Biblical Economics

The Bible does not endorse any economic organizing principle but it has a lot to say about the results or outcomes of an economic organizing principle. An economic organizing principle may be considered Biblical when the outcome of the system meets Biblical standards. Most books on the subject of Biblical Economics make a cursory bow toward the Bible and then launch into windy justifications for a libertarian world view. Capitalism has pledged three things: affluence, individual liberty, and that the free exercise of individual virtue would aggregate into a just society. Unfortuately the last of these promises is subverted by the dynamics of capitalism itself, as it strives to fulfill the other two — affluence and liberty.

A Search for Biblical Economics

I have been troubled for some time by the religious fervor of those who claim that any and all government involvement in economic matters always results in bad outcomes. These are the people who are organizing “tea parties” and demonstrating at health care reform town hall meetings with claims that the Democrats and Obama are promoting socialism and have a Nazi like agenda. The disproportionate numbers of Ron Paul campaign stickers in church parking lots on Sunday morning is another symptom. There seems to be a collection of belief that the Bible condemns government restriction of personal liberty in general and involvement in economic matters in particular.

If one does a search of books on Amazon using terms like “Biblical Economics” many relevant hits will be displayed. I picked two that looked interesting to see what they said. A Biblical Economics Manifesto: Economics and the Christian Worldview, by James P. Gills, M.D. and Ronald H. Nash, Ph.D., Creation House Press, 2002, ISBN: 0-88419-871-5. Biblical Economics: Economic Myths versus Biblical Values, by Robert L. White, University Press of America, Inc., 2006, ISBN13: 978-0-7618-3444-1.

I also heard Dr. R. C. Sproul refer to “Stewardship Capitalism” during one of his daily radio lectures. I have a lot of appreciation for Dr. Sproul’s biblical insight, so I wrote to him to ask what he meant by Stewardship Capitalism. He wrote back referring me to his son’s book, Biblical Economics: A Commonsense Guide to Our Daily Bread, by R. C. Sproul, Jr., Tolle Lege Press, 2008, ISBN13: 978-160702-150-6.

I first read Dr. Gills’ 70 page book and was very disappointed. Despite the title there was little in the way of Biblical exegesis to justify its conclusions. A few unrelated Bible references are extrapolated into a theology of economics. On page 25 Dr. Gills makes the claim that the problem of sin is not relevant to the working of a capitalist economic system as the free market will remove the effects of individual sin. This means that the coercive power of government is not required. Much of the book lapses into polemics condemning socialism and government intervention that is not very instructive. Dr. Gills picks out several authors, such as Paul Hollander, for particular criticism. Hollander is criticized for advocating “Christian Socialism.” I’m not sure what Christian Socialism might be, but I am sure I probably would not like it after what Dr. Gills has said of it. Dr. Gills uses the term socialism as a pejorative and assigns it to any and all government intervention. The instruction on economic principles is not derived from the Bible and presents juvenile descriptions of economic fundamentals. On page 2 Dr. Gills depicts Christians as confused on economic principles. I would say that in his case this is justified.

Dr. Gills states his economic organizing principle on page 11.

“In a free market, individuals—and not the government—determine the value of goods and services. In such a system, when individuals are accountable and responsible for their decisions, people are enabled to make the best transactions that benefit themselves.”

Robert White’s 55 page book is very different. He does not try to present a theory of economics nor make claims that he has the last word in what economic organizing principle is Biblical. He addresses six economic myths using Biblical examples as part of his argument, but derives his conclusions from empirical evidence and argument. This book does not try to justify any particular economic organizing principle. I found his discussion of a Biblical approach to the problem of good versus evil on page 41 instructive.

“Some read the bible as a battle between good and evil, with good triumphing after the apocalyptic battles and catastrophes that are interpreted literally from the book of revelation. The other way of reading the bible is to see it as a way that God is attempting to reconcile and redeem a broken and wayward world:”

His opinion on the free market on page 9 is not negative, but nuanced.

“Free competition does produce economic efficiency. The problem is that the textbook case of the economy automatically achieving an idealized and illusory ‘optimality,’ if unfettered by outside influences, cannot be achieved in the real world.”

R. C. Sproul, Jr. in his 215 page book has written a longer version of Dr. Gills’ book. I was really looking forward to reading this book given my high regard for Dr. Sproul, Sr.’s scholarship, insightfulness, and deep Biblical knowledge. I was fully prepared to be convinced and probably converted by the arguments in this book. I expected something like The Doctrine of the Christian Life by John M. Frame, ISBN 978-0-87552-796-3. The description of economic principles is again juvenile and not very instructive. There is the same unquestioning regard for the unfettered free market as if it has an autonomic ability to solve all our problems. The thoroughly discredited Laffer curve is repeated as a fact on page 56. Again the term socialism is used as a pejorative and applied to almost any government intervention.

Sproul, unlike Dr. Gills, does make a lot of good points, but it is hard to find how these relate to his economic organizing principles. On page 154 Sproul makes a good point where he contrasts equality with equity and provides citations for Scripture enjoining equity and he is right that there is little justification for equality of outcomes in scripture. Paul tells servants to obey their masters, but that does not justify slavery. In the same way not condemning inequality of economic outcomes does not justify an unfettered capitalism that permits exploitation of the labor of many by the few.

Sproul’s guiding principle is stated on page 199.

“The problem with government is our understanding of the function of government. As long as the government is seen as the solution to all of our problems, the government will continue to be the source of many of our problems.”

Since this is the 2008 edition of his book, Sproul should know that some of his examples are inaccurate. On page 202 he complains about the national debt. What he does not say is that Bill Clinton ended his term in office with a budget surplus. Something no post war Republican has achieved. He complains on page 205 about farm subsidies, but does not mention that these were brought down to a post war low by Clinton and then put up to a post war high by President Bush. He mentions the Chrysler bailout in the Lee Iacocca era, but does not mention that these were government guarantees and not direct loans. Chrysler paid back these loans seven years early. On page 206 he singles out Harley-Davidson for opprobrium, but does not mention that those tariffs are a distant memory and Harley-Davidson is today used in business schools as a case study in superior management.

R. C. Sproul, Jr. needs to stay close to his intellectual roots, Biblical exegesis. I found his Biblical commentary interesting and insightful, the rest was not much use. I was not convinced of his economic organizing principles.

Since I was not overly helped by these three books, I thought I would take a look myself to see what the Bible has to say about economics in general and the relationship of government to economics.

What does God think of Man’s …Isms?

I the Preacher was king over Israel in Jerusalem. And I gave my heart to seek and search out by wisdom concerning all things that are done under heaven: this sore travail hath God given to the sons of man to be exercised therewith. I have seen all the works that are done under the sun; and, behold, all is vanity and vexation of spirit. That which is crooked cannot be made straight: and that which is wanting cannot be numbered. I communed with mine own heart, saying, Lo, I am come to great estate, and have gotten more wisdom than all they that have been before me in Jerusalem: yea, my heart had great experience of wisdom and knowledge. And I gave my heart to know wisdom, and to know madness and folly: I perceived that this also is vexation of spirit. For in much wisdom is much grief: and he that increaseth knowledge increaseth sorrow. [Ecclesiastes 1:12-18]

Wherefore the Lord said, Forasmuch as this people draw near me with their mouth, and with their lips do honour me, but have removed their heart far from me, and their fear toward me is taught by the precept of men: Therefore, behold, I will proceed to do a marvellous work among this people, even a marvellous work and a wonder: for the wisdom of their wise men shall perish, and the understanding of their prudent men shall be hid. [Isaiah 29:13-14]

God is not interested in man’s …isms. “For the wisdom of this world is foolishness with God: for it is written (see Job 5:13). He taketh the wise in their own craftiness.” [1 Corinthians 3:19] God is not interested in Socialism, Communism, Capitalism, Liberalism, Communitarianism or Libertarianism. He does not care by what …ism we organize our economic life.

With thy wisdom and with thine understanding thou hast gotten thee riches, and hast gotten gold and silver into thy treasures: By thy great wisdom and by thy traffick hast thou increased thy riches, and thine heart is lifted up because of thy riches: Therefore thus saith the Lord God; Because thou hast set thine heart as the heart of God; Behold, therefore I will bring strangers upon thee, the terrible of the nations: and they shall draw their swords against the beauty of thy wisdom, and they shall defile thy brightness. They shall bring thee down to the pit, and thou shalt die the deaths of them that are slain in the midst of the seas. Wilt thou yet say before him that slayeth thee, I am God? but thou shalt be a man, and no God, in the hand of him that slayeth thee. Thou shalt die the deaths of the uncircumcised by the hand of strangers: for I have spoken it, saith the Lord God. [Ezekiel 28:4-10]

Even worse, when our wisdom has resulted in success in this world replacing our trust in God, then God will take his providence from us leaving us to the mercy of unbelievers.

It is utter foolishness to associate some form of economic relationship with godliness. Our …isms are not going to fix what is wrong with us. That is God’s provenance and only God’s.

John M. Frame in The doctrine of the Christian Life comes to this conclusion:

The Bible does not directly address the question of how a society should organize its economy. As we have seen, it does affirm private property and the principle that one should meet his own needs and his family’s through work. When it deals with civil government, it presents it as limited, both by divine sovereignty and by other institutions. The Bible’s doctrine of divine sovereignty rejects totalitarianism. But among nontotalitarian systems, the Bible leaves various options open to us. Our choice among these should, however, take larger biblical values into consideration.

[The Doctrine of the Christian Life by John M. Frame, ISBN 978-0-87552-796-3, p 827]

Jesus warned against false prophets in Matthew 7:15-20. He instructed us to look at the result of applying one of man’s …isms. If the result is obedience to God then the …ism is acceptable, otherwise reject it.

Is The Market God?

Thou shalt have none other gods before me. Thou shalt not make thee any graven image, or any likeness of anything that is in heaven above, or that is in the earth beneath, or that is in the waters beneath the earth: Thou shalt not bow down thyself unto them, nor serve them: for I the Lord thy God am a jealous God, visiting the iniquity of the fathers upon the children unto the third and fourth generations of them that hate me. And shewing mercy unto thousands of them that love me and keep my commandments. [Deut. 5:7-10]

How many times have you read in the newspaper or heard on cable news the term, “The Market,” as though The Market were somehow sentient as in “Now let us see what The Market says.” Many politicians attract votes by promoting a reliance on The Free Market that seems to have an autonomic cure for all that ails us. Has The Market become our god on whom we should rely for succor from economic storms? Isaiah explains in chapter 44 how people receive some benefit from a thing and then make from that thing a god for themselves and worship it. Have we received much benefit from our free market system and now have made of it a god?

A Free Market Pantheon
God	The Market
Old Testament	The Wealth of Nations, Adam Smith
New Testament	Atlas Shrugged, Ayn Rand
Satan	Socialism
Saviour	Ronald Reagan
Anti Christ	Barrack Obama
Apostle	Alan Greenspan
Prophet	Warren Buffet (Oracle of Omaha)
False Prophet	George Soros

A reliance on the free market to be always rational and provide good outcomes reminds me of Dr. Pangloss’ mantra, "all is for the best in the best of all possible worlds," that he repeated through one disaster after another.

Sinners by Nature Do Not Act Rationally

Can the Ethiopian change his skin, or the leopard his spots? Then may ye also do good, that are accustomed to do evil. [Jeremiah 13:23] For the ways of man are before the eyes of the Lord, and he pondereth all his going. His own iniquities shall take the wicked himself, and he shall be holden with the cords of his sins. He shall die without instruction; and in the greatness of his folly he shall go astray. [Proverbs 5:21-23] Wherefore, as by one man sin entered into the world, and death by sin; and so death passed upon all men, for that all have sinned: [Romans 5:12] Jesus answered them, Verily, verily, I say unto you, Whosoever committeth sin is the servant of sin. And the servant abideth not in the house for ever, but the Son abideth ever. If the Son therefore shall make you free, ye shall be free indeed. [John 8:34-36]

We are sinners by nature and trapped by our own nature. So how can we act rationally? Barbara Tuchman in The March of Folly provides four examples of government leaders acting contrary to their own self interest with disastrous results for themselves and their people. These four examples are: Troy and the Trojan Horse, the Renaissance Popes provoke the Protestant secession, the British loss of America, and America betrays herself in Vietnam. “There is a way which seemeth right unto a man, but the end thereof are the ways of death.” [Proverbs 14:12] This is the natural man. It is God only who rescues us from our nature.

Every way of a man is right in his own eyes; but the Lord pondereth the hearts. [Provers 21:2] There is a way that seemeth right unto a man, but the end thereof are the ways of death. [Proverbs 16:25] In those days there was no king in Israel; every man did that which was right in his own eyes. [Judges 21:20]

To act with perfect rationality one must be perfect. So to claim that The Market acting without restraint will be rational is to claim that it is a god since only a god can be perfect. The passage from the Book of Judges is a curse as it describes a time of anarchy where each man is a law unto himself.

Personal Responsibility and Duty

Behold, all souls are mine; as the soul of the father, so also the soul of the son is mine: the soul that sinneth, it shall die. But if a man be just, and do that which is lawful and right, And hath not eaten upon the mountains, neither hath lifted up his eyes to the idols of the house of Israel, neither hath defiled his neighbor’s wife, neither hath come near to a menstruous woman, And hath not oppressed any, but hath restored to the debtor his pledge, hath spoiled none by violence, hath given his bread to the hungry, and hath covered the naked with a garment; He that hath not given forth upon usury, neither hath taken any increase, that hath withdrawn his hand from iniquity, hath executed true judgment between man and man, Hath walked in my statutes, and hath kept my judgments, to deal truly; he is just, he shall surely live, saith the Lord God. [Ezekiel 18:4-9]

Where does the operator of a Payday Loan establishment who charges 60% interest fit in this? How about the health insurance provider who cancels a sick client’s policy? Should we as a society tolerate such things because they are under the control of The Market or should we as a corporate body through our government prevent oppression and violence? In what is your faith and trust? Who is your god?

Ezekiel was talking to the same people in his day who today justify their actions by ignoring God for a god of their own making.

The Role of Government

God instituted both the government and the Church. This is the source of the American concept of separation of Church and State. Both are responsible directly to God. Neither have authority to rule the other and both are subject to God’s authority.

Let every soul be subject unto the higher powers. For there is no power but of god: the powers that be are ordained of god. Whosoever therefore resisteth the power, resisteth the ordinance of god: and they that resist shall receive to themselves damnation. For rulers are not a terror to good works, but to the evil. Wilt thou then not be afraid of the power? Do that which is good, and thou shalt have praise of the same: For he is the minister of god to thee for good. But if thou do that which is evil, be afraid; for he beareth not the sword in vain: for he is the minister of god, a revenger to execute wrath upon him that doeth evil. Wherefore ye must needs be subject, not only for wrath, but also for conscience sake. For for this cause pay ye tribute also: for they are god’s ministers, attending continually upon this very thing. Render therefore to all their dues: tribute to whom tribute is due, custom to whom custom; fear to whom fear; honour to whom honour. [Romans 13:1-7]

Submit yourselves to every ordinance of man for the Lord’s sake: whether it be to the king, as supreme; Or unto governors, as unto them that are sent by him for the punishment of evildoers, and for the praise of them that do well. For so is the will of god, that with well doing ye may put to silence the ignorance of foolish men: As free, and not using your liberty for a cloke of maliciousness, but as the servants of god. Honour all men. Love the brotherhood. Fear god. Honour the king. [1 Peter 2:13-17]

Jeremiah tells us in chapter 22 what God wants governments to do. “…did not thy father eat and drink, and do judgment and justice, and then it was well with him? He judged the cause of the poor and needy; then it was well with him: was not this to know me? saith the LORD” [Jeremiah 22:15-16] Jeremiah here is referring to Josiah who’s son, Jehoiakim, had replaced his father’s policies with those that favored the accumulation of wealth by a few rather than encouraging prosperity for all.

Josiah had “judged the cause of the poor and needy” but in Jehoiakim’s day the rich were getting richer by wrong methods, and the poor were getting poorer.

God has a great deal to say on this subject. Jeremiah called attention to the fact that the rich men were heaping up wealth by the labor of others and treading down the poor. In their pride and in their arrogance they built themselves palaces and lived as though God had forgotten their iniquitous means for the acquisition of their wealth. In the New Testament we read: “Go to now, ye rich men, weep and howl for your miseries that shall come upon you. Your riches are corrupted, and your garments are motheaten. Your gold and silver is cankered; and the rust of them shall be a witness against you …” (James 5:1–3). There are two things for which God condemns the rich: the way they get their money, and the way they spend their money or the way they use it. [McGee, J. Vernon, Thru the Bible with J. Vernon McGee, (Nashville: Thomas Nelson Publishers) 2000, c1981.]

Honest judgment and mercy is enjoined in 2 Samuel 23:3, 2 Chronicles 19:6, Psalm 2:10, and Proverbs 20:28, 29:4, 29:14. In Psalm 2:11 the king is commanded to serve the Lord and fear him. Isaiah condemns kings for unrighteous laws in chapter 10 verse 1. “The king that faithfully judgeth the poor, his throne shall be established for ever.” [Proverbs 29:14]

We see that it is the duty of government to suppress evil, to do justice, obey God, protect the weak, and care for the poor. Man’s …isms are not in view. The reign of Uzziah is instructive. He demonstrated practicality and obedience to God’s law and was blessed for this. His failure was hubris, something all powerful governments and leaders need to avoid.

It is through our constitution that we decide what is evil or good and enact laws to provide disincentives to do evil and incentives to do good.

John M. Frame in The Doctrine of the Christian Life comes to this conclusion on government taxation:

Scripture does not prescribe any maximum or minimum tax. In general it assumes that the king may assess whatever he needs, both for official purposes and to maintain his kingly lifestyle. At times, Scripture criticizes taxation as oppressive (1 Kings 12:4). Jeroboam, though he disobeyed the Lord in many ways, was right to claim that Solomon’s son Rehoboam was wrong in his refusal to lighten his people’s burden (12:12-24). … In general, however, taxation is not theft. It is theft when it violates the laws of the land and when its demands conflict with the spheres of family and church. And people who withhold taxes are guilty of theft, depriving the government of its due. [The Doctrine of the Christian Life by John M. Frame, ISBN 978-0-87552-796-3, pp 803-804]

Nehemiah is often cited as an exemplar of leadership and management to teach and motivate managers public and private. Nehemiah was a government bureaucrat who came to Jerusalem from the distant capital to tell the citizens of Jerusalem what would be best for them. In our present society that sounds like the punch line of a joke, “I’m from the government and I am here to help you.” Our government managed World War II to an absolute success as Nehemiah managed the building of the walls around Jerusalem. In both cases the citizens had a will to work. Success required that both government and citizens performed their roles effectively. Government cannot succeed without a public that is willing and a willing public needs an honest and effective government.

Four times in the book of Judges God pronounces a curse on Israel, “In those days there was no king in Israel, but every man did that which was right in his own eyes” (Judges 17:6, 18:1, 19:1, and 21:25). These people had rejected God as their King long before God told Samuel that they had rejected Him (1 Samuel 8:7). God had planned this long before the actual event (Deuteronomy 17:14-20). A good way to interpret this is the same logic used by Jesus in Matthew 19:8 to justify Moses’ rule for divorce, “for the hardness of your hearts.” The people of God were not going to obey God, so God would permit a king to rule over them for the hardness of their hearts. In the same manner we also need a government to rule over us because we are sinners that need restraint.

Under our constitutional system, we elect representatives who decide how much to tax and how that revenue will be expended. We as voters have the responsibility to hold these representatives accountable both for their honesty and for the practicality of their decisions. That means that all voters are responsible for clearly and objectively understanding the issues that are being decided.

Incentives to do Good or to do Evil

As any marketing manager can explain, incentive is the driving force in sales. Sales plans are written to provide incentives to the salesmen to do what the sales manager wants them to do. Disincentives include telling a salesman to look for another job if he does not like the plan. Well designed carrots and sticks go a long way in management.

Regulation is one method of restraining evil. Another is to arrange incentives to encourage and reward good behavior and disincentives that tax bad behavior. We have tax credits for raising children and sin taxes on cigarettes and alcohol. We have tort law to discourage incompetence and negligence. These are all ways that our government restrains evil. To eliminate these institutions is to invite the curse from the Book of Judges. To believe that The Market will restrain evil is to make a god of The Market.

Secular Philosophical Sources of “Biblical Economics”

The “Biblical Economics” described in Gills and Sproul’s books seem to owe more to Ludwig von Mises and Ayn Rand than to the Bible. Rand was greatly influenced by Nietzsche and derided Christianity as a religion celebrating victimhood. Her philosophy is essentially an inversion of Marxism where labor leaches off of Capitalists. These philosophies should be judged by whether they produce Biblical results or not. The fundamental problem of man’s …isms is that they tend to make people live by the dictates of a totalizing ideology that fails to honor the realities of human existence.

Both Marxism and Ayn Rand Objectivism violate the Biblical concept that everyone in a group is equally important. A church cannot function well without the Sexton, the Vicar, or the Vestry. All have critical roles. Some Presbyterians recognize the importance of the Sexton by having him ceremoniously place the Bible on the pulpit before the beginning of worship. In the political economy of a nation everyone has a role. No one leeches off of anyone. In the Old Testament economy, the Levites were assigned the role of teachers and priests. Men and women were assigned differing roles. In no case was one person or group declared to have a greater spirit, intelligence, or importance. We base our ideal of universal equality on this. The important New Testament references concerning the concept of roles are: Matthew 25:15, Romans 12:6, First Corinthians 4:7, First Corinthians 12:4, and Ephesians 4:11. First Corinthians 4:7 states the case plainly: “For who maketh thee to differ from another? And what hast thou that thou didst not receive? Now if thou didst receive it, why dost thou glory, as if thou hadst not received it?” That which is being received are gifts from God of aptitude and abilities equipping individuals for particular roles.

Amitai Etzioni promots Communitarianism as the answer to what ails us in “Spent,” The New Republic, June 17, 2009 pp 20-23. He defines Communitarianism:

Communitarianism refers to investing time and energy in relations with the other, including family, friends, and members of one’s community. The term also encompasses service to the common good, such as volunteering, national service, and politics. Communitarian life is not centered around altruism but around mutuality, in the sense that deeper and thicker involvement with the other is rewarding to both the recipient and the giver. Indeed, numerous studies show that communitarian pursuits breed deep contentment.

This sounds a lot like “Compassionate Conservatism.” It also sounds like the early church described in Acts.

And all who believed were together and had all things in common. And they were selling their possessions and belongings and distributing the proceeds to all, as any had need. [Acts 2:44-45]

Now the full number of those who believed were of one heart and soul, and no one said that any of the things that belonged to him was his own, but they had everything in common. [Acts 4:32]

There was not a needy person among them, for as many as were owners of lands or houses sold them and brought the proceeds of what was sold and laid it at the apostles’ feet, and it was distributed to each as any had need. Thus Joseph, who was also called by the apostles Barnabas (which means son of encouragement), a Levite, a native of Cyprus, sold a field that belonged to him and brought the money and laid it at the apostles’ feet. [Acts 4:34-37]

First note that this altruism was within the church and not necessarily extended to the population at large. Second, the individual Christians were giving what belonged to themselves and that without compulsion. Ananias and Sapphira were punished for lying and not for withholding. It is not uncommon for a new believer to be possessed by a rush of enthusiasm. Imagine the entire world communion being made up of new believers and you will see the book of Acts church. This euphoria tends to wear off and in a healthy church is replaced by considered attention to the needs of the church and of fellow Christians.

In the end Communitarianism is another of mans’ idealistic …isms. It certainly goes against the grain of the past 20+ years when looking out for number one has been the driving principle. Without acknowledging man’s sinful nature and instituting some level of compulsion and managed incentives there is little hope of utility from this idea for the general population. As a guiding principle it is more in line with Christian ideas of community than Daniel Boone self sufficiency. We hear the story of Daniel Boone because he survived. His incentive was survival. What are the stories of all those self sufficient pioneers who did not survive? The Daniel Boone story of rugged individualism and self sufficiency is for the survivors of a Social Darwinist society rather than a Christian community that recognizes the role and importance of each individual.

Communitarianism is not Socialism. The term, Socialism, is used so much in America as a pejorative that it has lost its meaning. America has never liked the idea of a command economy and nothing being proposed these days has that intention. The real argument before us is the choice between liberty and license. The Christian concept of liberty means to be free to do that which God intended for us to do. Christ’s work on the cross freed us from the bondage of sin so that we could become what God always intended us to be. That does not include license to be a law unto ourselves, but liberty to be willing and enthusiastic followers of God’s will for ourselves.

The Benefits of a Free Market Economy

The success of a free market economy derives in large part from the dispersal of responsibility and authority. Authoritarian regimes fail because power and authority is centralized so that those delegated with responsibilities do not have the authority to carry out their responsibilities. All decisions are made by the center so nothing can be done until such decisions have been made. Unless the center is god, it is not possible for decisions to be made quickly or correctly so activity freezes.

The free market system makes possible speedy decisions that meet the immediate needs of each situation. Accountability is maintained by the failure of enterprises where the leaders have made bad decisions. However, a decision that is in the interest of one enterprise at one point in time is not necessarily in the interests of the entire society or for posterity.

The free market or free enterprise does not guarantee good decisions. At the confirmation hearing for his appointment as Eisenhower’s Secretary of Defense, Chairman Wilson of General Motors said that what is good for General Motors is good for the U.S.A. Al Capp immortalized these words in the person of General Bull Moose in the Lil Abner Sunday comics. A Broadway musical put these words to music. Chairman Wilson was responsible for the purchase of the high speed rail network in the Los Angeles basin. The railroad was bankrupted and the State built the freeway system on the right-of-way. Today massive congestion and use of fuel is threatening the health and economy of Los Angeles. The cost of replacing the efficient rail passenger system today is staggering. Today GM is struggling to exist. What was good for GM in the 1950s has not been good for the U.S.A.

Government in America has always had a role in our economy. The party of Lincoln in the 1860s and ‘70s spent the tax payers’ money in large amounts on “internal improvements” – infrastructure in today’s language. This was a plank in the party platform. Government land was given away to the railroad companies to help finance the building of our railroad infrastructure. The Eisenhower administration started the interstate highway program. A pure libertarian policy would have the government step aside and watch the grass grow.

The following is an example of competent government “interference” in the spirit of King Uzziah:

“…there’s another job that the government has been fairly good at doing over the years: supporting technologies that are already viable but, for whatever reason, face barriers to gaining a toehold in the real world. ‘Historically, when the government has thought through what those barriers were, and targeted that barrier quite precisely, it could have a terrific positive impact,’ says Fri. In the 1970s, he notes, Energy Department labs realized that using electronic ballasts in fluorescent light bulbs could make the bulbs vastly more energy-efficient. The big roadblock was that, at the time, two ballast manufacturers dominated the market, and neither had any incentive to adopt the new technology, since if one did, the other would quickly follow, and no one would gain any market advantage—they’d just have spent a bit more money. So the Energy Department seeded a few small start-up firms that demonstrated the ballasts and prompted the bigger companies to follow suit, leading to large savings for the public.” [“Power Struggle”, The New Republic Magazine, June 17, 2009, p 19.]

Two good examples of incompetent government interference are the deregulation of California electric power in the 1990s and deregulation of the savings and loan industry in the 1980s. In both cases profit was deregulated but risk was retained by the government. Both efforts turned out very badly with the electric power distribution company in California ending in bankruptcy and the taxpayers saddled with over 10 billion dollars and massive power outages. The savings and loan deregulation ended in massive bankruptcies across the industry with the government holding the bag. The S&Ls had been the primary source of mortgage loans. This fiasco led in no small way to the current disaster in housing loans.

Both of these disasters were the result of privatizing profit and socializing risk. In the case of California electric power, wholesale electricity generation was deregulated but the retail price of electricity was capped. When the wholesale price of electricity exceeded the retail cap, the electricity distributer became bankrupt and the state had to provide the bailout. It is interesting to note that Los Angeles did not suffer from this disaster. The county itself owned the generation and distribution of electricity and planned power supply and distribution far in advance. It seems this case made socialism look good.

The savings and loan deregulation permitted the S&Ls to enter any line of business they liked while retaining the government depositor guarantee. This allowed the S&Ls to make risky investments and when these investments failed, the taxpayer got the bill.

Government is not incompetent by nature and private self interest does not necessarily translate into the common good.

Restraints on a Free Market Economy

That America has benefited from a free market economy is not in question. The question is whether this is a result of unfettered cowboy capitalism or from a symbiotic relationship between public and private endeavors. Also, as is often pointed out by conservative evangelical Christians, this nation was founded on Christian principles. How has this contributed to our economic success?

Our Christian heritage taught us the rule of law rather than men. Since all men are sinners, we cannot trust anyone with unfettered power. For this reason we wrote a constitution that divides power and authority. We also devised a legal system that assumes the worst in men. Many restraints are put upon the courts and law enforcement to avoid abuse of power.

We have an elaborate civil legal system to govern the relationships between people. Our courts enforce contracts and protect the interests of the weaker parties – not perfectly, but good enough to provide us with a civil society in which we can all function feeling safe in our lives and property. There are many countries in which this is not so. Present day Russia is closer to a libertarian economy than any have seen in America. They have little in the way of contract law and little restraint on business practice. The courts are arms of the state and open to influence from whomever has money and power. Contracts are enforced by hit men and not by the courts. Crony capitalism might be a good term to describe the situation. There is little individual entrepreneur business development in part because of the lack of a legal framework. The Russian population has been dropping for many years. At this time the Russian economy is in free fall, even with all the energy and other resource wealth of that country. [see “Courting disaster”, The Economist, July 4, 2009, p 63]

The king by judgment establisheth the land: but he that receiveth gifts overthroweth it. [Proverbs 29:4] If a ruler hearken to lies, all his servants are wicked. [Proverbs 29:12] The king that faithfully judgeth the poor, his throne shall be established for ever. [Proverbs 29:14]

We take our legal system for granted. In fact it is not unusual to hear lawyers talk of the law in terms usually reserved for God. Again, something that is useful has become an object of worship. It is the restraints of our legal system that keeps our capitalist economy from destroying itself in anarchy and violence.

Early steam engines had a tendency to accelerate to speeds that caused them to literally fly apart. A governor was added that prevented the engine from operating at an excessive speed. Our economy needs the same to prevent it flying apart like an ungoverned engine. We have many examples from history including our recent housing bubble to show that an ungoverned economic system needs a governor. America’s banking companies are on life support, from the government, while Canada’s banks are healthy and lending. Canada has some of the most restrictive banking laws of any industrial country and they do not have the government bailing out their banks.

We see that we are sinners in need of a governor to restrain our excesses. The question is not the need of a governor, but how and how much.

The Free Market in Health Insurance and Health Care

The television ads put on by those opposing a national health insurance plan claim that a government bureaucrat is going to be micromanaging each individual’s health care. If that were true then why do we not see this in Medicare and Medicaid? Right now private insurer bureaucrats are denying coverage using masses of technical language in insurance plan fine print. One method is to refuse to renew coverage at the annual renewal date because the covered individual has become sick and needs a lot of expensive care. Pre-existing condition is the other major way to refuse coverage to sick people. Insurance companies make money covering healthy people and have ways of purging sick people. Another technique is to write policies that sound good but do not cover many common and expensive tests and procedures.

Which would you prefer, a private insurance bureaucrat who has a financial incentive to refuse to pay your medical bills or a government bureaucrat who has a legal incentive to follow a well defined set of rules and procedures designed to prevent fraud and not necessarily to prevent your medical bills from being paid? Private insurers have a 30% overhead while Medicare has a 4% overhead. There are private insurance CEOs who are paid over a billion dollars each year. The head of Medicare is paid about $144,000 per year. Who is more efficient? Who is robbing you? Who is denying coverage?

If you become unemployed, you lose your employer paid health insurance. With no income you cannot pay for the COBRA health insurance nor after the three month grace period can you pay for insurance even if you can find an insurer who will cover you. The numbers of employers who do not offer health insurance benefits is rising along with the staggering rise in insurance rates. We pay twice as much per person for health care as any other industrial country, but we have worse outcomes. We rank very low on infant survival and many other measures of population health.

The only statistics on health care systems that really matter are life expectancy and infant mortality. Both speak to accessibility and affordability. If you want to know how the U.S., the wealthiest nation on earth, stacks up, here you go:

In life expectancy, the U.S. ranks 38th or 45th depending on whether one uses the United Nation’s statistics or those compiled by the CIA. (In both cases, life expectancy in Cuba is higher!) According to the CIA World Factbook, the U.S. has many more infant deaths than its EU counterparts or northern socialist (to right-wing ideologues) neighbor, Canada. While the U.S. has 6.26 deaths per live births, Canada had 5.04. Britain, France and Germany? 4.85, 3.33 and 3.99, respectively. [Where the healthcare debate seems bizarre, by Michael Goldfarb, GlobalPost Published: July 21, 2009 18:32 ET]

The U.S. health care system, as you probably realize, is a vast cesspool of waste. We spend nearly twice as much on health care as the average advanced country and have no better results to show for it. Alas, every dollar of what we call waste is what somebody in the industry calls “income.” So anything that makes the system more efficient makes somebody unhappy, and that somebody has a team of lobbyists. [Jonathan Chait, “Thought Rationing,” The New Republic Online, July 15, 2009.]

The incentive for health care providers is to maximize revenue. Hospitals and doctors have a financial incentive to perform as much service for which they can bill and be paid. This is why every hospital must have a CAT scanner and each machine must be kept busy 24X7. The necessity of the provided service is less important than whether an insurance company or the government will pay for it. It is little wonder why both private and public bureaucrats are incented by their employers to find ways to deny coverage.

The individual consumer of health care services is at the mercy of the health care providers. The doctor’s union, the AMA, fights any attempt to measure the effectiveness or quality of care provided by its members. In like manner, hospitals and pharmaceutical companies also restrict information on their performance. Someone who is sick is not going to question the cost of services or shop around for the best deal and even if they did the effort would be pointless. There is nothing that equates to the market myths of other industries in the provision of health care. [see “Heading for the emergency room,” The Economist, June 27, 2009, pp 75-77]

The insurance, pharmaceutical, and other medical businesses are said to be “cooperating” with President Obama’s plan to reform how health care is financed. They want to be at the table helping to make decisions so that their own self interest is covered. Beware of this “help” as it can result in privatizing profit and socializing risk. This would destroy any chance for the cost savings being touted for this reform and could bring bankrupt levels of cost upon the taxpayer.

For many people who cannot afford either insurance or medical bills, the current system can be devastating. Over half of personal bankruptcies are caused by medical bills. Many people avoid preventive care from dentists and physicians because of the cost and then end up in emergency rooms needing very expensive care at a great cost to the local community. Insurance companies purge people who are sick so they do not have to pay their medical bills. The way our system operates is more like Social Darwinism than anything resembling Christian economics. The rule is that if you get sick and cannot pay then you should die and make room for the healthy and those who can pay for medical care.

Defend the poor and fatherless: do justice to the afflicted and needy. Deliver the poor and needy: rid them out of the hand of the wicked. [Psalm 82:3-4]

This is not only a moral problem but a major economic problem for our society. Labor mobility is restricted by the need to hang onto the health insurance provided by one’s current employer. As expensive as health insurance benefits are to employers they have not been campaigning to replace this system as those benefits are a tool to control and hang onto employees.

People who are sick, become unemployable. Something that is easy to fix such as teeth can make someone unemployable. A national insurance plan that covers everyone will benefit our society as a whole, reducing medical costs and fostering labor mobility. It would be much easier for entrepreneurs to start businesses if they did not have to worry about providing health care for themselves and their employees.

Income is being taxed as surely by payments for health insurance and for health care as it is by the government. Since the cost per person for health care in America is double that of any other modern economy then we are being taxed at double the rate of the citizens of those countries. The rapidly rising costs of health insurance benefits is paid by employers at the expense of wages to employees or the business simply ends the benefit as unaffordable.

The need for a national health insurance plan is plainly visible for purely economic reasons. This is not welfare for the poor, but a sharing of the cost and management of a service absolutely necessary to the economic health of the nation as well as the health of each individual. Redirecting the existing health care “taxes” to use those resources more efficiently and advantageously for the society as a whole will put money in all our pockets. We need to look to the practicality of Uzziah here rather than a secular ideology that seems derived from Ludwig von Mises and Ayn Rand. “Bear ye one another’s burdens, and so fulfill the law of Christ.” [Galatians 6:2] This is the purpose of national health insurance. And because we are self centered sinners, there needs to be some level of compulsion to accomplish this purpose. Providing affordable and cost efficient health care to all Americans will liberate business and labor to fulfill their proper role in our economy.

The Current Crisis and Human Behavior

The chief intellectual casualty of the current crisis has been the “efficient markets” school – the theory, associated with such erstwhile laissez-faire gurus as Alan Greenspan [an Ayn Rand acolyte], that market participants are governed by rational expectations and markets are self-correcting. As an academic economist, Summers has studied the shortcomings of that approach but, working on Wall Street gave him, he says, a more visceral understanding of the “self-referential” character of markets: “Markets are concerned with the ultimate health of economies and the like but they’re equally or more concerned with what the likely judgments of other market participants in the short run are.” [ft.com Lunch with the FT: Larry Summers By Chrystia Freeland Published: July 10 2009 22:05 | Last updated: July 11 2009 02:42]

…a second branch of financial economics is far more sceptical about markets’ inherent rationality. Behavioural economics, which applies the insights of psychology to finance, has … argued that human beings tend to be too confident of their own abilities and tend to extrapolate recent trends into the future, a combination that may contribute to bubbles. There is also evidence that losses can make investors extremely, irrationally risk-averse—exaggerating price falls when a bubble burst. [“Efficiency and beyond”, The Economist, July 18, 2009, p. 69]

The new administration’s fondness for behavioral economics may be more in line with the Christian view of man’s inherent sinful nature than the belief that economic decisions will always be, in aggregate, rational.

“…the administration’s fondness for behavioral economics, the branch of the dismal science that recognizes that humans aren’t utility-maximizing automatons, but flawed creatures who often screw up simple calculations and struggle with self-control.” [“Nudge-ocracy” by Franklin Foer and Noam Scheiber in The New Republic, May 6, 2009, p 24]

Recent intriguing work in animal behavior may have some application to our economic behavior.

In the 18^th century, Marie-Jean-Antoine-Nicolas de Caritat, marquis de Condorcet, welcomed the French Revolution and used mathematical probabilities to argue for the virtues of shared decision making. Known today as Condorcet’s jury theorem, his work describes conditions in which members of a group voting by majority rule are more likely to render a correct choice between two alternatives than is any individual in the group. One of the critical conditions for a happy outcome, the Marquis contended, was that each group member vote independently rather than copy another (possibly mistaken) juror. [“Swarm Savvy” by Susan Milius in Science News, May 9, 2009, p 18]

Studies published in Nature in 1907 seem to have confirmed Caritat’s assertions. The article in Science News goes on to describe bee swarms and ant colonies decision making when looking for a new home. Bee swarms and ant colonies send out scouts who return and communicate what they have found to the group by dancing. The article shows that a decision is made when a quorum of individuals come to a consensus on where to go. These decisions are most often but not always the best decision.

There is more application here to group decision making than to individual decision making. In a market, investors tend to vote with their money by copying successful investors thus violating Caritat’s rule of independence hence, the creation of bubbles. The few people who vote independently are the ones who walk away with the gold. This does not speak well for efficient market theory. It does say something positive for the secret ballot.

Conclusion

It is more likely that the Libertarian economic view expressed in two of the reviewed books derives more from secular economic philosophy and American pioneer myth than from the Bible. That the Bible does not condemn aspects of this secular philosophy does not imply that the Bible endorses that philosophy. This is not the first economic philosophy that attempted to “explain everything.” Marxism was popular in part because it was an integrated and logical explanation for man’s economic woes with a prescription to fix what ails us. Libertarianism appears to be another integrated and logical explanation and prescription. There are Libertarians, the Cato Institute, who have a jaundiced view of religion in general, but hold to this same economic philosophy.

Christianity is unique for not having a prescription for what ails us that we can apply. It is God who will fix things. It is a human trait to want to control our destiny. Our …isms are all prescriptions for this purpose. The Bible does not endorse any …ism and does not have much good to say about man’s wisdom. The Bible does endorse obedience to God and community cohesiveness and interdependence. It does not endorse Daniel Boone self sufficiency.

I used the term Social Darwinism in this essay as a pejorative. I find it curious that it is not used by the secular left in the same manner. I suspect that its association with evolution is the reason. This is probably an impossible philosophic divide for a secular humanist to cross, but not for a Bible believing Christian.

Trying to justify any form of economic organizing principle using the Bible involves more isogesis then exegesis. God is simply not interested in how we organize our economy. What He is interested in is how we relate to each other and to Him. There is a lot said about that in the Bible. It is better to look at the fruit (outcomes) of our economy and judge if it meets the standards that God has set for equity and care for each other (Matthew 7:20).

God instituted earthly government because we as sinners run from God and become a law unto ourselves, each man doing that which seems right in his own mind. This is a definition of anarchy. It is the purpose of government to maintain order, suppress evil, do justice, obey God, protect the weak, and care for the poor.

The Bible highlights godly men who were at the same time pragmatic and courageous. King Uzziah and Nehemiah are examples. You will note, in particular in the book of Nehemiah, that there are no self sufficient individuals. Community and close cooperation are the characteristics that are displayed in a positive light. The walls of Jerusalem were built by a community with a will to work. The “free market” of Jehoiakim was condemned.

President Obama summed up a reasonable defense of government as part our polity thus:

Our predecessors understood that government could not, and should not, solve every problem. They understood that there are instances when the gains in security from government action are not worth the added constraints on our freedom. But they also understood that the danger of too much government is matched by the perils of too little; that without the leavening hand of wise policy, markets can crash, monopolies can stifle competition, the vulnerable can be exploited. And they knew that when any government measure, no matter how carefully crafted or beneficial, is subject to scorn; when any efforts to help people in need are attacked as un-American; when facts and reason are thrown overboard and only timidity passes for wisdom, and we can no longer even engage in a civil conversation with each other over the things that truly matter -- that at that point we don't merely lose our capacity to solve big challenges. We lose something essential about ourselves.

© Copyright 2009 Stephen Daniel McLeod. All Rights Reserved. No portion of this document may be copied, retransmitted, reposted, duplicated or otherwise used without the express written permission of the copyright proprietor.