Munich Personal RePEc Archive

The 'Common Goood' in Pope Francis's Social Welfare Hypothesis

Amavilah, Voxi Heinrich (2016): The 'Common Goood' in Pope Francis's Social Welfare Hypothesis.


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In conventional welfare economics Pareto optimality requires competitive markets in which rational sellers use pure private resources to produce pure private goods and services for rational consumers. Although such theory acknowledges that market failures prevent Pareto optimality, it continues to advocate efficiency alone as the first best policy for society. Pope Francis has argued recently that the current economics of indifference to the common good is responsible for the enormous environmental damage to Earth (‘our common home’). He calls for an integral approach to consumption and production, one that takes the common good as the source and object of well-being. In that way consumption and production depend on the common good, and so too do associated time-discounted social satisfaction and surplus. This means that a socially desirable program is one that optimizes integral satisfaction and surplus, so that consumption and production functions are a system of endogenous (dynamical) simultaneous equations in which the utility of the integral person is a function of the social utility. I use insights from the economic models of resources (both exhaustible and renewable) to describe what the Pope means. The description is rather loose, but the implications of the exercise are wide and far-reaching. For example, I find that the socially efficient price is not Pareto efficient; it is one that allows for the marginal social utility, marginal social surplus, and marginal social royalty to the common good. In other words, under conventional welfare economics the marginal cost of generating the present value of the social surplus that eats up the present value of the rent to the common good guarantees the disutility of the integral person even as it meets the utility of the rational person. One policy implication of such a result recommends consideration of the common good as a key variable in both production and consumption. Precisely how that can be done is the direction in which future research must go. The question this result raises is about how to quantify the common good. For Pope Francis the level of analysis is integral subsidiarity, where the environment would be a good proxy for the common input to production and the common outputs are reduce poverty, inclusion (reduced inequality), and the protection of the common input.

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