Theologian Reinhold Niebuhr and ex -Congresswoman Clare Boothe Luce agreed politely Saturday, night that modern capitalism is not entirely compatible with the precepts, of Christianity. They spoke before over 1,800 spectators at the Law School Forum.

Mrs. Luce stated at the outset that the American capitalistic economy, with all its defects, is closer to the spirit of Christianity than either socialism or communism. The Rev. Dr. Niebuhr replied that a proper application of the "Love thy neighbor" ideal was the decisive element in making any governmental system truly Christian in spirit.

Rapa Socialism

"Christianity is opposed to the spirit that puts gain above all other principles," Mrs. Luce said, "but socialism is even worse, because it gives the state final authority over all human rights."

Arguing for a "sort of mixed economy or democratic socialism," the Rev. Dr. Niebuhr asserted that all extensions of government power do not lead to tyranny. "Some forms of monopoly power ought to be nationalized," he added, stating that, "Britain, with its nationalization, is at least as great a democracy as we are."

Mrs. Luce suggested profit-sharing and laws "in the direction of social justice" as a start toward bringing capitalism more in line with Christian ethics, but warned against the trend to "statism."

"Every system must take self-love into account," the clergyman commented. "But in a technical society," he said, "each man seeking his own good will not produce the common welfare."

Saturday's Law Forum, held at the Cambridge High and Latin School, was broadcast nationally.