I'm not so interested on the monetary policy bits as I am the general response of Woods to Caritas in Veritate:
I actually didn’t want to write anything about the Pope’s encyclical. In 2007, I wrote a book, Sacred Then and Sacred Now: The Return of the Old Latin Mass, in defense of the Pope’s restoration of the traditional Latin liturgy, an area in which Benedict XVI is quite knowledgeable and has much of value to say. I like this Pope. He is smart and serious, not frivolous or vain. He is in many ways a substantial improvement over his predecessor. (I cite as evidence the very fact that the media believes the opposite.) And having been viciously denounced and ridiculed by some pretty despicable people, he certainly has all the right enemies.
I have reluctantly yielded to the urging of quite a few correspondents and typed up a few thoughts. So here goes: Caritas in Veritate strikes me as at best a relatively unremarkable restatement of some familiar themes from previous social encyclicals. At worst, it is bewilderingly naïve, and its policy recommendations, while attracting no one to the Church, are certain to repel.
The response to the encyclical throughout the right-of-center Catholic world was drearily predictable: with few exceptions, it was a performance worthy of the Soviet Politburo, with unrestrained huzzahs everywhere.
It is one thing to receive a statement from the Pope with the respect that is due to the man and his office. It is quite another to treat his every missive as ipso facto brilliant, as if the Catholic faith depended on it. If his supporters are trying to live down to the Left’s portrayal of Catholicism as a billion-person cult, they could hardly do a better job.
Woods then launches into an explanation of the concepts of his book and how economics should be viewed only as what it really is, an objective study of economic processes and the theories that attempt to describe those processes. Then Woods goes on:
Nothing in the Deposit of Faith even comes close to deciding this and countless other important economic questions one way or the other. Not even the most uncomprehending or exaggerated rendering of papal infallibility would have the Pope adjudicating such disputes as these. Yet misunderstandings or ignorance regarding such seemingly abstruse points are so often at the heart of the policy recommendations that bishops’ conferences propose and papal encyclicals can seem to imply.
It is obviously not “dissent” merely to observe that the cause-and-effect relationships that constitute the theoretical edifice of economics are not a matter of faith and morals. They simply do not fall within the range of subjects on which a Catholic prelate is endowed with special insight or authority. Catholic laity cannot head up petition drives against them. They are facts of life. Facts cannot be protested, defied, or lectured to; they can only be learned and acted upon. There is no use in shaking our fists at the fact that price controls lead to shortages. All we can do is understand the phenomenon, and be sure to bear it and other economic truths in mind if we want to make statements about the economy that are rational and useful.
Woods closes out the section of his critique by basically saying what we already know in the real world (and the Holy Father does in his Catholic world when dealing with Catholic things): just saying it should be this way won't make it so, especially when economics is a trade-off. One can't ask for higher wages for all bread winners and expect employers to be able to pay to hire as many bread winners as before.
Anyway, go read through the rest. It's pretty interesting.