Chapter 26: Cooperation
Updated: 1/13/20
Christian Economics: Teacher's Edition
But now the LORD my God has given me rest on every side. There is neither adversary nor misfortune. And so I intend to build a house for the name of the LORD my God, as the LORD said to David my father, 'Your son, whom I will set on your throne in your place, shall build the house for my name.' Now therefore command that cedars of Lebanon be cut for me. And my servants will join your servants, and I will pay you for your servants such wages as you set, for you know that there is no one among us who knows how to cut timber like the Sidonians."As soon as Hiram heard the words of Solomon, he rejoiced greatly and said, "Blessed be the LORD this day, who has given to David a wise son to be over this great people." And Hiram sent to Solomon, saying, "I have heard the message that you have sent to me. I am ready to do all you desire in the matter of cedar and cypress timber. My servants shall bring it down to the sea from Lebanon, and I will make it into rafts to go by sea to the place you direct. And I will have them broken up there, and you shall receive it. And you shall meet my wishes by providing food for my household." So Hiram supplied Solomon with all the timber of cedar and cypress that he desired, while Solomon gave Hiram 20,000 cors of wheat as food for his household, and 20,000 cors of beaten oil. Solomon gave this to Hiram year by year (I Kings 5:4–11).
Point three of the biblical covenant is law. It asks: “What are the rules?”
Every offer to buy or sell is an offer to cooperate. Solomon wanted cooperation with Sidon. He planned to build the temple. The temple would be the most holy place in Israel. He wanted the temple to be constructed with the finest timber available. That meant timber cut in Lebanon, a pagan city. It would mean that covenant-breakers would transport the timber to Israel. This meant that the people of God would become dependent on the people of a rival god. He negotiated a price for the timber and the workers who would deliver it. But this was a two-way street. The king of Sidon would become dependent on the people of Israel to supply wheat and oil. This arrangement would be known to the people of Sidon. So, people in both societies would benefit from the transaction.
The exchange was possible because the king of Sidon wanted wheat and oil more than he wanted timber and labor services of timber shippers. Also, Solomon wanted the temple in Jerusalem more than he wanted wheat and oil. He was rich. The king of Sidon was rich. Neither of them needed the other for his basic income. They acted as economic representatives of their respective populations. A mutually beneficial exchange was possible because each of the kings wanted what the other possessed more than he wanted what he possessed. There was no equality of exchange: like for like. On the contrary, there was inequality of exchange. Each wanted what the other possessed.
This was a not much of a negotiation. The king of Sidon could have refused to accept Solomon’s offer. He could have asked for more wheat or more oil. But he thought the offer was a good deal for him as the economic agent of his people. Solomon was ready to make a long-term exchange at this price. No negotiating was required. There would be nothing like this: “‘Bad, bad,’ says the buyer, but when he goes away, then he boasts” (Proverbs 21:14). Both kings saw the benefits of such an agreement at the price Solomon offered.
This is an example of cooperation. In this case, it was cooperation between kings. But it was cooperation between the people who were represented by these kings. Most amazing of all, it was cooperation between the God of Israel and the god of Sidon. God allowed His temple to be built with timbers that were supplied by people of a rival faith. This leads to a remarkable conclusion: voluntary exchange is basic to kingdom expansion. It looked as though the deity of Sidon expanded his kingdom. But because of the progress of God’s kingdom in history, God safely shrugs off all such criticisms of economic cooperation. The god of Sidon is long gone. The God of Israel is still with us. God knew this would be the case. The god of Sidon was no threat to Him, confessionally speaking.
In a mutual exchange, both parties expect to be better off after the exchange. If they are, they may trade again. It will be cheaper next time. Trust will be greater. Uncertainty will be lower. Exchange costs will be lower. Here is a law of economics: “When cost falls, more is demanded.” Both sides prosper. Individuals on both sides can then pursue their goals less expensively. Whenever the exchanges were based on negotiations between kings, the political kingdom of each king expanded. In the ancient world, kingdoms were confessional. So, each had a covenant. Yet the expansion of Sidon’s kingdom was no threat to God. God knew who was in charge in history. So, the temporary expansion of Sidon’s kingdom was no threat to God’s kingdom.
This voluntary economic exchange was not based on a covenantal unification. The confessions were different. There was no covenant allowed (Deuteronomy 7:2). This means that an economic contract is not the same as a covenantal merging. It is not established by an oath to the same God. A promise to pay does not have the authority of a public oath to obey the laws of God: in marriage, church, or state. Jesus warned:
“Again you have heard that it was said to those of old, ‘You shall not swear falsely, but shall perform to the Lord what you have sworn.’ But I say to you, Do not take an oath at all, either by heaven, for it is the throne of God, or by the earth, for it is his footstool, or by Jerusalem, for it is the city of the great King. And do not take an oath by your head, for you cannot make one hair white or black. Let what you say be simply ‘Yes’ or ‘No’; anything more than this comes from evil” (Matthew 5:33–37).
A contract is established by “yes.” It rests on the integrity of the contracting parties. In contrast, a covenant is established by a formal oath in God’s name. This rests on the idea of God as a covenant-keeper and a covenant-enforcer.
Solomon built the temple by means of a voluntary exchange. There was nothing immoral about this exchange. Despite the fact that covenant-breakers were involved in the construction of the temple, this in no way broke covenant with God. Cooperation economically is not the same as cooperation covenantally. A contract is not the same as a covenant. A promise is not the same as an oath. The division of labor does not extend through trade because of covenantal unfaithfulness. It extends as an outworking of covenantal faithfulness. The fact that covenant-breakers are better off economically after the trade is covenantally irrelevant. So are covenant-keepers. The increased prosperity of covenant-keepers is what matters in history and eternity. This is because the kingdom of God expands over time at the expense of the kingdom of man. What matters is confession, not economic prosperity as such. The kingdoms of men rise and fall. They last for a few generations. The kingdom of God compounds.
You shall not make for yourself a carved image, or any likeness of anything that is in heaven above, or that is on the earth beneath, or that is in the water under the earth. You shall not bow down to them or serve them; for I the Lord your God am a jealous God, visiting the iniquity of the fathers on the children to the third and fourth generation of those who hate me, but showing steadfast love to thousands of those who love me and keep my commandments (Deuteronomy 5:8–10).
What is true of negotiations between kings under the Mosaic covenant remains true of negotiations between individuals today. When two people see an opportunity to better themselves through exchange, they negotiate. At some price, a deal may be possible. At some price, they may both be better off. This has to do with the wealth they both seek to extend their respective kingdoms. There are only two kingdoms: the kingdom of God and the kingdom of mammon. A person must serve either one or the other of these two deities (Matthew 6:24).
The issue is price. In a free market, there can be negotiations. But, in general, most prices are set by competition: buyers vs. buyers, sellers vs. sellers. The more widespread the competition, the narrower the range of negotiation. In a supermarket, there is no negotiating. Prices are in the computer. This is the shopper’s choice: “take it or leave it.” In this case, “Leave it” means shopping at a competing store or shopping online. Someone can use a phone to see competing prices online. He may not have to leave the store’s premises in order to leave the opportunity behind. It is easy to “leave it.”
An owner is responsible for the use of his property. He is responsible to God, to consumers, to those under his authority, and to himself. He knows better than anyone what his property is worth to him. Therefore, because of both greater responsibility and superior knowledge, he should be the person to decide the terms of rental (labor) or sale.
In contrast are the politician and the bureaucrat. They claim the moral authority and legal right to set the terms of exchange. They have no responsibility as owners. They have no specific knowledge of local market conditions. They do not know the subjective utility of owned assets in the minds of the owners. Yet they claim the moral high ground in setting prices, so as to protect the weak. They also protect members of special-interest groups from price competition, a fact they never mention in public.
The buyer has what every seller wants: money. He has far greater market authority than a seller. Money is the most marketable commodity.
The auction principle is this: high bid wins. It works for both sides of the exchange. The high money bid wins among buyers. The low price per unit in money is the high bid among sellers: more consumer goods per currency unit.
A high bid sends a signal: “Cooperate with me. I’ll give you greater cooperation than my competitors will.” Is there anything morally wrong with an offer to provide greater cooperation? If there is something morally wrong, the critics of the free market ought to make clear what the objection is, and what moral principle supports it.
Someone owns money. There is nothing morally wrong with this if he obtained it legally. He decides that he wants to sell some of this money. He owns it. Therefore, he has the legal and moral right to exchange it for something he wants more. The meaning of ownership is this: the right to disown something by trading it or giving it away. If someone is not allowed by the government to disown something, he does not really own it. The government owns it. The government sets the terms of exchange. The government sets the price, not market competition: buyers vs. buyers, sellers vs. sellers.
The buyer is now in a position to say this to the government agent: “Am I not allowed to do what I choose with what belongs to me?” (Matthew 20:15a). The implicit answer is this: “No, you not allowed to do this. You do not own the item. The state does. You are merely an unpaid agent of the state.”
Critics of the morality of the free market’s auction process have a moral obligation to explain why this auction process is immoral. Why is an offer to cooperate immoral? The politician and the bureaucrat face a challenge: “You can’t beat something with nothing.” The critic of the market should explain why the free market’s principle of high bid wins is immoral. If it is not immoral in all situations, when is it immoral? Where? Why?
If a buyer or a seller does not have the right to sell at a lower price, then he does not fully own the item or service. A government bureaucrat has the legal authority to veto the sale in advance.
An example of a pre-sale veto is a price floor for a service. Another pre-sale veto is a price ceiling. In both cases, a government bureaucrat threatens someone if he accepts the offer. This means that the government is in charge of the pricing process. It prohibits this rule: high bid wins. It claims that such a rule is immoral because it discriminates against the weak. What this really means is that the government discriminates against the most desperate sellers and the most efficient sellers.
Price floors are imposed on buyers. An example is the minimum wage. An employer is prosecuted if he pays less than the minimum wage. Price ceilings are imposed on sellers. An example is rent control. The owner of the rental unit is prosecuted if he charges more than the rent ceiling. But both the buyer and the seller are harmed economically. They both lose the benefits of an exchange.
If the government imposes a price floor, such as a minimum wage law, it tells some workers this: “Your offer to work for a lower wage is illegal. That would be competitive against existing employees.” The bureaucrat does not say this. He says this: “I am here to keep you from being exploited by a heartless employer.” The result may be to persuade the employer not to make the offer. The job is not filled. The employer loses. So does the lower-cost worker he was willing to hire. So do all of the customers who will not be offered something to buy at a lower price.
Why does a politician vote for such a law? Officially, because he believes that every worker is entitled to a “living wage.” But what happens to the worker who was willing to work for this “nonliving wage”? He receives no offer of employment. But no one notices him. His unemployment is the thing not seen. He becomes a statistic. This benefits the worker who keeps his job at a higher wage. He does not face competition. Critics of free market pricing call this cut-throat competition. What kind of competition is this? Price-competitive competition.
Cut-throat competition is an offer: “Cooperate with me.” It is a request to cooperate more profitably. A person is seeking cooperation in the form of a sale. He thinks that a buyer is willing to cooperate if the price of this cooperation is low enough. This is an economic law: “When the price falls, more is demanded.” When the price of cooperation falls, more cooperation is demanded. Why is it an immoral goal to foster more cooperation?
Sellers are specialists in selling some item or service in a niche market. They are intently focused on their market. Their livelihood depends on it. The general public barely notices. So, sellers find it easy to persuade politicians to pass laws restricting price cutting. They also favor laws restricting entry, such as licensing laws. This keeps prices higher than the market’s auction process would have produced. But the politicians always defend these laws in the name of protecting consumers. These laws in fact protect existing sellers from competition.
Because few people understand the free market’s auction process, even though they enjoy local auctions, the advocates of minimum wage laws, price floors, and even price ceilings never are challenged to explain in public why their position is the moral high ground. The price controllers may offer a vague platitude about reducing exploitation by businessmen. But they do not explain why a seller’s offer to cooperate by reducing his price is immoral when the seller is a seller of labor. They do not explain their system of morality, which labels a price-competitive offer to cooperate as immoral.
If a pencil manufacturer wishes to sell more pencils, he must find a way to persuade buyers why they should by more pencils from him. Maybe he can persuade them to switch from a competitor and buy from him. Maybe he can persuade them to buy more pencils because there are more ways to use them, and therefore more ways to wear them out sooner than they had previously experienced. How can he do this? He can reduce retail prices. He can reduce wholesale prices, thereby encouraging retailers to stock more of his pencils than a competitor’s pencils. He can advertise more.
What if he has found a way to cut production costs? Now he can afford to adopt a new marketing program for increasing sales. He can reduce his prices without suffering a reduction in net revenues. But if he does this, his competitors will try to find out why he can do this. If his innovation can be imitated, then the competition will get more rigorous. Other companies will cut their prices, too. Consumers will benefit, but the innovator will find that his pre-imitation profit margins have disappeared. This is the auction process in action. It benefits consumers in the long run. It benefits innovators in the short run. Why is this immoral?
We have seen this process of innovation and price competition in action in the pencil industry ever since the late sixteenth century. The pencil today is so inexpensive that it is a child’s plaything. This was not the case in 1585.
Every auction relies on this pricing principle: high bid wins. There are few critics of auctions. We are not told that the principle of high bid wins is inherently immoral. One reason why we do not hear critics of auctions is because they cannot find plausible reasons why high bid wins is immoral.
An auction is a rare event in most communities. There are specialty auctions, such as used car auctions for used car dealers. There are livestock auctions. But most auctions offer used goods. A company goes bankrupt. Its equipment is auctioned off. Someone dies, and the estate holds an auction. Auctions are for goods that are peripheral to the economy.
The public does not perceive that the free market is a gigantic auction. People do not make the connection. So, when a critic of some offer to cooperate brings his criticism before the public, he invokes the language of Karl Marx, the co-founder of Communism. He identifies one of the parties to an exchange as an exploiter. Not both. Just one. But it takes two parties to make an exchange. Both parties want a better deal. Both parties would prefer more to less. Both parties are owners. If asked, both parties would say this: “Am I not allowed to do what I choose with what belongs to me?” They are not asked. They are not allowed this right of choice. They are not free to choose.
The auction process is as morally legitimate in a factory as it is in a weekend flea market. The distribution principle of high bid wins is as legitimate in a labor market as it is in an estate sale. The principle of high bid wins is the principle of ownership. It is the principle of disownership. It is the principle of allowing anyone to make an offer to buy someone else’s cooperation. A buyer makes this offer because he is also a seller, and vice versa. In any exchange, each party gives up something (seller) in order to obtain something (buyer).
The moral alternative to the auction process of pricing is state coercion of pricing. This prohibits voluntary exchange. It reduces personal responsibility of buyers and sellers. In what way? Because it places legal restrictions on the right of owners to disown their property.
The Christian should have confidence in the morality of the auction process. The market is not an agency of exploitation. It is an agency of cooperation.
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