Economics

On Christianity and Economic Systems

When discussing a variety of social issues, one of the concerns that will tend to arise are the various economic impacts, as well as which economic system is preferable as a guiding principle. The problem is, many people are not very educated about the facts of what economics is, nor what the realities of various economic models are. Because these issues are relevant to a variety of specific topics, we’ll go ahead and discuss them here.

Economics

If you go to wikipedia, you’ll quickly realized that a simple definition of economics and a basic understanding of it is nontrivial.  Merriam-Webster gives us this:

economics

  1. a :  a social science concerned chiefly with description and analysis of the production, distribution, and consumption of goods and services, b :  economic theory, principles, or practices

  2. economic aspect or significance

  3. economic conditions

Thomas Sowell, in Basic Economics, defined it as:

Economics is the study of the use of scarce resources which have alternative uses.

Adding one more definition from Economics: A Study of Markets, by Albert N. Link and Stuart D. Allen (copyright 1986) is:

Economics is concerned with choices – how choices are made, why they are made, and what consequences these choices may have. Economists study the choices made by individuals, families, businesses, and nations, as well as the outcome of these choices.

As we look at these three definitions, we see different aspects of the concept of economics brought to light. Here are a few takeaways from these definitions:

Scarcity of Resources

There is a finite amount of gold in the world. There are a finite number of hours in a day. There is a finite amount of land. There is a finite amount of clean water. Some things seem so abundant as to be nearly infinite, such as breathable air, while others are so rare that most people will never see them, such as some of the unstable, man-made atoms.

Choices

A company can choose to purchase 100 licenses of Microsoft Office, or use OpenOffice for free. A gamer with $60 can choose to buy a copy of Overwatch, or three to ten indie games (depending on price). A young man can take his girlfriend on a date to a steak restaurant, or to Taco Bell and a movie.

Production and Consumption

When you combine limited resources with choices, you get decisions about how to use limited resources (materials and labor) to produce various products and services. Further, when reviewing the range of products and services available, people make decisions about which ones they want.

Money

Money is an unusual resource in an economy. Money has no intrinsic value, yet it is the mechanism that is used to facilitate trade in modern countries. For example, as a programmer, my services are not particularly valuable to the local grocery store. They already have cash registers and a website, so they don’t need another programmer’s efforts. Similarly, my boss doesn’t have lots of food hanging around to provide me. Instead, my boss gives me money in exchange for my time, and I give a portion of that money to the grocer in exchange for food.

Money, then, is a proxy unit for measuring the value of things. It has the advantage of freeing up other items, such as gold or silver, for use in production. It also provides a common frame of reference. If I say, “I’ll pay $10 dollars for an 8 oz sirloin,” it expresses how much I value a sirloin over all the various other things I could spend my money on. The butcher or restaurant then can choose to accept or decline that money as a fair value for their product.

Regulations and Taxes

Governments are peculiar actors in the discussion of economics. First, governments generally do not produce a good or service that can be easily “sold” to its citizens. Consider something like the military. Some people would prefer to contribute no money to the military, while others might contribute quite a bit. Unfortunately, the needs of the military (however the government may determine them) may not match what people are willing to provide. As a result, governments use taxes to collect money from citizens to pay for the various services they provide.

Along with that, some people/families/businesses/nations are inclined to make decisions that others may not approve of. Regulations are government enforced rules on what kinds of decisions are allowed. This can range from prohibition (prostitution is often illegal), to regulation (a business that produces toxic waste can only dispose of it in certain ways), to licensing (a business must register with the city to operate legally). Consequences of violating regulations can vary from fines, to disbanding of a business, to imprisonment of the violators.

Black Markets

When a regulation states that certain products may not produced or consumed, some people will seek to produce or consume them anyway. This can range from cocaine, to alcohol (when sold to minors), to cigarettes that haven’t been taxed, to labor (so-called “working under the table”).

The existence of black markets indicates that there are people who are willing to risk the consequences of violating regulations, at a surcharge. It also indicates that there are people whose desire to consume those products is high enough that they’ll pay the surcharge to acquire them. These risks generally include possessing the item (for both producer and consumer), production (for the producer), and engaging in the transaction (for both producer and consumer).

Economic Systems

With the above as a frame of reference, there is another concern that arises: who should control the means of producing goods, and who should control the process of consuming goods? The three major economic systems I’ll discuss now are capitalism, socialism, and communism.

Capitalism

Looking at wikipedia, we find that capitalism is defined as:

an economic system based on private ownership of the means of production and their operation for profit.Characteristics central to capitalism include private property, capital accumulation, wage labor, voluntary exchange, a price system, and competitive markets. In a capitalist market economy, decision-making and investment are determined by the owners of the factors of production in financial and capital markets, and prices and the distribution of goods are mainly determined by competition in the market.

The key aspects of this model are private ownership of nearly everything (by individuals), and limited regulations.

In a capitalist system, the overall market price, then, reflects how many people are willing to produce a product for a given sales price (based on costs associated to acquire all physical/labor resources involved, as well as profit) compared to the number of people willing to purchase a given product at that price (based on alternative products available). Numerous factors can affect both, such as advertising, perceived popularity, changes in cost of resources, etc. Prices will rarely be static, and unusual events can result in sharp drops in price (No Man’s Sky flopping) or increases in price (gas pipelines getting damaged) which may be permanent or temporary. As prices drop far enough, many items will simply disappear from the market.

Socialism

Looking at Wikipedia, we find socialism is defined as:

a range of economic and social systems characterized by social ownership and democratic control of the means of production; as well as the political ideologies, theories, and movements that aim to establish them. Social ownership may refer to forms of public, collective, or cooperative ownership; to citizen ownership of equity; or to any combination of these. Although there are many varieties of socialism and there is no single definition encapsulating all of them, social ownership is the common element shared by its various forms.

The key shift relative to capitalism is the change from individual ownership to group ownership. Prices tend to be more controlled and the overall market less dynamic than in a capitalist system.  This is good for predictability, from a consumer perspective, but can result in surpluses or shortages being more common as well.

Communism

Looking at Wikipedia, we find communism is defined as:

In political and social sciences, communism (from Latin communis, “common, universal”) is the philosophical, social, political, and economic ideology and movement whose ultimate goal is the establishment of the communist society, which is a socioeconomic order structured upon the common ownership of the means of production and the absence of social classes, money, and the state.

Communism further changes the notion of ownership to the ultimate group: the government as a whole. While there’s no government in principle, the reality of common ownership and the need for decision making will force the existence of some sort of governing body. Since all allocation (no prices, in theory, since there’s no money) is determined by the governing body, extreme over- or under-production of goods can easily happen. The Soviet Union, for example, would frequently have far more or fewer tires than cars that needed them. Supply is highly predictable, but doesn’t reflect demand at all.

Hybrid systems

Of course, most societies are not a pure example of any of the above. For example, the United States is primarily capitalist, but there are numerous regulations (ranging from prohibiting certain products to sanctioned monopolies of utilities). In addition, federal and state governments provide numerous services, such as public roads, some radio and television stations, and even some health care financing.

The Biblical Position

Different worldviews support different economic systems. For example, communists generally view communist economic systems as the ideal everyone should aspire to. Socialism is a common economic model in Europe. Libertarians in the US often advocate for a purely capitalistic system.

Christians, in theory, should base their worldview on the Bible. That raises a simple question: what does the Bible say about economics? Let’s start someplace equally simple: the Ten Commandments.

Exodus 20:1-17

 And God spoke all these words:

“I am the Lord your God, who brought you out of Egypt, out of the land of slavery.

“You shall have no other gods before[a] me.

“You shall not make for yourself an image in the form of anything in heaven above or on the earth beneath or in the waters below.You shall not bow down to them or worship them; for I, the Lord your God, am a jealous God, punishing the children for the sin of the parents to the third and fourth generation of those who hate me, but showing love to a thousand generations of those who love me and keep my commandments.

“You shall not misuse the name of the Lord your God, for the Lord will not hold anyone guiltless who misuses his name.

“Remember the Sabbath day by keeping it holy. Six days you shall labor and do all your work, 10 but the seventh day is a sabbath to the Lord your God. On it you shall not do any work, neither you, nor your son or daughter, nor your male or female servant, nor your animals, nor any foreigner residing in your towns. 11 For in six days the Lord made the heavens and the earth, the sea, and all that is in them, but he rested on the seventh day. Therefore the Lord blessed the Sabbath day and made it holy.

12 “Honor your father and your mother, so that you may live long in the land the Lord your God is giving you.

13 “You shall not murder.

14 “You shall not commit adultery.

15 “You shall not steal.

16 “You shall not give false testimony against your neighbor.

17 “You shall not covet your neighbor’s house. You shall not covet your neighbor’s wife, or his male or female servant, his ox or donkey, or anything that belongs to your neighbor.”

Notice the eighth and tenth commandments (vs. 15, 17): you shall not steal and you shall not covet your neighbor’s property. To me, this strongly suggests that God expects us to have private property and honor it. This includes servants and animals that perform labor for that person (the means of production).

Leviticus 19: 11,13 further reinforces this:

11 “‘Do not steal.

“‘Do not lie.

“‘Do not deceive one another.

13 “‘Do not defraud or rob your neighbor.

“‘Do not hold back the wages of a hired worker overnight.

Again, the laborers (who have part of the means of production) deserve to be paid. Those who own resources have the right to keep and use them as they see fit.

Look also at John 12:1-8

12 Six days before the Passover, Jesus came to Bethany, where Lazarus lived, whom Jesus had raised from the dead. Here a dinner was given in Jesus’ honor. Martha served, while Lazarus was among those reclining at the table with him. Then Mary took about a pint[a] of pure nard, an expensive perfume; she poured it on Jesus’ feet and wiped his feet with her hair. And the house was filled with the fragrance of the perfume.

But one of his disciples, Judas Iscariot, who was later to betray him,objected, “Why wasn’t this perfume sold and the money given to the poor? It was worth a year’s wages.” He did not say this because he cared about the poor but because he was a thief; as keeper of the money bag, he used to help himself to what was put into it.

“Leave her alone,” Jesus replied. “It was intended that she should save this perfume for the day of my burial. You will always have the poor among you, but you will not always have me.”

Judas sought to dictate how Mary used her property, yet Jesus rebuked him and defended her. The perfume was hers to use as she saw fit. (I’m aware that I’m stretching a bit with this context.)

As you read through Proverbs and the Leviticus, two themes become apparent: trade is to be honest and voluntary. Pay what you owe, what you agreed to, and be shrewd in your dealings. Finally, if you look at Proverbs 31:10-31, you find someone who practices capitalism wisely as the exemplary wife:

Epilogue: The Wife of Noble Character

10 A wife of noble character who can find?
    She is worth far more than rubies.
11 Her husband has full confidence in her
    and lacks nothing of value.
12 She brings him good, not harm,
    all the days of her life.
13 She selects wool and flax
    and works with eager hands.
14 She is like the merchant ships,
    bringing her food from afar.
15 She gets up while it is still night;
    she provides food for her family
    and portions for her female servants.
16 She considers a field and buys it;
    out of her earnings she plants a vineyard.
17 She sets about her work vigorously;
    her arms are strong for her tasks.
18 She sees that her trading is profitable,
    and her lamp does not go out at night.
19 In her hand she holds the distaff
    and grasps the spindle with her fingers.
20 She opens her arms to the poor
    and extends her hands to the needy.
21 When it snows, she has no fear for her household;
    for all of them are clothed in scarlet.
22 She makes coverings for her bed;
    she is clothed in fine linen and purple.
23 Her husband is respected at the city gate,
    where he takes his seat among the elders of the land.
24 She makes linen garments and sells them,
    and supplies the merchants with sashes.
25 She is clothed with strength and dignity;
    she can laugh at the days to come.
26 She speaks with wisdom,
    and faithful instruction is on her tongue.
27 She watches over the affairs of her household
    and does not eat the bread of idleness.
28 Her children arise and call her blessed;
    her husband also, and he praises her:
29 “Many women do noble things,
    but you surpass them all.”
30 Charm is deceptive, and beauty is fleeting;
    but a woman who fears the Lord is to be praised.
31 Honor her for all that her hands have done,
    and let her works bring her praise at the city gate.

To me, it seems clear that capitalism is held up as the norm and the expectation. Socialism and communism seem to run afoul by coveting your neighbor’s property. As a result, it seems clear to me that a government that supports capitalism, with respect for private property and honoring of agreements (contracts), is what the Bible models. Note, also, that the Proverbs 31 wife is generous, but it is voluntary.

Altogether, then, the Bible appears to support a capitalist economic system. There are commands to be generous, and there are commands for those with wealth to provide opportunities for the poor. Private ownership of land and goods is strongly supported. At the same time, taxes are also justified for those things a government provides best. Regulations also make sense to ensure people are not cheating each other. I cannot find similar support for a socialist or communist economic system.

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