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Economists then need to consider, given the reality of selfishness, what the best forms of economic and political organisation are. In some senses, selfish business people can, without intending to, do an awful lot of good by providing goods and services which are valuable to others (not always, of course). A free economy can make the best out of the human condition by requiring even selfish people to serve others and do something useful — indeed, it might even force them to develop some virtues such as keeping their word, paying what they owe on time, taking care to produce a good product, treating their workers well (if they want to keep them), co-operating with others, and so on. It would be better if such people were virtuous, but economics policy should not be based on the assumption that they always will be.

On the other hand, if the same people were finance ministers in a corrupt country (or even a low-grade official in a corrupt country) they could do enormous harm. Colonel Gaddafi amassed $200 billion and President Mobutu of the Congo $5 billion — which is actually at the low end for a dictator — at the expense of the people.

Political or government regulation of the economy is certainly no substitute for ethics and, by concentrating power, may well make things much worse by creating what we now call    cronyism. Pope Francis’s home country, Argentina, and its neighbour, Brazil, are very good examples of this.

Thus, government regulation or direction of the economy cannot be assumed to be a corrective for greed and selfishness. That is lesson one. However, economists also need to understand that, whatever policy choices they make, there will be poorer outcomes if people behave selfishly. As Pope Benedict said in his encyclical letter, Caritas in Veritate (and he wrote it in italics), “Without internal forms of solidarity and mutual trust, the market cannot completely fulfil its proper economic function.”

If you prefer to listen to economists, Nobel Prize winner Kenneth Arrow has said more or less the same thing:

Virtually every commercial transaction has within itself an element of trust . . . It can be plausibly argued that much of the economic backwardness in the world can be explained by the lack of mutual confidence.

And, despite popular misconception, Adam Smith said exactly the same. So, economists should not detach the study of economics from the study of ethics. Ethics are important for economic wellbeing. This is lesson two.

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