Updated: 1/13/20
Christian Economics: Teacher's Edition
For the creation waits with eager longing for the revealing of the sons of God. For the creation was subjected to futility, not willingly, but because of him who subjected it, in hope that the creation itself will be set free from its bondage to corruption and obtain the freedom of the glory of the children of God. For we know that the whole creation has been groaning together in the pains of childbirth until now (Romans 8:19--22).
This is an aspect of point two of the biblical covenant. Representation in the Bible is always associated with God’s hierarchy. Representation is basic to all social theory. Someone speaks in the name of an owner or sovereign. This is judicial representation. He acts on behalf of the owner or sovereign. This is economic representation.
The Bible teaches that the creation came under God's negative sanctions when Adam and Eve did. It also teaches that the curses will be progressively removed from nature at some point in the future--not completely, because sin never disappears in history. The progressive ethical sanctification of covenant-keepers will be accompanied by an increase in their dominion. This will lead to a reduction of nature's curses on man.
The fall of man had ecological effects and implications for nature. This was man's fault, not nature's. Nature was not subject to negative sanctions willingly, but rather as a consequence of Adam's sin. The curse on Adam was that nature would be cursed (Genesis 3:17). It would henceforth produce thorns and thistles (Genesis 3:18). Mankind represented nature covenantally before God. As surely as a nation suffers defeat when the supreme military commander loses the decisive battle, so did nature lose when Adam sinned. We know that the dominion covenant of Genesis 1:26--28 was a covenant because nature visibly came under God's negative sanctions after Adam's fall. Every biblical covenant has positive and negative sanctions. Nature was supposed to be cared for by mankind. Instead, it came under God's negative sanctions. Nature's hope in history is therefore the progressive sanctification of covenant-keepers and their extension of the kingdom of God.
Adam was covenantally responsible for nature as a representative agent. This responsibility did not end at the fall, as we see from Paul's comments on nature. Nature will be restored to its pre-fall condition after the final judgment. The point is, nature is still under sanctions because of the sin of Adam. The dominion covenant is still in force. So are its positive sanctions.
Adam was also covenantally responsible for his wife. He would have been responsible for his non-adult children. Then came the fall. Again, as with the dominion covenant, the family covenant did not end. Neither did the church covenant: eating from a tree, either the tree of life or the forbidden tree. To these covenants was added the civil covenant (Romans 13:1--7). In all cases, covenantal leaders are judicial representatives of institutional covenant members before God, and representatives of God before members.
What I have written so far has to do with delegated judicial sovereignty. But there are also economic ramifications with respect to all of the covenants. The church must be supported by the tithe. The state must be supported by taxes. The family must be supported by the heads of households. The dominion covenant must be pursued by means of work and capital formation. The individual covenant involves lawful self-interest. So, there are economic obligations upward, downward, and inward.
What about outward? What about economic obligations? There is the general obligation not to cheat buyers: civil laws against false weights and measures.
You shall not have in your bag two kinds of weights, a large and a small. You shall not have in your house two kinds of measures, a large and a small. A full and fair weight you shall have, a full and fair measure you shall have, that your days may be long in the land that the Lord your God is giving you. For all who do such things, all who act dishonestly, are an abomination to the Lord your God (Deuteronomy 25:13--16).
Fraud is a moral crime, Jesus said. He told the rich young ruler: "You know the commandments: 'Do not murder, Do not commit adultery, Do not steal, Do not bear false witness, Do not defraud, Honor your father and mother'" (Mark 10:19).
There are moral rules of conduct. These are to guide covenant-keepers in their dealings with other people. Covenant-keepers represent God to covenant breakers in the sense of personification.
For you were called to freedom, brothers. Only do not use your freedom as an opportunity for the flesh, but through love serve one another (Galatians 5:13).So whatever you wish that others would do to you, do also to them, for this is the Law and the Prophets (Matthew 7:12).
And Jesus called them to him and said to them, You know that those who are considered rulers of the Gentiles lord it over them, and their great ones exercise authority over them. But it shall not be so among you. But whoever would be great among you must be your servant, and whoever would be first among you must be slave of all. For even the Son of Man came not to be served but to serve, and to give his life as a ransom for many (Mark 10:42--45).
This is the service mentality. It undergirds the free market's competitive order, according to Adam Smith.
But man has almost constant occasion for the help of his brethren, and it is in vain for him to expect it from their benevolence only. He will be more likely to prevail if he can interest their self-love in his favour, and show them that it is for their own advantage to do for him what he requires of them. Whoever offers to another a bargain of any kind, proposes to do this. Give me that which I want, and you shall have this which you want, is the meaning of every such offer; and it is in this manner that we obtain from one another the far greater part of those good offices which we stand in need of. It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages. Nobody but a beggar chooses to depend chiefly upon the benevolence of his fellow-citizens (Wealth of Nations, Bk. I, Chap II, para 2).
A buyer has a limited amount of money. He seeks to gain his goals without wasting money. He would like to buy many goods and services. He has a list of priorities. He uses his money to purchase those items higher on his list.
He acts as an economic agent for others. He must support his family. He must pay taxes. He may belong to a club, where he is expected to pitch in with time and money. There are many people who depend on him to one degree or another. Some of these obligations are legal. Others are cultural. But they are obligations. So, he must budget his time and money if he is not to fall short of these obligations. This means that buyers must allocate money and time. This allocation process is at the heart of economic analysis.
These obligations are objective. He must provide money or other goods and services for specific people or organizations. These other people become economically dependent on him. Dependence is an inescapable aspect of the division of labor. People expect that others will perform predictably. They adjust their plans accordingly.
In this sense, each buyer is a servant of others. He is their economic agent. He may not be their legal agent, but he is their economic agent. What he does affects others.
In matters of exchange, each party is an economic agent of the other, at least until the terms of the exchange are met. This mutuality is basic to exchange and therefore to the division of labor. Someone says this: "You can count on me." This may involve spending money (buyer). To skip over the buyer in economic analysis is a conceptual error. The consumer no less than the producer is an economic representative. Every buyer is a seller, and every seller is a buyer.
A seller pays greater attention to preparing for a future exchange than the buyer does. He has to. He hopes to make a profit, which is based on his specialized knowledge of the market. He seeks buyers. Buyers own money, which is the most marketable commodity. They can afford to pay little or no attention to the future conditions of the market.
If he expects to sell his output, the seller must get inside the heads of future buyers. He must think of his product from their point of view. He must discipline himself to design his marketing campaigns accordingly. He understands that the buyer asks only this question: "What's in it for me?"
I am a specialist in writing advertising copy. I started a subscription-based newsletter in 1974, the Remnant Review. I still publish it occasionally on my website, GaryNorth.com. I had to learn how to write ads in order to get paying subscribers. I am still learning. It is a sophisticated skill. But it always begins by imagining a specific audience for the product. This audience has needs and wants. There is an old rule for a successful business: "Find out what people want, and sell it to them."
A business owner specializes in a niche market. He is an expert in production. He thinks about the technical details of his product. Then he writes an ad for the product. His mind is focused on production. This is what is called his default setting. This outlook usually leads him to create ineffective ads. This is because buyers care little about technical details unless they are engineers or data fanatics. Most buyers are neither. They want to know what the product will do for them. This outlook is expressed by an old rule-of-thumb of copywriters regarding the buyers' attitude: "Don't tell me about your grass seed. Tell me about my lawn." I teach a one-year course in starting a home business for the Ron Paul Curriculum. Most of the course is devoted to teaching teenagers how to think from the buyer's point of view. This ability is rarely innate. People innately think "mine," not "yours." This began with Adam and Eve.
The producer is an economic agent of specific buyers. He decides on one line of production rather than another. He buys raw materials, tools, and space in order to serve a specific future group of buyers. He hires workers. This allocates production away from all other groups in the direction of his chosen group. He bids away resources from all other producers. He does not do this for his own sake directly. He does it for his own sake indirectly: to make money. In between is the production process. This process must focus on the buyers' purchases.
The producer takes money into the various markets for producers' goods and makes bids. He does this only because he believes that at the end of the process, he will possess more money than he spent. He has faith that he has better knowledge about the future than his competitors do. They all make bids to buy assets. But none of them does this as a final consumer. Every producer is acting as an economic agent of people he hopes will be buyers of his output. He probably does not know the names of these future consumers. He has faith that unnamed buyers with money to spend will decide to buy a small portion of his output rather than another producer's output. If he is correct, and if he does not overspend on producing this output, he will bring in more money than he spent to produce the goods. Then he will become a consumer. He will pay himself. He will decide which producers to reward and which to ignore. He will make winners of a few and losers of most.
He does not possess a legal claim on future consumers' money. They do not possess a legal claim on his future output. None of this is guided by any central planning agency, assuming that we do not think of the Trinity as an agency. This process is guided by prices. Some producers buy specific production goods. Other producers fail to buy. Some consumers buy specific consumer goods. Other consumers fail to buy. It is through the interplay of competitive bidding that the market process brings final products and services to consumers. Producers compete against producers. Consumers compete against consumers.
Leonard E. Read's "I, Pencil" is brilliant in its description of the complexity of the market process. Yet there is coherence in this process. This coherence is provided concurrently by an omniscient nonhuman central planner and millions of hopeful human forecasters. The pencil writes:
Actually, millions of human beings have had a hand in my creation, no one of whom even knows more than a very few of the others. Now, you may say that I go too far in relating the picker of a coffee berry in far off Brazil and food growers elsewhere to my creation; that this is an extreme position. I shall stand by my claim. There isn't a single person in all these millions, including the president of the pencil company, who contributes more than a tiny, infinitesimal bit of know-how. From the standpoint of know-how the only difference between the miner of graphite in Ceylon and the logger in Oregon is in the type of know-how. Neither the miner nor the logger can be dispensed with, any more than can the chemist at the factory or the worker in the oil field--paraffin being a by-product of petroleum.
Knowledge is decentralized. No one on earth knows at any time who possesses exactly the knowledge required to deliver what he wants to buy at a price he is willing to pay. Yet producers daily enter specific markets to buy production goods. They usually find these goods at prices they expected to pay. The coherence of the market process serves all of them well in their quest for more efficient output strategies. This coherence is provided by the market's decentralized and unplanned pricing system. The pencil maker knows where to buy wood, paint, metal, and the stuff that consumers think is rubber. He enters specific markets and comes to an agreement with suppliers. He pays (sells) money in exchange for specific goods.
He pays employees to combine these different production goods so that he has pencils to sell. He has signed contracts to deliver these pencils to retail outlets, where people can buy them. He probably does not advertise his pencils. He knows that most people think all pencils are the same within each lead hardness category and each blackness category, the HB scale. (Did you know about the HB scale?) They will not rush to a store to buy a box of his company's pencils just because he paid to run an ad. He hopes that the buyers of previous pencils will recall that they liked his company's pencils, and therefore they will shop for his brand. Do you do this? Are you committed to a certain brand of pencil? I never have been.
Insofar as you are a user of pencils, you can sleep at night knowing that you will be able to buy more pencils when you run out. Maybe you have been losing sleep over this. I am here to calm you. There are people working hard to see to it that you will be able to buy exactly the pencil you want at a price you are willing to pay. They do not know who you are. Most of them do not know what purposes will be fulfilled because of their efforts. But they go to work each day to see to it that there will be plenty of pencils and whatever other products are produced by their efforts.
This is not a miracle. This is the result of a social order that upholds private property, the rule of law, freedom of choice, unrestricted pricing, stable money, and contracts.
The Bible teaches the doctrine of self-sacrifice on behalf of others. Adam Smith taught the doctrine of enlightened self-interest. These doctrines need not be in conflict. In a free market social order, they are only rarely in conflict. Smith explained that enlightened self-interest involves making mutually beneficial offers to sellers of goods and services. It is through competitive bidding for the ownership of resources that producers offer good deals to buyers. It is through the ownership of a key resource, labor, that most buyers earn enough money to make enticing offers to sellers.
Most economists say that little of this is centrally planned. They are incorrect. All of this was planned before the foundation of the world. It is planned moment by moment. God designed the world in such a way that His law-order, when implemented and obeyed widely, enables producers to find willing buyers, and enables buyers to find willing sellers. Buyers serve as economic agents of future sellers, and sellers serve as economic agents of future buyers. Buyers keep money in reserve for their own purposes, but sellers can then benefit from the buyers' foresight or their access to lines of credit. Sellers keep production lines running for their own purposes, but buyers can then benefit from the producers' foresight in bringing these goods to market. This entire process is governed by this motivation: "Let's make a deal."
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For the rest of this book, go here: https://www.garynorth.com/public/department193.cfm
Note: On the day that I posted this chapter in 2017, I found that I probably had prostate cancer. That was confirmed a week later: stage III. I began to write what became my Cancer Victim's Diary. I finished this book on August 18, 2017.
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