Updated: 1/13/20
Christian Economics: Teacher's Edition
“For it will be like a man going on a journey, who called his servants and entrusted to them his property. To one he gave five talents, to another two, to another one, to each according to his ability. Then he went away. He who had received the five talents went at once and traded with them, and he made five talents more. So also he who had the two talents made two talents more. But he who had received the one talent went and dug in the ground and hid his master's money. Now after a long time the master of those servants came and settled accounts with them. And he who had received the five talents came forward, bringing five talents more, saying, ‘Master, you delivered to me five talents; here, I have made five talents more.’ His master said to him, ‘Well done, good and faithful servant. You have been faithful over a little; I will set you over much. Enter into the joy of your master.’ And he also who had the two talents came forward, saying, ‘Master, you delivered to me two talents; here, I have made two talents more.’ His master said to him, ‘Well done, good and faithful servant. You have been faithful over a little; I will set you over much. Enter into the joy of your master’” (Matthew 25:14–23).
Point four of the biblical covenant is sanctions. It asks: “What do I get if I obey? Disobey?"
The free market rests on a legal system that reflects God’s delegated ownership rights to individuals, families, and other institutions. This is a system of delegated responsibility: a stewardship program. Ownership establishes responsibility.
This parable is about personal responsibility. It is therefore about personal motivation. It is about economic sanctions: positive and negative. It rests on an assumption: seeking a profit is morally mandatory. As a goal, this is not an option. The fate of the third servant makes this clear.
“He also who had received the one talent came forward, saying, ‘Master, I knew you to be a hard man, reaping where you did not sow, and gathering where you scattered no seed, so I was afraid, and I went and hid your talent in the ground. Here, you have what is yours.’ But his master answered him, ‘You wicked and slothful servant! You knew that I reap where I have not sown and gather where I scattered no seed? Then you ought to have invested my money with the bankers, and at my coming I should have received what was my own with interest. So take the talent from him and give it to him who has the ten talents. For to everyone who has will more be given, and he will have an abundance. But from the one who has not, even what he has will be taken away. And cast the worthless servant into the outer darkness. In that place there will be weeping and gnashing of teeth’” (vv. 24–30).
The first servant received a reward commensurate with his performance. He doubled what had been transferred to him as a steward. So did the second servant. He had been entrusted with less. The first steward had greater responsibility because he had been given more capital. The third steward was a failure. He returned only what had been transferred to him. The owner was adamant: the servant could at least have lent out the coin and have received it back, plus interest. But the servant was too fearful to take any positive action. It was not that he had merely made nothing. He could have made something. He was a loser. The lack of a positive rate of return proved this. It is not sufficient in God’s kingdom to “break even.”
The three servants had to deal with life’s uncertainties. No one is omniscient except God. Men should not strive for omniscience as a goal. They should strive to make better forecasts than their competitors’ forecasts. They should also strive to devise plans that are superior to their competitors’ plans. It is not sufficient to have an accurate assessment of the future. You must also design and then implement a plan to deal efficiently with your forecast. James wrote: “But be doers of the word, and not hearers only, deceiving yourselves” (James 1:22). What do I mean, “deal efficiently”? This: “Buy low. Sell high.” You must own more capital at the end of your plan than when you began. This is the basis of economic growth. This is the biblical definition of economic success in life: not simply more consumer goods, but also more capital.
Profit stems from the accurate forecasting of the future, coupled with efficient planning. It has its origin in the lack of omniscience. No one besides God knows the future clearly. “For now we see in a mirror dimly, but then face to face. Now I know in part; then I shall know fully, even as I have been fully known” (I Corinthians 13:12). We can buy low and sell high only because we possess more accurate forecasts than our competitors. We can buy low only because they have not yet bid up the price of capital, raw materials, and labor. We will sell high only because our competitors did not enter this market. They are not bidding down retail sales prices.
The biblical doctrine of salvation is accurately called redemption. Redemption means “bought back.” God’s plan of salvation is this: to buy back a lost world. Covenant-keepers are supposed to gain the capital that is required to buy back the world from covenant-breakers. This is God’s plan of redemption. It is His plan of conquest. It requires the moral transformation of every area of life that is presently under the bondage of sin. No area of life is exempt. Active participation in this kingdom program of redemption is a moral obligation of every covenant-keeper. To argue otherwise is to grant to Satan the legitimate authority to exercise dominion autonomously in history.
The free market’s profit-and-loss system is a result of individual responsibility. The consumers possess final economic authority. This is because they possess money, which is the most marketable commodity. Everyone in business wants to sell to them. The profit-and-loss system provides consumers with their means of disciplining sellers. They reward some sellers with purchases. They penalize rival sellers by refusing to buy anything from them. The successful competitors enjoy a stream of income. If they have forecasted accurately and planned wisely, they will reap a profit. This is the meaning of “buy low and sell high.”
There is a hierarchy of authority: consumers over sellers. This hierarchy is established by money and the exchange system. Accounting allows sellers to calculate their success in buying low and selling high. They have objective evidence of their performance.
This system favors resource conservation. How? By reducing waste. It is wasteful to buy high and sell low. Sellers who persist in doing this are systematically eliminated from the marketplace. They run out of money.
Economic analysis identifies profit as a residual that remains after all costs have been paid. This includes the value of the managers’ time: alternative income that managers must forego. This residual remains only until rival entrepreneurs identify the source of this profit, and then copy it. This residual is inherently temporary. It succumbs to competition.
The entrepreneur must be alert to possible losses. Jesus taught this clearly.
“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.’ Or what king, going out to encounter another king in war, will not sit down first and deliberate whether he is able with ten thousand to meet him who comes against him with twenty thousand? And if not, while the other is yet a great way off, he sends a delegation and asks for terms of peace” (Luke 14:28–32).The fear of loss is a major inhibitor, as we see in the parable of the talents. One man buried his coin. But he failed to calculate accurately the response of the owner. The owner was not content with zero profit. He wanted a positive rate of return on his money. A banker could have provided this. This parable clearly establishes the moral authority of banking and interest. The church refused to acknowledge this for almost 1500 years. This was major restraint on economic growth.
The profit system is seen by socialists and social gospel welfare statists as a system of exploitation. They do not understand either the origin or the role of the profit system. Entrepreneurs guide the production system as owners, but only on this basis: to satisfy buyers sufficiently to persuade them to hand over their money in the quantity that entrepreneurs expected. This is not exploitation. This is voluntary exchange. Voluntary exchange is the outcome of ownership: the legal right to disown property.
The profit–and-loss system is grounded morally in property rights, which in turn are grounded on God’s system of authority. Men are morally responsible to God for the use of the assets that God has transferred to them in history. This system of responsibility pervades the capitalist system.
A buyer is responsible to God for the use of God’s money. This money is God’s delegated wealth. James wrote: “Every good gift and every perfect gift is from above, coming down from the Father of lights, with whom there is no variation or shadow due to change” (James 1:17). Grace precedes law.
In the administration of his money, the buyer, just like the seller, reaps either profit or loss. He faces an uncertain future. He does not know for sure what is coming. So, he accumulates money as a way to shield himself from the uncertainties of life. Money is the most marketable commodity. It offers the widest range of purchases. If the buyer makes a mistake in forecasting or planning, he has money in reserve. He can smooth over the jarring disruptions of life. He can buy his way out of at least some of his problems.
Money makes him less of an entrepreneur than a seller is. He can sit tight if he has money. This is what the poor steward did with the coin. He buried it. He put it to no productive use, other than to shield himself from loss. But that was not good enough for God.
Then what can a buyer do with his money that will be productive? He can buy capital goods. He can use these goods to reduce uncertainty for others. He can switch from being a buyer of consumer goods to being a buyer of capital goods. He can switch to becoming a seller or renter of capital.
But what about his role as a buyer? He can still become a careful shopper. He does not waste his money. This way, he sets aside money to be used as capital. The more future-oriented he is, the more concern he will have about accumulating capital, especially appreciating capital. The lure of becoming an investor is supposed to increase as he becomes richer. Why? Because with each increase of income, he satisfies goals that were less high on his scale of values. But this assumes that his tastes do not change. The problem for economic theory is this: men’s tastes change as they get richer. In short, other things do not remain equal. Buyers replace a desire of low-cost consumer goods for higher-cost goods. They get on the treadmill of consumption. Their criteria of satisfaction ratchet upward. The increased wealth that they had thought would satisfy them no longer does.
Here is where morality becomes crucial. Does a man use his wealth to satisfy God or himself? Does he worship God or mammon (Luke 16:13)? The secular economist refuses to say that one or another desire is immoral. He attempts to adhere to his assumption of value neutrality. But God does not honor the principle of value neutrality. “But those who desire to be rich fall into temptation, into a snare, into many senseless and harmful desires that plunge people into ruin and destruction. For the love of money is a root of all kinds of evils. It is through this craving that some have wandered away from the faith and pierced themselves with many pangs” (I Timothy 6:9–10). The moral decision of spending vs. saving vs. giving is inescapable. Greater wealth increases the degree of personal responsibility. This is a benefit of the free market. It makes it more difficult for people to evade responsibility.
A seller possesses money capital. He uses this capital to buy production goods and services. He moves from money to goods. Why? Because he believes that he possesses advantages over other producers. He thinks he can buy lower and thereby make a profit. He makes himself more vulnerable to unexpected economic changes than someone who owns money. This is what the poor steward refused to do. But God’s system of economic authority is structured to penalize this attitude. God requires His people to show an increase.
The seller must please future buyers. He must serve them faithfully. If he refuses, or if he serves ineffectively, he will lose his a portion of investment, and perhaps all of it. He will suffer losses. If he goes bankrupt, his capital will be bought by more effective sellers. He bought high. He will be forced to sell low.
There is nothing immoral about a buyer who decides that he prefers the services of one seller over another. The seller has no legitimate complaint regarding buyers’ decisions to buy from a competitor. The seller is unhappy. He wishes that buyers had bought his product. He wishes that had foreseen this result of his efforts to buy low and sell high. But on what moral basis can he legitimately complain that buyers made this decision? If the decisions of buyers were not coerced, then the buyers’ decisions to buy from a competitor are morally legitimate. There is nothing immoral about an institutional arrangement that transfers final economic authority to buyers with money gained lawfully.
Sellers who failed to meet customers’ demand often collude with other frustrated sellers to persuade politicians to pass laws that restrict access to the market by price-competitive sellers. This is done in the name of protecting buyers from unscrupulous sellers. The colluding sellers never come to the politicians in the name of restricting access to a market by highly efficient sellers who meet customer demand more profitably. Instead, they invoke a higher morality. But this morality always leads to a conclusion: restrict competition by threatening negative legal sanctions.
A pencil is an ancient technology. While there are no doubt improvements from time to time, most buyers are unaware of these. The pencil looks about the same and works the same as 14 billion other pencils made every year. There is no strong name identification enjoyed by any manufacturer. There is little brand loyalty.
This means that opportunities for above-average rates of return are few and far between. The technology is old. The equipment used to produce pencils is old. It does not pay manufacturers to spend money on innovative manufacturing techniques. They do not expect to reap profits consistent with expensive capital investment. They limit their commitment to familiar expenditures because they do not expect consumers to reward them with increased purchases in response to innovation.
No one complains about exploitation by pencil manufacturers. A pencil is not seen as cutting-edge technology. The safety of the nation is not involved. Neither are the unemployment statistics if this industry should falter in innovation. A pencil is out of sight, out of mind. So is the industry that produces pencils.
No one would begin a moral critique of the capitalist system with a chapter on pencil production and distribution. The industry is not regarded by capitalism’s critics as representative of capitalism. Yet it is. That is why Leonard Read’s essay has been so successful over the years. It lays out clearly the system of economic coordination that makes possible a pencil. But Read did not discuss the profit-and-loss system in his essay. He did not explain the so-called miracle. The average voter does not understand it, nor could he explain it if asked to do so.
Could you? I hope so.
The parable of the talents is clear. God commands His people to make a profit. They are supposed to produce a positive rate of return in the broadest sense. God has provided them with capital. It is not sufficient for them to return this capital and no more at their deaths. God expects more from them. They are supposed to buy low and sell high. They are to accumulate capital.
God does not tell His people to accumulate toys. He tells them to accumulate capital. This means that they must be thrifty. They must budget carefully. They must see to it that they spend less than they bring in. But that is not sufficient. They are to generate a positive rate of return on whatever capital they have accumulated. Their productivity must increase through greater service. This will increase their income. They must also become better investors.
It is clear from this parable and the parallel parable in Luke that profitability in the broadest sense is mandated by God. This is not optional. Why would God use market profitability as His model for the kingdom of God if there were some moral flaw in the market system? Free market profitability is based on private ownership, long-term planning, ethical performance, profit-and-loss accounting techniques, and future-orientation. The parable of the talents makes no sense on any other set of assumptions.
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