On Mere Economics: A Reply to Peter Leithart

Mere Economics, Not Summa Economica 

Peter Leithart—Theopolis Institute president and master of all things biblical-typological—recently reviewed Mere Economics in his donors-only Theopolitan newsletter. We’re honored, having profited from his writing.

We’re especially gratified that he finds the book “clear,” “workmanlike,” and “true and accurate in many, many ways.” He also calls it “boilerplate”—which, in an age of warmed-over socialism and resurgent protectionism, we’ll gladly embrace. Hence, Mere Economics, not Summa Economica (though that may yet appear).

But we part ways with his description of the book as “free market theory.” No such thing exists. What’s on offer in Mere Economics is economics, plain and simple. There’s no Cockaigne of upward-sloping demand curves and free lunches. No society has alchemized bad institutions into mass flourishing. Mere economics possesses ex ante clarity: it tells us, beforehand, which rules yield which results. Discarding—or even heavily modifying—such an impressive intellectual apparatus would require a case far stronger than we’ve ever seen.

Most of the rest of Leithart’s comments, while raising interesting questions, misread key points and pull in opposing directions: (1) economics allegedly can’t handle everyday phenomena that are its historic bread‑and‑butter; yet (2) economics should develop a comprehensive theory of the good. Both perspectives mistake the purpose of mere economics.

Since much of Leithart’s critique concerns the nature of choice—what shapes our choice set, whether our choices are really free, hard problems of vice, and ultimate ends—we grapple with these issues in turn.

Incentives and Choice  

Leithart asks: “What really shapes our choices, or our evaluation of what counts as ‘good’?” 

The list is long. 

Culture matters. That’s why we draw on Peter Boettke’s insight that “culture either legitimates or delegitimates institutional structures” (quoted from the source cited in fn. 43, p. 218). It’s why we invoke Deirdre McCloskey (a Carden coauthor), who attributes the Great Enrichment in part to changing informal norms (chs. 1 & 13). And because preferences aren’t fixed, we nod to James Buchanan’s classic, “Natural and Artifactual Man” (p. 234).

As Leithart himself argues, the church is a culture that shapes sensibilities, thus page 234 says: “Finding and forming true purpose, though individual, requires fellowship with the Holy Spirit, God’s guidance through His Word, and fellowship with God’s people, the church.” Indeed, Theopolis exists to augment this process.

Families are cultures too (pp. 180-181). They shape our loves, affections, attitudes, and outlooks.

Leithart wonders whether economics can account for fads, fashions, the lures of advertising (pp. 89-96), the pressures of power (pp. 56, 101, 105, 118-125; 131-145; 179-186; 207-210), and doing nice things for Mum (pp. 58-59). It can.

You want to please mom, so you throw a party—but not at the Biltmore, because you still want to provide for your children. Economics begins from a simple but profound insight: you can’t choose what’s unavailable, the strength of your love notwithstanding. You can’t both throw the lavish party and fund your child’s college: tradeoffs apply.

Why honor her at all? Because, in your judgment, the benefits—divine command, social expectation, time with mom, discharging a vague obligation—exceed the costs. Incentives, again.

​Many Christians blanch at “unholy” incentive talk applied to family. But consider: “...which one of you, if his son asks him for bread, will give him a stone? Or if he asks for a fish, will give him a serpent?” (Mt. 7:9-11, ESV). If you want to bless your son, you have an incentive to give him fish and bread. 

So, page 34 asks, “Want to better grasp the inner workings of marriage and family life? Economics enriches our understanding of these holy institutions.” ​In fact, future editions of Mere Economics should cite scholars like Margaret Brinig, Douglas W. Allen, Peter Leeson, and Clara Piano, who have done just this, “squeezing” (Leithart’s terminology) these phenomena into “incentive” and “cost-benefit analysis” categories. All to great effect and with enormous explanatory power.  

Saying, as Leithart does, that “we aren’t fundamentally responsive to incentives” misses what economists mean by incentives. When someone chooses, he compares (if only fleetingly) the sacrifice (the cost) to expected gains (the benefit). Yes, we form ourselves through fellowship, but incentives still shape when, where, how, and with whom those conversations happen. 

If people aren’t “fundamentally responsive to incentives,” why does church attendance decline when roads are icy or it’s a holiday weekend–when attending is costlier (p. 40)? Why did the serpent promise Eve she would “be like God”? Why did the devil offer Jesus all the kingdoms of the world? Why does persecution act as a winnowing device toward the lukewarm? Frankly, someone who denies the power of incentives should respond with perfect insouciance to news that airlines now pay their pre-flight inspection mechanics by the piece rather than by the hour.

Moreover, the words “benefit” and “cost” needn’t be a stumbling block to the Christian, since “costs” and “benefits” are subjective. “Incentive,” meanwhile, is shorthand for subjective cost-benefit relationships. Since the sole “ingredients” in incentives are subjective, incentives are subjective too, and they change when costs, benefits, or both change. Leithart acknowledges our denial that “cost-benefit analysis” is strictly monetary (pp. 32ff., 57-59), but he misses that economic logic is universal, though methodologically modest about the content and moral assessment of ends. 

By encompassing both material and non-material ends, economic theory is more realistic and capacious than Leithart portrays. Thus, calling some choices “economic,” as Leithart does, risks confusion. Economics analyzes choice—period. 

For instance, in ch. 2 (pp. 34, 40), DeJuan ponders the (rising) opportunity cost of worship. Should people disregard the Creator’s worship summons in favor of dopamine hits from their devices? You won’t find the answer in the pages of economic theory. Otherwise, we’d have waited until 1755 or 1776 or 1871 for clarity. 

If Leithart wants economics per se to be decisive on all of these questions, then he wants economics to be something other than economics. We don’t ask E=mc2 to condemn nuclear fission. 

At times, Leithart conflates “economics” and “economists,” but the difference matters. He asks, “Can an economist avoid having convictions about what counts as human flourishing?” No, economists can’t avoid this, but thankfully, we don’t know any who do. That said, economics itself, like physics, should stay value-free. 

Page 37: “...while economic logic and statistical evidence are informative, they are not decisive. They can identify trade-offs, but they cannot select among them.” We can and should marry economics and the humanities to navigate tradeoffs. Economists have ethics, but economics isn’t ethics. In leaning into incentives, economics does not wish to supplant theological anthropology, but simply to emphasize that choice takes place against constraints. What is deficient about this division of intellectual labor?

Though value-free, economics, like physics, can still reveal moral structure. The order that emerges from human interactions demonstrates a social reality reflecting the wisdom of a logical, orderly Mind. The heavens declare the glory of God, but so does the price system (p. 83).

Exchange: Free Yet Constrained 

Leithart worries whether “trade is always free cooperation.” 

So do we, but the answer is: “yes, absent force or fraud.” If the terms of trade don’t beat your alternative, you can walk away. This principle holds even in cases of so-called market power, which ch. 8 discusses. 

The terms of trade are not always great for both parties, but this reflects that “cooperation” isn’t a synonym for “unconstrained cooperation.” If “free” meant “no constraints,” even the richest man would not be free when he buys bread, since God gave him a stomach that demands frequent replenishment. Grocers would daily “exploit” us. Yet, the presence of constraints doesn’t incapacitate economists’ ability to analyze the bread market.

Or, any other market. Like sweatshops (pp. 42-43). Of particular importance is Paul Heyne’s point that when someone is situated badly, you can’t improve his lot by removing his best option. When exchange looks lopsided, look to improve endowments and capabilities—usually, by removing restrictions. Repealing restrictions increases production, improving workers’ alternatives so they can walk away from low wages and poor working conditions. 

Until that happens, it is emphatically not any voluntary trade which is to blame. Trades in bad situations are like rickety lifeboats—not the best solution you can conceivably imagine, but better than drowning. Marginal gains from trade are still gains. 

All this assumes some passable system of property rights, true. But, once again, economics doesn’t tell us which property rights system is just, only how alternatives play out. Armen Alchian loved to say: “you tell me the rules and I’ll tell you what outcomes to expect.” On normative questions, we welcome the assistance of legal and political philosophers in determining which arrangements are just and which aren’t. We hope they also welcome our assistance in predicting the consequences of rule changes. 

Concern about the power to inflict physical harm is why we flag the “Great Social Problem” (page 54): how do societies escape Douglass North, Gary Cox, and Barry Weingast’s violence traps? How do they curb coercion and cultivate cooperation? Real power means an offer you can’t refuse, typically backed by gun, bat, or badge. Historically, these “offers” were the norm. And historically, they kept people from producing much to improve their options. Widespread physical violence or the threat thereof is far more troubling than temporarily high prices in barrier-free markets. 

Porn and Prohibition 

We don’t “never raise the porn question,” as Leithart claims. Although we neglect to include the word in the index, we discuss porn six times (pp. 36, 113, 162, 164, 170, 214). 

Carden, who raises teenage sons, has a front-row seat to the struggle. But to paraphrase Thomas Sowell, “there are no buttons, only tradeoffs.” Vaporize every file today (and we would), and persistent demand will soon call forth new supply. 

Fighting a high-demand problem by restricting supply generates predictably disappointing results. Battling porn must start with changing hearts, minds, and yes, preferences. 

True, people have made massive profits making porn, but once again, profits are informative, not decisive. Just because there is money to be made doesn’t mean that we should make that money. Profits tell us where scarce means are being used in response to willingness to pay; they do not certify that the underlying wants are praiseworthy. Such normative discernment belongs to the queen of the sciences; economics is one of her faithful handmaidens.

On drugs: we don’t explicitly recommend complete laissez-faire, but do document the costs of prohibition. Reasonable people can disagree whether those costs merit bearing, but only after grasping what prohibition does. 

Price theory matters here: enforcement changes relative prices (Alchian and Allen’s third law of demand), encouraging higher potency; econometric work links this potency to fatal overdoses. Prohibition makes demand more inelastic, meaning higher revenue for violent cartels. Black markets blunt reputation mechanisms and lower the costs of violence. Wise perspectives on prohibition have reckoned with these facts, regardless of the ultimate policy conclusions they draw.

If people “aren’t fundamentally responsive to incentives” (Leithart’s language), what policy proposals are available for addressing porn and drugs? Since public policy aims to change incentives, but since people are not responsive to incentives, ought we to be indifferent among the panoply of available policy options? 

What’s Love Got to Do With Economics?

Leithart says economics ignores love and lacks a theory of human telos. 

A few quick reactions. First, there is tension in suggesting that economics can’t explain “fads” and “fashion,” but can develop a metaphysics of love, desire, and ultimate ends. Second, a humanities colleague apparently requesting that economics intensify its imperialist tendencies surprises us. Third, many of our examples feature love-laden stakes (for just a few, see: pp. 3, 68-69, 75, 179ff., 236ff., and Munger’s endorsement).

Leithart’s comments on love, while interesting, miss key points. To say “all human action is ultimately motivated not by utility but by love for some person or persons” is a category error because in economics utility refers to the rank ordering of ends—which reflects one’s loves. “Utility” is not somehow opposed to “love.” 

Augustine developed the ordo amoris to assess the moral quality of a person’s rank ordering. Economics (not the economist) sets this aside, not because it’s unimportant, but because economics unflinchingly traces the consequences of choices, whether stemming from rightly or wrongly ordered loves. 

Like Mueller and Wicksteed (and Adam Smith before either), we also argue (page 2!) that a person typically pursues shoemaking, bartending, and truck driving to (in Mueller’s words) “pay for food, clothes, shelter, and other goods for himself, likely also for others – his wife, children, guests in his home, perhaps the church food bank.” This quote could have come from Mere Economics. 

Economics does not, however, “elevate” (Leithart’s term) these things to ends. It does, though, link them to ends by showing how the value of means (leather, glass, tires, etc…) is imputed from the ends they fulfill (pp. 81‑82).

Hence, it’s mistaken to say modern economics amputates “final distribution.” Wicksteed’s classic “mother-with-milk” doesn’t suddenly find herself, in media res, with milk and a “final distribution” problem to solve. Mothers—Wicksteed’s or anyone’s—buy milk to satisfy concrete ends they anticipate. Their spending capitalizes milk producers, who bid for productive factors like cows; bids become factor owners’ incomes; incomes (imperfectly) reflect contributions to society’s “pie.” In other words, how mothers (and everyone) use these goods in the final estimation is ultimately what drives this market process and gives rise to these incomes. But again, incomes say nothing about the moral praiseworthiness of the commercial activity in question (pp. 46, 113, 242). 

No economist describes people as “abstractly balancing supply and demand” (Leithart’s language). We say people act when expected subjective benefit exceeds expected subjective cost. As Wicksteed himself taught us, people do this, regardless of whether they’ve passed an economics class.

Moreover, self‑interest doesn’t require quid pro quo. A mother may pour milk simply knowing it’s the right thing to do (pp. 215‑16). Beliefs (“God wants me to nourish my children”) shape incentives.

Still, the term “self‑interest” does not appear in Mere Economics. Following Adam Smith, we speak of our own interest, which better captures the richer concept Leithart seeks. Smith’s butcher‑brewer‑baker line says we appeal to a seller’s own interest, not his benevolence. Is this blameworthy? The Golden Rule says: “Love your neighbor as yourself” (Mt. 22:39, ESV) and Phil. 2:4 says, “Let each of you look not only to his own interests, but also to the interests of others” (ESV). Market exchange is one way image‑bearers practice this.

Where did Wicksteed’s mother get the milk? And why did the milkman have it when she needed it? Did he wake up thinking, “I need to milk my cow so Wicksteed’s mother can feed her child”? He probably thought, “I need to milk my cow and sell milk to feed, clothe, and shelter my family.” Maybe he’s buying a porn subscription (not loving)–but in that case, he’s not blameworthy because selling milk and earning money is wrong, but because pornography is.

Leithart’s review is commendable for raising questions about gifts, and we don’t ignore them (pp. 59, 103-104, 216, 243), but that topic deserves its own essay.

Economics isn’t metaphysics. What is deficient with this intellectual division of labor? Economics doesn’t explain every sparrow’s fall, nor does it hand us a theory of the good. It’s a general social science precisely because it assumes nothing about the ultimate content of our “own interests.” As Ludwig von Mises writes in Human Action, “It is in this subjectivism that the objectivity of our science lies.” 

The Glorious Science  

What are our ultimate non-material ends? On this metaphysical question, we gladly defer to Augustine, C.S. Lewis, and Peter Leithart. But applying means to pursue those ends invites economic reasoning.

Augustine taught that our loves are our weight. Theology helps us order those loves toward God; economics enables us to see how, once ordered (or disordered), they generate predictable social patterns. That is why we defend space for mere economics inside the larger household of Christian learning. It will not tell us what to love, but it tells us something indispensable about what follows when we do. 

Leithart concludes by invoking Carlyle’s “dismal science” jab. But what, exactly, is dismal about the “study of how people expand their options by cooperating” (p. 4)? 

Is it dismal that markets require me to serve you before I get what I want? Is it dismal that markets presume the right to say “no”? Historically, common folk couldn’t safely decline the demands of their betters. In markets, by contrast, people are moral agents with rights that trump others’ wants, a fitting arrangement for bearers of God’s image.

Surely it’s not dismal that through voluntary exchange we bear one another’s burdens—often unknowingly. Competing bids and offers compress dispersed knowledge into guides called prices, helping us discern where goods are wanted and whether our efforts best serve God and neighbor by meeting those wants. That such cooperation unfolds, minute by minute, on a global scale fills us with wonder and gratitude. His yoke is indeed easy, and his burden is light. 

Is it dismal that giving more scope to this process made the average Westerner (conservatively) 3,000% richer than his ancestors? Is the origin story of the moniker “the dismal science,” as told in David Levy’s How the Dismal Science Got its Name, dismal?

We find these things not dismal, but glorious. That God made a world teeming with potential—and that, given the right rules of the game, his earthly stewards can cooperate to unlock its abundance—is a marvel meant to awaken, in the words of Adam Smith, "wonder, surprise, and admiration." For us, mere economics has done even more. It's deepened our love for this glorious world—and for the glorious God it reflects.