Pontiff-icating on the Free-Market System: A New Freakonomics Radio Podcast

(Photo: Semilla Luz)

(Photo: Semilla Luz)

This week’s episode of Freakonomics Radio takes a look at Pope Francis’s critique of the free-market system in “Evangelii Gaudium” (“The Joy of the Gospel”), his first apostolic exhortation. (You can subscribe to the podcast at iTunes, get the RSS feed, or listen via the media player above. You can also read the transcript, which includes credits for the music you’ll hear in the episode.)

The pontiff’s 224-page document covers a wide range of topics, but a small sub-section discussing “some challenges of today’s world” has captured the most attention. Using fiery language, Pope Francis condemns a global economy that “kills,” promotes inequality, and allows “the powerful [to] feed upon the powerless.” (Rush Limbaugh argued that this sounds like “pure Marxism.”) Here is a sample passage of “Evangelii Gaudium”:

“[S]ome people continue to defend trickle-down theories which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world. This opinion, which has never been confirmed by the facts, expresses a crude and naïve trust in the goodness of those wielding economic power and in the sacralized workings of the prevailing economic system. Meanwhile, the excluded are still waiting. … One cause of this situation is found in our relationship with money, since we calmly accept its dominion over ourselves and our societies. The current financial crisis can make us overlook the fact that it originated in a profound human crisis: the denial of the primacy of the human person! … While the earnings of a minority are growing exponentially, so too is the gap separating the majority from the prosperity enjoyed by those happy few. This imbalance is the result of ideologies which defend the absolute autonomy of the marketplace and financial speculation. Consequently, they reject the right of states, charged with vigilance for the common good, to exercise any form of control. A new tyranny is thus born, invisible and often virtual, which unilaterally and relentlessly imposes its own laws and rules.

Most papal documents tend to be pored over primarily by the Catholic faithful, but this one has opened the door for a larger secular question: what is the role of markets in causing — or alleviating — human suffering?

To answer this question, Stephen Dubner turns to Jeffrey Sachs, a longtime advocate for both the market system and the poor. Before bumping elbows with the likes of Bono and Angelina Jolie in the fight against poverty, Sachs was a very young tenured economics professor at Harvard, a globe-trotting market fixer and reformer, and an economic adviser to Pope John Paul II; he continues to have a working relationship with the Vatican, and has met Pope Francis. Sachs is currently the director of the Earth Institute at Columbia University and a special adviser to U.N. Secretary General Ban Ki-moon on the Millennium Development Goals. As you’ll hear in the podcast, Sachs doesn’t always sound like an economist when he talks about how the economy should work:

SACHS: First let me say I am a believer in a market economy … and I would imagine Pope Francis, too, is a believer in a market economy, but what the Church has taught … is the idea that an economy needs a moral framework. This is a very, very basic idea that we have mostly discarded but that I believe in.

We also hear from Notre Dame economics professor Joseph Kaboski, a devout Catholic and president of CREDO, the Catholic Research Economists Discussion Organization. Kaboski says that the Pope makes important points in “Evangelii Gaudium,” but stresses that markets are crucial for eliminating poverty:

KABOSKI: The pope has a point on a number of fronts. And you know, markets aren’t perfect, and ethics are important. I think that’s one of the things he’s trying to say. … But on the other hand, we’ve never seen an example of any country that has escaped extreme poverty because of foreign aid or NGOs. … More people have escaped extreme poverty in the past 25 years in part through the growth of China and India than in any period of human history. And all of these miracle countries — “miracle” in the economic sense, China, South Korea, Taiwan, Hong Kong, Singapore, Chile down in Latin America — they’ve all grown through, high levels of trade, market economies. And that’s important.

Not long ago, Dubner moderated a discussion with Richard Thaler and Dean Karlan about how to fight poverty with evidence, and this is an expansion — philosophically and in scope  — of that conversation. With more than 1 billion people living in extreme poverty, and Pope Francis just named Time‘s Person of the Year, it is both a timeless and a timely subject.

Audio Transcript

[MUSIC: The San Andreas Fault, “Bags Unlimited” (from Encantada)]

 

Stephen J. DUBNER: Hey podcast listeners. We know you’re a pretty smart group of people. But how smart? Are you smarter than a fifth grader? Of course you are. But are you smarter than … an economics Ph.D. who’s won all kinds of gaudy economics awards? I think you are! Let me explain. A few months ago, we asked you for the first time to go to Freakonomics.com and make a donation to support Freakonomics Radio. And Steve Levitt -- he’s my Freakonomics co-author, the guy with the economics Ph.D. -- here’s what he thought would happen:

 

Steven D. LEVITT: The chance that someone’s going to get done with their run, go back and take a shower, and then log onto a computer and give you money? I think that is really close to zero.

 

DUBNER: So, you think we’ll raise close to zero dollars?

 

LEVITT: I do, actually.

 

DUBNER: Well, Levitt was wrong. We raised more than zero dollars -- quite a bit more, I’m happy to say. In fact, Levitt and the people here at WNYC, our public-radio station, they were kind of shocked by how supportive you were. So to those of you who did give -- thanks! And if you haven’t donated yet -- let’s shock them some more. Just go to Freakonomics.com, hit the donate button, and there’s still time to claim your donation on this year’s tax return. And now you have a good New Year’s resolution too: keep proving smart people wrong. Now for today’s program.

 

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[GREGORIAN CHANT]

 

DUBNER: Every once in a while, the Pope issues some kind of statement reflecting the views of the Catholic Church. Usually, it’s just the hardcore faithful who pay much attention. This time was different…

 

Brian WILLIAMS: Pope Francis is getting a lot of attention tonight for the mission statement he issued for the Catholic Church he would like to see in the future.

 

Lawrence KUDLOW: I just was so surprised because that language…I understand… the pope’s job is not to proselytize about free market capitalism. Ok, I get that.

 

John ALLEN: The strongest language of this document called has to do with critiquing what he calls a kind of crude and naive faith in the free market. And insisting that the Church has to be a change agent on things like income inequality, spreading unemployment, the environment, war and peace.

 

DUBNER: You may be wondering what the Pope is expecting to happen when he talks about the miseries of the free-market system. Yeah, we were wondering that too.

 

[THEME]

 

ANNOUNCER: From WNYC: This is FREAKONOMICS RADIO, the podcast that explores the hidden side of everything. Here’s your host, Stephen Dubner.

 

[MUSIC: Matthew Aguiluz, “Early Morning Tea”]

 

DUBNER: Today we’re talking about Pope Francis’s recent broadside against the global economy. Our story begins with the economist Jeffrey Sachs, who remembers the very day he found out that economics, the way it’s taught and learned in academia, represents only a sliver of a shard of a smidgen of how economics actually happens in the real world. The year was 1985; the place, Bolivia:

 

Jeffrey SACHS: I remember from the first moment, literally of getting off the airplane actually taking a deep breath and finding no oxygen there because you’re about 13,000 feet above sea level, that my mouth was absolutely agape and amazed, and I’ve never ceased that feeling. What I had learned in the classroom was such a small part of what one needs to understand to be able to apply tools of economics effectively that I’ve regarded the next 28 years as really being an extraordinarily intensive learning curve. And I continue to feel that way. The world’s very complicated. What we can learn from theory and from models and from econometrics is very useful. But if it’s done divorced from practice I think it is almost inevitably, profoundly misleading.


[MUSIC: The Diplomats Of Solid Sound, “Shadow Of Your Soul” (from Let’s Cool One)]

 

DUBNER: Jeff Sachs has spent his career trying to keep that marriage alive – the economic theory and modeling that happens in universities, and the practice of economics, out in the world. These days, he’s known as a globetrotting, poverty-fighting, economic superhero, an adviser to the United Nations and director of the Earth Institute at Columbia University.

 

SACHS: I began as an academic economist joining the faculty at Harvard University in 1980.

 

DUBNER: He was awarded tenure at just 28. When he went to Bolivia, he was asked to help tame that country’s hyperinflation. Really, it was hyper-hyper-hyperinflation: in one year, prices had risen by about 20,000 percent.

 

SACHS: And I worked in Latin America very extensively for several years after the work in Bolivia...

 

DUBNER: In 1989, he was contacted by an official in the Polish government, looking for some economic advice.

 

SACHS: And I told them that I would be interested but frankly as long as my hero, the Solidarity leader Lech Walesa, was under house arrest, I wasn’t really able to do it.

 

DUBNER: And you know what happens next, right?

 

SACHS: And he called me back a few weeks later and said well we’re making a deal with Solidarity, things are moving, would you come? And I became Poland’s economic advisor, and communism fell, and I was there and played some role in helping to design the transition from a completely collapsed and defunct, centrally planned economy back to a market economy.

 

DUBNER: Sachs’s work in Poland became a calling card for much of the former Soviet Union, including the mother ship, Russia…

 

SACHS: ...working with Gorbachev and Yeltsin, and many leaders around the region on this transition back from the failed communist era.

 

DUBNER: With that on his resume, Sachs was called upon to work on economic reform in India and China…

 

SACHS: And then in 1995 another quite decisive turn for me was an invitation to Zambia and to see what this experience and these lessons might mean for Africa.

 

[MUSIC: Color Radio, “Future Product” (from Architects)]

 

DUBNER: By now, the focus of his work had shifted a bit…

 

SACHS: I became quite engaged in the fight against AIDS and malaria and the challenge of fighting extreme poverty.

 

DUBNER: The World Health Organization asked him to help scale up the fight against disease in poor countries…

 

SACHS: And from that I was asked by Kofi Annan to advise him on the newly born Millennium Development Goals.

 

DUBNER: And ever since, Jeff Sachs has been at the very center of the fight against global poverty:

 

SACHS: And Ban Ki-moon very kindly asked me to continue in that capacity when he became Secretary General. And so, I am, for a dozen years now, the lead adviser to the secretary general on the fight against extreme poverty.

 

DUBNER: Okay, so you’re a special adviser to the U.N. on issues of poverty, and development, and you’ve advised many heads of state on the same and on their economies, what about popes? Have you ever sat down with popes and talked to them about these issues?

 

SACHS: Well, I have indeed.

 

DUBNER: First there was Pope John Paul II, the Polish pope. He was particularly interested in the economic reforms that Sachs had worked on in Poland.

 

SACHS:  And I was very, very lucky that he wanted to make an encyclical about teachings of the economy, what’s the role of a market economy? And so this was an extraordinary experience. He gathered a group of diverse economists of different faiths, different countries. He greeted every one of us in our native languages. It was the most extraordinary day.

 

DUBNER: After offering advice for that encyclical, Sachs met the pope again, eight years later, as part of the Jubilee Year.

 

SACHS: And I was part of the Jubilee Campaign to drop the debt for poor countries. And that was a little bit different visit because that one was with Bono and Bob Geldof, and the pope, and Quincy Jones, and then a few others, so it was a pretty interesting day in the Castel Gandolfo.

 

DUBNER: But if you are a person of Jeff Sachs’s intellect, and track record, and temperament, you aren’t necessarily limited to one Pope per lifetime.

 

SACHS: Then recently I saw and met this new, absolutely wonderful, wondrous Pope Francis at the Vatican last month and have been quite involved with the Pontifical Academy of Social Sciences in recent months discussing the challenges of poverty, because this is at the core of Pope Francis’s interests.

 

DUBNER: And so, when Pope Francis recently published a document calling the global economy a “dictatorship" in which “the powerful feed upon the powerless” – well, we

we thought that Jeff Sachs would be a pretty good person to ask about it:

 

SACHS: First let me say I am a believer in a market economy and I would imagine Pope Francis, too, is a believer in a market economy, but what the Church has taught is the idea that first an economy needs a moral framework.

 

DUBNER: So we’re here today primarily to talk about this new document that Pope Francis has published -- technically it’s called apostolic exhortation, it’s called “Evangelii Gaudium,” or the “Joy of the Gospel.” I guess my first question before we get into the particulars, particularly the economic particulars, is: Were you involved in any way? You describe these earlier meetings with Pope John Paul II to talk about economics as they would make their way into that encyclical. Were you involved in any way in the crafting of this particular message?

 

SACHS: No, not in this document. But I am an avid reader of it.

 

DUBNER: OK, so even if you weren’t an avid reader you would have heard about it by now. And it’s made a lot of news for a variety of reasons. There wasn’t that much in the document about economics per se, but what there was was quite trenchant, statements about the economy, calling unfettered capitalism “a new tyranny.” So my first question for you is this, knowing a lot about economics, knowing a lot about poverty, knowing quite a bit about popes, too, and the way they try to send a message like this, first of all who actually wrote this exhortation? Did Pope Francis, do you think, write the whole thing or most of it himself? Or does he have some economists on staff who he brings in for different parts, particularly the economic sections?

 

SACHS: Well, I would imagine this is his voice, because this seems very authentically his message to the world. And much of what the pope talks about in the analysis, the preferential option for the poor is a famed and justifiably so Church doctrine. The universal destination of goods is another phrase that he uses, and those who have read through Church teachings as I have over the years know these phrases and these concepts. But, of course, what Pope Francis is bringing is something extraordinarily vivid and fresh, and his message really is that he’s infusing the exhortation with the very spirit of going forth and being out in the community. That’s partly the Jesuit background and it’s partly his holding Jesus’ own teachings as the most central part of the Church’s message.

 

DUBNER: Let me read from you one brief passage from the exhortation about the economy. Pope Francis writes, “Today everything comes under the laws of competition and the survival of the fittest, where the powerful feed upon the powerless. As a consequence, masses of people find themselves excluded and marginalized without work, without possibilities, without any means of escape.” So Jeff, I’m curious, is the description here from Pope Francis accurate, that the laws of competition result in masses of people who are excluded and marginalized? Is that what causes the majority of poverty that you’ve seen around the world?

 

SACHS: Well, I resonate with this for a number of reasons. In the end, while there can be property rights and market forces, they are not sacrosanct to use an appropriate word in this context.. They must serve a bigger purpose. And one of those purposes is that there should be the ability of every human being to meet basic needs, and to have basic human dignity. And I think that this is what the Church calls the preferential option for the poor. What Jesus said is he who feeds the least among thee, feeds me. That the Church’s attention is to the most marginalized, the most destitute, those outside. Now I’ve taught for a number of years, on the, let’s say the more analytical side of this that there is the reality of poverty traps. And that is you can have a functioning market economy, but for some reason pockets of that market economy in the word can be so impoverished, so destitute, so devoid of the most basic things needed, whether it’s food supply, freshwater, ability to fight malaria, ability to pave a road from the hinter land, that the economy is actually trapped. And you can even see what should be done, but our capital markets don’t work well enough, and our ability to see that there’s a way out of this doesn’t just allow for this kind of bootstrap rising out of poverty. And so when I wrote the book, The End of Poverty, in 2005, I use the metaphor of the ladder of development, and I said that it is often crucial to help the poorest of the poor get onto the ladder. After you’re on the ladder of development, then you can walk up the rungs, and market forces are very powerful, and they can carry people, help them climb the rungs, but if you’re not even on the ladder, and there are a lot of reasons why that might be that I emphasized over the years, many disagree with me, but I’ll keep fighting for what I see with my own eyes and what I’ve been able to gather, that helping those that are excluded get into a process where markets work for them and not against them is extremely important.

 

DUBNER: So I would argue that the view that you just expressed there is a somewhat nuanced one. Maybe even an extremely nuanced one. And I think to most people who hear it, certainly most people who listen to a program like this would say well yes, absolutely, that resonates, and it makes sense, and it’s doable and all those things. I guess my question to you is this, compared to what the pope has written about capitalism and how it can or can’t work, it was much heavier on the can’t work part and here’s why it doesn’t work, and yes we need to reintroduce a moral framework to capitalism. But I guess what I don’t read in it is a pragmatic means of approaching or building said framework. So can you help us kind of sort that through? In other words what is the pope actually calling for in terms of practical steps, in terms of less or more regulation, in terms of more open or more regulated markets? Can you give us any kind of insight into what that vision might be?

 

SACHS: I think I can. First, he makes very clear in this document, he’s not a policy maker, policy analyst, politician. This is a spiritual text. It is not a policy framework. And I think this is very important. What he’s really talking about here is what is just in a few lines after the ones you quoted a phrase that I think is very powerful and very correct, the globalization of indifference. He’s talking about the fact that we have lost even a moral sensibility of the suffering that is around us of those who are battling extreme poverty, or hunger, or disease, or all of them. And that what he is calling on the Church to do in going forth and entering the community and spreading the gospel as he sees it is to break that moral indifference. Now, I was at the Vatican just a few days ago for a very practical discussion about programmatic things, because the church also has a huge network of clinics, hospitals, schools. It’s very much engaged all over the world, including throughout Africa, of course, where I come into contact a lot with Church institutions providing life-saving social services. So there are a lot of pragmatic things to say. I discussed how information technology can be mobilized to improve healthcare delivery, to improve education, very specific kinds of things and there was hug interest in that, not only high abstraction. But I think what the pope is really talking about here is breaking that indifference. And I have to say I see this very much, this indifference. It really does weigh on me very heavily. And I’ll give you an example, Stephen, recently the Global Fund to Fight AIDS, TB, and malaria came up for its financial replenishment, a three-year replenishment. I was one of the architects of that global fund 12 years ago. And at the time, George Bush said look we won’t let money stand in the way, you show that this works and the money will be there. Well, this fund has saved millions of lives. It’s delivered. And yet when it came to the replenishment just now, it couldn’t raise the funds for the minimum package. It was saying that it needed at a minimum to fight these three diseases $5 billion a year. Mind you, hundreds of millions of people and their lives are at stake. Five billion dollars we know in macroeconomics is nothing in this world, and yet they could not raise $5 billion a year. They raised $4 billion a year. And that may not sound so consequential, but when you’re in a village and the rapid diagnostic tests aren’t there, there’s a medical stock out, the antiretrovirals aren’t there, this is life and death. And since I’m living in a neighborhood where if not down the block, then a few blocks away, or a couple miles away are billionaire hedge fund owners taking home personally paychecks of a billions dollars for the year, the fact that we can’t come up with $5 billion for this institution from all worldwide sources is the globalization of indifference. And the pope says the culture of prosperity deadens us. This is what he’s really talking about.

 

[MUSIC: Seks Bomba, “Cal Tjader” (from Thanks and Goodnight)]

 

DUBNER: Coming up on Freakonomics Radio ...  The president of CREDO – that’s the  Catholic Research Economic Discussion Organization – isn’t quite so sour on the global economy:

 

Joseph KABOSKI: ...More people have escaped extreme poverty in the past 25 years in part through the growth of China and India than in any period of human history...

 

DUBNER: And Jeff Sachs talks about what it’s like to be a moralist in economist’s clothing:

 

DUBNER: Do your economist peers, especially from the old days, consider you something of a heretic in taking morality so seriously?

 

SACHS: I think so.

 

[THEME]

 

ANNOUNCER: From WNYC: This is FREAKONOMICS RADIO. Here’s your host, Stephen Dubner.

 

[MUSIC: Spencer Garn, “Living In Harmony”]

 

DUBNER: Pope Francis recently published an apostolic exhortation called “Evangelii Gaudium,” describing the role of the Catholic Church in the modern world. He was particularly critical of income inequality, calling unfettered capitalism “a new tyranny.” Not everyone agreed with the Pope. Rush Limbaugh, for instance …

 

RUSH LIMBAUGH: I gotta be very careful. I have been numerous times to the Vatican.  It wouldn't exist without tons of money.  But regardless, what this is, somebody has either written this for him or gotten to him. This is just pure Marxism coming out of the mouth of the pope.  There’s no such...unfettered capitalism?  That doesn't exist anywhere.  Unfettered capitalism is a liberal socialist phrase to describe the United States.

KABOSKI: Sure, I mean, the first thing is Pope Francis is wholeheartedly not a Marxist.

 

DUBNER: That’s Joe Kaboski. He’s an economics professor at Notre Dame.

 

KABOSKI: Yeah. I’m a cradle Catholic. I’ve been Catholic my whole life. I’m a daily communicant, so I mean, Catholicism is central to my life.

 

DUBNER: Kaboski does research on development and growth around the world.

 

KABOSKI: And I’m also the president of CREDO, which is Catholic Research Economist Discussion Organization, which is a professional society. I want to emphasize again that also for the Rush Limbaugh crowd is that you don’t want to read this as an economic document. And in fact there’s many places in the document where the pope has said, I’ve gone into a great level of detail because I want you to think about how these things concern the practical implications for the Church’s mission. That’s what he’s about, thinking about the practical implications for the Church’s mission. And the economy is not completely separate from that. But that’s not what he’s talking about.

 

DUBNER: All right, so we all agree that the Pope isn’t writing an economic prescription – but what is he saying about the economy?

 

KABOSKI: You know I think, so...the pope has a point on a number of fronts. And you know, markets aren’t perfect, and ethics are important. I think that’s one of the things he’s trying to say. And as just an example of that, I have an immigrant friend who went to buy a car and had, you know, he doesn’t speak English, has no information, and the person ended up charging her twice what the car was worth. There’s an ethical thing, that’s ethically wrong for someone to take advantage of your misinformation. So ethics are important in markets. You know, finance obviously is not perfect. Globalization itself isn’t perfect. You know, I do work in Kenya. There’s a town called Malindi. If you go to Malindi, there’s a lot of people from the West, from Italy who are working for NGOs, missionaries, doing all sorts of work to help the people of Malindi, and there’s another segment of people from the exact same countries that are coming for basically child sex trade. Child sex is a market. You know, that’s an impact of globalization that’s not entirely positive. So I think the pope has some important things, the idea that growth doesn’t cure everything. But on the other hand, we’ve never seen an example of any country that has escaped extreme poverty because of foreign aid or NGOs. And more people have escaped extreme poverty in the past 25 years in part through the growth of China and India than in any period of human history. And all of these miracle countries, miracle in the economic sense, China, South Korea, Taiwan, Hong Kong, Singapore, you know, Chile down in Latin America, they’ve all grown through high levels of trade, market economies. And that’s important. The importance of a market economy you can see no better than South Korea and North Korea. I mean, North Korea people are starving to death and dire poverty. And South Korea is basically a high income country at this point, and it’s because of 40 years of intense growth versus opposed to 40 years of stagnation or even going down.

 

[MUSIC: Ed Hartman, “Two Guitars”]

 

DUBNER: As much as Joe Kaboski and Jeff Sachs insist that the Pope’s “Evangelii Gaudium” is not an economic treatise – well, here we are, talking about the economics of it. And so are a lot of other people. What will all those conversations produce? Many millions of people, if not billions, have become disillusioned with capitalism in recent years; will the Pope’s words tilt that disillusion into something more productive? Here’s Jeff Sachs again:

 

SACHS: The dynamics of society are indeed extraordinarily rich and complex. And we know that material forces, the forces of the market if you will, of technology drive a lot of change. We know that politics, which means how power is organized and used has huge effects. And we also know that beliefs and ideas and moral principles can also have very powerful effects, but which ones work and in which ways is a very difficult thing to know and to guess. And, of course, it was Stalin who famously sniffed at the pope well how many divisions does he have? And the pope’s institution outlasted Stalin’s institution. And it turns out that ideas can matter a lot. And I do think that there is some hope, and I regard it as more than a passing need for a kind of new awareness. And I say this not only because of the problems of wealth and poverty by the way, but because I believe that at least as large, an existential crisis is unfolding with the physical environment. We also have a globalization of indifference over climate change. We have lots of deniers, we have lots of skeptics. But I believe that the science is as strong as can be to tell us that we’re, as a species, we’re moving in a reckless and largely uncharted and very dangerous direction for our planet. And one needs to break through there as well. And while this exhortation does not discuss the environment at length, it does talk about protecting God’s creation and our moral mandate and practical need to do it. So I think the stakes are quite high.

 

DUBNER: Jeff, let me ask you about the environment, because it’s an interesting point. He does write, “The thirst for power and possessions knows no limits in this system, which tends to devour everything which stands in the way of increased profits. Whatever is fragile, like the environment, is defenseless before the interests of a deified market, which become the only rule.” So he is talking about economic concepts here, externalities and market failures, and I’d be curious to know how you see these kind of problems, again wearing the hat of both an economist and a humanitarian and almost a philosopher of poverty by this point. I’d love you to talk to me about the optimal balance, not just on the environmental point, but on the whole economic point. I think that’s what’s really challenging for people is how to get their head around this.

 

SACHS: Well let me mention just an example, it may sound like a digression, but I think it’s relevant. I worked in Poland and in Russia after the communist system collapsed. One of the things that was extremely powerful in Poland was the fact that the Catholic Church was there almost as a guardian of the society and of some decency, and standards, and while the Church was not engaged in the reforms in any way in particular, and on specifics, probably was not too enthusiastic about some of the market liberalization and so forth, the fact of the matter is it gave a context to the government and to the society that really held in check massive corruption, that helped the Polish people to hold together through a very difficult period, and help Poland come out as a great success story, rapid economic growth, rapid improvements of living standards, and a fully functioning democracy. In Russia I felt very strongly that, the Russian Orthodox Church had of course been suborned by the Communist Party, all civil society had been crushed, there were not organized institutions that could discipline the government and say, “Come on, hold back on that mega corruption.” And I watched the difference close up. It was very subtle, very complicated, but I believe that the moral framework that Poland found itself in, not explicitly, but as part of its history, as part of its culture, as part of the role of the Church and its institutions, played a very important role in helping Poland through the crisis. And the fact that the Communist Party in Russia and the Soviet Union and its brutality had they’d basically slaughtered civil society and brought the Church under state control with all that that entailed, meant that you didn’t have that kind of moral framework that could help to stop what eventually became an orgy of corruption. So this is a very perhaps a general, I hope not an esoteric point, but that’s why I’m a believer in these things, that all of this matters and that reminding ourselves, and especially hearing it from a pope, that there needs to be a moral framework, that our indifference, our brazenness, our hard-heartedness, is no favor to ourselves or to the functioning of our societies, can be extremely powerful in opening eyes and making people rethink.

 

DUBNER: It’s so interesting, you know, if you look at the history of economics itself you see that there used to be a lot of moral sentiment, literally from Adam Smith, in thinking about what economics was, or how economics works. These days, however, economics and economists are not known for trafficking in moral statements or moral judgments as you put it. Often the moral view is considered kind of naive or passé. I’m curious, do your economist peers, especially from the old days, consider you something of a heretic in taking morality so seriously?

 

SACHS: I think so. And I do feel that this is a very, very real issue. I find it absolutely necessary for the orientation that I take as what this whole field is about and how I view my own attempts to practice it as inevitably requiring that moral framework anyway. But I think that once you have that perspective and I must throw in an Aristotelian idea that happiness means also that our institutions comport with our deep human nature, including our human nature as social animals. To my mind it brings it back full turn that we need the morality not only to know what we’re doing but for our institutions to have a chance at delivering things that humanity wants. And as the pope talks about in this exhortation sometimes these days even the ideas of moral sentiments are viewed with derision or scorn. That is true and incredibly dangerous. He says here that, “Ethics has come to be viewed with a certain scornful derision. It seems as counterproductive, too human…” and so forth. And this I think one could say, I’ll say it both analytically and normatively and prescriptively, if we view ethics in that way as silly, a nuisance, a hindrance, we’re going to get everything wrong.

 

[MUSIC: Laura Ault, “The Greatest Thing” (from The Greatest Thing)]

 

DUBNER: It’s easy to be skeptical, even cynical, when you hear the leader of the Catholic Church describe the global economy as exclusive and exploitive and too rich for its own good – because those are the very criticisms that could have been levied against the Church itself for quite a few centuries. Even today, the Vatican is hardly a shining example of financial rectitude. So if you wanted to, you could dismiss the Pope’s message here as a pot-calling-the-kettle-black situation, or just a statement of moral platitudes. You could also accuse him of throwing out the baby with the bathwater – highlighting the obvious failures of a free-market system while failing to highlight the perhaps even more obvious victories. But those are easy outs. It’s harder – and, I would argue, much more admirable – to go for the balancing act, to figure out how to keep the baby and clean up the bathwater. It strikes me that that’s what Jeff Sachs is going for. He doesn’t sound like most of the economists we talk to on this program – really, he doesn't sound much like anybody. What struck me most is his ability to be the ultimate non-extremist. Most conversations these days, especially in the political sphere, tend to take one side and ride it hard, wiping out all nuance, refusing to acknowledge any strength in an opponent’s argument. But Jeff Sachs argues for the power of the market and the power of morality. A voice like his probably shouldn’t be so rare – but it is. In the new year, here’s hoping for more.

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  1. Joe D says:

    The problem is the tendency for economic winners to use their winnings to reduce the transparency of free markets, and rig the system behind that opacity so that they continue to win. What’s in those credit default swaps? I dunno, but they’re rated AAA. What’s my mortgage rate gonna be in three years? Doesn’t matter, you’ll refinance before then against the increased value of your home.

    This tendency to cheat to stay ahead is closely related to the Christian concept of original sin, so it’s a particularly good target for papal writing.

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  2. alex says:

    I think one of the Pope’s problems is he doesn’t actually know what real capitalism is. He grew up in the corrupt crony system of Argentina, traveled through the rest of corrupt South America, then finally made it to the more advanced and less corrupt Europe. Europe has huge welfare programs but he wasn’t there to see they were built on the back of capitalism. Capitalism, which by the way, is totally unlike what went on in South America when he was young (it was more like feudalism).

    Hot debate. What do you think? Thumb up 35 Thumb down 39
    • Shedrick says:

      Chicago is more like South America than you think. Plus drugs is free market and more companies are finding ways to addict customers to their products like drug dealers than offer a useful product.

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      • Average.Random.Joe says:

        Chicago is less than South America than you think. How are drugs free market? They more like the opposite of free market. They are black market, the results of regulation and restrictions to a free market. Black markets have market functions but can hardly be analogous to free markets where the illegality of the trade is going to cause serious problems like death in a deal gone bad.

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      • J1 says:

        FWIW, I think he’s referring to the pharma industry, not the illicit drug industry. They’ve developed a lot of profitable stuff that is nice but not necessarily essential.

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    • perk says:

      capitalism: “an economic and political system in which a country’s trade and industry are controlled by private owners for profit, rather than by the state” (http://www.oxforddictionaries.com/definition/english/capitalism)

      I don’t think capitalism is the issue. the “market” pope francis is referring to crosses economical and political systems. democracy, communism and dictatorships all participate in the “market”. I think he is referring to the distribution of the world’s wealth.

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    • JSchell says:

      I don’t believe that Pope Francis’ position and the “Evangelii Gaudium” is open for debate. His position is his belief based on his Catholic Faith. Accept it or not, as you choose, but it’s ridiculous to try and ‘debate’ someone out of their faith.

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  3. Libra says:

    I am a serious Catholic and I think the new Pope is a fascinating and wonderful person. I think he will go far in moving the focus of the church to where it needs to be, as opposed to where it has been. I look forward to the years ahead with Pope Francis.

    That said, I do not kid myself that the Pope is a world class economist and despite his comment above, the DATA does support that the ONLY PATH to pulling large populations of people out of poverty. And also that charity alone has NEVER worked to improve poverty for any large population.

    Hans Rosling is a world class professor in these topics. His Widely known, Data driven TED talk shows this conclusively. If you haven’t seen it the link is here: http://www.ted.com/talks/hans_rosling_reveals_new_insights_on_poverty.html

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    • Phil Persinger says:

      Libra–

      Thank you for the link. Novel way of looking at data and very entertaining as well. Would love to see his updates for the last 6 years.

      Everyone should watch until the very end.

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    • Jeff D says:

      Just to clarify–the only KNOWN PATH to pull large populations out of poverty in an imperfect world. The only way to do this in an imperfect world is to allow freedom to do what is right, thereby allowing people to sometimes do a little bit of wrong. In a perfect world with only people who will do what is right–then capitalism isn’t necessary–but we don’t live in that world.

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  4. Sasha Patino says:

    “Thing 7: Free-market policies rarely make poor countries rich. As I discussed in Chapter Six of my own book, every developed nation from England down to the present day got that way through protectionism and state industrial policy, not pure free markets. Even the good ol’ USA played this game from Independence until after WWII.

    Thing 12: Governments can pick winners. Not every time, and don’t get careless, but the free market isn’t always right, and the government isn’t always wrong. In the U.S., government was responsible for (in order) the Erie Canal, the Transcontinental Railroad, the Interstate Highway System, and the Internet. Not to mention the aircraft and semiconductor industries. In East Asia, governments did even more.

    Thing 16: We are not smart enough to leave things to the market. In the real world, markets don’t take care of themselves. They need to be regulated. How much and in what way is legitimate party politics, but an unregulated economy is a dangerous fantasy.”

    Ha-Joon Chang, 23 Things They Don’t Tell You About Capitalism.

    That India and China achieved growth partly by opening up their markets to more commercial enterprises does not mean they surrendered their economies to the free market. Their growth was from direct intervention, use and management of the market. Their success is an example of the role of strong government and governance, not of unfettered markets.

    Capitalism defined as a free enterprise and fair trade system among stakeholders of equal power that accurately accounts for total costs is generally better than other economic systems. But the free-market “laissez-faire” variant pushed by the neo-liberal financial sector is worse than most forms of state-controlled economies. It is anti-state, anti-democratic, non-transparent, and non-accountable. It is neither valid nor sound.

    The Pope presents a valid critique of the dominant variant that shapes most economic policies across the globe. He does not offer any prescription. He may yet, but I imagine it will be in consultation with working economists such as Sachs

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    • Julien Couvreur says:

      Thing 7: the lack of pure free market in history is not an argue that people wouldn’t have been better off without the institutionalized coercion of the State.
      So you can look at China and say that it has managed to improve a lot in the last few decades under State control, but compared to what? In particular, how do you compare to the counter-factual of an even freer China? Stating a conclusion is substitute for reason or evidence.

      Here is a cross-country analysis of economic freedom vs poverty: http://bastiat.mises.org/2013/12/pope-francis-income-equality-poverty-and-capitalism/
      How can you look at this and conclude that the extent to which people are not free is somewhat beneficial?

      Thing 12: what exactly is the argument? How do you know that those government choices are good (aside from status quo bias) or worthwhile (how do you know that the net result of government picking winners is positive?).
      Pointing out that the market produced the piano tie (a fashion failure) is hardly a systematic critique. Similarly, pointing out the government may have supported some not so horrible efforts is hardly a systematic analysis of a net benefit either. You cannot look at a built bridge as a proof of the goodness of government without looking at the unseen (opportunity costs).

      “The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.” ?Henry Hazlitt

      Thing 16: “We are not smart enough to leave things to the market.” I’m not even sure what that means. The market is simply people within the framework of property rights and voluntary exchange. How can we not be “smart enough” to leave it to people? Do you realize what kind of magical thinking this attributes to governments?
      There is no such thing as an unregulated economy. Consumers and their preferences are the ultimate regulators of an economy. Do not confuse the lack of top-down coercive regulation with absence of regulator mechanisms.

      PS: It shows the depth of our trouble when the diagnosis of our financial sector is that it is taken over by neo-liberal mentality. If you cannot realize how much the financial sector is in bed with government and its supposed regulators, then what are the chances of correcting the root cause of the problem. For starters, I suggest you look into the birth of the central bank with the Jekyll Island meeting; in short, it is the use of government power by bankers to secure their business by cartelizing around a central bank and socializing risks to the government (ie. taxpayers).

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      • Julien Couvreur says:

        Sorry for unfortunate typos, I’ll review more carefully next time:
        #1 the lack of pure free market is not an argue that -> is not an _argument_ that
        #2 Stating a conclusion is substitute for -> is _no_ substitute for

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      • Sasha Patino says:

        “So you can look at China and say that it has managed to improve a lot in the last few decades under State control, but compared to what? In particular, how do you compare to the counter-factual of an even freer China? Stating a conclusion is [no] substitute for reason or evidence.”

        No economic history is strictly comparable. How do you compare the neo-liberal austerity of the last thirty years with any other period? That is not the purpose of the analysis. Chang shows how every developed economy succeeded through a strong role of the state, via protectionism, industry subsidies, industrial policy, etc.

        Governments pick winners all the time. They also pick losers. So does the market. For every Bill Gates and Steve Jobs, thousands go into bankruptcy. I know of no one who claims we should then abolish the market since more fail than succeed. (Those who do want to abolish the market for other reasons.) Yet libertarians and neo-liberals use that argument against government finance. And where is the evidence that government ignored opportunity costs? Most infrastructure is built since it will provide greater returns than its costs, opportunity or otherwise – sanitation plants increase public health; roads and bridges lower transportation and other transaction costs.

        “Thing 16: “We are not smart enough to leave things to the market.” I’m not even sure what that means. The market is simply people within the framework of property rights and voluntary exchange. How can we not be “smart enough” to leave it to people? Do you realize what kind of magical thinking this attributes to governments?”

        The magical thinking is the power attributed to markets. Which are far more than property rights and voluntary exchange. Both of which are political concepts, not economic. Should property rights be primary or secondary to human rights? Is all voluntary exchange allowed? (Can we hire assassins to settle disputes or continue to rely on lawyers?) How is competence determined? How voluntary is an exchange when one party lacks equivalent power to negotiate?

        And consumer preference is the most easily manipulated aspect of the economy, (as every ad budget should make clear) which makes it the worst regulator possible, and the most undemocratic form of governance as well. A billionaire’s preference outweighs twenty-five thousand median wage earners.

        And yes, the neo-liberal philosophy is not how the financial sector governs itself, except when they profit from particular policies, but it is how they prevent any countervailing power from asserting itself. It is the argument they use to disempower citizens, states, unions, public finance …. and churches. No room for ethical guidance in commerce, the magical power of the market will provide some sort of check, somewhere, somehow….

        And they find no shortage of allies among libertarians. Their points of agreement are far stronger than their disagreements, and well leveraged by both sides for political gain.

        As for the root cause, that is a separate topic, but the role of central banks are minimal in that regard. I would suggest “Small is Beautiful” by E.F. Schumacher for a better answer.

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    • Al says:

      Your points have been well argued against by Julien so I will point out one more thing which you have overlooked and that is any discussion of morality. The adjectives you have used to describe capitalism (anti-state, anti-democratic, non-transparent) speak nothing of morality.

      Morality (at the minimum requirements) = adherence to the Non-Aggression Principle or non-initiation of the use of force and therefore protection of individual property rights

      The only question you need to ask is, “Who is initiating the use of force or fraud?”

      The answer is the State.

      Sachs, in his own book “The End of Poverty” mentions the local governments in many of the places he has been to be corrupt and damaging to voluntary aid. This is because they are initiating the use of force on its citizens.

      When two parties engage in a voluntary interaction without coercion or violence, they both believe they will benefit. There is no need for a third party to regulate this. When you pay your teenage neighbor to babysit your kids, do you make him/her report that income to the State? Seems like a perfectly valid and non-transparent way of interacting individual to individual.

      Since a true free market calls for voluntary and peaceful interaction, it is by definition MORAL.

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      • Enter your name... says:

        A “true free market” can only call for “voluntary and peaceful interaction” if only moral people are permitted to participate. I’ve not personally encountered much fraud from governments. I have encountered rather more than I wished from individual people running small businesses (including, sadly, one of my own relatives, who believed that his destiny was to getting rich quick). Anyone know someone who got scammed on eBay? Has anyone here had a cell phone, laptop, or other something similar stolen and then fraudulently resold? Do you know someone who was trying to rent a house, only to discover that the alleged owner of one that they were looking at didn’t actually own it? Why do we think that Craigslist has warnings up about Western Union?

        So the answer to your question, “Who is initiating the use of force or fraud?”, is—at least for the latter item, and in the case of burglary, also force—is “people”.

        I’m not certain that the use of force is entirely immoral. I *want* the (silicon) chip factory down the street to be forced to keep their toxic chemicals inside. I *want* my neighbors to be forced to pay their fair share of taxes. I *want* the severely mentally ill man who stabbed a complete stranger to death in the next neighborhood to be forced into a psychiatric hospital for the rest of his life. I *want* corporations to be forced to disclose their financial situation. It would be best if these things were done voluntarily, but, if they don’t choose to, then I see no immorality in forcing people to bear the costs of their own externalities or to play fair or to be safe.

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      • Al says:

        We’re talking about the system or philosophy itself as a moral framework. You could say that any system is immoral with immoral people in it. Democracy, which is a system of “majority rules” or “might makes right” is itself immoral because it relies on the use of force to get everyone to participate. A voluntary society is the only moral framework possible.

        I’m sorry to hear about your relatives but I can guarantee you the amount of fraud you have experienced from local businesses is FAR less than the government has done to you. Let’s examine this.

        You stated that the answer to who is initiating force is “people.” Great! Not exactly precise, but we can work with it. I am sure there are individuals who have “wronged” you as they have to me. Who makes up the government? Individual people. They are no different than you and I in moral nature; they just happen to wear suits and spend a lot of time in Washington D.C. These “people” are the ones who are creating and serving policies which initiate the use of force or fraud.

        The big ones are taxation, inflation, and debt.

        Taxation is a violation of individual property rights and the government holds a monopoly on this power. I cannot tax you for example.

        When the Fed, in line with the State, prints money via programs like “Quantitative Easing”, they are directly devaluing the existing currency already in existence. Try to explain this to your grandparents who have saved their whole lives and are watching their savings go down in value everyday as a direct result of State interference.

        Government pays for the remainder of their spending addiction with debt. This is another violation of the Non-Aggression Principle assuming that someone will eventually have to pay back this debt. These people will be our children and their children who have nothing to do with these obligations. It is stealing their time and productivity without their consent. FAR more egregious than getting scammed on eBay.

        Let me be very clear. The INITIATION of the use of force is immoral. I perfectly agree that self defense is justified. If the silicon chip factory is emitting toxic chemicals, we should stop doing business with them because we don’t want that. In the case of the mentally ill man, he has initiated the force and also he is not in the same moral category as normal humans due to his illness. In a true free society, corporations would not exist as they do now. The corporation as we know it is an invention of the State created for the sole purpose of protecting individuals from liability. So, I think you agree that the INITIATION of the use of force is immoral. The examples you have given don’t represent that.

        And if anyone does believe that the initiation of the use of force IS moral, it can be dis-proven logically with a few moments thought.

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      • Phil Persinger says:

        Al–

        Your argument would be more interesting if you would differentiate “immoral” from “amoral.”

        For my money, a “true free market” is like a pure vacuum, a frictionless surface and the velocity of light– all theoretical, none achievable without the expenditure of infinite energy and, even if achievable, none of them an environment for the likes of us.

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      • Al says:

        Phil,

        I’m afraid you lost me at “frictionless”, but that could just be due to my ignorance :)
        I’m not sure what differentiation is needed but let’s look at the two terms.

        From Merriam Webster’s online:

        immoral: not morally good or right : morally evil or wrong

        amoral: having or showing no concern about whether behavior is morally right or wrong

        My argument again, is that the initiation of the use of force is immoral. Would you like me to say that the initiation of the use of force is amoral, or does not include any moral nature? First, I don’t believe in that and second, it can be proven logically that it doesn’t hold true. If you’d like to make the argument, I’d be willing to hear it but I will certainly not make it here myself.

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      • Phil Persinger says:

        Al–

        My comment was not addressed to the last point you made but to the first: that democracy is fundamentally immoral. While I understand that your world-view might rest on that equation, most of the rest of us view your “use of force” instead as simple, morally-neutral law enforcement– however misguided, stupid or corrupt that latter might sometimes be.

        That said, I admire your absolutist stand against initiation of force.

        Anyone who’s endured a physics class knows what a frictionless surface is: an ideal arena of action in which Newton’s laws of motion may be observed without having to take into account sticky realities like friction, distribution of mass within an object or human consciousness. My point is that a human being cannot move on a frictionless surface– or indeed get into position to stand– without falling down. Same point in from a different direction regarding absolute zero, etc.

        My Merriam-Webster dictionary locates the first use of the phrase “free market” in AD 1896– not an era which whets an appetite for the concept.

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      • Al says:

        Phil,

        Thank you for the clarification. Sorry I missed that the first time.

        This is not a matter of perspective and subjectivity. We can look at specific actions, intents, and effects in the past and present for empirical evidence to support this. First, democracy is a system where people vote and the majority gets their way. Would you agree? That would mean that the minority is forced to comply with the majority, even if the majority decision is immoral. For example, if you were in a room with 2 other guys and one of them said, “Hey, I’d like to steal Phil’s wallet. Why don’t we take a vote?” If they both voted against you 2-1, would you peacefully hand over your wallet to adhere to the principles of democracy?

        Taxation is either collected by force or it is voluntary. If you’d like to argue that it is voluntary, please be my guest but I can tell you that I am definitely not “volunteering” to pay. If you are trying to argue that it is morally neutral, we will be entering into Constitution and social contract stuff. Instead of prolonging this, I will just say that personally, I have not seen or signed any contract and we would all agree that entering someone else into a contract without their permission is a violation of the Non-Aggression Principle.

        Finally, what you may call “an absolutist stand” I would call an adherence to the truth. I would also take an absolutist stand that 2 + 2 = 4 or that I cannot exist in two places at the same time. If you believe that the Non-Aggression Principle is subjective, all you have to do is give me an example where theft is moral or I’ll even extend it to amoral. No one has been able to do it thus far.

        And I must apologize again. I’m still not following your physics analogy. Are you saying that two people cannot trade without a third party or some other “friction”?

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      • Phil Persinger says:

        Al–

        Two people who know each other very well might be able to trade, but that exceptional situation does not “scale” very well into larger arenas– and certainly not into the modern global economy.

        And, yes, the “friction” which allows us to stand economically is provided by custom and law. Larry and Curly might be able to trade without that substrate, but neither will nor should trust Moe. Moe must be constrained somehow to maintain a semblance of equality amongst the three.

        If the stars moved as you would like– with consensus and without force– Francis, the prelates before him going back to Leo XIII and the ministers of the Social Gospel movement would not to have been moved to preach their sermons on labor, profit and justice.

        I really do wish that world were more as you believe it should be, but the situation (alas!) simply doesn’t scale.

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  5. Julien Couvreur says:

    I think this Papal document needs a lot more discussion, because it has such influence on the culture of a large number of religious followers and anti-market rhetoric can hinder economic development (people coming out of poverty).

    Why is this anti-market rhetoric potentially harmful? As Deidre McCloskey has been documenting in her magnum opus, economists and historians are still trying to narrow down the main causal factors which enabled the dramatic development of the last two centuries. Many of the commonly discussed factors don’t seem to have sufficient explanatory power, and she argues convincingly that a key factor was a cultural change: the adoption of bourgeois virtues. In other words, the appreciation of cooperation, exchange and production. Where would India and China be if people there hadn’t shifted to such values (appreciation of property rights and voluntary exchange).
    So the pope’s message may have the opposite effect than what he is hoping for.

    Also, I am quite concern with flowery images, such as the “globalization of indifference” (which is discussed in this podcast). Why not use straightforward terms?
    The conflation of terms with strong connotations does not contribute to clarity and critical analysis. In this instance, globalization is general used to mean the increase in cooperation and exchange across national boundaries. So globalization of indifference doesn’t mean anything.
    If he means to say an increase in indifference, then say it simply. Even better would be to provide a reference or some evidence to support such a claim (is it even true that people are more indifferent to poverty in other countries than before? I doubt it).
    Also, the term indifference reminds me of the famous Adam Smith quote: “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.” The power of voluntary exchange (the market) is that it generates benefits and creates incentives for people to serve one another regardless of selfless intentions, and it also does not preclude such intentions.
    Who feeds Paris? (reference to “Naked Economics” and other classical economists who raised similar questions) It is not concern (the opposite of indifference) which feeds Paris, but the cooperation and competition of people (ie. the market).

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    • Pseudonym says:

      Why not use straightforward terms?

      Sorry, you’re asking economists this question?

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    • Enter your name... says:

      “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.”

      “Who feeds Paris?”

      The Pope’s question sees to be somewhat different: Who feeds the person that has no money and no way of getting money? If it is not in the interest of the baker to see me fed, then how will I eat? Who feeds the poor of Paris?

      Once upon a time, we had a social structure that said, “Look, my neighbor is sick, so I will take some food to him” and “Look, my great-aunt has no money and no place to live, so she will live with me.” Now, in developed countries, especially in urban environments, we don’t do that. We don’t know our neighbor’s names, much less whether they’re sick. Even if we did know that they were sick, we don’t do much. We resign our elderly relatives to the state and consider ourselves to be doing a lot if we phone Senior Services ourselves.

      Not only that, but the ethic has changed with respect to employment. It used to be that people who could afford it would hire a housekeeper not merely because they wanted a clean house, but so that fewer poor women would be desperate. A hundred years ago (or just a decade ago, in developing countries), a well-off person didn’t say, “My bank account has gotten so big that it makes me unable to care for my home or my family, so I suppose I’ll have to hire someone”. You instead said, “I can afford it, and my second-cousin (or my old friend’s child, or the sister of my neighbor’s gardener) is out of work, so she can live in the little bedroom and take care of the house for me”. If a transient showed up and asked to work in exchange for a meal, you looked around and said, “I need the lawn raked and the weeds pulled, and I can give you stew and bread”. Now, you call the police about this person who obviously wants to rob you. There was a sense back then that you needed to take care of the people connected to you, even to the extent of giving them a job. We don’t have that sense now.

      The modern American attitude of indifference has now spread everywhere. We aren’t even surprised if someone says, “What’s it to me, if my neighbors have no job and no possibility of getting one? I’ll put my factory in Vietnam because my profits will be 1% bigger than if I put it in Detroit, and all I care about is my bank balance, not my neighbors.” We aren’t even surprised if someone says, “What it to me, if half of my employees are unable to afford both food and housing for their families? I pay them this wage because I can find workers willing to take this job at this price, and all I care about is my bank balance, not my workers.” Having your worker live in poverty used to be a source of shame for employers. It’s not now.

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  6. Tim McKeever says:

    Sachs is moving the field of economics in the right direction. In my undergrad Econ courses, there was very little about ethics of markets or of market participants. Our society’s focus on growth and consumption over sustainability, equality, and human rights will end badly, as I think the Pope eludes.

    The “free market” kings all love socialism, as much as they rail against it. They do their utmost to socialize their risk and costs. They spew pollution nearly cost free. They use the social safety net to feed and provide health care for their underpaid workers. They take advantage of huge subsidies that make profitable businesses even more so. They beg for bailouts when their business model brings the economy to the brink. Through tax dodging, though, they make sure profits are private.

    Until the externalizing machines we call corporations and private enterprise are exposed for these swindles, there can be no discussion of free market capitalism. Limbaugh is right in that respect, it doesn’t exist. In a market, everything has to have a price, or there is a market failure. As a regular listener, I would like to hear greater coverage of externalizing costs and market failures as they are a big part of how our economy (mal)functions. A podcast that looks outside the orthodoxy should do just that.

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    • steve cebalt says:

      A couple comments:

      1. I have never seen anyone able to start a greater number of worthwhile dialogues in so short a time as this Pope. He’s amazing.

      2. He makes many good points. “Capitalization” is a religion to many people, as opposed to merely being a useful economic concept. And as for government intervention, which many capitalists rail against in all forms with religious zeal; those anti-government capitalists seem to love the Fed’s economic stimulus (bond-buying), which has propped up stock markets artificially in recent years, with the greatest benefit accruing to the wealthiest among us. BUT …

      3. All charity, except labors of love with one’s own hands, depends 100% on money, profits and private enterprise. No wealth, no charity. Period. Before charity can happen, profits must be created.

      4. The most under-rated story of our time is how two of the richest people on the planet, Gates and Buffett, made a friendship and are giving 99.999 percent of their capitalist gains to charity that helps the most destitute people on the planet. Andy they are recruiting — successfully — other ultra-wealthy people to do the same. That is a remarkable thing. Capitalism and charity are part of the same economy.

      As a communicator, Pope Francis is in a league of his own.

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      • steve cebalt says:

        Unfortunate typos I just made:

        #2, Capitalism, not capitalization
        #4. And, not Andy

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      • Julien Couvreur says:

        How is capitalism a religion?

        Merriam-Webster defines it as “an economic system characterized by private or corporate ownership of capital goods, by investments that are determined by private decision, and by prices, production, and the distribution of goods that are determined mainly by competition in a free market.”

        In short, it is the system of self-ownership, property rights and voluntary exchange. It is the consistent adoption of simple principles which we accept in our daily lives already. Are you a religious fanatic in your daily life, or do you simply recognize the foundation for civilized cooperation?
        We don’t steal from each other, we cooperate based on mutual consent (and not coercion), and so on. People who steal, rape, murder, defraud, and so on relinquish their rights to the same extent (legal doctrine of estoppel). Do we reject slavery out of religious fervor or out of reason?

        I’m curious to hear how a civilized society can rest on a different foundation.

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      • Enter your name... says:

        Anything can be a religion, if you faithfully devote yourself to believing in it. Science is some people’s religion. (This unfortunately makes them bad scientists, because they have trouble rejecting “scientific facts” when they’re disproven and too credulous when someone declares that something is “scientifically proven”.)

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    • Pedro Ribeiro says:

      What a great comment @Tim McKeever.
      I just want to add my frustration about this episode. There was a lot of time dedicated to trying to explain what the Pope meant, the context of his message, if he is a marxist, a policy maker or knows anything about economy. On the other hand there was little exploration on the problems of Capitalism. The best you can get is that we need more/some ‘morality’ in capitalism? And who is going to give that? The bought out government? The church? Are the protests on the streets working as check and balances for you? Perhaps we all should vote on presidential candidates that promise Change?

      As a south american, although not catholic, I come from the same culture that the Pope came, and I do believe that he meant what he said, because this is what you see down there. Sure there are richer than ever people! The number of bullet-proof Ferraris on the street is record high, but so are the homeless, the uneducated and the unemployed. The trickle down economy is happening on the beaches of Miami where the richest are now buying expensive Condos and Yachts. Almost twenty years of full democracy in Brazil and the country’s government has never been more corrupt. With the last president having a counted wealth of about U$1 Billion, The slums are growing strong and so is the struggle of the almost non-existent middle class.

      May be the so called Free Market is not happening in Brazil??

      Also I find a very misleading statement to say that more people have escaped poverty in the past 25 years than in any period in history, given that we have today more people in poverty then we ever had in history of mankind as well.

      This show should’ve taken the opportunity of the speech given by the catholic leader to explore, to give a hard look in what is really happening with market failures. It is cheaper to buy ads on TV than to fix the Gulf of Mexico. It is way less expensive to have the president saying that Fracking is a safe Technology than to fix the wells….

      Who is there to fix the market failures?

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    • Al says:

      I checked Merriam-Webster for “religion” and the top definitions had “god” in them so I chose the definition which most fits your description.

      religion: a cause, principle, or system of beliefs held to with ardor and faith

      principle: a law or fact of nature that explains how something works or why something happens

      faith: firm belief in something for which there is no proof

      According to these definitions, the concept of “religion” when you apply it to “non-godly” things is a contradiction. You cannot have a law or fact of nature without proof.

      An adherence to reality, validity of the senses, reason, logic, evidence, and use of the scientific method are the exact opposite of faith and religion. Free market capitalism is founded on two principles:

      1. Non-Aggression Principle (non-initiation of violence)

      2. Respect and validation of individual property rights

      These principles are not pulled out of thin air but exist as laws of nature. When you universalize these principles, a voluntary system of trade (free market capitalism) is the only logical conclusion. It is NOT a religion in any sense of the word.

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  7. Julien Couvreur says:

    I can’t help but comment on your concluding remarks about market and morality. You seem to be opposing them for some reason. But nothing about property rights and voluntary exchange (ie the free-market) says anything about the values or preferences you should hold.

    Nothing in the free-market per se tells you to be materialist, greedy, selfish, indifferent, destructive, void of culture, vile, impolite, or anything else. The only basic rule of cooperation is that if you steal, murder, rape, or defraud you relinquish your rights to that extent. This does encourage people to cooperate and serve one another, but it does not tell people to be kind, patient, or virtuous in any other ways.

    The free-market is the mirror of the soul, as it lets individual maximally free to be who they are.
    This leaves two main suspects for humanly avoidable problems in the world: preferences (if nobody enjoys forests, then no system will protect forests) and the non-free realm of society (coercive entities who violate property rights, such as genuine criminals and governments).

    Maybe the pope should focus on his area of expertise, namely trying to improve people’s choices, preferences and values. He should do so through persuasion, not coercion, as allowing coercion in society is sure to let those with least morals and scruples control the rest.
    This means no government imposition of “morality” and no threatening impressionable children with fires of hell (although I’m afraid such simple civility may be too much to ask from the church).

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    • Pseudonym says:

      “The free-market is the mirror of the soul, as it lets individual maximally free to be who they are.”

      If you believe in original sin, or the secular equivalent (i.e. that people left to their own devices tend to do things they’re morally not supposed to do and avoid doing some things they’re morally supposed to do), I can see why this might not seem like an entirely good thing to you.

      No pure ideology works in practice, because the real world is messy. Given that some regulation will always be needed, morality seems like a good place to start.

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  8. Capitalist says:

    Mr. Sachs is wrong. Like all Marxist theory it sounds great but breaks down when applied. Who do we trust to make these decisions for us? Marxism has never worked. Since there is not even a functioning model why should I follow Mr. Sachs’ vision. And BTW George Bush is not a capitalist. He and most of the Republican Party are statist who will do anything to retain their power and privilege.

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    • Pseudonym says:

      Far too many people see “Marxist theory” and think it’s a single thing. Rush Limbaugh is a case in point. It’s hardly PURE Marxism!

      Ask anyone who actually understands how the real world works, and they’ll tell you that Marx got the diagnosis of the problems of Capitalism almost exactly right, but his proposed treatment plan was almost exactly wrong.

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    • Enter your name... says:

      > Like all Marxist theory it sounds great

      I never thought Marxist theory sounded good at all.

      I’m also not sure what the connection is. The Pope seems to be saying that if, for example, you get full-time work out of a human, then that human should be getting the equivalent of full-time food and full-time housing out of you. And if someone is unable to work, then we should do things that make it possible for him to work, and, if we fail at that goal, then he still should be left to freeze and starve in the streets. You seem to call that “Marxist”, but I think that the Pope is likely to say that feeding, clothing, and housing the poor, sick, and powerless is “Christian”.

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      • Enter your name... says:

        This is just the thread for awkward typos, isn’t it? That should say, “he still should NOT be left to freeze and starve”.

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      • Capitalist says:

        Thank you for replying to my comment. I consider myself a devout Christian. I practice charity as I believe it should be applied. I ask God for forgiveness every day for not doing enough or not doing the right thing. However, I take offense at my government and even the Pope for telling me what proper behavior and charity is. Individual behavior and charity are personal decisions each man or woman should be required to make alone. Relinquishing this freedom to a soulless bureaucracy is to volunteer for slavery.

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