To many people, economics is an incomprehensible, abstract subject that deals with things like unemployment, inflation, and gross domestic product. No doubt it is important for Federal Reserve chairman Alan Greenspan to know about economics, they think, but ordinary people can get along without it.
Most people can do quite well without ever taking a course in economics. But everyone makes economic decisions, down to the most mundane questions of managing household affairs. The term economics comes from a Greek word meaning “household stewardship.” It might be wise, then, to spend a little time thinking about a subject that permeates our lives. For Christians, this means examining what the Bible has to say about stewardship and the roles of economic institutions around us.
The World of Scarcity
A first, basic fact to grasp is that we live in a world of scarcity. Unlike God, we cannot create out of nothing to satisfy our desires. We have to prioritize, deciding which of our needs are more urgent and choosing the most cost-effective way of fulfilling them. Even Adam faced scarcity — a consequence of our finite humanity rather than of sin. Adam had finite physical strength and intellectual abilities. He was limited by time and could not perform all his tasks at once.
In prioritizing, we act as stewards of the things given to us for our management. Stewardship over the world is not given to people in general, but to specific people — typically to families — as the basic institution in society. I am a steward over my household and my property, but not my neighbor’s. It would be unjust for me to demand that my neighbor withdraw money from his bank account and redecorate his living room. I have no jurisdiction over his household, and no claim on the allocation of his funds, unless he has agreed to pay me for redecorating.
The “We” Whose Job It Is
This is an area of serious error by many Christians who talk about stewardship. We are called to be good stewards of our households, businesses, wildlife, air, water, forests, etc. But the real question is, who is the “we”? In far too many cases, the “we” turns out to be the state. As a consequence, the individual or family may be denied legitimate stewardship authority so that the state’s priorities can take precedence.
Ultimately, it is God who has ownership rights over people and institutions like the family, church, and state. All our management rights derive from God. As owner, He sets the conditions and rules of our stewardship. Economics is inseparable from Biblical law.
Apart from the laws God has created for individuals and institutions, we are free — free to make agreements or promises to one another (as with contracts). As long as those agreements do not violate God’s laws, they are ethical.
Authority and Coercion
Christians believe that people are by nature sinful. People will violate the law of God, and earthly authorities have been provided to restrain them. Parents admonish and discipline their children, and church elders perform similar functions for their flocks.
The state also is an institution of God, as we see clearly in Romans 13, to be a terror to those who do evil. Because of sin, coercive power is a necessary part of Christian society. Yet because those in earthly authority over us are also sinners, we should restrict any coercive power to its Biblical limits, leaving it as diffuse and decentralized as possible while still allowing the authority to fulfill its Biblical responsibilities.
Unlike these God-ordained authorities, the marketplace is not coercive. It is based on voluntary cooperation, and no one can force another person into a transaction against his will. “Market power,” though often cited as a failure of free market systems, is fundamentally different from state power. No company, not even the largest multinational conglomerate, can force anyone to buy its products unless it has an unjust grant of coercive power from the state. As economists Ludwig von Mises and Friedrich Hayek pointed out, the state cannot have the same kind of information available to it as markets have, information that is necessary to make good decisions. Unless the state has some specific Biblical warrant to perform a certain function, markets should be preferred.
Markets also can restrain evil, sometimes more effectively than state coercion. People respond to economic incentives in seeking their own ends, whatever those ends might be. In the marketplace, if you want something, you must produce something your potential trading partner wants. Even if a person hates his neighbor, he will cooperate with him in the marketplace. He must swallow his hatred and make a mutually beneficial exchange with his neighbor in order to move ahead with his own plans.
The market confronts people with the immediate economic costs of their behavior, motivating them to cease doing what is harmful. A friend of mine recently applied for additional life insurance, and discovered that his tobacco-chewing habit would push his premiums much higher. So he did what no government-sponsored anti-tobacco propaganda campaign had yet induced him to do — he quit chewing tobacco.
Where We Stand Now
A Biblical economy will look quite different from the one in which we now live. The state would play a much smaller role. Let me suggest three examples:
1. The buyer and seller may freely decide wages and prices (and interest) without state intervention. The Bible does not say what a “just price” or “just wage” would be, unless it is simply the price or wage agreed upon by the buyer and seller. Minimum wage laws, price controls, price “stabilization” schemes, and other interventions not only extend the state beyond its proper boundaries, but create practical problems as well.
2. The state may not manipulate the money supply. When the state (or its agent, an “independent” central bank) creates and injects money into the economy, the value of the already-existing money falls in proportion to the increase in the state’s purchasing power. Inflation toys with the market’s weights and measures, violating a Biblical principle of honesty.1 When the government increases the money supply, it rests its finger on the scale to tip exchanges in its favor. I would go further and suggest that the state has no authority even to determine what money is — except to the extent that it may declare what it will accept in payment of taxes.
3. The state may not engage in large-scale interventions, monetary or otherwise, to “stabilize the economy.” Not only do these shenanigans generally destabilize the economy, but the “fiscal stimulus packages” and money creation schemes usually proposed extend the state far past its proper jurisdiction. The state is, in the Christian understanding, a minister of justice, to restrain sin. Economic instability — manifested in high unemployment rates and low growth rates — is undesirable, but it is not sin. God never commissioned the civil magistrate to be a general problem-solver.
This is a short introduction to some of the principles of Biblical economics, and its brevity means that some issues have been left out. For those interested, www.chalcedon.edu has many other articles on Biblical economics, and there is a wealth of information available in other places.
1. See Leviticus 19:36. Isaiah 1:22 addresses monetary dishonesty specifically.
- Timothy D. Terrell
Timothy Terrell is associate professor of economics at Wofford College in Spartanburg, South Carolina. He is assistant editor of the Quarterly Journal of Austrian Economics and is an Associated Scholar with the Mises Institute.