Updated: 3/2/20
God said, “Let us make man in our image, after our likeness. Let them have dominion over the fish of the sea, over the birds of the sky, over the livestock, over all the earth, and over every creeping thing that creeps on the earth.” God created man in his own image. In his own image he created him. Male and female he created them. God blessed them and said to them, “Be fruitful, and multiply. Fill the earth, and subdue it. Have dominion over the fish of the sea, over the birds of the sky, and over every living thing that moves upon the earth.” God said, “See, I have given you every plant yielding seed which is upon the surface of all the earth, and every tree with fruit which has seed in it. They will be food to you. To every beast of the earth, to every bird of the heavens, and to everything that creeps upon the earth, and to every creature that has the breath of life I have given every green plant for food.” It was so (Genesis 1:26–30).
I have called this declaration by God the dominion covenant. Mankind was not yet in existence, but these words are binding on mankind. God spoke representatively for mankind. As Creator, He had this right of representative covenantal declaration. The dominion covenant defines mankind. It identifies each person as made in God’s image. But it also identifies unified mankind as made in God’s image. This image is both unified and plural because God is both unified and plural: “Let us.” This is Trinitarian theology. It is Trinitarian social theory. It is Trinitarian economic theory. God is both one and many; mankind is both one and many.
God’s declaration established a hierarchy: God > man > nature. Mankind (collective) is in charge of nature because people and institutions are God’s agents. “God blessed them and said to them”: the word “them” is plural. Mankind represents God to nature, and nature to God. This representation is both legal (trusteeship) and economic (stewardship).
This passage means that all worldviews that are based on pantheism, meaning the equality of God and nature, are wrong. It also means that all forms of pantheism that place nature on an equal status with mankind are wrong. Nature is subordinate to mankind. Nature’s resources therefore belong to mankind. This is a matter of delegated ownership. God is the cosmic Owner of the universe because He is its Creator. “The earth is the Lord’s, and its fullness, the world, and all who live in it. For he has founded it upon the seas and established it on the rivers” (Psalm 24:1–2). [North, Psalms, ch. 5] God delegated ownership to mankind. This ownership is governed by God’s purpose for the creation, which is redemptive. “Blessed be the God and Father of our Lord Jesus Christ, who has blessed us in Christ with every spiritual blessing in the heavenly places, even as he chose us in him before the foundation of the world, that we should be holy and blameless before him. In love he predestined us for adoption to himself as sons through Jesus Christ, according to the purpose of his will, to the praise of his glorious grace, with which he has blessed us in the Beloved” (Ephesians 1:3–6, English Standard Version).
In the declaration given to Adam personally, there was a law (point three) with a negative sanction (point four) attached. “The Lord God took the man and put him into the garden of Eden to work it and to maintain it. The Lord God commanded the man, saying, ‘From every tree in the garden you may freely eat. But from the tree of the knowledge of good and evil you may not eat, for on the day that you eat from it, you will surely die’” (Genesis 2:15–17). [North, Genesis, ch. 9] The supreme covenantal issue was obedience (point two). God placed a legal boundary (point three) around a tree. This tree had a specific characteristic. Its fruit provided ethical knowledge. This placed ethics (point three) at the center of the covenant. But it also placed knowledge (point four) at the center. Knowledge in this case is the ability to render judgment. This meant the ability to declare judicially good or evil: “not guilty” or “guilty.” This meant the subjective imputation of meaning.
I identified allocation as the second analytical economic category (Chapter 7). The dominion covenant specified the terms of the initial allocation of capital. This was the initial distribution. It was corporate: the distribution of the earth to mankind. But, from the beginning, God dealt on an individual basis with Adam. First there was grace: the distribution. Then there came law: a task. God assigned Adam a specific task: naming the animals of the garden. This is the pattern: grace precedes law. But law always follows. Soon after the initial distribution came a specific responsibility. Only after that task was completed was a second distribution made by God: a wife. There was payment required: a rib. It was not a zero-price distribution. This was the advent of the price system. Adam learned that there are no free wives. There are also no free lunches.
After the temptation, Adam wanted additional authority. This would mean additional responsibility. He had already named the animals and his wife. He had the preliminary ability to assess meaning or function and then verbally declare the results of his imputation. But this ability did not yet include ethics. This was a missing piece of his being, he thought. He did not want to wait. He could have eaten from the tree of life, thereby ending on God’s judicial terms the threat of the negative sanction of death, but he refused. He went straight for the forbidden fruit after his wife tested God’s word by eating and surviving.
The story of the representative fall of mankind reveals that Adam’s lust was not the desire to accumulate wealth. He already owned the entire creation, except for one tree. Rather, he wanted to possess specialized knowledge. He wanted to know good from evil. He committed evil in order to gain this knowledge. He rebelled against God’s covenantal hierarchy by means of an invasion of God’s legal boundary, which was a boundary of ownership: “No Trespassing.” Here is my point: the original desire to steal was based on a quest for specialized knowledge, not wealth.
God did not need additional knowledge. He is omniscient. This is an incommunicable attribute of God. Man will never be omniscient. Adam wanted more knowledge than God had distributed to him. This limitation vexed him. He was discontented with God’s initial distribution. He was also discontented with the sequential pattern required for him to gain more knowledge. He wanted more knowledge at a below-market price. But there are no free lunches. There is no free knowledge. He did not want to pay the price: labor, learning, and time. He decided to gain additional knowledge on his own terms. The terms were ethical: theft.
Greater knowledge would bring with it greater responsibility. He did not want to work in order to gain the ability to deal with this added responsibility. He wanted instant responsibility. He gained it. But he was unable to deal with it covenantally. He sewed fig leaves rather than going straight to the tree of life. He was expelled from the garden after his trial and sentencing by God.
The fall of man set the pattern for mankind’s subsequent revolts: the quest for premature knowledge. Knowledge brings power. Men want power. This power is the power to judge and then convict: point four. We call the evaluation process judgment. We call the declaration of guilt or innocence judgment. We call the imposition of sanctions judgment. To gain the power to impose sanctions, men must seek and accumulate knowledge. Covenant-keepers who wish to shape the future must gain authority by means of knowledge, which includes wisdom: decision-making. They may gain wealth, but their purpose for this wealth is supposed to be accumulation of responsibility. The essence of covenant-breaking man’s rebellion is his discontent with God’s initial distribution of wealth, but wealth of a specific kind: knowledge that leads to autonomous power.
The supreme model of this pattern of rebellion in modern times was the Russian Communist revolutionary Josef Djugashvili, who took an alias, as did other senior Bolsheviks. He called himself Stalin: the Russian word for steel. He became a Communist in 1899. He moved from organizing public protests and strikes to organizing a major crime in 1907. His gang robbed a convoy taking money to the Imperial bank of Tiflis, killing 40 people. He did not keep this money, which was a fortune. He used it to further the revolution in the name of Karl Marx. Yet he had begun his life’s calling a decade earlier as a seminary student in Tiflis. Then he switched his theology of personal and social redemption by the shed blood of Christ to Marx’s religion of revolution: personal and social redemption by the shed blood of the bourgeoisie in a proletarian revolution. He had greater knowledge of the covenantal truth of Christianity than any of the other Russian Communist leaders did. He was truly self-conscious, just as Marx and Engels were self-conscious: converts from Christianity.
Most people cannot follow long chains of reasoning. Among those who can follow them, most of them are unable to remember all of them in the correct order. Even if they could, it would not help. They could not persuade most listeners by means of their recitation of these chains of knowledge. (Consider the 20 principles of covenantal economics, meaning five times four, with three words each, in Chapter 2.)
The Bible overcomes this limitation by the use of historical stories. The strictly theological books of the Bible are rare. The wisdom literature—Psalms, Proverbs, Ecclesiastes—are Old Testament exceptions. The epistles in the New Testament are exceptions. Jesus’ parables are made-up stories in the midst of historical narratives.
1. A Teaching Technique
It is common for economists to begin their analyses of scarcity with a version of Robinson Crusoe, the character in the first English novel, published in 1719. They present a picture of a man on a deserted island. He makes choices about the allocation of scarce resources among competing ends, such as whether to spend time building simple tools to increase his consumption. Tool-building temporarily forces him to reduce his present consumption of food that he has been harvesting by less efficient methods. To get more food in the future, he must consume less food while he builds tools. They explain his planning in terms of his desire for greater consumption. In short, they see him as a worshipper of mammon: more for me in history. They see production as being driven ultimately by consumption. This was Adam Smith’s view. It is not the Bible’s view. Production is for the sake of building the kingdom of God (Matthew 6:33). [North, Matthew, ch. 15]
To use the story of Crusoe as a way to connect with readers is a good teaching technique. But the economists do not consider Crusoe as a person. He is an abstraction. This abstraction is unrealistic. The economists’ Crusoe makes plans and choices. He has knowledge. They never ask this: “Where did he get it?” He has experience with planning and the use of tools. They never mention that Crusoe is the heir of an entire civilization. Most of all, he is responsible to God. The author of the novel was a Christian. He presented Crusoe as a man in rebellion against God, a man who sought autonomy from his family, and who is punished for this, as Crusoe fully understood. The economists’ Crusoe has no guilt, no responsibility before God, and no thought about getting off the island. He is an abstraction from history.
The Bible is not based on abstractions from history. It is filled with narratives. These are historical stories. They are true stories. The story of stories in the Old Testament is the story of Adam’s transition from grace to wrath. God wants His people to begin with this story in order to understand what we have lost and how we lost it. We are also to discipline our thoughts and our lives in terms of another story, the supreme story in the New Testament. This is the story of the second Adam, who Paul called the last Adam: Jesus Christ, the Redeemer. “So also it is written, ‘The first man Adam became a living soul. The last Adam became a life-giving spirit. But the spiritual did not come first but the natural, and then the spiritual. The first man is of the earth, made of dust. The second man is from heaven. Just as the one made from dust is, so also are those who are made of the dust, and as the man of heaven is, so also are those who are of heaven. Just as we have borne the image of the man of dust, we will also bear the image of the man of heaven” (I Corinthians 15:45–49). This is the story of the transition from wrath back to grace. This grace is judicial and historical. It has three aspects: definitive (imputed), progressive (developed), and final (consummated).
For covenant-keepers, there will be covenantal continuity from the final judgment into eternity. Mankind’s accumulated capital will become the church’s inheritance in the new heaven and new earth. History therefore has meaning. This meaning has to with progress: extending the dominion covenant. It is the restoration of the world we have lost—not just the pre-fall garden but the world that sinless mankind would have built. That lost world was the economic cost of sin, individually and corporately. The economic aim of Christ’s redemption—His buying back—is the restoration of something economically comparable to that lost world. To argue otherwise is to argue implicitly that Satan’s plan will be successful in thwarting the fulfilment of the redemption phase of the dominion covenant. This is an implicit argument that Christ’s redemption—definitive, progressive, and final—is not comprehensive. But it is.
2. The Grace of Knowledge
The basis of this extension of the dominion covenant is grace: a gift of God to those who do not merit it. This grace involves a world-transforming increase in knowledge. This pattern began in the garden, where there was an increase of knowledge. Adam named the animals. He learned. This was technical knowledge. This was not the primary form of knowledge in the garden, nor is it today. The primary form of knowledge is ethical: the knowledge of good and evil. The serpent did not lie about the fact that they would become as God, knowing good and evil. Rather, he lied about the cost of obtaining these facts through Satan’s way: by committing an act of theft. “You will surely not die” (Genesis 3:4b). Adam and Eve did not become God, but they became as God or like God. They learned first-hand about good and evil, just as the serpent promised. They took this knowledge with them from the garden. They transmitted this knowledge to their heirs, who are also learning about good and evil. This is why economic theory is not ethically neutral (value-free). Nothing that man knows is ethically neutral.
Here, I continue the economists’ tradition of explaining the workings of the economy by beginning with a man alone in an unfamiliar setting. But, unlike Crusoe, Adam was a man with no experience. Yet he had knowledge. He had received it as a created being in God’s image. More importantly, he received knowledge directly from God through verbal revelation. This was God’s grace to Adam. Then shortly after grace came law. His knowledge made him responsible to a degree that Eve was not, since God did not speak to her face to face.
God gave Adam the whole world, except for one tree. This was grace. But the greatest grace that God showed to Adam was His verbal revelation. God’s verbal revelation is the supreme tool of dominion—not technical knowledge. This knowledge was encapsulated in this statement: “The Lord God commanded the man, saying, ‘From every tree in the garden you may freely eat. But from the tree of the knowledge of good and evil you may not eat, for on the day that you eat from it, you will surely die’” (Genesis 2:16–17). This was an ethical command. Specifically, it was a command against theft. Had they obeyed it, this would have made Adam and his heirs rich. It would have enabled them to make the earth fruitful beyond anything conceivable by Adam. But they did not obey it. They learned the hard way about God’s negative sanctions.
The garden was part of the world we have lost: the initial distribution. But we have also lost the world that would have developed outside the garden in sin-free history. The preeminent social question in the post-fall world is this: “Is there a guide by which humanity can build that post-garden world, the world that could have been, but never was?” The answer is the same as it was in the garden: God’s verbal revelation. Paul wrote this: “So faith comes from hearing, and hearing by the word of Christ” (Romans 10:17). There is a supreme economic principle undergirding this restoration: “You must not steal” (Exodus 20:15). [North, Exodus, ch. 28] That was the supreme economic rule in the garden.
My exposition here explains why Christian economics is covenantally different from non-Christian economics. This is why its analytical categories have a different structure and emphasis. This is why it starts with ownership, a judicial category, not scarcity, an economic category.
Because the forbidden tree had to do with ethical knowledge, a Christian economist should place ethics at the center of economic analysis. In Chapter 3, I argued against humanistic economics’ assertion of value-free economic theory. Nothing is value-free, including economic theory. Economists, beginning with the mercantilists of the late 1600s, have insisted on this presupposition: value-free economics. The mercantilists substituted mathematics and statistics for ethics, as William Letwin demonstrated in The Origins of Scientific Economics (1963). Adam Smith and his disciples substituted logic and history for mathematics and statistics, but they did not openly import ethics in their analysis. Modern economics has returned to the mercantilists’ methodology. Economist Fritz Machlup in 1956 referred to this as metromania and mathematosis. This affliction is far worse today than in 1956, both in its intensity and its range of applications.
I have said that we should begin with ownership as the judicial starting point of economic theory. Ownership is inherently ethics-based. It announces legally enforceable boundaries around specific pieces of property. These legal immunities are grounded in morality. Legally rightful ownership is morally rightful ownership. Ownership is not limited to physical assets. Economists sometimes refer to ownership as a bundle of legal rights. It involves the right of control over designated resources in designated ways. It is above all the legal right of exclusion. This is a legally transferrable right.
Every judicial declaration has an ethical foundation. Christian economics begins with God’s legal declaration: “You must not steal.” The correct judicial starting point—ownership—has five analytical components: God’s redemptive purpose, man’s allocation responsibilities, ethics, historical sanctions, and a transfer of ownership to designated heirs. This is an analytical package. It is covenantal. Point two rests on this analytical principle: responsibility. Man’s ownership is not autonomous. It is also not value-free. It rests on ethics.
I am arguing that the economic concept of ownership cannot accurately be separated analytically from man’s legal responsibility: trusteeship. I am also arguing that trusteeship carries with it an economic category: stewardship. The legal category is superior to the economic category. This is why in all Christian economic theory, there must be a theory of a non-market civil government above the market process. Civil government is covenantal. God established it to protect owners from unlawful invasions. Ownership always implies the legal right of exclusion. This goes back to the forbidden tree. Adam and Eve were judicially excluded by God. This was an aspect of the covenant’s hierarchy (point two). They invaded the lawful boundary of God’s tree. They rebelled against a legitimate hierarchy of authority. God imposed negative sanctions (Genesis 3). These were sanctions from outside the market order.
Adam and Eve were legally responsible for their actions. They were subject to a hierarchical system of sanctions. So was nature: “cursed is the ground because of you” (Genesis 3:17b). [North, Genesis, ch. 12] Paul wrote: “For the creation was subjected to futility, not of its own will, but because of him who subjected it, in the certain hope that the creation itself will be delivered from slavery to decay, and that it will be brought into the freedom of the glory of the children of God. For we know that the whole creation groans and labors in pain together even now” (Romans 8:20–22). [North, Romans, ch. 5] Analytically speaking, any attempt to separate ownership from personal responsibility is an implicit assertion of man’s autonomy. Ownership in the biblical framework is inseparably connected to responsibility.
This section is long. It covers a lot of material. This material has significant implications for economic theory. It also has significant implications for political theory. I cover ten topics: ownership, knowledge, responsibility, capital, specialization, opportunities, cooperation and competition, pricing, profitability, and inheritance.
1. Ownership
God is the cosmic Owner because He created the universe. This is the theological foundation of the starting point for Christian economic theory: original ownership. This is point one of the biblical covenant: God’s sovereignty.
Man is not originally sovereign, but he is derivatively sovereign. I call this authority. This is point two of the biblical covenant. Authority has to do with hierarchy. As I have written in the previous chapter, the Second Person of the Trinity was the Creator. This is a hierarchy: economic Trinity. The Son serves God the Father as a trustee in relation to the creation. The Second Person was incarnated as a man, Jesus Christ. He is now seated at the right hand of God, a position of judgment. Paul wrote: “In my prayers I ask that you may know the incomparable greatness of his power toward us who believe, according to the working of his great strength. This is the same power that God worked in Christ when he raised him from the dead and seated him at his right hand in the heavenly places. He seated Christ far above all rule and authority and power and dominion, and every name that is named. Christ will rule, not only in this age, but also in the age to come. God put all things under Christ's feet and gave him to the church as head over all things” (Ephesians 1:19–22). This is the basis of covenant theology’s theory of authority/hierarchy. Man represents God in relation to the creation. Christ, the resurrected and ascended perfect man, is the supreme representative in history and in the eternity to come.
In one sense, delegated ownership is point two: stewardship. But delegated ownership has characteristics of point one: delegated sovereignty. As was the case with God in the creation week, man’s creativity is associated with ownership. When a person makes an item, he has a legal claim to it. This is the meaning of property: a legal claim to specified goods. There are legal boundaries around this property (point three). This is why point three (property) is covenantally related to point one (ownership) and point two (stewardship).
Ownership is legal (point three). There is an enforceable legal bond between a specific asset and a specific owner. But this bond is always established and defended by a legal hierarchy: point two. It is a matter of trusteeship. God has delegated ownership to mankind as His trustee. This trusteeship is personal. Adam and his heirs were designated by God as owners of the earth. To argue that God did not do this is to deny biblical truth. To argue that there is no covenantal connection between this initial distribution of ownership and today’s distribution is necessarily to place property rights on some other legal basis than day six of the creation week. I cover this in greater detail in the next chapter.
Here is the crucial economic point in this Section 1: all ownership in history rests on the dominion covenant. This covenant was manifested in the initial distribution of ownership. Ownership is a covenantal concept. The concept of ownership is an inescapable concept. It is never a question of the covenantal basis of ownership vs. a non-covenantal basis of ownership. It is always a debate over the God of the covenant and His representative agents.
2. Knowledge
God created Adam with enormous knowledge. Adam named all the animals of the garden that God brought to him. This was not simply naming them as we name our children. Rather, he classified them on some conceptual basis.
He understood language. He understood it well enough to understand the legal terms of the covenant. Modern biological evolutionists follow the lead taken by eighteenth-century Scottish Enlightenment theorists who explained the origin of language as an evolutionary process. Men supposedly learned language in stages. Prior to language, they grunted and pointed. Adam Smith, in the final section of The Theory of Moral Sentiments (1759), discussed this. (Rarely is the full title of the book cited, for good reason: The Theory of Moral Sentiments; or, An Essay towards an Analysis of the Principles by which Men naturally judge concerning the Conduct and Character, first of their Neighbours, and afterwards of themselves. To which is added, A Dissertation on the Origins of Languages.) In the first paragraph of the final chapter, Smith wrote this: “Two savages, who had never been taught to speak, but had been bred up remote from the societies of men, would naturally begin to form that language by which they would endeavour to make their mutual wants intelligible to each other, by uttering certain sounds, whenever they meant to denote certain objects.” The argument is preposterous. The social division of labor requires a complex language. This is the social message of the biblical story of the tower of Babel (Genesis 11). Mankind would not have survived apart from the social division of labor. This is the familiar “chicken or egg” argument. Which came first? It is answered in Genesis 1.
Adam was tempted by the lure of prohibited knowledge: violating the judicial boundaries of the tree of knowledge of good and evil. He possessed all other earthly assets, so they were not matters of temptation. Man’s lack of knowledge was the key element in the temptation. Adam wanted special knowledge that God possessed. He wanted it immediately. This knowledge was associated with rendering judgment: power.
We are told that knowledge is the way to wealth. “Through wisdom a house is built and by understanding it is established. By knowledge the rooms are filled with all precious and pleasant riches” (Proverbs 24:3–4). Modern man has learned that accurate knowledge is the most valuable scarce resource. With this, men can gain both power and wealth. The capital markets are primarily markets for the purchase and sale of knowledge. These markets are manifested by money prices. A price is the objective outcome of competing bids for ownership, which in turn are based on competing knowledge. If an entrepreneur knows the price of any marketable resource in advance, he can get rich. He may not bother to take delivery of the resource. He can make his fortune in the commodity futures market, a market legally tied to commodities but in fact tied to the ownership of money. Almost no one takes delivery of the commodity that he buys with an ownership contract, which is what a futures contract is. He instead sells this ownership and collects money. In entering into a contractual arrangement, he is interested only in gaining ownership of more money, not the ownership of a specific quantity of a specific commodity. Accurate knowledge is his key to making money, not using the commodity in a production process.
The primary social benefit of the commodity futures markets is not the allocation of physical property. Rather, it is the benefit of gaining access free of charge to knowledge regarding the correct prices of these commodities, as determined by experts in pricing who buy and sell the contracts for physical goods. This is the greatest social benefit of capital markets. Individuals take on the uncertainty of specific ownership for the sake of personal profit. Society gets the benefit of their expert knowledge at close to zero cost simply by monitoring these widely reported transaction prices. Private ownership and private profit or loss convey great social benefits at close to zero cost. This is another example of the harmony between individual self-interest and public interest. This harmony was what Adam Smith argued for in The Wealth of Nations.
3. Responsibility
Legal responsibility is established by ownership. Legal title conveys legal responsibility. The ownership of knowledge is central to legal responsibility. God held Adam more responsible for sin than Eve was. Adam had greater knowledge. God had told him face-to-face about the forbidden tree. God did not speak directly to Eve. She was more easily deceived. Paul wrote: “Adam was not deceived, but the woman was deceived and became a transgressor” (I Timothy 2:14). Similarly, the case law in Exodus regarding the ownership of a dangerous animal rests on this idea: ownership of an animal establishes the presumption of specialized knowledge about its behavior. “If an ox gores a man or a woman to death, the ox must surely be stoned, and its flesh must not be eaten; but the ox's owner must be acquitted of guilt. But if the ox had a habit of goring in the past, and its owner was warned but did not keep it in, and the ox has killed a man or a woman, that ox must be stoned, and its owner also must be put to death. If a payment is required for his life, he must pay whatever he is required to pay” (Exodus 21:28–30). [North, Exodus, ch. 40]
Ownership establishes a judicial link between knowledge and responsibility. The biblically required system of private ownership is God’s means of establishing legal responsibility and therefore justice. This is why the correct starting point of a philosophical defense of the free market’s system of private property is found in Genesis 1–3. This is the trusteeship aspect of ownership. God held Adam responsible for violating the tree. This was a matter of self-government. But Adam was also required to defend it from Eve. He should have prevented her from eating from the tree.
There was also a stewardship aspect of the initial distribution. God held Adam responsible for the economic improvement of His property. “The Lord God took the man and put him into the garden of Eden to work it and to maintain it” (Genesis 2:15). There was no escape from this responsibility. It was based on Adam’s ownership. This was not changed by the fall.
4. Capital
The earth was perfect, but it was undeveloped. This was also true of Adam. It would take time and labor for Adam to develop both the land and his wisdom. Time was required for capital development. This was not changed by the fall.
Adam had enormous wealth: the whole earth, minus one tree. “The Lord God commanded the man, saying, ‘From every tree in the garden you may freely eat’” (Genesis 2:16). God placed no legal barriers around assets outside the garden. The trees inside the garden were consumption goods. Nevertheless, Adam was also told to work the land. This meant that he had to improve it. He had to apply labor to it. He also had to apply knowledge in order to apply physical labor in the right proportions. There also had to be a sequence of improvement: first, second, third. God established this model in the creation week. This was a rejection of magic: stones into instant bread (Matthew 4:3). [North, Matthew, ch. 1] Time is an inescapable component of capital development.
Adam had natural resources: land. He also had the ability to labor. Raw materials are worth nothing in the market unless they can be put to productive use, as determined by the future imputations of paying customers. It takes knowledge to put raw materials to productive use. Accurate knowledge of markets is more profitable than accurate technical knowledge of the resources. This form of knowledge is far more scarce than most assets are and most engineering knowledge is. You may own land with gold in it, but until you discover the gold, the market value of the land will not reflect this. Knowledge about gold mining is worth much less than knowledge of where the gold is. This economic analysis is the basis of Jesus’ parable of the field. “The kingdom of heaven is like a treasure hidden in a field. A man found it and hid it. In his joy he goes, sells everything he possesses, and buys that field” (Matthew 13:44). [North, Matthew, ch. 31]
Land is a resource. Labor is a resource. Together, they produce capital: tools of production. Capital is best defined as the product of land plus labor over time. Land means natural resources. Labor means physical labor and mental labor. Time means temporal sequence: first, second, third.
5. Specialization
Adam had land in abundance, but he had very little labor time: no more than 24 hours a day. To complete his dominion assignment, he needed someone to help him with his labor. “The man gave names to all the livestock, to all the birds of the sky, and to every beast of the field. But for the man himself there was found no helper suitable for him” (Genesis 2:20). God gave him a helper. But Adam had to pay for her: a rib (v. 21). He did not know this in advance. It was not his choice. He did not negotiate with God regarding this price. (Men have humorous stories about how Adam bargained with God for the woman he received. I suspect that women have different stories. I have not heard any, however.)
The division of labor was implied by the terms of the covenant: “God blessed them and said to them, ‘Be fruitful, and multiply. Fill the earth, and subdue it. Have dominion over the fish of the sea, over the birds of the sky, and over every living thing that moves upon the earth’” (Genesis 1:28). Mankind had to multiply in order to complete this task. The following assessment is not the result of the fall. “Two people work better than one; together they can earn a good pay for their labor. For if one falls, the other can lift up his friend. However, sorrow follows the one who is alone when he falls if there is no one to lift him up” (Ecclesiastes 4:9–10). [North, Ecclesisates, ch. 14]
The division of labor between husbands and wives is the correct starting point for any biblical discussion of labor specialization. Adam Smith’s famous example of the pin-makers has been quoted ever since 1776, but from an analytical standpoint, the story of Adam and Eve is better. The separate tasks appropriate to each were biologically determined. These were fundamental. The social forms of labor reflect this today. As greater capital has come into existence, this biological specialization has become less distinctive. For millennia, men chopped wood to light and heat their homes. Women usually did not. But with respect to electric lighting, heating, and cooling, gender conveys no advantage.
Specialization of production is based on many factors, but these were primary before the fall: gender and knowledge. Had there been no fall, with the multiplication of mankind, geography would have played an increasingly important role, but not indefinitely. With modern telecommunications, differences in knowledge have become the primary sources of specialization. There are two reasons for this. First, the economic value of highly specialized forms of market knowledge is far greater than any other resource. Second, the cost of telecommunications has fallen. This economic law is true: “When the price falls, more is demanded.” More people with valuable specialized knowledge can find buyers of either this knowledge or the output of this knowledge. This shift in favor of the value of specialized knowledge over the value of geographically distributed raw materials has profoundly changed the world economy. It will continue to do so as capital development continues. Consider this example. The speed of communications in 1800 was a little over one mile per hour, which was what it had been in Jesus’ world except for limited military communications with horses. This speed increased with the development of trains after 1830. Then came the first commercial telegraph in 1844, which increased the speed of transmission to 186,000 miles a second, minus the telegraphers’ delays. Where a person lived along this the line of transmission made a big difference in the value of his land. Note: men had no biological advantage in telegraphy. They surely have no advantage today in telecommunications.
For the fulfilment of the dominion covenant, pre-fall mankind had to find ways to help each other. This required the specialization that furthered the division of labor. The fall did not change this.
6. Opportunities
Economic opportunities are opportunities for service: to God mainly, but by way of service to others—people we trade with, people who employ us, and people under our administration.
Unique opportunities for profit are perceived by people who have unique information and also the capital and courage to turn this information into profits. These people are called entrepreneurs. We are all entrepreneurs. We all make forecasts. We all make plans and take steps to make ourselves better off when the future arrives. But there are specialists in forecasting. From the perspective of making money, the most valuable information that someone can possess is accurate information about future prices. All market-based opportunities contain information about prices.
There were no prices in the garden. There was no market within the family. This made the family a non-market institution. Adam and Eve did not make money bids as a way to allocate their personal responsibilities. But, over time, the population would have grown. Information would have become far more specialized and far less based on face-to-face communications and negotiating. This is why market-based money prices would have arisen. Men are not omniscient. The discovery and development of exchange of ownership outside of the family would have arisen. It does not arise in a family. Why not? Because husbands and wives cannot legally sell their sexual services to outsiders. Families are not market-based institutions. Market exchanges between nuclear families would have arisen because of the economic benefits of specialization.
People take advantage of economic opportunities by exchanging ownership. They assess the value of these future opportunities differently. One man’s opportunity to own is another man’s opportunity to sell. Each is a buyer of opportunities, and each is a seller. Traditionally, we call a seller of money the buyer. We call a buyer of money the seller. But exchange is always two way. It is an exchange of legal ownership. This is how we exploit opportunities, which is another way of saying “take advantage of better ways to serve.” We purchase the legal right to serve. We may serve ourselves. We may serve others. We may serve God. We may serve mammon. But we must serve. Service is inherent in the dominion covenant. Therefore, opportunities to serve are inherent in the dominion covenant.
Seeking profitable opportunities for service is how we seek to increase our wealth. This is the basis of market exchange. As Smith wrote: “Whoever offers to another a bargain of any kind, proposes to do this. Give me that which I want, and you shall have this which you want, is the meaning of every such offer; and it is in this manner that we obtain from one another the far greater part of those good offices which we stand in need of. It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.” Put differently: “Do I have a deal for you!”
7. Cooperation and Competition
Adam needed a wife. Without a wife, he would have been less efficient in completing his tasks. He had too much work to do. He had to administer a large garden. A huge world lay outside the garden. Alone, he could not increase the value of natural resources as efficiently as if he had a wife and children. The value of additional labor was high in comparison to the value of additional natural resources. There was not much labor available and way too many natural resources for Adam to develop. He needed cooperation.
This did not mean that there would be no competition in his life. People want to prove to themselves and others that they do something well. Adam was no different. In the creation week, God daily evaluated His work and declared it to be good. This is the pattern for mankind. Alone, Adam had no one other than God to declare this to. No other human being would appreciate his work. Then God made Eve. But there was always this possibility: Eve might do some tasks even better than he did. If she did, then who should perform them? There would have to be evaluations. Someone would be declared the winner in a competitive environment.
As mankind multiplied, this kind of competition would have become common. People would assess who did what tasks best. Also, who charged the lowest price? The more complex a society, the more competition there has to be. Knowledge is limited and specialized. Skills are specialized. Had there been no sin, the market process would still have provided information on who did what best. Specialization is not the result of sin. Neither are multiplying opportunities.
So, in order to cooperate, Adam and Eve would have competed until it was clear to both of them which of them performed which tasks most efficiently. People think of cooperation as a benefit. The word “cooperation” has a positive connotation. In contrast, some critics of the market process think of competition as a defect. But to cooperate, we must also compete. In a developed market order, sellers compete against sellers. Buyers compete against buyers. This would have been true in the world before the fall, had the fall not taken place before Adam and Eve had children. In a world marked by the division of labor and specialization of both production and consumption, there cannot be cooperation without competition. If producers did not compete against each other, consumers would not maximize their wealth. We all seek for bargains. Competing producers are the people who make bargains available. This arrangement was not the result of man’s fall.
8. Pricing
Pricing is an aspect of finitude. It existed before the fall. There was a price that Adam paid for Eve: a rib. He did not get something for nothing. This should warn us that the formation of prices is not the product of sin.
To take advantage of any opportunity, a buyer asks: “What is the price?” Without knowledge of prices, people could not make wise exchanges. To get a wife and lose a rib was a benefit for Adam. Adam did not make this choice. God did. But the fact that he lost something in order to get what he needed was evidence of the nature of reality in a finite world. There are no free wives. There are no free lunches. To obtain ownership, temporary or permanent, we must surrender something of value to the person who owns what we want.
Adam wanted to be able to make choices on his own. Making choices is the essence of freedom. It is also the essence of adulthood. God had him name the animals that God brought to him. Are we to imagine that Adam wanted to be treated as an inexperienced amateur in every area of his life for the rest of his life? There would be no dominion. There would be only servitude. Mature men do not like servitude. The more creative they are, they more they want greater independence. They want to demonstrate their expertise. The model for this is the creation week. The Second Person of the Trinity was the Creator. He was under the Father’s authority, but He was not a slave. He made His own decisions.
Prior to the fall, prices would have provided mankind with valuable information on how they could achieve their individual tasks. “Should I do this or that? Should I buy this or that . . . or nothing at all?” To determine the correct answer, they first needed to get this question answered: “At what price?” For economists, this is the supreme analytical question. The fall has not changed this.
9. Profitability
Adam was not omniscient, as his decision to eat the forbidden fruit proves. He did not know the future perfectly. He had to decide which forecaster was reliable: God or the serpent. God promised a loss if he disobeyed: death. The serpent promised him a benefit if he disobeyed: to be as God. He preferred the benefit, discounting the probability of a loss.
To improve the world, Adam had to do something. He could not remain a pure consumer. He was human, and the dominion covenant defines humanity. There are blessings of consumption. “God said, ‘See, I have given you every plant yielding seed which is upon the surface of all the earth, and every tree with fruit which has seed in it. They will be food to you’” (Genesis 1:29). But there are also responsibilities of administration. “God blessed them and said to them, ‘Be fruitful, and multiply. Fill the earth, and subdue it. Have dominion over the fish of the sea, over the birds of the sky, and over every living thing that moves upon the earth’” (v. 28). Dominion is not automatic. It requires active administration.
Adam had to invest. How? By saving. He had to do without: forfeited time, forfeited leisure, and forfeited assets. Adam’s goal in life was not pure consumption. He could have settled for that, but he would have had to forfeit the positive feeling that success in an uncertain venture brings. God pronounced His work good, day by day, in week one. His assessment was positive. To make it, His work had to match His plan. His plan had to match His priorities. To achieve such consistency was good. Adam had the correct model of his life of production. He had God’s verbal revelation to him regarding the creation week. I assume that this revelation was verbal. He had not been there to see it and hear it.
10. Inheritance
God announced their responsibility to multiply. This means that they would have had to transfer the ownership of parcels of the world to their descendants. Their descendants also had to fulfill the dominion covenant. They had to use plans, raw materials, capital, and labor. They also had to invest time. They had to decide: time used to produce vs. time used to consume. They could not do both.
This meant that there had to be individual sequences over time. There had to be multiplication. To avoid decreasing per capita wealth, humanity would have had to increase per capita productivity. This requires saving (not spending on consumption) and investment (spending on production). Parents would have had to train their children. This is always a capital investment. It requires saving. The fall has not changed this. The fall has brought frustration and disappointment to this process of transferring ownership, but the requirement has not changed.
Dominion before the fall required population growth. So, in terms of extending the dominion covenant, there had to be a positive rate of return from having children. Each generation had to add more children. This meant that each generation had to teach the next generation to add productivity. Productivity involved a net increase after deducting the costs of capital consumption, time, and raw materials. There would have to be innovation. But each generation would have had innovators. Human creativity is a more valuable resource than raw materials or capital. Human creativity adds value. A growing population required increasing per capita productivity. But, because of differences in individual creativity and geography, rates of return on invested capital and time would have been higher before the fall: no losses.
Christian economic theory must begin with creation and its related issues: purpose, ownership, and providence. Next, it must move to Adam in the garden, not with Robinson Crusoe on an island. The categories of scarcity and resource allocation are important, but they are subordinate to the covenantal issue of ownership: God’s original ownership and man’s delegated ownership. Christian economic theory must extend its analysis beyond family ownership to the wider range of ownership and responsibility as these inescapably related concepts apply in the market-organized social division of labor.
The concept of ownership in a market society is inescapably related to the concept of disownership. The legal right to sell property and thereby transfer legal responsibility is the crucial legal aspect of the market process. Without the right to sell property, the market’s self-contained and self-enforced (endogenous) sanctions of profit and loss would not govern the market process. Economic theory would lose its status as a science. It would become no more rigorous than sociology—a cruel fate in the eyes of economists.
The right to disown property and therefore the right to transfer legal responsibility does not apply well inside the legal boundaries of the covenantal institutions of the family, the church, and the state. This is why the categories of market analysis do not apply well to families, churches, and civil governments. I have covered this issue in detail in The Covenantal Structure of Christian Economics.
God’s initial distribution of wealth is the starting point, both conceptually and historically, of the theory of market exchange. The dominion covenant still applies in the post-fall world. There is covenantal continuity: pre-fall and post-fall. This means that there is both ethical continuity and legal continuity. The heart of this continuity is God’s prohibition of theft (Exodus 20:15). The decalogue is both moral and legal. Because of the covenantal and historical continuity regarding the initial distribution and distribution today, I must discuss the issue of the legality and morality of distribution and redistribution today. I do this in the next chapter.
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