A mistake by Pope Benedict XVI, or a few words about regulation

Benedict XVI apparently does not understand economics. At least he has a mess in it - on the one hand, he wants a person to be at the center of the economy, on the other hand, he wants to get rid of those tools that enable the fulfillment of the first goal.

Pope Benedict XVI
Pope Benedict XVI Photo: AP

According to the Lidovky.cz server, the Pope expressed himself as follows:

"One must be at the heart of the economy. This is confirmed in the current crisis. The economy cannot be measured by maximum profit, "he said. He also rejected the "illusion of a self-regulating economy" and called for solidarity to replace the pursuit of profit.

- Lidovky.cz

Not if, but how

However, the question is not whether regulate, The question is how to regulate.

A completely unregulated economy is an animal economy, an economy where people do not make intellectual decisions according to their preferences.

Every human economy is regulated - by the people themselves. Each of us, by our decision, sets the boundaries of the market.

If you refuse to eat in a dirty restaurant, you state hygienic standards. If you refuse to buy low-quality trinkets for huge sums, you set quality standards. If you refuse to buy goods whose shelf life is less than any period, you have replaced the law on the minimum warranty period with your decision. If you refuse to work for a wage salary, so you just replaced the minimum wage law.

Every economy is regulated, every preference is now and here regulated by the market. In that case what a man, countless regulations.

The entrepreneur with the highest profit is then the most dignified in fulfilling these rules, the entrepreneur with the highest loss is then the worst.

The economy's us, we don't need a mechanic!

The economy is made up of people, no one else. And only people can regulate. Each economy thus de facto "regulates itself".

In some economies, preferential regulation prevails - that is regulation according to human preferences. We usually call such economies "market" economies. In others, power regulation prevails - regulation from a position of power. Today we can mostly see such an economy around us.

Power regulation consists in the fact that an interest group enforces through the state the regulation which it imposes on others against their will - from the position of power.

This will force some people to pay a higher minimum wage than they would set themselves unemployment. For some, you will impose higher hygiene standards than you would set yourself, making your money pay to meet your needs. And so on.

So while in the system of market regulation everyone creates such a regulated economy as they wish, in the system of power regulation the elite group to all others some regulation centrally enforces. It is always central, because the state is a monopoly of power, the center, let us divide it as we wish.

Center inefficiency

Central power regulation has a few flaws. Above all - as it is central - it has no competition. Because it has no competition (or potential), it is not effective.

What does it mean? That in order to ensure many regulations, we must consume far more scarce resources than we will create as many new scarce resources as we can benefit from fulfilling the regulations.

So many we artificially block precious resources to comply with central regulations, although those resources would be much better used elsewhere.

In reality, for example, this means that in order to fulfill an official's (or trade unionist's) dream of a high minimum wage, we must keep a scarce resource (labor, ie man) out of the labor market. People whose labor cost is lower than the dream minimum wage will simply be unemployed.

As a result, any central power regulation will create one structure of the economy that does not correspond to the consumer's idea (his preferences).

In practice, this means that central regulation will create a system where a large group of people will be artificially kept unemployed and the center (state) will take more and more money from their wages to compensate the involuntarily unemployed. Not only do those who earn the least earn even less than before the minimum wage.

At the same time, we have a group of people who receive money for nothing and a group of people who have to pay it for "nothing". We have entrepreneurs here who have to pay their employees' wages without being able to demand any output from them.

"Matching consumer preferences" is then fundamental properties system of market regulation, because it is the preferences that make up this system. AND each of us is a consumer.

Moral hazard

The system of central regulation has another significant flaw - moral hazard. The center determines the regulation - it decides, but does not bear the costs (impacts of its decision). The center bears no responsibility. The center will logically create more expensive regulations than necessary.

That inefficiency is not only a possible impact of the absence of competition, inefficiency is also a fundamental feature of the system power regulation.

It is precisely the system of power regulation that creates an environment where profit can be created not by fulfilling human desires and wishes, but subordination to an officialwhich regulates my competition.

This hazard is not in the system of market regulation. If we decide to "regulate our labor market" by setting as our possible minimum wage, for example, CZK 100 per month, then we bear the consequences of our actions - we then bear potential unemployment ourselves.

A little mess

Not only is there no economy that does not regulate itself, but if the center of the economy is to be human at the same time, we must enforce an increasing share of market regulation in our economy, to the detriment of power regulation.

Benedict XVI then made a special statement. If he wants a person to be at the center of the economy, then it needs profit and losswhich tell us all how good we are at fulfilling that person's rules. I need exactly the profit that the pope is damning. Apparently His Holiness has a bit of a mess in that.

As he said Murray Rothbard: “It is not a crime to be ignorant of economics; after all, it is a specialized discipline that is, moreover, considered by many to be a 'gloomy science'. But it is absolutely irresponsible to shout out loud opinions on economic issues, I am in this state of ignorance. "

0 comments

  1. @ 3,14ranha

    The problem is that if we do not start tackling it as soon as possible, we will be left with nothing but a civil war. This can be seen in the Šluknov region. Today's police are absolutely useless to ordinary people and are used only to collect other, indirect taxes (road speed tax). Ie. we have to pay the police, but at the same time we have to take care of our own safety.

  2. PS: the situation would certainly improve over time, the weapon could of course be inherited in the family, etc.
    I'm just saying that we are just talking about a problem that I will solve very slowly (if people want at all) and it will take decades (if we do not want a variant of the civil war)

  3. re: waffles
    Well, you speak for yourself, you don't have a wife (another three salaries) you don't have a child somewhere in college (another three salaries, let's say that smaller children would always be accompanied by one older person at certain hours and in certain places) and we are on the price of a cheaper car and this is just a pure acquisition - we are not talking about training and the price of ammunition (a normal 9mm round is I guess for ten crowns)

    we are not in america, for most czechs, safe handling of their own firearm is quite expensive fun
    (And I'm a man who supports self-defense and is considering buying a weapon!)

    you would probably pay the police anyway (I'm not saying obligatory) - someone, despite the "good" conditions, still have to clarify, investigate, catch and close or execute the crimes committed

    do not confuse the police with security - in 99% of cases, self-defense is always up to the individual himself!

  4. @ 3,14ranha
    I have a bit of the impression that you see some "jungle law" behind the term "market hand". This is not the case, the term refers to a system of voluntary cooperation operating on the basis of enforceable property rights. I think we agree on that, because in this conservatism is close to libertarianism. There will probably be less agreement on who should enforce the property rights 😉
    Today's system is especially suitable for those who benefit from it. Those who do not benefit from it pay for it, and therefore they rather suffer because they do not see an alternative (which was also my case). And of course, a lot of people don't even think about the world they live in. It does not matter whether Hitler, the Communists or Nečas rule.
    As far as labor market flexibility is concerned, I did not mean the abolition immediately, but with preparations and after a certain time. I'm also not saying that it would be without problems, temporarily it would probably be worse than now, but I think it's the only option. In addition, a free society cannot exist without law enforcement organizations, and their task would be to ensure order, as it does today. Anyway, thanks for the feedback 🙂
    Ad ideology, yes, it is mainly about ideas. Don't you think that seeing beyond a person's ideology in its alleged complexity is just another ideology?

  5. 3,14ranha

    "How much would the defense means, individually and globally, for each" decent citizen "

    I think that three monthly salaries is far less than the obligation of about 40 years to pay the police a few percent of the salary. Not to mention that today's police are doing everything possible to protect the lives and property of citizens.

  6. And one more thing: you have a very naive idea of ​​labor market flexibility… at least one, two, maybe three generations of maladapted people simply will not work voluntarily, after the abolition of the social system they prefer to rely on violence and petty crime, you have no idea how sensitive society's prosperity is to feeling safe

    (just how much defense costs would cost individually and globally for each "decent citizen - a firearm is three months' wage minimum and demand would increase the price) then you can talk about the introduction of anarchy, before that criminals would be privileged!
    (It is true that this situation is still there today, there are very few criminals and these are basically always crazy, rather than people who flow into their shoes and have nothing to lose from their point of view)

  7. re: vokonaruby
    but I'm not saying it wouldn't work naopak, on the contrary, the hand of the market works almost always, I'm just saying you wouldn't like such a system… (unless you're one of the survival "fanatics" who grows his own food and has a smaller weapons warehouse at home)
    maybe it would take a bit of a glimpse into the ideology and see behind it the people the politics is supposed to serve
    (don't you think that's one of the reasons why anarcho-capitalists have so little support? we all "decent citizens" have much more to lose than just state money - it's not privileges for some and loss for others is more game theory)

    you are pulling for the shorter end of the match, if you want something different than it is here today you have to convince your fellow citizens of it, one would say that today's system basically suits most people…

    I support you and I will always be critical of today's world order (it is basically my duty - after all, I am a Catholic) but I can guess a little what leads to what consequences and I do not forget that man is not a tabula rasa and is not a bare individual (what benefits "others" often it also benefits "me", not abstractly in the future but just today, yesterday and tomorrow a thousand times and again)

  8. @ 3,14ranha
    A self-regulating economy or an invisible hand are descriptions of the mechanism that works best when no one has privileges. If you are calling for economic governance, you are calling for privileges for a certain group of people. This is the ethical core of the problem of the pope's statement.
    Education and leadership are a completely different issue. I do not see what positive effect privileges could have on selfishness, quite the contrary.
    I write about the Šluknov problem here: http://www.vokonaruby.blogspot.com/
    Anarchy, in my understanding, is a state where no person or group of people has any other, superior rights (privileges). This does not exclude any form of government or hierarchy, but it certainly excludes the current form of government.
    You also need morality to maintain order in today's society, because even that is the result of consent rather than outright violence. Most agree to be robbed, but I think it's more a matter of awareness than morality.

  9. re: vokonaruby
    I would say that rather A is right, after twenty centuries (perhaps even longer - Christians did not start from scratch thanks to Judaism) philosophizing is not enough to pull out one branch and omit the whole building around it. But to the point:

    The Catholic Church is "politically" more to the left, but not compulsorily obligatory for all, but by showing examples and trying to persuade opponents to argue
    after all, the New Testament is full of it - whoever disagreed, the disciples with Jesus or the early Christians let it be, because compulsory consent sucks and leads to hypocrisy (rich young man, Sapphire and Ananias), so in this context "rejection of self-regulating economy "Means that it is not enough to lead people to consumption and selfishness" through corpses "and to think that it is regulated by an invisible hand, it is absolutely necessary to warn, educate (ideally examples - reed leads as hypocritical) people to fairplay values, otherwise the law will prevail jungle, anarcho-capitalism limits the evil committed by states, but this does not preclude a devastating civil war between somehow orderly "citizens" and gangs of parasites (isn't the Šluknov tasting enough?)

    it is enough to look at history and take into account the moral profile of homo sapiens, it is not for nothing that the Church teaches about inherited sin (although many now chuckle) what man is human (except the hypothetical Adam and Eve) will always have a choice between good and evil, between construction and destruction, demagoguery is to throw all evil purely on one culprit (class enemy, Zionists, bureaucracy, etc.) as well as it is true that very many people have a desire to "let themselves be controlled" (because it reduces the stress of their choice) and therefore, I strongly doubt the establishment of global anarcho-capitalism (it will suffer to the maximum in some self-sufficient communities)
    you are talking about something that does not exist, the pope is talking to a billion-dollar crowd that is completely engrossed in the current political system, moreover, most of them are not qualified today to act as a "responsible hand of the market", first they will have to work on themselves pope
    the laisess fair will not cause a civil war only on the assumption of relatively advanced morale among the majority of the population and on the condition that a certain supercritical population does not "flow into the shoes"

  10. @ Vít Kučík
    My assessment of the case is based on his statement. Reputation is secondary to the assessment of his statements. If someone says that black is white, is it necessary to examine his expertise or the logic of that statement to determine its truth?

    @ 3,14ranha
    When the pope rejects the "illusion of a self-regulating economy," does he mean its self-regulation by acting individuals? Quite an Orwellian interpretation. Either this statement is really roughly taken out of context or it really believes in state supervision over the economy.

  11. re: interface:
    is it worth responding? but only briefly - the church was persecuted by the Romans in the 4th century. after Christ so where do you have the conspiracy and desire for power? the pope may not be a model (you didn't provide your photo either) but it can hardly be a primitive (at least compared to you), a criminal (or would you have arguments?) or a fool (given that the pope is probably the only opponent of Islam or Hinduism which Muslim and other non-Catholic intellectuals intend to have fun as equals)
    in many areas of interreligious dialogue and tolerance it has gone further than its generally accepted predecessor, thanks to its intellectual insight and rational discussion with opponents

  12. in my opinion you are arguing unnecessarily about words, no statement of the pope can be taken out of the context of Catholic teaching and this clearly prefers private property and that regulation means exactly what the author describes - self-regulation of each individual (because the church also recognizes that man is not "tabula rassa")

    RE: Janíček: but that's the misunderstanding - the pope does not theorize like you, he tries to help ordinary people with such imperfect tools as governments (they are controlled by specific individuals) you will argue why there is famine in Somalia and the pope, meanwhile, will try to get help for Somalis even among "hated" politicians - around and around politics will always be at least half about responsible people (except for anarcho-capitalism, which does not work to a greater extent yet) and so turning to politicians is a pure conservative realism , there are things that can wait or can be endured in some way (unemployment in the Czech Republic a) and things that will not wait (Somalia protože) because you should no longer help anyone
    PS: if the pope ever said what was quoted… it would be an original statement and not "artificial" translations of our proud journalists 😛

  13. to iNTERFACE: It is clear from your post that you are not a Catholic, and if you are a Christian at all, then you sympathize with some minority heretical offshoot… nothing but (anger) can be read. Your religious statements ("Christianity died with Christ",…) cannot be discussed, because on the one hand you obviously do not care about it and on the other hand they are completely outside of Christian logic and historical reality…
    to voknonaruby: Do you think you are able to judge whether the pope is "groping in ethics"? I would like to point out that Joseph Ratzinger has long been one of the world's intellectual leaders in theology and social sciences (including ethics), and this is also acknowledged by extra-church (academic) circles. -scientist ”or“ pope-intellectual ”who has the capacity to set the direction of the church in a time of constant ideological changes in the surrounding world.
    Do you think that you have enough information to be able to objectively match his knowledge and the context of his statements?

  14. @ Vít Kučík
    The word brothel may sound non-gentlemanly, but if the pope has really stated what is at the beginning of the article, it is more than unfortunate and, in principle, at odds with some of the implications of Christian teaching. If Christianity is to result in the freedom of the individual, as many claim, then his statement goes directly against that freedom. It is understandable that the Pope does not understand economics, but that he is also obsessed with ethics, it seems to me right at the head of the Christian Church.

  15. "The Pope is the direct representative of Christ" and he denied all this himself - he is certainly not the representative of Christ and Christ himself must have a very great headache from him - the representative of Jesus, the chief of the church, who joined essentially a sick and unnatural and therefore ANTI divine element? the pope is not a representative of christ, because christ would never, on his own free and voluntary measure, agree with such a criminal, a primitive, and a scarky fool… Christianity was born and died by Jesus and lives only in truly free people without any females who are exempt from all who insult the jazz and use his name… yikes

  16. To challenge the pope for his general statement with an expression like a "mess", etc., strikes me as a bit tacky and ungentlemant… :))
    The pope is above all a spiritual leader, not an economic theorist. And in this role he is extremely competent. Surely there is an immediate objection: "So let him speak to religious matters and not to economics!" But that is a limited view. There is no clear dividing line between religion and other disciplines - religion permeates all human activities, including politics or economics. When the Vatican tried not to "mix" into politics, for example, during the Second World War. war, he is criticized for this to this day. Nor can a person with such influence and mission as the Pope remain silent on the most fundamental issue at the moment, such as the financial crisis.
    So far, the Vatican has approached economic issues very conservatively and in general - it has not promoted specific measures, but rather has highlighted general characteristics. He looked at economic issues more from a moral, religious point of view. The Pope is the direct representative of Christ, so it is not surprising that he emphasizes topics such as solidarity, helping the poor, the moral dimension, etc., ie topics directly contained in the teachings of Christ. It's logical, he can't help it. On the other hand, the church has always defended some typically liberal values, such as the right to private property, so it has come into conflict with left-wing dictatorships anywhere in the world.
    Let the pope, no matter what he comments on, it is his right and duty, let us be lenient with his economic expressions, for let us judge them by a theological, not a secular-economic lens…:))

  17. I basically agree, but the first quote has several possible interpretations:

    "One must be at the heart of the economy. In the current crisis
    this is confirmed. The economy cannot be measured
    maximum profit, "
    It can also be interpreted as follows: If you can get more money, but at the cost of working all day and becoming an antisocial, consider whether it's worth it. Money is not a goal (something that would make a person happy in itself), but only a means.

    If a person has enough money (this is a relatively relative concept, one will not be enough for a million and another will be enough for a few hundred…) and yet he is not satisfied, he has the opportunity to realize this.

    But I completely agree with the fact that regulation from above is not the way to go. And it doesn't matter if we are talking about "money only as a tool" (what I wrote above) or in economics in general:
    In the first case, it has no chance of being effective and would have the effect of forbidden fruit. Everyone just has to do it on their own.
    And in general, in the economy it creates just unnatural states, which in the future create the impression of how regulation is needed. There is little, which will increase prices. This will introduce regulation (it is quite suitable for election campaigns), which will discourage investors, so there will still be little (and perhaps even less in the future), which will just maintain high market prices and create a sense of need for regulation. ("Do you see what you would pay if we didn't introduce the regulation?") At the same time, unregulated market prices wouldn't have a chance to screw up so high, because the shortage would be solved (competition would arise, for example)…

  18. to Petr: That is true, but I have the right to disagree with building and running a company based on strength and fear.

  19. You may disagree with the pope in many ways, but the claim that he does not understand the economy is forgiving with a pardon. Realize that the company he runs - the Catholic Church - is the most economically successful enterprise of all time. The head of the state - the Vatican - has one of the healthiest economies in the world.

  20. And I just read his "encyclical" he published in 2009 yesterday, it's on the Vatican website.
    I rolled my eyes. The very cheap phrases of how everything doesn't work for the will of greed, and then the hymns to the state, democracy and politics that will save it all. Basic human rights to access drinking water, health care and public education. Karel Marx revival special. It is sad

  21. "But the question is not whether to regulate, the question is how to regulate."

    The Pope certainly means a regulation not secular in power, imposed by people in some center on other people, but precisely the distributed regulation by the transformation of the hearts of all from the Holy Spirit. Regulation, which is a natural by-product of the birth of a new person, at the center of which stands God. A man who sees in every man Christ, hungry, poor, needy.

    : )

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