Building better things, living better lives

For many, the Vatican gardens would be ruined by several days of papers on economics, but I recognized it as a blessing. The dismal science it is not!

The academy is made up of a few dozen world-class social scientists, including two Nobel laureates in economics, both of them non-Catholic. I have spent my entire adult life on the university campus, but as an observer at these annual meetings, I get a taste of what university life should be but rarely is. Here we have the exploration of a problem of general interest by scholars who can speak out of their specialty to a general audience of intelligent people. The university norm is that scholars avoid general audiences and problems of general interest in favour of specializations so obscure that even their colleagues have trouble following their research.

The topics here change from year to year – development, security, education, peace and security. This year the topic was the economic crisis, with a special focus on philosophical and moral dimensions.

Economics has a philosophical dimension, and because it deals with human action, its roots are in moral philosophy. Economics often forgets this and pretends to be like engineering or physics, but human sciences remain human and social sciences remain social – the person matters, and the person lives with others.

A dominant theme of the deliberations was that too much of the economy had become "financialized." Too much energy was spent not on building better things or providing better services, but rather on financial instruments that were, as their name suggests, derivative of the real economy. In this derived – and contrived – world the normal rules of prudence, transparency and integrity were flaunted. When reality intruded, the result was catastrophic.

That's not left-wing rabble rousing. The chairman of Ferrari and the governor of the Italian central bank were among those who worried about the consequences of greed, the problems of moral hazard and the need for strong governance over financial instruments – which after all, are necessary for investment and trade.

There was a deeper concern too about "financialization" of common life beyond strictly economic concerns. Some relationships should obviously not be treated only in terms of commercial exchanges, like husbands and wives, or parents and children. But what about doctors and patients, or even banks and their clients? Is something not lost when those relationships are reduced only to their financial dimension?

Or consider the corporation. The profit it makes is an indication of its efficient use of resources in the provision of goods and services desired by others. It is also an association of people working co-operatively on a common project for the common good. What happens to a corporation then when it is considered not an association of free creative persons but a commodity to be bought and sold? When its profit is seen not as an indication of a well-functioning association but solely as a financial asset to be realized? Is that not only a human loss, but an economic one as well, undermining the foundations of economic stability?

Life makes room for gifts. Can economics?

If philosophical questions are not the usual metier of economists, theological ones are more challenging still. In his encyclical last year, Pope Benedict XVI argued that the logic of the gift had to find a place in economic life. That's not easy to do. The social phenomenon which is the object of economics is the exchange – we observe free exchanges, and then make conclusions about preferences, incentives, goals and even happiness. Without exchanges it is hard to imagine what economists would study.

Gifts are not exchanges. Indeed, a gift that becomes an exchange might be said to have been financialized into something else. In acquiring a commercial value it ceased to be a gift. Yet the gift is an essential part of being human – we experience it before we learn about exchanges. Life makes room for gifts. Can economics?

A useful distinction is often drawn between a market economy and a market society. The latter is the consequence of the financialization of everything. And if financialization weakens the economy, it wreaks havoc in society. Yet is it possible to have the former without the latter?

Academies are for asking such questions; universities should be too.