In a recent critical essay, A. M. C. Waterman evaluates Centesimus Annus (CA) in moral and economic terms.²³ Although our article concerns an earlier papal encyclical, Laborem Exercens (LE) reflects some of the same confusion that Waterman found in Centesimus. He applauds the Catholic Church’s recent recognition of the positive roles of markets—protecting some freedoms, constraining some sins, enabling individuals to contribute to the common good, and efficiently creating value by liberating human creativity (e.g., entrepreneurship). However, Waterman finds that some criticisms of markets and capitalism in Centesimus, and other official documents, arise from a misunderstanding of the ways that markets work and an unrealistic expectation about the wisdom and power of any government. Heretofore, we have discussed examples of unwise governmental limitations on markets in the form of government-controlled wages. Waterman argues that the particular type of Christian organicism underlying recent papal documents is, ultimately, incompatible with free markets (as well as with democracy and pluralism).

According to Waterman, Pope John Paul’s statements in CA about the need for governmental intervention, in such dimensions of the market as wage rates (responding to their duty to promote the common good), can only make sense if all of the following conditions apply:

1. There exists a collectively optimal course of action in each national economy and in the world economy as a whole;
2. Some individuals in each society are in a position to identify such action;
3. Such individuals are, or could be, in a position of political authority;
4. This authority could be exerted by them with sufficient power to achieve their ends; and
5. Power would actually be used by those in authority to achieve the social optimum (that is, common good) rather than their own ends.²⁴

Markets are one of many kinds of spontaneous orders, in that they are not the result of an overall rational design. Like languages, markets evolve out of interactions among individuals and groups—a “conversation,” as Michel calls it.²⁵ Criteria number 2 above is particularly problematic for markets because no individual or group of individuals—including the government—can know enough about the unique skills, resources, and opportunities of each economic actor to identify an optimal action plan.

To be optimal, a plan must enhance the common good. However, even careful rational planning often leads to suboptimal results, in that many individuals and groups would have sacrificed less, or done better, if they had retained the power to make their own decisions—about buying and selling, and so forth. Pope John Paul’s call in LE for government—the indirect employer—to provide overall planning for the “right proportions between different types of employment” is an example of expecting too much knowledge on the part of the government.

Given the government’s inherent lack of detailed information about changing demands and supplies of workers, governmental manpower planning (which attempts to predict gaps between supply and demand for certain labor skills and tie these to public-education planning) is no longer favored by most development economists.

All economists since Adam Smith (including Marx) have marveled at the material achievements of free and expanding markets. Likewise, they have understood that human beings belong at the center of any economy. Smith said, for example, that no country could call itself successful if the masses lived in extreme poverty. However, human beings are at the center of an economy, in a second sense, because the ingenuity and efforts of millions of human actors create the material goods and services consumed by all. Markets may look to some like chaos, but there is no one-man (or one-group) planning process that could make it possible to discover and unleash economic potential as well as markets do.

Waterman cites the following passage from Libertas to illustrate the Christian organicism espoused by Pope John Paul and to show its incompatibility with the theory of spontaneous order:

The eternal law of God is the sole standard and rule of human liberty, not only in each individual man but also in the community and society that men constitute when united. Therefore, the true liberty of human society does not consist in every man doing what he pleases, for this would simply end in turmoil and confusion [read chaos], and bring on the overthrow of the State.… (229f)

Furthermore, John Paul says that it is the job of governments to bind “all citizens to work together for the attainment of the common end proposed to the community and forbidding them to depart from this end.…”²⁷ Waterman says that this type of organicism presumes that human beings are in a position—especially when acting through a responsible government—to know how to achieve an optimal government. Most classical and modern economists are extremely skeptical about this “position.”

Waterman pleads for Christians to develop a better ecclesiology to solve the contradiction between spontaneous order through markets, and the assumption that the government must exercise a moral role by regulating some aspects of markets. He suggests that a better understanding of the Christian Church as the Body of Christ is essential to reconciling the two.

We do not offer a solution to this dilemma but agree that such rethinking is needed. Perhaps the organic nature of the Body of Christ, in relationship to the economy, can be thought of as the harmonious and free collaboration of various body parts with each other. The apostle Paul, after all, did not suggest that possible jealously among the body parts, for example, between the head and foot, or the unpresentable parts and the rest of the body, could be remedied by letting the head run everything. Instead, he used his body analogy to teach respect for, and recognition of, various gifts, of which love is the queen. Markets have a way of eliciting the development and use of many (not all) gifts, for the good of the whole. Competition in markets acts to set prices and wages that reflect the usefulness of specific gifts to the whole society. To recognize such is to see that economic organization deals with forces that are as real and unavoidable as gravity is to understanding celestial dynamics.²⁹ Neither one is subject to an easy appeal to justice.