any other achievement in world economic history by quite a distance.

Not only that, in the same period the world income distribution has become much more equal. And malnutrition, illiteracy, child labour and infant mortality are not only falling, but have fallen faster than at any other time in human history.

To say that things are “not too bad” is not something that academics and commentators like doing. The philosopher Steven Pinker argues that this tendency is at least partly to do with the “psychology of moralisation” whereby academics compete for moral authority. Critics of the present state of affairs who argue that things should be much better are seen as morally engaged, whereas those who say things are not too bad are seen as apathetic.

However, the virtue of prudence demands that we look at the world as it really is. If we don’t, we will make mistakes. It also demands of political economists that we develop a discipline that has a realistic view of human nature whilst taking account both of the inherent dignity of every human person and of our imperfections.

Catholic social teaching has often been very good at this. The two bookends of Pope Leo XIII’s social encyclical letter Rerum Novarum, published in 1891, and Pope John Paul II’s encyclical Centesimus Annus, published in 1991, are particularly fine examples. Much earlier, St Thomas Aquinas followed exactly the same approach, especially in his justification for private property. Indeed, from what little I know as a non-theologian, it is tempting to say that St Thomas perfected the art of understanding human imperfection and its implications for politics, the law and society.

On the other hand, too much modern economics makes unrealistic assumptions about human nature and human behaviour which are designed to make economic problems tractable and amenable to mathematical analysis. This approach can leave important gaps in our understanding. It is OK to make an unrealistic assumption to make an economic model more tractable.

However, if, in the process, you omit the most important aspects of the problem, then your analysis may subtract from, rather than add to, the sum of human knowledge.

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