A Brief Intellectual History of the Lesser Depression

Abstract

Globally, the real economy of goods and services functions better than ever in human history, but the financial and monetary system remains subject to crippling crises, including a severe one in 2008. This deviation can be explained by ‘‘the power of bad ideas’’, in particular policy-makers’ narrow focus on quantitative variables and their distrust of moral arguments. The combination leaves regulators and practitioners unable to recognise the role of greed and pride in finance. A moral approach could help reduce the financial system’s vulnerability. The description of economic activity in Benedict XVI’s Caritas in Veritate provides a good starting point. He offers a fundamentally non-monetary view of three economic arrangements: giving through exchange (commerce), giving through duty (taxes), and ‘‘gratuitousness and communion’’ (economic self-giving without concern for a return). The integration of the last into economic analysis would be particularly helpful.