Scholastic Economics, Classical, and Modern
Authors:   , Mueller John D. 
Published: December 2024

This thesis seeks to restore economic theory, in an updated version, to its place of origin within the Scholastic natural law. This summary of the innovations in the thesis follows the outline of the Scholastic understanding of human nature, combining insights from Aristotle Augustine and Thomas Aquinas. According to this view, derived from Scholastic moral philosophy, man is at once a ‘personal’ (meaning both ‘rational’ and ‘religious’), ‘domestic’ (comprising ‘conjugal,’ ‘money-using’ and ‘social’) and ‘political avnimal.’ Each of the three chapters considers one element in this integrated view. The conclusion instantiates the Scholastic view of human nature in a new Human Flourishing Index (HFI). The first chapter presents a brief overview of the four main economic theories in history: scholastic economic theory, and the three branches of today’s Neoclassical economic theory (summarized in Table 1-1). Then the four basic equations that describe the economic behavior of an individual according to the updated Neoscholastic Economic Theory are presented and compared with the three basic equations of the prevailing Neoclassical Economic Theory, as well as the two oversimplified equations of Adam Smith’s Classical Economics and Aristotle’s slightly more complicated, but still mathematically ‘under-determined’ system. Three of the four equations are presented in Cobb-Douglas form, greatly simplifying the notation. In his History of Economic Analysis, Joseph Schumpeter noted (though without explaining) what he called ‘The Great Gap’—the absence of any development of economic theory between Aristotle in the 4th century BC and Thomas Aquinas in the mid-13th century A.D. even though, as Schumpeter remarked, administering the Roman Empire “might have fully employed a legion of economists” (Schumpeter, 63). I suggest a reason for this lack of development: a system with fewer equations than unknown variables is“underdetermined,” and therefore has no unique solution. Hence the logical and mathematical incompleteness of Aristotle’s system prevented its fruitful development. Chapter 2 begins with Aristotle’s description of marriage, then applies it to a simple example of a business firm modeled on a children’s lemonade stand, proceeds to apply this analysis to the reproduction of the children themselves, then shows how everyone’s lifetime income is determined by sex, education, and marital status. Finally, it presents how the stylized description is confirmed by census data and recent research on the national transfer accounts. I outline the principles of a business firm using the lemonade stand example and show how the National Income and Product Accounts may be constructed by applying the same principles. Though nearly all economists regard economic transactions as limited to market exchanges, in this chapter, as elsewhere, I examine the substantial but overlooked role of transfer payments, which include both personal gifts (or their opposite, crimes) and their social analogue, distributive justice. In Chapter 3, I show that the two most importantmacroeconomic policy problems of the 21st century—unemployment and inflation—result from violations of the two kinds of justice that Aristotle outlined in the 4th Century B.C.: distributive justice and justice in exchange. To do this,I develop and apply the analysis of the French economist Jacques Rueff (1896-1978) to illustrate the principles of distributive justice and justice in exchange by using Rueff’sLaw of Unemployment and Law of Inflation. The two biggest innovations in this chapter are showing that the civilian unemployment rate is a function of net unit labor costs (that is, labor compensation after subtracting taxes on workers and adding social benefits received by workers and their dependents) as a share of national income and developing and applying Rueff’s insight that inflation (or,more rarely, deflation) is a function not of the domestic money supply (as conventional monetarist analysis maintains) but of total foreign and domestic official monetary liabilities: the world supply of base money in each nation’s currency. The key to the accuracy of the labor force regressions in Chapter 3 is a methodology that I call ‘disaggregation,” which means that each social benefit program becomes a separate variable in trying to explain the effects of economic policy on the labor market, for example,the unemployment or labor participation rates, which are treated separately for men and women. This technique permits a researcher to recognize that one kind of social benefit or tax might raise, while another reduces, the unemployment or labor force participation rate and might have a different influence on labor market behavior. Disaggregation typically raises regression correlation coefficients substantially, often from the mid-60 or 70% to the mid-to-high 90% range. I conclude the book by discussing religion and the Human Flourishing Index (HFI), beginning with an overview of religious affiliation over the past 4,000 years, including Pew Forum projections to the year 2100. Then I show that religious practice is even more important in explaining a wide range of behavior, including fertility and charitable giving. The HFI is based on the combination of three separate databases: the Maddison Project Database, which estimates national population and GDP per capita back to AD 1; the Barro-Lee database of educational attainment, back to 1820 and projected forward to 2040; and the data and demographic projections of the United Nations Population Division back to 1950 and projected forward to 2100.