Chapter 16: Imputation and Value
Updated: 1/13/20
Christian Economics: Teacher's Edition
And God saw everything that he had made, and behold, it was very good. And there was evening and there was morning, the sixth day (Genesis 1:31).
This passage is an aspect of point four of the biblical covenant: judgment. During the creation week, God exercised daily judgment in assessing the results of His work of creation, excepting only day two. He declared that His work was good. Then He did this at the end of the sixth day. Economists have a term for this assessment of value: imputation.
This was not yet the culmination of the first week. A day of rest lay ahead (Gen. 2:2). But the prelude to the day of rest was God's assessment of the success of His work. He imputed positive value to it. Imputation is point four of the pre-fall biblical economic covenant. It is related to rendering judgment: God's declaration of guilty or not guilty, good or bad. On day six, God rendered verbal judgment on His week's work. In the creation week, this was related to the fourth commandment: the sabbath rest requirement.
Remember the Sabbath day, to keep it holy. Six days you shall labor, and do all your work, but the seventh day is a Sabbath to the Lord your God. On it you shall not do any work, you, or your son, or your daughter, your male servant, or your female servant, or your livestock, or the sojourner who is within your gates. For in six days the Lord made heaven and earth, the sea, and all that is in them, and rested on the seventh day. Therefore the Lord blessed the Sabbath day and made it holy (Exodus 20:7--11).
To render judgment is to evaluate. The word value is closely related in meaning to evaluate. To render judgment, a person assesses a result in terms of a standard. In the biblical covenant, this standard is supplied by God: biblical law. This standard is transcendent. It is permanent. It is reliable. He who adheres to it will be blessed. He who violates it will be cursed. Blessing and cursing are verbs. They are also nouns. They are sanctions. Sanctions are an aspect of point four of the biblical covenant. "So God blessed the seventh day and made it holy, because on it God rested from all his work that he had done in creation" (Genesis 2:3).
Throughout the creation week, God rendered judgment at the end of every day except day two. The day's work was completed. God declared it to be good. There were six days (many). The week's work was a separate unit of production (one). He declared it to be good. The components were good (days). The overall project was good (week). This culminated in a blessing: rest. God was not exhausted. He was finished. Completion deserved a day of rest.
At the end of each step, God rendered judgment. Judgment is not merely final. There are preliminary judgments. Men are made in God's image (Genesis 1:27). They are stewards of God. They are therefore God's legal agents. As legal agents, they must render preliminary judgment in God's name, according to His standards. This was what Adam should have done with the serpent. Instead, he rendered judgment on God's word, calling it into question. But he had to render judgment, one way or the other. He had to decide who was telling the truth.
Stewards are trustees. They must render judgment. One aspect of this judgment is judicial. One aspect is economic. I describe judicial judgment as follows: "in God's name." I describe economic judgment as follows: "on God's behalf." Judicial judgment carries more weight than economic judgment. It is more covenantal than contractual. It is good or bad in the sense of moral. The second is good or bad in the sense of profitable or unprofitable. The first takes priority over the second.
Ben Franklin announced that honesty is the best policy. The phrase was not original with him. It was a commonplace in late eighteenth-century colonial America. It is worth citing the document in which he said this. It was a letter to Edward Bridgen (Oct. 2, 1779). He was responding to Bridgen's offer to sell copper to the Revolutionary government for use in its coinage. Franklin thought there should be some proverb on every coin.
Instead of repeating continually upon every Halfpenny the dull Story that everybody knows, and what it would have been no Loss to mankind if nobody had ever known, that Geo. III. is King of Great Britain, France & Ireland &c. &c. to put on one Side some important Proverb of Solomon, some pious moral, prudential or œconomical Precept, the frequent Inculcation of which by seeing it every time one receives a Piece of Money, might make an Impression upon the Mind, especially of young Persons, and tend to regulate the Conduct; such as on some, The Fear of the Lord is the Beginning of Wisdom; on others, Honesty is the best Policy; on others, He that by the Plow would thrive; himself must either lead or drive. On others, keep thy Shop & thy Shop will keep thee. On others, a Penny sav'd is a Penny got. On others, He that buys what he has no need of, will soon be forced to sell his Necessaries, on others, Early to bed & early to rise, will make a man healthy, wealthy & wise, and so on to a great Variety.
Franklin assumed that good morality produces profits. This is also the teaching of the Bible (Deuteronomy 28:1--14).
Therefore, when God imputed value to His work, He had in mind both morality and practicality. His stewards should use this as their model in rendering judgment.
We call this rendering of judgment imputation. We implicitly declare that something is good or bad. Then we are supposed to take action in terms of our imputation. James wrote:
But be doers of the word, and not hearers only, deceiving yourselves. For if anyone is a hearer of the word and not a doer, he is like a man who looks intently at his natural face in a mirror. For he looks at himself and goes away and at once forgets what he was like. But the one who looks into the perfect law, the law of liberty, and perseveres, being no hearer who forgets but a doer who acts, he will be blessed in his doing (James 1:22--25).
The Austrian School of economics began in 1871 when Carl Menger, who was technically a professor of law at the University of Vienna, published his book, Principles of Economics. He argued that economic value is not inherent in any resource or service. Rather, it is imputed by consumers. It is not objective but subjective.
This was an important insight, but it leads to crucial problems. If economic value is exclusively subjective, how can government policy-makers come to a scientifically valid conclusion about the collective value of any policy? It is impossible to add up exclusively individual imputations of value. There is no objective measure.
The biblical view is that value is subjectively imputed, but since God can make valid assessments of interpersonal comparisons of subjective economic value, so can His stewards, though of course not perfectly. Jesus taught this. He observed the temple's treasury.
And He sat down opposite the treasury, and began observing how the people were putting money into the treasury; and many rich people were putting in large sums. A poor widow came and put in two small copper coins, which amount to a cent. Calling His disciples to Him, He said to them, "Truly I say to you, this poor widow put in more than all the contributors to the treasury; for they all put in out of their surplus, but she, out of her poverty, put in all she owned, all she had to live on" (Mark 12:41--44).
God imputes subjectively, but because His assessment is perfect, it is judicially objective. It is therefore also economically objective. There is an objective correlation between God's subjective imputation and objective truth or falsehood, good or bad, profitable or unprofitable. Our subjective imputations are made analogously to God's. We do not have to evaluate perfectly in order to evaluate effectively. If we had to evaluate perfectly, then we would always fail. Man is not omniscient.
This discussion may seem obscure, but it is a major difference between Christian economics and free market economics, which rests on the presupposition of methodological individualism. Methodological individualism rests 100% on the assumption that it is scientifically and logically impossible to compare one person's subjective value with any other person's subjective value. But if this is true, then there is no way scientifically to evaluate the collective results of any policy. Economists should never speak of socialism's inability to produce wealth. To say that socialism has failed requires the economist to assess the interpersonal subjective utilities of people before and after socialism was abandoned. There is no way this can be done, according to methodological individualism. Therefore, no economist should offer economic advice in the name of economic theory or statistical analysis. But they are constantly offering advice, often unrequested advice.
A buyer who is a final consumer of any asset or service imputes value to it. He compares it to a scale of values: first, second, third, etc. He wants something a lot or a little. He cannot say how much in an objective way. There is no objective measure of subjective value. But he has priorities. He will spend money accordingly.
Multiple buyers impute multiple values to the items offered for sale. There will be wide variations of imputed value, person by person. These items have prices. Sellers have priced these in terms of a monetary unit. These prices may be negotiable, especially for volume purchases. Because there is bidding, there are objective prices. Buyers must then determine whether a particular item is worth what a seller says is the selling price. How does someone assess this?
Money will buy almost anything. It is the most marketable commodity. So, a buyer looks at the price tag. He sees how much money this is. Then he makes a rough mental calculation of what this amount of money would buy him. There is a money cost of making the purchase. But the money is good only for what it can buy now or may be able to buy in the future. It is not sought after for its own sake except by misers or by people who measure their own value by how much money they possess. So, the cost of buying item A is not being able to buy item B. This cost is subjectively imputed by a prospective buyer.
You must be clear about the relation between value and price. Value is subjective. Price is objective. The objective price conveys information to buyers. They must then decide subjectively: Is this worth buying? If they decide to buy at the list price, they confirm the prior decision of the seller that this product was worth the money it cost him to produce and bring to market.
Value is not the same as price. Subjectively imputed value informs the buyer whether some item is worth owning when compared to his subjectively imputed value of whatever else his money can objectively buy. Then he buys one item or the other. He pays an objective price.
A seller has already forfeited the use of money in producing the item and bringing it to market. He made an evaluation. He estimated how much money he would have to spend on the production of the item. Then he estimated how much money he would receive from the sale. Then he compared the expected net subjective future profit to the subjective value of the money spent to produce the item. He used objective prices to make the comparison. He prefers more money to less money. Why? Because he has in mind the subjective value of the things money can objectively buy.
He must spend money to make money. But money is merely a tool for estimating the profitability of decisions. Money does not measure value. Money prices are objective. Value is subjective. The seller must spend money to make more money. He therefore gives up goods now to be able to buy even more goods, he hopes, in the future. The value of the goods given up now, as well as the value of the hoped-for goods coming back, is imputed subjectively.
The seller is motivated by the prospect of more value in the future than today. He bears the burden of uncertainty for the sake of greater value in the future. To participate in the free market, he must spend money. He must pay objective prices. Money tells him what he must give up objectively. The subjectively imputed value of a specific amount of money is the subjectively imputed value of whatever he can objectively buy with the money. He makes his decision to produce or not to produce in terms of the present subjective value whatever goods he must give up now vs. the present subjective value of his expected return.
A buyer wants a pencil now. Maybe he has run out of pencils. Maybe he can see that he will soon run out. He makes a subjective imputation of the value that a pencil will bring him. The pencil is a tool. The buyer does not want it for its own sake. It may be a consumer good used to draw pictures. It may be a producer good to make notes. But whatever his uses for the pencil, the buyer imputes subjective value to the expected output of the pencil. Then he imputes value to the pencil based on his estimation. Will he buy it? That depends on his subjectively imputed value of whatever else the money spent to buy the pencil would buy.
The seller makes a similar estimate. He must spend money to produce the pencil. He hopes to get more money back. What might this money objectively buy in the future? Is it worth bearing the uncertainty of going into the pencil business?
Buyers compete against buyers objectively. They bid money for the ownership of pencils. Sellers compete objectively against sellers. Retailers bid money to buy wholesale cartons of pencils. Producers bid money to buy producer goods and labor services to manufacture them. But buyers and sellers make these decisions in terms of their individual imputations of subjective value to whatever the money will buy objectively.
God imputed value to His work during the creation week. This is our model for imputing value, whether moral value or economic value.
Covenant-keepers should strive to impute value to their lives. They should strive to meet God's moral and legal standards. These standards are connected covenantally to sanctions in history. Covenant-keeping produces visible benefits. These benefits are objective (Deuteronomy 28:1--14). But they are evaluated subjectively by God and men. This is why God announced regarding His Bible-revealed law:
See, I have taught you statutes and rules, as the Lord my God commanded me, that you should do them in the land that you are entering to take possession of it. Keep them and do them, for that will be your wisdom and your understanding in the sight of the peoples, who, when they hear all these statutes, will say, 'Surely this great nation is a wise and understanding people.' For what great nation is there that has a god so near to it as the Lord our God is to us, whenever we call upon him? And what great nation is there, that has statutes and rules so righteous as all this law that I set before you today? (Deuteronomy 4:5--8)
We impute value subjectively to scarce resources. We already have priorities before we impute value. We assess the value of any item in terms of what it can do to help us achieve our priorities. But such help always comes with a price tag. We need money prices to enable us to make accurate estimations of the cost of gaining help. These prices are objective. They show us the objective limits of our budgets. We say: "I can afford this." Or else we say: "I cannot afford this." We make these judgments in terms of whatever else we could buy for the same amount of money. The subjective value we can afford to buy is objectively limited by the prices of the offers. Sometimes, we cannot afford to buy the help that we think we need. We must take second-best. The limit of our wealth objectively constrains our expenditures. We make objective decisions in terms of our objective limitations. We decide which decision to make in terms of our subjective imputation of the comparative value of the available objective options.
The kingdom of heaven is like treasure hidden in a field, which a man found and covered up. Then in his joy he goes and sells all that he has and buys that field. Again, the kingdom of heaven is like a merchant in search of fine pearls, who, on finding one pearl of great value, went and sold all that he had and bought it (Matthew 13:44--46).For what will it profit a man if he gains the whole world and forfeits his soul? Or what shall a man give in return for his soul? (Matthew 16:26)
_____________________________________
For the rest of this book, go here: https://www.garynorth.com/public/department193.cfm