Updated: 1/13/20
Christian Economics: Teacher's Edition
You shall love the Lord your God with all your heart and with all your soul and with all your might. And these words that I command you today shall be on your heart. You shall teach them diligently to your children, and shall talk of them when you sit in your house, and when you walk by the way, and when you lie down, and when you rise (Deuteronomy 6:5–7).Train up a child in the way he should go; even when he is old he will not depart from it (Proverbs 22:6).
These passages are aspects of point five of the biblical covenant: inheritance. They deal with education, the most important economic aspect of an heir’s inheritance. Education is an investment in human capital. There is no such thing as a free lunch. There is no such thing as a free education. Someone has to reduce his present consumption for the sake of educating members of the next generation. The central issues of education are revealed in the answers to these two questions. First, who should be in authority? The Bible answers: the family. Second, what is the supreme public mark of this authority? The answer is education’s funding. The source of the funding is in charge of education. In short, follow the money.
Yet when we follow the money, we find that neither parents nor politicians control modern education. A specialized hierarchy does: professional educators. These people are certified by the educational institutions that are funded by families and civil governments. The parents have nothing to say about the curriculum. Neither do politicians most of the time. Neither do municipal school boards and college boards of trustees. Legally, politicians are in charge of tax-funded education, but operationally they defer to certified experts. Education is a huge cartel, one exceeded in revenues only by commercial banks.
So, while those who pay for education are economically in charge, and in the case of tax-funded education, also legally in charge, they are in fact not in charge. They have surrendered authority to salaried educational experts. The state has granted educators legal authority to create curricula and award degrees. The degrees are sanctions. Earning one is a positive sanction. The failure to earn one is a negative sanction. The economic analysis of cartels applies to education. Those who pay for education—parents, donors, and taxpayers—only rarely impose negative sanctions after the state has granted the exclusive right to impose sanctions to educational bureaucracies. The budgets always rise. This is the central positive sanction after the cartel has been set up. Rising budgets reward the existing behavior of the cartel-certified experts.
The family is the primary institution for the education of children with respect to informal education: language, social interaction, and ethics. Parents are responsible before God to rule their households as trustees. This responsibility cannot be deferred to others. The tasks can be lawfully delegated, but not covenantal responsibility. This is why parents should be the primary source of funding for formal education. There is an old phrase: “He who pays the piper calls the tune.” If the family refuses to fund education, then some other institution will take over. It will call the tune.
Most Christian parents pretend that this principle does not hold. They argue that education is neutral covenantally, and therefore the supposedly neutral state should fund education. They assume that the first principles of Darwinian evolution by means of unplanned, purposeless natural selection do not shape the entire public school curriculum from day care through graduate school. They assume that the ethical content of education is the same for all educational programs. They assume that state-funded instructors will be neutral in both their selection of facts and their presentation of facts. They are close to immune to the biblical idea that the content of education is not neutral. They pretend that the education provided by the king of Babylon was not a way to train Hebrew children to become agents of the Babylonian empire (Daniel 1). But then came the day of reckoning when payment for the free education was demanded. The payment was obedience to the king.
King Nebuchadnezzar made an image of gold, whose height was sixty cubits and its breadth six cubits. He set it up on the plain of Dura, in the province of Babylon. Then King Nebuchadnezzar sent to gather the satraps, the prefects, and the governors, the counselors, the treasurers, the justices, the magistrates, and all the officials of the provinces to come to the dedication of the image that King Nebuchadnezzar had set up. Then the satraps, the prefects, and the governors, the counselors, the treasurers, the justices, the magistrates, and all the officials of the provinces gathered for the dedication of the image that King Nebuchadnezzar had set up. And they stood before the image that Nebuchadnezzar had set up. And the herald proclaimed aloud, “You are commanded, O peoples, nations, and languages, that when you hear the sound of the horn, pipe, lyre, trigon, harp, bagpipe, and every kind of music, you are to fall down and worship the golden image that King Nebuchadnezzar has set up. And whoever does not fall down and worship shall immediately be cast into a burning fiery furnace.” Therefore, as soon as all the peoples heard the sound of the horn, pipe, lyre, trigon, harp, bagpipe, and every kind of music, all the peoples, nations, and languages fell down and worshiped the golden image that King Nebuchadnezzar had set up (Daniel 3:1–7).
The three young men who had been trained by the king refused to obey. He had them put into a furnace (vv. 8–23). It turned out that the king’s curriculum was not neutral.
It takes years to train a child. It takes patience. It takes a methodology. This methodology must work for all of the family’s children. It takes a broad accumulation of facts. Not all parents possess these skills. They are therefore allowed to hire tutors, but only those who share the parents’ first principles of moral cause and effect in history, both individual and corporate. The model for this is Passover.
Every firstborn of man among your sons you shall redeem. And when in time to come your son asks you, ‘What does this mean?’ you shall say to him, ‘By a strong hand the Lord brought us out of Egypt, from the house of slavery. For when Pharaoh stubbornly refused to let us go, the Lord killed all the firstborn in the land of Egypt, both the firstborn of man and the firstborn of animals. Therefore I sacrifice to the Lord all the males that first open the womb, but all the firstborn of my sons I redeem.’ It shall be as a mark on your hand or frontlets between your eyes, for by a strong hand the Lord brought us out of Egypt” (Exodus 13:13–16).
Anyone who violated the rules of Passover was cut off from membership in the congregation. “Seven days you shall eat unleavened bread. On the first day you shall remove leaven out of your houses, for if anyone eats what is leavened, from the first day until the seventh day, that person shall be cut off from Israel” (Exodus 12:15). This person could not become a tutor in a household headed by a covenant-keeper.
Not everyone was literate in Mosaic Israel. The cost of publishing was high until Gutenberg’s revolution in the second half of the fifteenth century. A literate person would not have had much to read. So, the value of literacy was low except for priests, Levites, civil rulers, and businessmen. But Israel was called a nation of priests (Exodus 19:6). There was considerable social pressure to learn how to read and write. The king was required to read the law.
And when he sits on the throne of his kingdom, he shall write for himself in a book a copy of this law, approved by the Levitical priests. And it shall be with him, and he shall read in it all the days of his life, that he may learn to fear the Lord his God by keeping all the words of this law and these statutes, and doing them, that his heart may not be lifted up above his brothers, and that he may not turn aside from the commandment, either to the right hand or to the left, so that he may continue long in his kingdom, he and his children, in Israel (Deuteronomy 17:18–20).
The value of literacy increases as more people become literate. This is because more people can communicate with each other. This is called the network effect. It extends the division of labor. This in turn increases productivity. Literacy also furthers commerce. When archeologists discover troves of tablets in the Middle East, they find that most tablets are related to commerce: contracts and receipts. Military inscriptions in Israel from the era of the Babylonian conquest around 600 B.C. indicate that the military had extensive literacy. The costs of education historically have been borne primarily by families, and secondarily by priesthoods. Parents who can read teach their children. Literacy is a unique skill in primitive cultures. It conveys benefits to those who can read. Families that want their children to advance economically have an incentive to find tutors who can teach reading.
There is formal education. There is also apprenticeship. Both can lead to greater income. Students learn a trade. This is important education. The students can become master craftsmen. This was seen in the story of Aholiab and Bezaleel.
The Lord said to Moses, “See, I have called by name Bezalel the son of Uri, son of Hur, of the tribe of Judah, and I have filled him with the Spirit of God, with ability and intelligence, with knowledge and all craftsmanship, to devise artistic designs, to work in gold, silver, and bronze, in cutting stones for setting, and in carving wood, to work in every craft. And behold, I have appointed with him Oholiab, the son of Ahisamach, of the tribe of Dan. And I have given to all able men ability, that they may make all that I have commanded you” (Exodus 31:1–5).
Parents want their children to do better than they did economically. Formal education has been a common pathway to greater output and income. Even when parents do not expect their children to support them in old age, they pay for their children’s education. This is part of the family’s fulfillment of the dominion covenant: inheritance.
Adults also seek to improve their own employment opportunities. They pay for educational programs, especially when degrees serve as barriers to entry for future competitors. They use the cartel of higher education to create new cartels.
A buyer of educational services in the modern world has a huge range of programs to choose from. Digital education is spreading rapidly, and will continue to. Prices fall. More is demanded.
The economic return on educational investment falls because of the increase in the number of degree-holding people in the work force. Supply increases. Demand does not keep pace with supply. This reduces the wages paid to people with academic degrees. This is why it now takes longer to earn back the cost of earning a college degree. But education still produces an above-average rate of return in most fields.
Because the buyers are parents, the expenditure is seen as socially mandatory even when the rate of economic return is falling. Parents can buy lower-cost programs by adopting distance education, paying as little as 20% of what is considered normal, but very few parents shop for these low-cost, fully accredited college programs. An accredited degree that costs $15,000 has the same earning power as one that costs $100,000 to $250,000. Still, few parents take advantage of this. This indicates that the driving force of college education is social rather than economic. Parents fear unspoken social opinions from their peers that would impute to them a lower social position because their children do not attend college. Social imputation by non-paying peers is dominant.
Buyers compete against buyers. But the beneficiaries of college education are students who want four or five years of independent social life at the expense of their parents and away from their parents’ social controls. Those who pay are not the economic beneficiaries: parents. Those receiving the formal educations are not always after economic benefits. They are after parentally subsidized social experiences. This discrepancy between paying and consuming undermines the dominion impulse of higher education.
The structure of profit-seeking education makes sellers more alert to the demands of buyers. It makes education more economically relevant and less theoretical, unlike the programs provided by nonprofit education and state-funded education. Market-driven education tends to be practical. It is geared to the desire of buyers to gain a positive rate of return on the money and time they invest in education. This furthers dominion. Sellers train buyers in the skills needed to increase the buyers’ productivity, as imputed by consumers to whom the buyers sell final products. Education becomes consumer-driven. Buyers are economic agents of their customers. Customers retain authority. This is not social pressure. It is economic pressure.
Selling educational services is a traditional way to monetize specialized knowledge. If an individual can persuade buyers to pay for his output, this generally becomes his primary source of income. But he can also sell his ability to teach others the skills that he uses in his occupation. In each case, he is an entrepreneur, meaning a businessman.
Education provides continuity between generations. The structure of formal education does not change much. The classroom lecture is the main form of academic communication, as it has been ever since ancient Egypt. The other major tool is the textbook, which has been basic to higher education ever since the late fifteenth century. Parents have been purchasing the same product and the same result for millennia: access to high-paying salaries that are available only to degree holders.
In a nonprofit environment, sellers are bureaucrats in administration. They hire instructors to provide teaching services, but there is no direct financial connection between the seller of information and the buyer. The modern college’s administration acts as an intermediary. The administration hires marketers. Selling parents on the benefits of higher education for their children is a fine art. In the United States today, this generates over half a trillion dollars a year from parents and politicians. It is a gigantic industry.
In a profit-seeking legal environment that is unhampered by state licensing, sellers of educational services must offer measurable benefits to the buyers. Sellers are people who possess information that buyers believe will provide them with specific kinds of benefits. These benefits are primarily economic. The seller must deliver services that buyers regard as worth the cost.
In the field of finances, buyers have for over a century paid for subscriptions to newspaper and magazine publishers and newsletter editors who offer investment advice. Today, these services are online. This is surely education, but it is not formal education. The seller issues no academic degrees, but he does provide a form of education. He must continue to provide these services if he expects to have subscribers re-subscribe. He has a financial incentive to provide long-term educational services.
The seller must persuade buyers to impute greater value to his educational program than they impute to the money it costs to purchase these services. This requires marketing. Whenever the state does not subsidize education, educators adopt advertising. They must sell the buyers on the idea that there is great value to the form of education that the sellers are selling. Sellers compete against sellers. This economic competition pressures sellers to provide not only superior educational content but also motivational techniques to purchase the service and then renew it. Free market voluntarism is the basis of this form of education. It forces sellers to compete in the marketplace if they want to survive and prosper.
The common pencil has been used by children for centuries as part of their educational training. Students have written lessons with pencils because pencils have been inexpensive. Manufacturers have targeted children as users, but with their parents as buyers. The pencil has been a tool of family inheritance. Its low price has been the great selling point: its unique selling proposition (USP).
When a family pays to educate its children, it pays in more than money. It pays in time, either donated by parents or supplied by professional educators. The pencil is barely noticed in this process, but it is integral to it. For generations, families have sacrificed to educate their children. This is a central aspect of inheritance and dominion.
The pencil is a low-cost tool of education. The pencil is capital. It conveys no social prestige. Its eraser points to the fact that learning is going on: trial and error.
The constantly increasing demand for pencils worldwide is evidence that parents are willing to pay to have their children educated. The pencil is a minimal expenditure. There is little price resistance on the part of parents. But competition among pencil manufacturers is steady. Sellers compete against sellers. This keeps down the price of pencils despite increased demand.
The pencil’s versatility makes it ideal in education. It can be used for multiple purposes: taking notes, making outlines, and taking tests. If someone loses a pencil, the loss is minimal. It is easily and inexpensively replaced. It is not like losing a smart phone or a laptop computer.
Education in history has been tied to the family. It is only since about 1800 that the state has taken control over education by funding schools through taxation. The family has been the primary agency of welfare in every society. Education for children is a welfare function. It is not exclusively economic. Parents see education as a way to advance their children’s careers as adults. They invest time and money for the benefit of their children, not simply a way to gain financial support in their old age. There has been a huge increase in the percentage of national production devoted to education at the same time that welfare payments to the elderly for pensions and medical care have also increased proportionately with the cost of education. So, despite the fact that parents in their productive years expect to receive state-funded benefits in their old age, they have increased the amount of money they pay in taxes and also for college educations. These expenditures will not directly benefit themselves in old age. They will benefit their children and grandchildren. This is why education is a family welfare program. The motivation is to help their heirs, not to extend the kingdom of God. This motivation is an aspect of the dominion covenant, which is universal.
This is another example of what Adam Smith wrote about. The wealth of nations is a collective concept. Yet the self-interested transactions of individuals do more to increase the wealth of nations than mercantilism’s attempts at central planning ever achieved. But there is this difference. The parents are not acting in self-interest. They are acting on behalf of their heirs. Yet, as an unplanned effect, they are also extending mankind’s dominion over the earth. The positive results individually, child by child, also extend collective dominion.
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