All Commentary
Sunday, December 1, 1985

Catholic Social Teaching and the Q.S. Economy: A Hayekian Critique

William S. Kern is Assistant Professor of Economics at Franklin and Marshall College, Lancaster, Pennsylvania.

In October of 1985 the National Conference of Catholic Bishops released a new draft of their “Pastoral On Catholic Social Teaching and the U.S. Economy.” The Bishops seek to demonstrate, via a review of Biblical teachings, that certain ethical norms of economic life exist to which all men should adhere. As a result of their review of scripture, the Bishops conclude that a reorganization of the American economy is justified based upon the moral values of “social justice” and “economic rights.” The reorganization would rely much more heavily than at present upon the techniques of economic planning and state intervention.

The social thought of Austrian economist and social philosopher Friedrich A. Hayek provides us with a basis from which to evaluate the position taken by the Church on these matters. The recent work of Hayek has centered upon an elaboration of the ethical principles of the market economy and a free society. In one of his earliest essays on the morals of a free society Hayek stressed the symbiotic relationship between morality and freedom. He wrote that “It is an old discovery that morals and moral values will only grow in an environment of freedom, and that, in general, moral standards of people and classes are high only where they have long enjoyed freedom.” (1967, p. 23) At the same time he points out that the presence of certain moral values is a prerequisite for a free society. “We can add to this that only societies which hold moral values similar to our own have survived as free societies.” (1967, p. 23)

Among the requisite moral values, Hayek regards two as indispensable to a free society: “the belief in individual responsibility and the approval as just of an arrangement by which material rewards are made to correspond to the values which a person’s services have to his fellows; not to the esteem in which he is held as a person for his moral merit.” (1967, p. 232) It is one of the merits of the market that it accomplishes the latter of these states of affairs.

Morality and Freedom

Hayek also clearly recognized that while moral convictions are necessary for a free society to exist, not all moral principles are consistent with a free society. It might even be the case, paradoxically, that freedom may lead to the growth of values which are incompatible with the preservation of a free society and a market economy. (p. 230) Furthermore, in his view it was in large part because of the rejection of certain moral principles that a free society became possible, often in opposition to religious teachings:

Religious prophets and ethical philosophers have of course been mostly reactionaries, defending the old against the new principles. Indeed, in most parts of the world the development of an open market economy has long been prevented by those very morals preached by prophets and philosophers, even before governmental measures did the same. We must admit that modern civilization has become possible largely by the disregard of those indignant moralists. (1979, p. 165)

In his most recent work, Hayek has emphasized that the concepts of “social justice” and “economic rights” are among those that are incompatible with freedom.

Hayek accepts the idea that government has a legitimate role to play in protecting the destitute by securing some minimum standard of living for those unable to support themselves in the market. Unfortunately, the concept of social justice has never been nor is it likely to be restricted to this limited definition in actual practice. Because the concept is so ill defined it imposes no limits on the claims which can be made under this banner. In practice the concept of social justice is likely to become “a mere pretext for claims for privileges by special interests.” (1976, p. 140) Though the idea may have been intended only to apply to the most unfortunate, the concept has since been adopted by other groups who do not get as much as they think they deserve or groups that feel threatened in their present positions. By the measures it takes, government “will produce opinions and set standards which will force it to continue on the course on which it has embarked.” (p. 143) The result is that “every single act of this kind will give rise to demands by others to be treated on the same principle: and these demands can be satisfied only if all incomes are thus allocated”-in effect, eliminating the market as a distribution mechanism. (p. 142)

If income distribution is no longer to be performed by the acts of voluntary exchange and contract through markets, what will substitute as a method of determining wages and the allocation of labor among occupations? The answer must be that government will perform these tasks. Thus the ultimate sacrifice to be paid for the attainment of social justice and economic rights is freedom.

The Mirage of Social Justice

Hayek attributes the increasing popularity of the idea of social justice to a confusion in thought about the nature of morals. The concept of social justice is relevant in that which he terms the “small group.” The model of the small group society is that of a family, small village, or tribal relations. Within such a group individuals may have an extensive range of specific positive obligations. It may well be a recognized duty to assist others of the group and adjust one’s actions to the needs of the group.

As Hayek describes it, a free society became possible only by reducing one’s specific obligations toward others of one’s own small group while at the same time conceding to others outside of the small group “the same protection of rules of just conduct which apply to the relations of the members of one’s small group.” (1976, p. 89) But this process of the extension of rules of just conduct to others “requires an attenuation of at least some of the rules which are enforced in the relations to other members of the small group. If the legal duties towards strangers are to be the same as those towards one’s neighbors, the latter duties will have to be reduced to such as can be applied to the stranger.” (1976, p. 89)

Given these circumstances, Hayek argues that there is a fundamental difference between moral behavior in the Open Society and that of small group life.

In the small group the individual can know the effects of his actions on his fellows, and the rules may forbid him to harm them in any manner and even require him to assist them in specific ways. In the Great Society many of the effects of a person’s actions on various fellows must be unknown to him. It can, therefore, not be the specific effects of the particular case, but only rules which define kinds of actions as prohibited, which must serve as guides to the individual. (1976, p. 90)

Hayek concludes from this that the moral order of the Open Society is defined by a system of impartial rules of just conduct. This implies, he asserts, that the concepts of social justice and economic rights do not have meaning or definable content in such a moral code because “there are no principles of individual conduct which would produce a pattern of distribution which as such could be called just, and therefore no possibility for the individual to know what he must do to secure a just remuneration of his fellows.” (1976, p. 70) Hayek has described the concept of social justice as an “atavism” and has regarded the attempt to extend the concept’s influence in social reform as both misplaced and even dangerous. Such value concepts, imposed by force through economic planning and other forms of state intervention, are incompatible with the moral code that the market system and a free society require.

One of Hayek’s most important messages is that one of the hardest lessons we must learn is that immoral consequences may well result from morally inspired efforts. Our review of Hayek’s views on the issues of social justice and the morals of the free society reveals two things. A free society possesses a moral code. That moral code rests upon the ideals of individual responsibility, cooperation through voluntary efforts, and preservation of individual freedom. In contrast, the legal order that would have to be imposed to secure the results required by the standard of social justice would demand the sacrifice of these moral ideals.

Hayek, Friedrich. Individualism and Economic Order Chicago: 1948.

____________. Studies in Philosophy, Politics and Economics. Chicago: 1967.

____________. Law Legislation and Liberty, Vol. 2. The Mirage of Social Justice. Chicago: 1976.

____________. Law, Legislation and Liberty, VoL 3. The Political Order of a Free People. Chicago: 1979.