12 VERBAL BONDS AND ECONOMIC COORDINATION Ye shall not steal, neither deal falsely, neither lie one to another. And ye shall not swear by my name falsely, neither shalt thou profane the name of thy God: I am the LORD (Lev. 19:11-12).
Stealing, false dealing, and lying are prohibited. So is swearing falsely by God's name. The latter is worse because it invokes God's name and authority to defend fraud. It compounds the infraction. Notice that the passage begins with a judicial boundary that facilitates interpersonal relations: the boundary around private property.
What is the theocentric principle that undergirds this law? Protecting the name of God. This passage of Scripture is clearly an application of the third commandment. The third commandment prohibits the profaning of the name of God.(1) That is, it places a sacred judicial boundary around the name of God -- a boundary that must not be transgressed without permission. The name of God is the protected asset. Like a brand name in advertising, the name of God is strictly licensed by its Owner. Men are not to swear falsely by the name of God. Swearing in this case is an illegal imitation of a formal act of oath-taking.(2) This form of the violation -- swearing falsely -- is an aspect of point four of the biblical covenant model: oath/sanctions.
Nevertheless, the primary focus of this text is the profanation of God's name: a verbal boundary transgression. This places the law under point three of the biblical covenant model, just as the third commandment is under point three.(3) Additional evidence is the fact that this passage tells us not to defraud a neighbor or rob him. This is a prohibition against theft. The eighth commandment parallels the third commandment.(4) They are both aspects of point three of the biblical covenant model. The theocentric basis of this law is the absolute integrity and inviolability of God's name.
This commandment's focus of concern is theft, which includes false dealings. The theocentric reference point of this law is the name of God and the prohibition against profaning that name. A profane act is an act that transgresses a sacred boundary, either judicial or geographical.(5) Therefore, in the Bible, the laws against theft are part of the general law of God that protects His name and His property from any unauthorized invasion.
This commandment has implications that extend beyond the courtroom. Men are not to lie to each other in order to further their own ends at the expense of others. Even when not under oath, their words are to be reliable; other people will plan their own activities in terms of what is said. For example, a physician is not supposed to tell his patients that they are sick when they are healthy, nor is he to tell them they are healthy when they are not. The same rule applies to economic transactions.
Bonds and Promises "A man's word is his bond." This maxim is a familiar one in Western history. The word "bond" points to a legal transaction. In the Bible, a covenantal bond establishes a formal legal relationship under God. While a promise does not possess the judicial authority of a covenantal bond, since it lacks a lawfully imposed self-maledictory oath, a promise is nevertheless analogous to a covenant bond. It is a verbal contract.
In modern finance, a bond is a promise to pay. A person gives up money in the present in exchange for a specified stream of money in the future, with the return of the principal at a stated date, which will complete the transaction, thus ending the legal relationship.
Promises are a form of inventory. They serve as substitutes for physically stored assets. Instead of accumulating assets, a producer relies on another person to deliver the goods, literally or figuratively.(6) A broken promise here is the economic equivalent of an empty storage facility that was thought to be full. Worse; someone had guaranteed that it would be full. The missing good or service creates a kind of falling domino effect: delayed production all down the line. The person who fails to deliver on time produces losses for the person who became dependent on him.
The person who promises to deliver goods or services puts his reputation on the line. The better his reputation, the more business he will generate, other things (such as price) being equal. It pays a person to gain a reputation as one who keeps his word. He tells the truth, and when other people plan their actions in terms of what he says, they are not disappointed. "LORD, who shall abide in thy tabernacle? who shall dwell in thy holy hill? He that walketh uprightly, and worketh righteousness, and speaketh the truth in his heart. He that backbiteth not with his tongue, nor doeth evil to his neighbour, nor taketh up a reproach against his neighbour. In whose eyes a vile person is contemned; but he honoureth them that fear the LORD. He that sweareth to his own hurt, and changeth not" (Ps. 15:1-4). This person lowers the cost of doing business with him. By lowering the price of anything, the seller increases the quantity demanded. This is why a person who keeps his word has increased his market value.(7)
The fraudulent person is like a thief who steals the assets stored in a warehouse, and who then swears that the warehouse is full. He posts a verbal bond. Like a bonded warehouse illegally emptied by its manager, the violation of this verbal bond is regarded by God as theft. The promise-giver owes double restitution to his victim.
In this case, the promise-giver has used God's name in his false bonding. This involves an additional infraction. The bond-giver has invoked God as his personal bonding agent. This is a major violation of God's law. "And ye shall not swear by my name falsely, neither shalt thou profane the name of thy God: I am the LORD" (Lev. 19:12). By doing this, the false swearer has placed himself under the sanctions of God.
What is said here of individuals is equally true for nations and societies. False swearing invokes God's negative sanctions. A nation that cannot be trusted to adhere to its public commitments will gain few allies in a crisis unless those who represent the nations around it are equally corrupt and unreliable.(8)
The Illegal Transfer of Private Property What this law prohibits is the illegal transfer of private property. It prohibits a direct transfer in the form of robbery. The law says that we must not steal. There is also an indirect form of theft that is prohibited: fraud. Fraud is false dealing. It involves giving a false report to a buyer. First, fraud means a refusal to abide by one's previous word to another individual. Second, it means the deliberate camouflaging of one's word: to appear to say one thing but in fact mean something else. This is done in order to gain legal control of something that is not lawfully one's own. The other person transfers ownership voluntarily but in confusion. The classic example in the Bible is Satan's deception of Eve: the promise that she would become as God (Gen. 3:5). Third, false dealing is the outright defrauding of the individual. An example of this form of fraud is simple lying. A person says that he is going to do something, but he never intends to do it, and if all the facts were available, it could be proven that he never intended to do it. The deliberate writing of a check drawn against insufficient funds would be such an act of fraud.(9) So would posting as collateral for a loan an asset known by the holder to be worth less than what he insists it is worth. So would gaining multiple loans on the basis of one piece of collateral: fractional reserves.(10)
This indirect transfer of wealth can be achieved through false swearing. It is a false form of fraudulent dealing in which God's name is misused. It would be difficult to get away with such an act in a biblical covenant society because of the prohibition against taking God's name in vain. In a society in which the third commandment is not enforced, it is much easier for an individual to swear falsely in God's name. The obvious case in modern society in which this is done would be in a court of law. The person taking the false oath might be swearing in God's name in a formal sense, but his intention is to lie and to use that lie to gain an economic or other advantage from the victim. False swearing is mentioned in this passage, and therefore false swearing is considered to be an act of theft. It is first and foremost the public misappropriation of the name of God. This is an attempt by an individual to transfer the authority of God to himself for his own illicit purposes. He swears by the name of God in order to impress his listeners. This act can also be a formal oath that is taken in front of a court, which will accomplish the same thing.
The Problem of Economic Coordination The economic issue that must be explained is the problem of the coordination of individual plans. How is this best accomplished: By State compulsion or market coordination? It is clear from both the eighth commandment and the tenth commandment that private property must be honored. Men must neither steal nor covet their neighbor's property. This means that biblical economics rests on the ideal of the legitimacy of private property. "Christian socialism" is an oxymoron.
In a market economy, individuals make plans about the future, and then they act in terms of these plans. They buy or sell or hold in terms of their individual plans. The question then is: How are the millions of individual decisions integrated with each other so that men can participate together in the division of labor? This is the problem of the revision of economic plans. How do people change their plans and expectations in response to the decisions of other individuals? This is the problem of feedback: information coupled with sanctions. In what form does information come to an individual that other participants in the market approve or disapprove of what he is doing or not doing? This is the problem of economic sanctions.(11)
Promise and Dependence
The importance of the division of labor has been emphasized in modern economics ever since Adam Smith wrote his famous first chapter on the production of pins.(12) A highly skilled individual craftsman cannot produce a great number of pins in one day, Smith observed. On the other hand, a small group of relatively unskilled workers can produce thousands of pins if they are given the proper capital equipment. He pointed to the division of labor as the explanation -- a fundamental biblical concept (Rom. 12; I Cor. 12). The division of labor allows the increase of output per unit of scarce resource input. Cooperation produces greater wealth than economic autarky can. It is the division of labor which enables us to pool our talents in order to gain much greater output together than we could possibly have achieved as individuals acting in isolation. Because increased cooperation increases individual productivity, it also increases per capita wealth. This increase -- a positive sanction -- is the incentive for men to cooperate economically with each other. It is a very important aspect of the preservation of society. It allows the pooling of individual talents, and it allows the pooling of capital. This capital can be of three kinds: economic, intellectual, and moral.
Cooperation requires a degree of predictability. First, it requires the predictability of timing. Let us consider a business. A business manufactures a particular product. To do so, it requires resource inputs. Because people's knowledge of markets is limited, and because it is expensive to go out and buy exactly what you want exactly when you want it, businesses carry inventories of raw materials and spare parts. These inventories compensate for men's imperfect knowledge of the future. An inventory of raw materials and spare parts enables the business to expand production without a great deal of warning. An inventory of finished products enables the business to meet the demand without increasing the price of the product. It allows the business to continue operating if there is an interruption of the delivery of materials. In other words, inventories create a production system in which there are fewer bottlenecks. Bottlenecks create "ripple effects," both in the company and in some cases in the economy as a whole. Inventories smooth production. But they must be paid for. They must be "carried." They tie up resources.
Second, the producer seeks predictability in the pricing of his resource inputs as a means of gaining predictability of production. If an individual agrees to sell you an item, and you then make plans in terms of the price of that item, you have become dependent on him. Similarly, you have agreed to pay him a money price at a particular time. He has therefore become dependent on you. The free market economy produces a system of independence legally (individualism) and mutual dependence economically (coordination of plans). We are legally free to make our voluntary decisions; therefore, we are judicially independent. At the same time, because of these voluntary agreements, we become mutually interdependent in our economic activities. This is why pricing is so important. It enables us to make decisions rationally in terms of existing conditions of supply and demand.
Third, predictability of quality is also important. This one is more difficult to police. What level of quality is good enough at a particular price? This is difficult for the buyer or the seller to specify in a written contract. We seek ways of gaining this information inexpensively, both as buyers and sellers. The existence of brand names is very important in lowering the costs of people's estimates of quality. Pricing also plays an important role. We are used to the idea that an item which costs five times more than another item is probably of higher quality. We believe that the product will not break readily, and therefore our time won't have to be spent taking the thing in to be repaired. Brand names enable us to make better predictions about the performance of both services and goods.
This is an aspect of the third point of the biblical covenant. God protects His name from profanation. In a similar way, we protect our own names from misuse. We have a property right to our names: other people are not allowed to use our names to promote their ends without our agreement. This is why the existence of brand names and the legal right to property established in a brand name are so important in a society, in order to reduce the uncertainty of the future. People can make decisions based on price and name with respect to the quality of the good or the service.
Contracts
Contracts are a crucial part of this system of economic interdependence. God's goal is greater cooperation among men and a reduction of coercion in economic affairs: peaceful exchange. Peace on earth is a biblical goal. Contracts enable people to specify their own performance more precisely. At least when all parties understand the terms of the contract, contracts reduce the cost of cooperation, and hence increase the quantity of cooperation demanded.
There are always inherent limitations on contracts. One limitation is the difficulty of specifying the conditions of performance. This is why, as societies become more complex, contracts tend to grow longer and in ever-smaller print. Lawyers are the ones today who speak to each other about the nature of the conditions; the actual participants in the contract are rarely able to understand. This has created a new priesthood of lawyers. They speak to each other, and their supposed employers -- clients -- have to accept on faith what it is that they have just signed.
Language has limitations. Every possible condition cannot be included in a contract; hence, mutual trust is mandatory. This trust can be abused by one party. So can the contract's language. God serves as the final arbitrator in all contracts. He knows each person's intentions.
Another limit on contracts is the existence of clogged civil courts. A contract may specify exactly what the other individual is supposed to do, but if you cannot get that person into court, the contract does you very little good. This is why mutual trust is important. Nevertheless, people who trust each other should still write contracts in order to settle differences later. Even if the two parties presently agreeing to act together do not get involved in a dispute, their heirs may later get involved in a dispute. Still, we cannot expect contractualism to substitute for trust and moral responsibility. We should not expect words apart from intentions to protect us in all situations. We should not trust the letter of the law to protect us from evil intentions and the skilled misuse of language.
Mutual Trust
The society in which mutual trust is increasing is more likely to be a productive society. Men seek others who will deal honestly with them.(13) The cost of policing contracts is reduced as mutual trust increases. This is a form of self-government instead of civil government which becomes dominant. We have appeals courts in a society: both church and State. Less pressure is placed on these courts when mutual trust is increasing. This enables a society to achieve its goals with less expenditure than a society in which there is very little mutual trust.
There is another aspect of mutual trust that is important: historical experience. When, over a period of time, we have gained the trust of another person, this becomes an asset to us and to him. He has created a mutually beneficial asset. As the record of the participants' past performance becomes available, it makes it less expensive for other individuals to enter into agreements with these individuals.(14) Therefore, a society which has a good record of performance has increased other societies' trust in doing business with it. This is an important aspect of increasing the international division of labor.
The Doctrine of the Trinity and Social Theory From an economic standpoint, the problem of the coordination of the economy is an aspect of the more general problem known as the one and the many.(15) Let us first consider the theological origins of this philosophical and organizational problem. The doctrine of the Trinity tells us that there are three persons in the Godhead, yet there is only one God. Theologically, there are two concepts of the Trinity, both of which are true. The first is the doctrine of the ontological Trinity. This doctrine states that there is an equality of being and glory among all the persons of the Trinity. An implication of this is that there is an equality of knowledge, meaning that each of the persons of the Trinity has exhaustive knowledge of the other two, as well as of the universe.
There is also the doctrine of the economical Trinity. This doctrine deals with the relationships established among the three persons of the Trinity. The relationship of God the Father to God the Son is clearly hierarchical. "And he said unto them, How is it that ye sought me? wist ye not that I must be about my Father's business?" (Luke 2:49). Nevertheless, "I and my Father are one" (John 10:30). Both statements are true. The first relates to the economical Trinity; the second to the ontological Trinity. Each person of the Trinity has separate functions in relationship to each other and to the creation. There is voluntary coordination of the activities of three persons of the Trinity in order to produce any effect in history. This is why we speak of one God and three persons. So perfect is the coordination process among the three persons of the Trinity that the actions of God are the actions of a single being. With this theological context in mind, let us consider two applications of the doctrine of the Trinity: social theory and economic theory.
The Three Types of Social Theory
There are three (and only three) types of social theory: collectivism, individualism, and covenantalism.(16) These parallel the three types of philosophy: realism, nominalism, and biblical creationism. Trinitarianism proclaims the equal ultimacy of the one and the many. This is not true of either individualism or collectivism.
Individualism. Corresponding to the idea of God as three equal persons rather than as one being is a society based on philosophical individualism. Individualism emphasizes the plans and decisions -- economic and political -- of responsible moral agents. What individuals do and think in relationship to each other is the starting point of all individualistic or atomistic social thought. The key social idea of individualism is the concept of atomism. The individual is the irreducible social unit. Society is said to have no existence apart from the social atoms that compose it. The social whole cannot be of greater consequence than the sum of its parts. Society is seen as the result of human action but not of human design (Adam Ferguson).(17) The key political doctrine of individualism is the right of voluntary contract, both constitutional and economic. The participating many are sovereign, not the social one.
Collectivism. In contrast to individualism is collectivism. It is an extension of the idea of a purely monotheistic God. Collectivism asserts that the social whole is primary, not the individuals who compose it. The collective entity and its organizational needs are viewed as if the collective entity were a single being, a being represented judicially by specific agents. The key social idea of collectivism is that the social whole is of greater consequence than the sum of its parts. The key political doctrine of collectivism is the subordination of voluntary contracts to the decision of political representatives. The social one is sovereign, not the participating many.(18)
Covenantalism. In contrast to both individualism and collectivism is covenantalism. Covenantalism sees society as a collection of individual judicial agents. They have judicial relationships under God. These relationships establish the corporate nature of society. Individualism emphasizes contracts. Collectivism emphasizes organic or biological unity. Covenantalism emphasizes judicial covenants that are established among individuals publicly under God. The difference between covenantalism and its rivals is its emphasis on the Triune God as the initiator of the covenant. It is God who is sovereign, not the individual and not the collective society. God is the ultimate resolution of the one and the many, and therefore society can accurately reflect this resolution only when it is obedient to God and formally covenanted under God.
The Doctrine of the Trinity and Economic Theory The problem of the one and the many also manifests itself in economic theory. As in the case of social theory, there are three types of economic theory: individualist, collectivist, and covenantal. The theoretical issues are similar: explaining how the economic decisions of individuals are coordinated with each other. How are economic plans devised and revised?
Individualism. The individual decisions facing men are seen as the foundation of economic theory. This is called microeconomics. The microeconomist begins with the decisions of the individual in a world bounded by economic limits: scarcity. The individual seeks his own benefits. In his economic interaction with others, his motivation is self-interest. He wishes to achieve his ends with a minimal forfeiture of scarce economic resources. He wants to buy low and sell high.
The emphasis of individualistic economic analysis is on the productivity made possible by means of the voluntary agreement or contract. The division of labor increases the wealth of the participants if they are allowed to "truck and barter" with each other. There is no "social welfare" in such a view; there is only the welfare of each individual.(19) Economic individualism's most consistent school of thought is the Austrian school, whose principles were first articulated by Carl Menger in 1871.(20) The Austrian School's most comprehensive theorist was Ludwig von Mises (1881-1973). Its most famous modern defender was Mises' student, F. A. Hayek (1899-1992).(21)
Collectivism. In contrast to microeconomic theory is macroeconomic theory. This approach to economic theory argues that the overall operation of the aggregate economy is primary, not the decisions of individuals or firms. These macroeconomic processes have a life of their own beyond the individual decisions of acting men. Not only is the market a force separate from the individuals whose voluntary decisions shape it, the State is a force separate from individuals who provide the State with its legal sovereignty. Both the market and the State are viewed as forces with lives and laws of their own. Scientifically trained State bureaucrats are regarded as competent to give indirect orders to producers by means of monopolistic fiscal and monetary policies. Economic coordination is understood as a top-down process based on coercion: taxation, monetary manipulation, debt (fiscal policy), and regulation.Covenantalism. This view of economics rests on a concept of God's absolute sovereignty over creation. It begins with the doctrine of the Trinity and the doctrine of creation. God has established a system of subordinate authority for individuals and institutions. Three institutions are established by covenantal oath, meaning a verbal bond invoking God's negative sanctions: church, family, and State. The individual and the family are seen as the agents of production. Both church and State must be supported by a small portion of the net productivity of profit-seeking individuals, families, and derivative associations: partnerships, corporations, etc. This places primary earthly authority into the hands of individuals, not institutions. Because of the doctrine of the final judgment, the individual is regarded as the locus of primary earthly authority. Because of the doctrine of God's absolute sovereignty -- omniscience, omnipotence, and omnipresence -- the results of men's decisions are understood as being under the control of God and subject to his predictable covenantal sanctions in history.
Economic Coordination: State or Market? The fundamental question for humanist economists is this: Which of these two institutions possesses primary sovereignty in the process of economic coordination, the State or the free market? The microeconomist identifies the free market as the sovereign agency possessing the final say over what gets produced and sold. His faith is in the self-interested individual, who knows his own desires and productive capacities better than any outside observer or enforcer can. Microeconomic analysis lodges responsibility with the individual because he has better knowledge of local (individual) conditions. The profit-seeking entrepreneur is best able to match supply and demand. The impersonal free market is seen as the only morally and politically neutral coordinator, and therefore the only institution worth trusting in man's war to overcome the boundaries imposed by scarcity. The "invisible hand" of the market(22) is not attached to any self-interested individual. The market is autonomous and therefore far more trustworthy than the State, a monopoly always dominated by special interests.
The macroeconomist insists that the State is the final court of economic appeal. Only if endowed with civil power can an elite planning corps gain access to coercively extracted information: statistics. Only through the use of statistics can central economic planners even pretend to see "the big picture." But given the repeated failure of socialist and Keynesian systems to "deliver the goods" -- to match supply with demand -- this faith in the State is based on a religious faith that is far more than pragmatism. The collectivist's faith rests on a humanistic version of cosmic personalism, with man -- elitist, scientific man -- as the sovereign agent.(23) The macroeconomist's commitment to a concept of collective representation that is personal rather than impersonal.
The macroeconomist's concept of sovereignty is ultimately judicial rather than pragmatic. The voters have voted for the State's representatives, and therefore these representatives supposedly possess greater legal authority than anyone in the free market. These political representatives can then hire scientific economists who somehow can see "the whole picture," as well as respond to it, apart from self-interest. The free market can often fail as a system, the collectivist says, despite the desires and plans of acting individuals. The State must rectify these failures. In short, the market process is seen as unable to harmonize the conflicting plans of acting men. The market's process of coordination is imperfect, according to the macroeconomist. The underlying premise of the macroeconomist is that the State -- i.e., politicians and tenured bureaucrats -- must intervene to take coercive actions that will offset the evils and inefficiencies of contractualism. Without State intervention, the collectivist assures us, the free market economy will eventually collapse. Marxism and socialism emphasize macroeconomics. So does Keynesianism.
What the macroeconomist says is that officials of the State can see "the big picture" better than individual market participants can. These State officials supposedly represent the true needs of the political majority better than the market does. These representatives are supposedly capable of rising above their own self-interest. They are also capable of designing and implementing positive and negative sanctions that can motivate producers to meet the true needs of a majority of the population -- "true needs" being defined by the politicians and the bureaucrats.(24)
Economic Coordination: Covenantal The individualist says that the best economy is the result of human action but not of human design. The collectivist says that any economy that is the exclusive result of human action but not of human design is an imperfect economy. It needs the coercive power of the State to right wrongs, correct imbalances, and achieve high employment and sustained economic growth without inflation.
The covenantalist insists that the economy is the result of God's absolute sovereignty through delegated authority. The economy is designed by God. When the human actions of large numbers of the members of society conform to His law, the general economic results will be good, conforming to God's promises (Lev. 26:4-5, 9-10). When men's actions are rebellious, the economic results will be bad (Lev. 25:20, 22, 26). The collective results are determined by God's responses to widespread covenantal faithfulness or rebellion.
This means that there is an all-seeing, omnipotent agent who oversees the "big picture." He does not require or even permit men to usurp His role as overseer. He delegates to individuals the responsibility of planning for the future. He delegates to individuals the authority to bring evil-doers to the attention of civil magistrates. He relies on the individual's self-interest in both cases: the entrepreneur's quest for profit(25) and the victim's quest for restitution.(26)
This system rests on the concept of the honest word: the producer's promise to buy, the seller's promise to sell, and the oath-bound witness' promise to tell the truth to the court. It also rests on the idea of God's predictable corporate sanctions in history: economic, military, and biological-medical.(27) God takes care of the "big picture"; He delegates to individuals and voluntary associations the responsibility of administering the "local picture." This is the biblical doctrine of responsible (hierarchical) stewardship, which is always accompanied by the covenantal doctrines of law, judgment, and inheritance.
Economic Representation This debate is inescapably a debate over the nature of legitimate representation. The humanistic microeconomist says that the market process is generally the most reliable representative of the people -- an impersonal force that is the product of millions of individual economic decisions. The Keynesian macroeconomist says that the State is needed to complement the market by offsetting the market process in selected cases. The State is supposedly a personal, caring force that protects the weak while simultaneously increasing the wealth of the vast majority of people.(28) Both systems recognize the inescapability of economic representation.
So does covenantal economics. The representative of the people is God Himself: Jesus Christ, the Incarnate God. This cosmic agent of both God and man has announced His laws in the Bible. He has also designated earthly representatives of His three covenantal law courts: church, family, and State. The covenantal alternative to both individualism and collectivism is a system of economics that begins with the stipulations of biblical law. There is no covenantal "school of economic thought" in the twentieth century. The triumph of secular humanism in economics is total. It has been ever since the seventeenth century. In fact, the very origins of the modern science of economics was grounded in a self-conscious attempt to replace all theological and even moral opinion by the categories of neutral reason.(29)
Covenantal economics asserts the existence of an original natural harmony of economic interests, but only in the garden of Eden. Since the fall of man, there has not been a harmony of interests. There can be no permanent harmony of interests between covenant-breakers and covenant-keepers. There can, however, be temporary cooperation in history based on mutual self-interest. The tares are not uprooted in history; neither is the wheat (Matt. 13:18-23, 36-43). Their cooperation is based either on the willingness of the wheat to abide by the stipulations that are established by the tares or on the willingness of the tares to abide by the stipulations established by the wheat: biblical law. It cannot be based on neutral civil law, since there is no neutral law. There is no neutrality. There is only covenant-breaking and covenant-keeping.
Conclusion The prohibition against theft and false dealing is here linked to the prohibition against profaning God's name. This points to the parallel between the eighth commandment against theft and the third commandment against taking God's name in vain. The issue in the third commandment is misusing God's name in a formal oath. The issue here is lying. Swearing by God's holy name is prohibited; therefore, so is false dealing and lying.
Men must not deal falsely with each other. In economics, such a law increases the possibilities for cooperation. The division of labor and the specialization of production make possible greater output per unit of resource input. Honest dealing enables men to increase their productivity and their wealth.
"A man's word is his bond." This phrase points to the covenantal grounding of society: a legal bond between God and man, and among God and men, based on a self-maledictory oath. A contract is analogous to a covenant. Men may not use God's name in vain, so they may not swear by God in a contract. But there is an element of self-malediction: the contracting parties agree to submit themselves to an arbitrator or a civil magistrate when signing the contract.
Because of promises, men can cooperate with each other over time. The future becomes less uncertain because of the existence of promises. Thus, if we wish to overcome the economic uncertainties of life, we can enter into agreements with others. But each party to the agreement must deal honestly with the others; otherwise, men's plans regarding the future are undermined by the non-performance of others. The coordination of men's plans then becomes disrupted.
The West has generally been faithful to this law. The result has been the proliferation of contracts, culminating in the highly organized securities markets. These markets have led to a vast increase of wealth in the West. Men have been able to pool their assets, making possible the capitalization of present goods. Capitalization involves placing a present price on an expected future stream of income. If all men were liars all of the time, such capital formation would be impossible.
Because God has delegated authority and responsibility to men, they can cooperate. His system of hierarchical authority is a bottom-up system: men are free to do anything not specifically prohibited. A court system settles disputes between individuals. This is the structural foundation of a free market economy: local responsibility, voluntary cooperation, and hierarchical judgments after the fact. This is the opposite of bureaucracy: a top-down system of controls in which a central planning agency announces goals and standards, modifies them repeatedly, and then evaluates the performance of subordinates in terms of the previous announcements. If all men were liars most of the time, this is the kind of system mankind would be stuck with. It is Satan's system, for he deals with liars. Therefore, when society is marked by widespread lying and fraud, it will either move toward autarky or toward bureaucratic centralization: the many or the one. In both cases, productivity suffers.
Summary Swearing falsely is an aspect of the law against theft: profaning God's name, a boundary violation.
A bond is a promise to pay.
Promises are a form of inventory: substitutes for stored assets.
The person who keeps his word lowers the risk to others of doing business with him.
A violation of a verbal bond is judicially the same as theft: fraud.
The penalty is double restitution.
A false swearer has also misused God's name.
Promises in a division-of-labor economy create dependence.
Cooperation requires predictability: timing, pricing, and quality.
Contracts reduce confusion and make cooperation less expensive: hence, more is demanded.
Mutual trust is important for smoothing over the confusions inherent in every contract.
The courts are clogged; trust overcomes clogged courts.
The model of voluntary cooperation is the Trinity.
The model provided by the Trinity is covenantalism: not individualism or collectivism.
The free market provides coordination through contracts.
God insures the corporate outcome of contracts: macroeconomics.
The State is not supposed to impose a production blueprint.
Footnotes:
1. Gary North, The Sinai Strategy: Economics and the Ten Commandments (Tyler, Texas: Institute for Christian Economics, 1986), ch. 3.
2. Idem.
3. Ibid., Preface, p. xvi; ch. 3.
4. Ibid., Preface, p. xx; ch. 8.
5. See Chapter 6, above.
6. In the 1980's, the advent of inexpensive computers and the spread of overnight air cargo delivery companies made possible the development of "just in time" manufacturing. Manufacturers can time the delivery of raw materials and parts so that they do not have to invest in large inventories. This has made manufacturing far more efficient.
7. The market value is an asset's present price. This price is the asset's expected stream of future income, discounted by the prevailing rate of interest.
8. The fact that the nations of the West continued to make formal treaties with the Soviet Union, 1917-1991, despite the fact that the Soviets almost invariably broke these treaties, testifies to the moral corruption and willful self-blindness of those Western nations and the leaders who entered into those treaties. On the history of Soviet treaty-breaking, see Lawrence W. Beilenson, The Treaty Trap (Washington, D.C.: Public Affairs Press, 1969); William R. Kintner, "The Treaty Trap," in Mesmerized by the Bear: The Soviet Strategy of Deception, edited by Raymond S. Sleeper [an ironic last name for an editor of a book with this theme] (New York: Dodd, Mead, 1987), pp. 115-36.
9. In most states in the United States, this act constitutes a felony.
10. Gary North, Tools of Dominion: The Case Laws of Exodus (Tyler, Texas: Institute for Christian Economics, 1990), pp. 739-40; North, Honest Money: The Biblical Blueprint for Money and Banking (Ft. Worth, Texas: Dominion Press; Nashville: Thomas Nelson Sons, 1986), ch. 8.
11. Gary North, Inherit the Earth: Biblical Blueprints for Economics (Ft. Worth, Texas: Dominion Press, 1987), ch. 9.
12. Adam Smith, The Wealth of Nations (1776).
13. "And it came to pass at that time, that Abimelech and Phichol the chief captain of his host spake unto Abraham, saying, God is with thee in all that thou doest: Now therefore swear unto me here by God that thou wilt not deal falsely with me, nor with my son, nor with my son's son: but according to the kindness that I have done unto thee, thou shalt do unto me, and to the land wherein thou hast sojourned" (Gen. 21:22-23).
14. A word that increases advertising response is "proven."
15. R. J. Rushdoony, The One and the Many: Studies in the Philosophy of Order and Ultimacy (Fairfax, Virginia: Thoburn Press, [1971] 1978).
16. On the three kinds of social theory, see Gary North, Millennialism and Social Theory (Tyler, Texas: Institute for Christian Economics, 1990), pp. 34-37.
17. F. A. Hayek, "The Results of Human Action but not of Human Design" (1967), reprinted in Hayek, Studies in Philosophy, Politics, and Economics (University of Chicago Press, 1967), ch. 6.
18. This strict monotheism is the reason why Unitarianism has become politically statist. Thomas Jefferson and John Adams did not follow the logic of their unitarian theology. The political and intellectual influence of Trinitarianism was still too great in their day. This influence began to wane after 1825. Unitarianism proclaims an undifferentiated God who is represented by men who are not totally depraved by nature. It is the religion of humanity. R. J. Rushdoony, The Nature of the American System (Fairfax, Virginia: Thoburn Press, [1965] 1978), ch. 6.
19. Murray N. Rothbard, "Toward a Reconstruction of Utility and Welfare Economics," in On Freedom and Free Enterprise: Essays in Honor of Ludwig von Mises, edited by Mary Sennholz (Princeton, New Jersey: Van Nostrand, 1956), pp. 243-49.
20. Carl Menger, Principles of Economics (New York: New York University Press, [1871] 1981); cf. Thomas C. Taylor, An Introduction to Austrian Economics (Auburn, Alabama: Ludwig von Mises Institute, [1980] 1988).
21. Gerald P. O'Driscoll, Jr., Economics As a Coordination Problem: The Contributions of Friedrich A. Hayek (Kansas City, Kansas: Sheed & Ward, 1977); Eamonn Butler, Hayek: His Contribution to the Political and Economic Thought of Our Time (London: Temple Smith, 1983); John Gray, Hayek on Liberty (London: Basil Blackwell, 1984).
22. Smith, Wealth of Nations, p. 423.
23. Gary North, The Dominion Covenant: Genesis (2nd ed; Tyler, Texas: Institute for Christian Economics, 1987), Appendix A: "From Cosmic Personalism to Humanistic Sovereignty."
24. On personal self-interest in the decisions of politicians and bureaucrats, see the literature produced by the "public choice" school of economists, most notably James Buchanan and Gordon Tullock (who is not a degree-holding economist). Buchanan and Tullock, The Calculus of Consent (Ann Arbor: University of Michigan Press, 1962); Buchanan, The Limits of Liberty (University of Chicago Press, 1975). Buchanan won the Nobel Prize in economics in 1986; Tullock, never haven taken a course in economics, did not.
25. Frank H. Knight, Risk, Uncertainty and Profit (New York: Harper Torchbooks, [1921] 1965); Israel M. Kirzner, Competition and Entrepreneurship (University of Chicago Press, 1973).
26. North, Tools of Dominion, ch. 7. See also Gary North, Victim's Rights: The Biblical View of Civil Justice (Tyler, Texas: Institute for Christian Economics, 1990).
27. In Old Covenant Israel, there was another sanctioning agency: the land itself, i.e., the environment. See Chapter 10, above.
28. This assertion regarding socialism is no longer taken seriously except by college professors in the West. The Keynesian version -- meaning its rhetoric of State aid and legitimate representation -- is still believed by a majority of voters.
29. William Letwin, The Origins of Scientific Economics (Cambridge, Massachusetts: MIT Press, 1963).
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