Chapter 23: Capital and Culture
Updated: 1/13/20
Christian Economics: Teacher's Edition
And if you faithfully obey the voice of the Lord your God, being careful to do all his commandments that I command you today, the Lord your God will set you high above all the nations of the earth. And all these blessings shall come upon you and overtake you, if you obey the voice of the Lord your God. Blessed shall you be in the city, and blessed shall you be in the field. Blessed shall be the fruit of your womb and the fruit of your ground and the fruit of your cattle, the increase of your herds and the young of your flock. Blessed shall be your basket and your kneading bowl. Blessed shall you be when you come in, and blessed shall you be when you go out (Deuteronomy 28:1–6).The Lord will establish you as a people holy to himself, as he has sworn to you, if you keep the commandments of the Lord your God and walk in his ways. And all the peoples of the earth shall see that you are called by the name of the Lord, and they shall be afraid of you. And the Lord will make you abound in prosperity, in the fruit of your womb and in the fruit of your livestock and in the fruit of your ground, within the land that the Lord swore to your fathers to give you (Deuteronomy 28:9–11).
These linked passages are aspects point five of the biblical covenant: inheritance. Deuteronomy is the fifth book in the Pentateuch. It deals with inheritance. These were Moses’ parting words to the generation of the inheritance.
This passage and its parallel in Leviticus 26 present the case for obeying biblical law. The bulk of each chapter lists negative sanctions for disobeying. The chapters deal with sanctions. Sanctions reinforce God’s law.
The nation of Israel was set apart by its legal order. “The Lord will establish you as a people holy to himself, as he has sworn to you, if you keep the commandments of the Lord your God and walk in his ways” (v. 9). Biblical holiness means being set apart ethically. It has to do with sanctification. Israel’s holiness was comprehensive. It involved every aspect of Israelite culture. Biblical holiness is corporate, not just individual. Deuteronomy 28 had to do with Israel as a nation. It had to do with Israel as the manifestation of the kingdom of God. That is, it had to do with the civilization of God. This is the meaning of a kingdom. It is a separate culture. This separation is above all ethical: issues of moral right and wrong. This is why any discussion of either economic theory or practice apart from a discussion of ethics is a monumental conceptual error. There is no such thing as a value-free social order. This includes economics. There is therefore no such thing as value-free social analysis. This includes economics. The economist should be familiar with biblical causation. It is ethical. But modern economists pride themselves on an illusion: value-free economic theory.
God’s law applies to society as a whole. The biblical social order is intensely judicial and ethical. Crucial to this legal order is faith in historical sanctions. The Bible teaches that causation is primarily ethical. When the concept of ethical cause and effect is widely believed, biblical culture is optimistic. The positive sanctions are the basis of long-term inheritance. When coupled with the doctrines of God’s grace, God’s providence, and God’s kingdom, the biblical worldview produces an optimism that is crucial for entrepreneurship. Entrepreneurs are future-oriented and optimistic. They are willing to forego consumption now for the sake of greater wealth in the future. They are not primarily consumption-driven. Their primary goal is to accumulate capital. They are willing to bear the burden of uncertainty for the sake of accumulating capital.
Biblical law rests on self-government. This is another way of saying self-discipline. Psalm 119 is a representative passage. It is the longest passage in the Bible that is related to a single theme. Its theme is biblical law. The Psalmist proclaims his commitment to mastering and obeying God’s law.
I will meditate on your precepts and fix my eyes on your ways. I will delight in your statutes; I will not forget your word. Deal bountifully with your servant, that I may live and keep your word. Open my eyes, that I may behold wondrous things out of your law. I am a sojourner on the earth; hide not your commandments from me (vv. 15–19).
Self-discipline is basic to success in every field. The comprehensive nature of God’s law requires attention to details. The New Testament reinforces this attitude. Paul wrote the following:
Or do you not know that the unrighteous will not inherit the kingdom of God? Do not be deceived: neither the sexually immoral, nor idolaters, nor adulterers, nor men who practice homosexuality, nor thieves, nor the greedy, nor drunkards, nor revilers, nor swindlers will inherit the kingdom of God (I Corinthians 6:9–10).. . . understanding this, that the law is not laid down for the just but for the lawless and disobedient, for the ungodly and sinners, for the unholy and profane, for those who strike their fathers and mothers, for murderers, the sexually immoral, men who practice homosexuality, enslavers, liars, perjurers, and whatever else is contrary to sound doctrine (I Timothy 1:9–10).
Another attitude that is necessary to success is the commitment to finishing what you start. The model is the creation week.
Thus the heavens and the earth were finished, and all the host of them. And on the seventh day God finished his work that he had done, and he rested on the seventh day from all his work that he had done. 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 2:1–3).
This attitude is to govern our lives.
Better is the end of a thing than its beginning, and the patient in spirit is better than the proud in spirit (Ecclesiastes 7:8).For which of you, desiring to build a tower, does not first sit down and count the cost, whether he has enough to complete it? Otherwise, when he has laid a foundation and is not able to finish, all who see it begin to mock him, saying, ‘This man began to build and was not able to finish’ (Luke 14:28–30).
So now finish doing it as well, so that your readiness in desiring it may be matched by your completing it out of what you have (I Corinthians 8:11). I have fought the good fight, I have finished the race, I have kept the faith (II Timothy 4:7).
People should keep their promises. They should honor their contracts. They should be trustworthy. This would increase their opportunities for joint ventures. This would increase their output per capita through specialization.
If a man vows a vow to the Lord, or swears an oath to bind himself by a pledge, he shall not break his word. He shall do according to all that proceeds out of his mouth (Numbers 30:2).It is better that you should not vow than that you should vow and not pay (Ecclesiastes 5:5).
The wicked borrows but does not pay back, but the righteous is generous and gives (Psalm 37:21).
A culture that is marked by such attitudes will experience economic growth. It will be marked by above-average rates of success. It will extend its dominion.
Economics is a subset of the overall society. It is an extension of the individual covenant and the family covenant. It does not have the same degree of importance as the two covenants possess. A contract between people does not have the same sanctity that a vow between man and God has. But a society’s attitude toward covenants extends downward to contracts.
From an economic standpoint, culture is a form of social overhead capital. There is no market for it. Because it is primarily a product of self-government, which in turn is inculcated primarily by family government, it is funded on a mostly voluntary basis. There is no social overhead tax in the way that there are highway taxes or mosquito abatement taxes. Social overhead capital is paid individually, yet it has enormous social effects.
There is no government central planning bureaucracy that can improve culture. There is no central plan.
A buyer more readily extends trust to a seller when he knows that the culture is marked by widespread self-discipline. People are committed to fulfilling their contracts. This reduces both uncertainty and risk. This in turn increases the number of transactions per time period.
When members of any society extend trust, this reduces their insecurity. This reduces the money invested in all forms of property-protection strategies, from padlocks to lawyers. This frees up buyers’ money for purchasing goods and services, whether consumption goods or investment goods. Increased capital formation lowers the per unit cost of production. The economic rule holds true: when the price falls, more is demanded. When the price of cooperation falls, there will be more cooperation. This increases the division of labor. This in turn increases output per unit of resource input. People get richer.
The buyer wishes to reduce his risk. He does not want to pay for services that do not get rendered or that get rendered poorly. He does not want to feel cheated after the sale. When he finds a retail seller who is trustworthy, he is likely to buy from him again. In most businesses, repeat business is the main source of profits. The first sale is the most expensive one to generate. The buyer has doubts. After he benefits from the initial sale, he is more ready to make another purchase. The free market rewards both the buyer and the seller by means of uncertainty-reduction and risk-reduction. Reduced uncertainty and risk mean lower search costs for the buyer.
A seller competes against sellers. In a culture in which honesty is taught to children and enforced by the family, there is less temptation of sellers to use the equivalent of false weights and measures in their dealings with buyers. This reduces the range of cheating. There are many rival sellers competing for the buyer’s money. They use self-discipline in their business dealings. A seller who adopts practices that mislead buyers finds that repeat sales are minimal. His long-term revenues fall.
The competitive pressure of honest providers extends beyond market transactions. Better put, it extends into market transactions. Standards of behavior are high. People fear God. They think God is watching them. The Psalmist declared:
O Lord, God of vengeance, O God of vengeance, shine forth! Rise up, O judge of the earth; repay to the proud what they deserve! O Lord, how long shall the wicked, how long shall the wicked exult? They pour out their arrogant words; all the evildoers boast. They crush your people, O Lord, and afflict your heritage. They kill the widow and the sojourner, and murder the fatherless; and they say, “The Lord does not see; the God of Jacob does not perceive.” Understand, O dullest of the people! Fools, when will you be wise? He who planted the ear, does he not hear? He who formed the eye, does he not see? (Psalm 94:1–9)
This widespread fear of God’s negative sanctions restrains covenant-keepers. The larger the percentage of covenant-keepers is, the narrower the range of market deception.
A seller benefits from a moral order that condemns jealousy. “You shall not covet your neighbor's house; you shall not covet your neighbor's wife, or his male servant, or his female servant, or his ox, or his donkey, or anything that is your neighbor's” (Exodus 20:17). This is doubly true when it also condemns envy: the desire to tear down a superior. “Do nothing from rivalry or conceit, but in humility count others more significant than yourselves” (Philippians 2:3). A man’s wealth is safer from the politics of envy.
The biblical moral order favors property rights, which are in fact human rights regarding ownership. “You shall not steal” (Exodus 20:15). It could not be clearer. But, just in case someone feigns ignorance: “You shall not move your neighbor’s landmark, which the men of old have set, in the inheritance that you will hold in the land that the LORD your God is giving you to possess” (Deuteronomy 19:14).
Buyers go to a retail outlet to buy pencils. They have confidence that they will not be cheated by sellers. Most stores offer money-back guarantees for defective products. Retailers do not want to have to make refunds. They will not buy from a manufacturer that continues to sell defective products. Even in a morally loose society, the lure of profit pressures sellers to be honest. But in a society in which such behavior is widely condemned, this outlook increases the pressure on sellers. They find that honesty is the best policy, i.e., the most profitable policy.
Pencils are products for which there are repeat sales for decades. Such industries must conform to the ethical standards of the population. They will lose market share in the future if they do not deliver a good product for the money, and deliver it predictably.
Where a culture rewards individuals for acting honestly, there are corporate rewards. This is not an insight limited to Christian economics. But Christian economics rests its case for positive feedback between honesty and rewards on God’s providence, not the profit motive. The ultimate foundation of ethical cause and effect is supernatural. It is covenantal.
A culture that reinforces honest behavior from outside the market also pressures those inside the market to conform to higher standards. There is positive feedback between the market and the other institutions in society. We might call this a virtuous circle. But because there are so many transactions in a developed market, the positive feedback within the market exceeds the positive feedback between the market and the general social order. This is why the example of the market is crucial for the social order. Citizens rarely experience rigged politics or rigged courts. They experience rigged markets constantly. While it is common for people to become oblivious to a rigged market when there is minimal competition over many years, the presence of competition makes the performance of a rigged market appear substandard. This is another argument in favor of free trade. Free trade reveals the negative effects of collusion among sellers. It is also an argument against the creation of government legislative barriers to entry into a market. This is the case against licensing by government.
In a society in which the law-order of God is respected, preached, and enforced by all four governments, meaning self-government, family government, church government, and civil government, the society is less likely to give civil government anything like a monopoly of enforcement. This limits the creation of cartels and monopolies, which are almost always the result of government intervention into the market in the name of protecting the consumer. The politicians respond to political contributions. The existing sellers request that the politicians pass laws against unfair practices. Such unfair practices have one or more of these attributes: lower prices, better terms of sale, faster delivery, and no sales taxes because they are shipped from another tax jurisdiction.
A society that has adopted biblical ethics is a competitive threat to rival social orders. This is seen in market exchange more clearly than in other areas of the social order. Competitive offers to buyers are an aspect of Christian redemption: to buy back.
________________________________________________
For the rest of this book, go here: https://www.garynorth.com/public/department193.cfm