Ethics and Economics: Towards a New Humanistic Synthesis for
ABSTRACT. The Encyclical-Letter Caritas in Veritate by Pope Benedict XVI suggests to advance
towards a new conceptualization of the tenuous relationship between economics and ethics,
proposing a “new humanistic synthesis”. Where social encyclicals have traditionally justified policy
proposals by natural law and theological reasoning, Caritas in veritate gives great relevance to
economic arguments. The encyclical defines the framework for a new business ethics which
appreciates allocative and distributive efficiency, and thus both markets and institutions as improving
the human condition, but locates their source and reason outside the economic sphere. It places a
clear accent on the ontological connectedness of the economic and ethical dimensions of human
action. It is the proper ordering of means towards the end of integral human development that allows
mankind to leave a vicious circle of consumerism and enter a virtuous circle that applies the
creativity fostered by markets. This vision implies a new model of business management that
integrates considerations of vocation, purpose, and values at a theological level.
KEY WORDS: Caritas in Veritate, Catholic social thought, business ethics, economic efficiency,
humanism in management, papal encyclicals.
Not only since the events of September 11, 2001, the conflict between economic rationality
and religion has taken center stage in the public debate. Some religious devotees violently
oppose modern economic society as a demonic threat to their identity while secular groups,
on the other hand, denounce religion as a whole as a dangerous factor for peaceful
development. These events have brought to our attention that the supposed emancipation of
social and political thought from religious values and sentiments may only exist on the
surface. This realization defies the self-understanding of the disciplines of economics and
business administration. Where classical economics was still grounded in moral philosophy,
the development of the discipline into a “science” was accompanied by the conviction that it
could and should be conducted positively, i.e. by eschewing any foundation in values and
normative reasoning. Although much of “political economy”, as an academic discipline, had
its origin in natural theology (theologia naturalis) as based on reason and ordinary
experience, economics increasingly came to be seen as a substitute for this (Oslington,
2008). The emergence of business administration followed this pattern. Its classical authors
such as Fredrick Winslow Taylor, Henri Fayol, Lillian Moller Gilbreth, Henry Gantt, Eugen
Schmalenbach, Yoichi Ueno, or Herbert Simon may have diverged in areas and methods of
research, but they concurred in their belief that the science of management had only one
legitimate goal – the increase of efficiency. In defending the objectivity of scientific theory,
the sociologist and economist Max Weber (Brubaker 1984: 54) insisted on a sharp
separation between ends and means, and on social science being value-neutral with regard to
ends. Economics has since become “self-consciously non-ethical” (Sen, 1987, 2). Although
some currants in neoclassical economics have recently begun to question this dichotomy,
Weber’s methodological stance has dominated in the various areas of business
administration until the present day (Albach and Bloch, 2000). It explains the reluctance of
management scientists to consider questions of value or meaning ensuing from business
decisions, particularly if these questions derive from a foundation in religion. Some critics
believe that there have been significant costs associated with this growing divide between
management and ethics, and a strong orientation of business researchers towards value-free
economics has been identified as part of the problem (Ghoshal, 2005). 1
Against the background of a widening disconnect between economics and religion, it is
auspicious that Pope Benedict XVI in Encyclical Letter Caritas in Veritate employs
economic arguments to underpin his ethical and ultimately religious argumentation. Previous
social encyclicals have justified policy recommendations by arguments from moral theology,
including arguments taken from Natural Law or positive divine Revelation, following the
teaching of the Roman Catholic Church. They included economic arguments only
peripherally and hardly derived any moral conclusions from them (Yuengert, 1999). Pius
XI’s encyclical Quadragesimo Anno (1931), for example, introduced several principles of
social ethics: just wages and worker participation in capital (§ 63-74), subsidiarity (§ 79f.),
and occupational (vocational) organization (§ 81-87), in addition to “social justice and social
charity” (§ 88, 126). However, the justification for all of these was exogenous, by referring
to the natural law or to theological teachings. By first arguing endogenously, i.e. from within
“economic logic” (§ 32, 36), Caritas in Veritate opens up innovative types of deliberation.
Most importantly, the Encyclical departs from the traditional assumption in economics and
business administration that the goal of efficiency would necessarily exclude other values
from being pursued. This paper traces these new arguments of papal teaching in the context
of Benedict XVI’s comprehensive theological reasoning, and investigates their underlying
rationale. The importance of the document will then be shown as lying in a new
conceptualization of the tenuous relationship between economics and ethics, proposing a
“new humanistic synthesis” (§ 21).
The principal economic arguments of Caritas in Veritate are the following, either in their
original formulation, or in paraphrase:
(1) “Profit is useful if it serves as a means towards an end that provides a sense both of how
to produce it and how to make good use of it. Once profit becomes the exclusive goal, if it is
produced by improper means and without the common good as its ultimate end, it risks
destroying wealth and creating poverty” (§ 21).
(2) A greater disparity in wealth is counter-productive, because “through the systemic
increase of social inequality, both within a single country and between the populations of
different countries […], not only does social cohesion suffer, thereby placing democracy at
risk, but so does the economy, through the progressive erosion of ‘social capital’” (§ 32).
(3) The “access to steady employment for everyone” must be safeguarded, since “economic
science tells us that structural insecurity [of workers] generates anti-productive attitudes
wasteful of human resources, inasmuch as workers tend to adapt passively to automatic
mechanisms, rather than to release creativity” (§ 32).
(4) Economic exchange under conditions of trust reduces transaction costs and allows for a
greater efficiency of outcomes (§ 35).
(5) An economic system is not a zero-sum game in which one party wins what the other
loses. Thus it is “erroneous to hold that the market economy has an inbuilt need for a quota
of poverty and underdevelopment in order to function at its best” (§ 35). Economic
development is a positive-sum game in which all parties can achieve higher levels of
(6) Sustainable business policies are different from a “speculative use of financial
resources,” i.e. from “seeking only short-term profit, without regard for the long-term
sustainability of the enterprise, its benefit to the real economy and attention to the
advancement, in suitable and appropriate ways, of further economic initiatives in countries
in need of development” (§ 40).
(7) “The so-called outsourcing of production can weaken the company’s sense of
responsibility towards the stakeholders – namely the workers, the suppliers, the consumers,
the natural environment and broader society – in favour of the shareholders, who are not tied
to a specific geographical area and who therefore enjoy extraordinary mobility” (§ 40).
(8) A “morally responsible openness to life” is justified by the fact that “the decline in births,
falling at times beneath the so-called ‘replacement level,’ also puts a strain on social welfare
systems, increases their cost, eats into savings and hence the financial resources needed for
investment, reduces the availability of qualified labourers, and narrows the ‘brain pool’ upon
which nations can draw for their needs” (§ 44).
(9) “To consider population increase as the primary cause of underdevelopment is mistaken,
even from an economic point of view” (§ 44).
(10) An internalization of environmental externalities (under inter-generational equity) is
needed to achieve the most efficient use of natural resources (§ 50).
As these passages show, economic reasoning in the Encyclical does not have a merely
illustrative role. Rather, the Pope argues that efficiency itself is good, because it is required
by a good stewardship over resources (§ 50). Since much of current economic activity is
inefficient, “economic logic” requires the first step to be that of achieving greater efficiency,
although economic action must not stop there. The Encyclical also describes the normative
implications of positive economics, for example by stating that “human costs always include
economic costs, and economic dysfunctions always involve human costs” (§ 32). This
mutual implication amounts to a “convergence between economic science and moral
evaluation.” The argument here appears to be within the framework of neoclassical
economics, parts of which have indeed dropped any strict distinction between positive and
normative analysis (Sen, 1987; Van Staveren, 2001). The defence of the market economy
against Marxist and socialist reproaches of exploitation is explicit and follows indications
A preliminary version of this paper was presented at the 16th International Symposium on Ethics,
Business and Society organized by IESE Business School (Barcelona, 13-15 May, 2010).
1 Ghoshal made this claim specifically for two theories of supposedly value-free economics, i.e.
agency theory and transaction cost theory, that have been widely applied in business administration.
2 Romantics about social justice raised this critique for decades in opposition to economics and the
market (Messner, 1965).
3 “Love, and do what thou wilt” (Dilige et quod vis fac) (In Epist. Joann. Tractatus, VII, 8).
bridges the gap between religion and economics, and between religion and business, by
refocusing on their proper purpose.
The Encyclical mentions several business models and strategies that are within “commercial
logic” but differ from the shareholder-dominated model. Further studies should investigate
these. While there is much work on the application of CST to business at the macro-level,
there is little on its impact on tactical and operational decisions. Few studies have considered
how CST relates to theories of management, organization, marketing, or finance (Porth and
McCall, 2001). Even the “economy of communion” that Benedict celebrates as an
innovative business model has received little attention (Gold, 2010; Bruni, 2010).
If there is no longer a chasm between efficiency and equity, or economics and ethics, the
traditional view of business ethics as a subsequent additional corrective of business decisions
becomes moot. If charity influences decision-making at all stages within a relational view of
business, considerations of ethics become indeed deeply integrated into the conduct of
commerce. Much further work needs to be done to bring the theological vision of Caritas in
Veritate to fruition in economic reality. It is work that is of great importance and urgency.
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St. Norbert College
De Pere, Wisconsin, USA
Katholische Universität Eichstätt-Ingolstadt
Ingolstadt, Bavaria, Germany