Chapter 14: Scarcity and Costs
Updated: 3/3/20
To Adam he said, “Because you have listened to the voice of your wife, and have eaten from the tree, concerning which I commanded you, saying, ‘You may not eat from it,’ cursed is the ground because of you; through painful work you will eat from it all the days of your life. It will produce thorns and thistles for you, and you will eat the plants of the field. By the sweat of your face you will eat bread, until you return to the ground, for out of it you were taken. For dust you are, and to dust you will return” (Genesis 3:17–19).
The fall of man led to a curse on man and a curse on the ground. This cursed scarcity, but it was not the origin of scarcity. The combination of the dominion covenant and man’s finitude was the origin of scarcity. Scarcity was built into the creation. In the garden, Adam faced finitude. He could not wave a magic wand to get what he wanted. He had to labor, just as God had labored for six days. He faced the constraint imposed by time. Time is linear. There is progression chronologically. To produce and to consume, men face a sequence. The threat of death reminds men that there is a permanent limit on what they can accomplish in history. It also reminds them that they must make their peace with God before time runs out. This testimony is inherent in humanity. Man is made in the image of God. This image testifies to Man regarding God, law, and final judgment. “For the wrath of God is revealed from heaven against all ungodliness and unrighteousness of people, who through unrighteousness hold back the truth. This is because that which is known about God is visible to them. For God has enlightened them” (Romans 1:18–19).
God cursed the ground, meaning nature, along with mankind. This has made man’s work more difficult. Put in terms of economic analysis, this has imposed costs on production and distribution that did not exist prior to the fall. Because of this curse, there are new costs, new restraints on men. Cursed scarcity thwarts men. They seek to overcome its effects. They want greater wealth. In order to obtain this wealth, men must now cooperate with each other in the division of labor. They can then benefit from each other’s productivity. They exchange goods and services. They become interdependent. The positive sanctions of economic exchange are lures to cooperation. In a world of sinners, these positive sanctions are blessings. They favor peace. There is an element of grace in this curse.
The division of labor is now imperative for successful, efficient, low-cost production. There are no free lunches in a cursed, scarce world. There are also no free murders. Every man’s labor can be useful to others in the marketplace. Murder a man, and you remove a source of productivity from the marketplace. You remove someone who might have made your work easier or your wealth greater. Battling an uncooperative nature, men need the division of labor more now than they did prior to the rebellion. They need each other to enjoy the full potential of each person’s productive capacities. Having to work is also a way of draining energy that might have been put to perverse ends. Men have less free time to scheme and pillage. They have less strength. Part of the energy of nature was re-channeled by God into avenues that would thwart men’s evil plans. Time, capital, and energy spent towards increasing the productivity of the land could not be used simultaneously to commit any mayhem. The curse of the ground has helped to produce a zone of safety for men from their fellows. Man was made to sweat in order that he might not have to bleed.
The curse of the ground is also a blessing for the ground. Men in a scarce world must treat the creation with care if they wish to retain the productivity of the ground. This is one of the important reasons why private property has so often been a means of preserving the ground from pollution and soil erosion. Wherever private property is compromised or unenforceable—“free” air, “free” streams, “free” oceans, “free” land—we find ecological disturbances. Men rush in to get “their” share of the “free” goods, with little thought of the future, simply because they have little or no control over the future use of public property. In contrast, they can control the future use of their own property. The costs of ownership come from their capital resources. These costs provide a great incentive to use the resources in a cost-effective manner—one which respects the future expected benefits of the resources. There is a strong tendency, though not an invariable law, for men to take better care of the creation when they are allowed to take possession of the fruits of their labor on their parcel of the creation. Again, it is scarcity which pressures innately lawless men to observe God’s laws concerning the creation.
The curse of the ground is a form of grace to the godly—an unearned gift—for it allows them to work out their faith with less fear and trembling concerning the actions of the ungodly. It is also a form of grace—an unearned gift—to the ungodly, for it allows them to work out the implications of their anti-Christian faith in ways that are less harmful to other ungodly men, godly men, and the creation: grace leading to destruction (Luke 12:47–48). [North, Luke, ch. 28] The ungodly are given life. They are given power. They participate in history—a stay of execution. Their labors increase the wealth of covenant-keepers, since people all share in the blessings of greater productivity. Common curse (sweat, death, and thistles), common grace (time and incentives to cooperate), special curse (final judgment), and special grace (salvation): all are involved in God’s retaliation against evil. [North, Genesis, ch. 12:C]
I have argued that the basis of scarcity is finitude. God is infinite. The creation is not. Therefore, people have always faced limits. They want more than they are able to get at zero cost. That was the problem facing Adam. He resented his finitude. He wanted to be as God.
There is a problem with defining scarcity as an aspect of finitude. There is one aspect of the universe that is infinite: duration. Humanists who believe in the heat death of the universe deny this, but that is because they are humanists. They do not want to think of the lake of fire as an eternal condition. I do not blame them. But there are no limits on temporal extension. This is the teaching of Christianity, and it has been from the beginning. Heaven and hell are temporary; the new heavens and the new earth and the lake of fire are not. Heaven has to do with time on earth in the present world. There is a connection between the two. We read: “When the Lamb opened the fifth seal, I saw under the altar the souls of those who had been killed because of the word of God and the testimony which they held. They cried out with a loud voice, ‘How long, Ruler over all, holy and true, until you judge those who live on the earth, and until you avenge our blood?’” (Revelation 6:9–10). After the final judgment, there will be no distinction between heaven and history. The same is true of hell. The only lengthy discussion we have of hell is in Luke 16, and it has to do with time. The rich man asks Abraham to go back and warn his brothers about what is to come. This means that his brothers were still alive. This means that hell has a relationship with time in the present cursed order. As with heaven, this will not be true in the lake of fire. There will be no distinction between hell and the lake of fire. “Death and Hades were thrown into the lake of fire. This is the second death—the lake of fire” (Revelation 20:14). There will be no relationship between the lake of fire and the new heaven and the new earth, which will replace the present temporal order. There will be no progress in the lake of fire, but it will be eternal. It is of infinite duration. So are the new heaven and the new earth.
Adam and Eve faced scarcity— above all, a scarcity of knowledge. This scarcity will continue until the end of time, which is bounded by the final judgment. When the curse is lifted after the final judgment, covenant-keepers will be in the ethical condition of Adam and Eve before the fall. But there will be no further temptation to sin. History will be behind us, but eternity will be in front of us. Forever. Busy, busy, busy. Maybe we will not have to sleep. Think of all we will be able to accomplish.
God is infinite. We will never know everything that can be known about God. We will never become God. We will never have the self-knowledge that God has. We will never have knowledge of the universe comparable to that which is possessed by God. We will dwell in infinite duration. We will also have infinite learning ahead of us. There will be plenty of time to exercise dominion. When I say plenty of time, I mean all the time in the redeemed world.
When we read of a major discovery, the article usually records something like this. The person who made the discovery says this: “This discovery has raised more questions than it has answered.” This reality will accompany every discovery for all eternity. There will never be a discovery to which this statement is not applicable. That is because we are finite. Even though the universe is also finite, we will never know as much about it as God knows about it. We will never dwell in a period of eternal duration in which we will exhaust our knowledge about any tiny aspect the universe, because to do so would mean that we have exhausted God’s knowledge of this tiny aspect.
If this is true, there will always be prices. There will be exchanges throughout eternity. There will be cooperation among people. There will be specialization of knowledge. In other words, the division of labor is inherent in the nature of man’s social order. There is no escape from it. That is because there is no escape from finitude.
This is why scarcity is not a curse. It is an incentive for men to cooperate. The division of labor enables us to increase our output with the same amount of resource inputs. This is especially true of knowledge. Knowledge is the key resource in the modern world, and it will be an increasingly important resource as we learn more. There will be ever-greater economic incentives for men to cooperate in the division of labor.
Over time, tastes change. The fundamental taste that is not going to be satisfied is the desire for greater knowledge. In other words, this statement will never be true: “other things remaining constant.” Covenant-keepers can be sure that their taste for knowledge will never be satiated. It will never remain constant. It will accelerate. We will be ever-more curious about how the world works.
I have argued in Chapter 54 of the Teacher's Edition that this fact refutes the economists’ concept known as equilibrium. Equilibrium assumes omniscience on the part of mankind. It is inherently a demonic idea. With each increase in knowledge, there is always going to be an even greater increase in our awareness of the limits on our knowledge. The more we learn, the more we will learn about how little we know. This is an eternal condition.
Creativity is sequential. It takes time. This is the message of the first chapter of Genesis. Creativity after the final judgment will continue to be sequential. There will never be an end to the creativity of mankind. We will never get enough of anything. We will surely never get enough of everything. But we will not be discontented with our condition. That would mean being discontented with the fact that we are not God. That is Satan's discontent, and it will be forever. It is a horrendous curse. He will never get over it. Here, I am speculating, but I think what I am saying here is consistent with the Bible's limited revelation about Satan.
Scarcity points to eternity. That is because finitude points to eternity. Scarcity is basic to the human condition. The covenant-keeping human condition will extend beyond the grave. There is therefore a fundamental distinction between the scarcity imposed by finitude and the scarcity imposed by God’s curse in the garden. The second scarcity is going to be removed after the final judgment. The first form of scarcity will never be removed. Men will never become God.
The concept of cost is crucial in economic theory. The problem is this: humanistic economic theory does not offer a coherent, consistent theory of cost. The textbook definition sounds good: the value of the thing foregone. But this does not acknowledge the existence of a dualism between subjective value and objective value. This dualism is a permanent dualism in humanistic philosophy. In this section, I present the dualism as it applies to the concept of cost. Before I do this, I present the biblical solution to this dualism. It has to do with God’s imputation of value and cost.
1. The Theology of Cost
The word of God is given to men for many reasons, but one of these is to enable them to reduce their costs of economic action. This enables them to fulfill the terms of the dominion covenant with minimal expenditures of scarce economic resources. In other words, the word of God is given in order to prevent waste.
Because God is the sovereign Owner of the world (Psalm 50:10), it is understandable that He expects us to work efficiently as honest, hard-working, and smart-working stewards of His property. God’s revelation of Himself and His law-order is our primary cost-cutting device. This revelation comes from a wholly omniscient God who controls all events, yet it is divinely designed to match the capacities of man, a creature. God’s revelation fits the mind of man, even as it fits the total creation. It offers us a tool of dominion. Men are offered a capital asset that reduces the cost of the most expensive and crucial of all scarce economic resources: information. Revelation reduces information costs, and in doing so, it thereby frees up other scarce capital assets—time, effort, money—that otherwise would have to be expended in testing. In fact, God’s revelation offers us a way of action without having to test certain aspects of reality that are, by design, beyond the ability of man to test accurately. “The secret matters belong alone to the Lord our God; but the things that are revealed belong forever to us and to our descendants, so that we may do all the words of this law” (Deuteronomy 29:29). God’s written revelation frees us from the demonic pursuit of exhaustive knowledge—a knowledge that must be totally perfect if it is to be reliable, since any aspect of creation could conceivably influence the operation of any other aspect of creation. The self-proclaimed autonomous man must therefore master all of the universe in order to be confident concerning his mastery of any small fragment of it. The covenantally faithful man does not bear this epistemological burden. God is omnipotent, and He has provided him with the revelation of Himself and the rules of order necessary for prosperity and success in man’s enterprise of dominion.
There are costs associated with our choices. There are “real” costs, meaning objective costs, meaning costs imputed by God to each acting individual (Luke 12:48). God’s subjective (personal) imputation of cost is the equivalent of a truly objective cost. Every act of man therefore has eternal implications; every idle word must be accounted for on the day of judgment (Matthew 12:36–37). There is no escape from the objective costs of our actions. Nevertheless, there are also subjective costs imputed by acting men to their own and others’ actions. Men make choices in terms of imputations and estimations, concerning both the present and the future. They are constantly searching for better, less costly, more accurate ways of imputing costs and benefits to the choices that confront them. They act in order to benefit themselves as they interpret benefits. Sometimes they make accurate estimates despite universal opposition, as Caleb and Joshua did when they voted to go to war against the people of Canaan (Numbers 14). But they must make estimations and make decisions in terms of these estimations when confronted with choices over which they have the power of action.
2. Costs and Choice
I have argued that the judicial aspects of the dominion covenant are superior to the economic. Trusteeship is superior to stewardship. I have focused on responsibility. I have argued that the greatest benefit of the private property legal order is the tight connection between ownership and responsibility.
I have also argued that the Bible’s private property legal order leads to the free market economy. This moves the discussion from law to economics. There are many possible economic defenses of the free market economy, but none so strong, from a biblical point of view, as this one. The free market economy provides men with an institutional and legal framework for making choices in terms of each man’s expected benefits and each man’s expected costs. The free market economy closely links together choice, costs, and benefits. It makes each acting man responsible for his own actions in a direct fashion. It decentralizes the decision-making process, making possible the effective use of more and more specialized information—the division of intellectual labor. In other words, it allows each man to work out his own salvation (or damnation) with fear and trembling (Philippians 2:12b). It forces each man to bear the burdens of responsibility for his own actions. If he imputes accurately and plans successfully, then he reaps the rewards. If he fails in his task, then he bears the burden of failure. The “carrot and stick” both serve as motivational devices. The market provides a forum for testing the economic validity of his decisions, namely, price signals that can be used to estimate profit and loss. The subjective economic imputations of acting men, along with the registration of their actual decisions through a price system, combine to produce objective results. Men are taught to respect objective economic knowledge, even though this knowledge is the product of millions of subjective imputations. Their enterprises turn a profit or a loss. Their subjective imputations come face to face with hard, objective reality.
Another benefit of the free market is the rapid transmission of economic data. Men are taught to respond to the real world in an efficient manner, meaning rapidly. They are told whether or not they need to change their imputations and actions. They are told in a forceful manner: profits or losses. The faster they learn of their errors, the faster they are likely to alter their practices. The more forcefully the costs of their errors are registered, the faster they are likely to alter their practices.
Adam and Eve made the most expensive transaction in human history. We assess cost in terms of the most important or valuable use which we have to give up when we choose another economic (scarce) good or service. Cost is best defined as the most beneficial alternative which we must forego. [North, Genesis, ch. 11:D]
A cost is the highest-value thing that we must give up in order to enjoy something else. This is easy to say, but it is remarkably difficult to identify, especially if you have not read extensively in free market economic theory. Let us say that you want to buy an item for 20 one-ounce silver coins. You surrender the coins to a seller. You receive the item. This exchange cost you whatever those 20 coins would have bought. You presumably are richer than you were before the transaction. You own something of greater value to you than the 20 coins. If you decide immediately to sell the item, and the item, now used, will bring only 19 coins, the transaction has cost you one coin. Even if you do not think about selling the item, you should mentally deduct this value of this coin from the value of the item. Most people do not think about this expense, at least not for low-price items.
Perhaps this definition of cost is more easily understood by means of non-market transaction. When a man marries, he publicly swears not to love any other woman. She swears the same regarding him. He gives up a future choice; so does she. This act reduces to zero the God-given supply of other people eligible to marry. He understands this with respect to his permanent marriage costs. He decides that the price is worth it. But the value of the foregone opportunities is not all of the eligible women on earth. Rather, it is the value of the opportunity to marry one other woman who is eligible and who also might agree to marriage. As one of my professors said when I was age 20: “You marry the most available person when you are most vulnerable.” This is a highly limited supply at the point of highest demand. This results in a high price.
This definition of cost as the most valuable item foregone by your decision applies both to money and time. When we are children, the principle seems more applicable to money than to time. We think we have a lot of time. We think in terms of the money value of time, which is low. The marginal value of our money is higher than the marginal value of our time. As we grow older, this ratio begins to shift in favor of time. We think in terms of the time value of money. This is because it is far easier to gain more money than to gain more time. One of the marks of maturity is the shift from the mentality that thinks in terms of the money value of time to the time value of money. Someone who starts using a financial calculator early in life to make his economic decisions has a great advantage over someone who doesn’t.
Rich men accumulate money, but average life expectancy is close to the same. When you buy a life insurance policy, the premiums you pay will be the same for everyone in your age group, gender, and health lifestyle. The policy does not ask how rich you are. This is because, statistically, you will live as long as someone who is worth a hundred times what you are worth—or five times less. The rich man may be able to afford a far better physician than you can afford, but if you both get the same kind of cancer, the recommended treatments will be the same. If you both have health insurance, you will not be at a statistical disadvantage in terms of life expectancy.
At this point, I must introduce some seemingly arcane ideas regarding cost. I want you to understand the epistemological problems facing humanistic economists. Students are not introduced to these issues until graduate school, if then. I published this originally as the introduction to an appendix on my economic commentary on Exodus: Authority and Dominion. It is Appendix H: “The Epistemological Problem of Social Cost.”
1. The Cost of Reading
I begin here with a question: “What is it worth to you to finish reading this chapter?” You will never know for sure this side of the final judgment. This question is analogous to a far more important question in life, “What will it cost me to marry this person?” Both questions really mean: “What will I have to give up forever?” While the “foreverness” of the marriage decision is more obvious to us—“till death do us part” is a graphic covenant phrase—the “foreverness” of every decision is analogous, though not of the same order of magnitude.
When I choose this rather than that, I forever forfeit that, as well as all the little thats which might have been born later on. Perhaps I can change my mind later on, and buy that, but it will not be the same that which I choose not to buy today. It is a later that. Like a high school sweetheart whom you marry only after your first spouse dies, time has worked its changes on both of you. Everything that a person might have accomplished with that during the period of “this rather than that” is gone forever.
In making any decision, we must forfeit many things that might have been but will never be—indeed, a whole lifetime of things that might have been—but we never know exactly what. Every decision, moment by moment, is to some extent the proverbial fork in the road. We cannot predict the next eight moves and counter-moves in a chess game: moves that will become reality in part because of expectations regarding the next move. So, it is safe to say that we cannot know what life has in store for us because we do one thing today rather than another. If you read this chapter, it is because you think it will be “worth your time.” But what is your time worth? What is your time worth right now? It is worth whatever is the most valuable use to which you can put it. What is the cost of spending your time one way rather than another? The value of the most valuable use you must forego. So, what is your decision? “To read or not to read, that is the question!”
Decisions, decisions. Once our decision is made, we put the past irrevocably behind us. “The moving finger writes, and having written, moves on.” We then face the consequences of our decision. But these consequences—these costs—are imposed on us after the decision, not before. They are costs, but they are not costs that affected the original action. Expected costs affected the original action, not the actual costs that we in fact subsequently experience. Is this unclear? Ask the person who married the “wrong” spouse to explain the difference between expected costs and resulting costs.
2. Buchanan on Costs
James Buchanan, who won a Nobel Prize in 1986, in Costs and Choice (1969) distinguished between two kinds of costs: choice-influencing costs and choice-influenced costs (pp. 44–45). Choice-influencing costs are inherently unmeasurable by any scientific standard. The economist insists that, like beauty in the eyes of the beholder, these economic costs exist only in the mind of the decision-maker. They are subjectively perceived, and only subjectively perceived. And yet, and yet . . . there really are beautiful women and ugly women, and just about everyone can discern the difference, including the respective women (especially the women). But how is this possible? How can we deny the objective reality of beauty in the name of a “higher” subjective reality, when we know this? In order for our subjective appraisals to have meaning, there had better be an objective reality undergirding them. After all, two and two make four. Or do they? Does the objective answer depend on the subjective evaluator? The modern mathematician is not really sure. I discussed this in Chapter 4, Section E: “The Dualism of Mathematics.”
The costs that influence our decisions are always subjective evaluations of future potential consequences. Once we act, however, objective reality takes over, replacing our mental forecasts with cold, hard facts. (And yet, and yet . . . in order to be perceived by us, these cold, hard facts must first be warmed in the microwave ovens of our minds.) Thus, concluded Buchanan: “Costs that are influential for behavior do not exist; they are never realized; they cannot be measured after the fact.” The dream becomes reality, but the reality is always different from the dream, at least to this extent: the dream could not be measured; the reality can be. Supposedly. Maybe. We hope. Buchanan argued that the choice-influenced costs that are subsequently imposed on people as a result of some previous decision are in some sense objective and measurable—so many forfeited dollars of income, for example—but these real-world costs did not affect the original decision in any way. Yet even this doffing of the economist’s cap to objective cost theory may be overly respectful, given the presuppositions of modern subjectivist economics. The meaning of these objective, choice-influenced costs—e.g., accounting costs—must be subjectively evaluated by the person who personally bears them. A number in a ledger is supposed to convey accurate and economically relevant information in order for it to be effective as a summary of past events. The individual who pays an accountant thinks he is getting something for his money. What is he getting? A bunch of numbers on a page? Or information? The individual must interpret the significance of this information. There is no escape from subjectivism.
Consider your own situation. You are still reading this chapter. You still have faith. Let us consider a hypothetical possibility. With the time you spend reading this chapter (assuming you stick with it to the bitter or delightful end), you might be able to think of an investment strategy that would make you rich, but because of something you will read here, you will never think of it or have the courage to risk it. On the other hand, you may also avoid an investment that really would bankrupt you. Instead, you choose to read this chapter. Which would be the outcome? You cannot know for sure. You will never know on this side of the final judgment. You can only guess. So, what is the true cost of reading this chapter?
If we take seriously the modern economist’s discussion of costs and choices, we find our world disturbing. We never really know what our actions are costing us, assuming that it is true that there is no way to relate our subjective evaluations before we act with objective costs after we act. This disturbing lack of certainty can be relieved, however. Paul wrote: “We know that for those who love God, he works all things together for good, for those who are called according to his purpose” (Romans 8:28). But this suggestion is hardly helpful to the modern humanistic economist. We can of course sit around moaning and groaning about a past cost: the abandoned dream that might have come true. We can worry retroactively about what our decision has cost us. But the cost that really counted—“counted” is in fact misleading, since there was nothing objective to count—at the moment of our decision was imposed at that moment.
What is past is past. This is what the economist says of all decisions. Decision-makers are necessarily forward-looking. The past is gone forever. We must do the best we can with whatever we have today. This is the doctrine of sunk costs. This is not to say that we do not bear the objective costs that are imposed by a previous decision. We do. Even if we do not perceive these costs, we bear them. A madman may not understand that he is not Napoleon, but he bears the social costs of his delusion when he is placed in an insane asylum. There can be no escape from objective costs, any more than from subjective costs. But whether we accurately foresaw these costs or not, they are the result of that action, not its cause. These costs are borne by us objectively in history, yet they are always subjectively borne. One person may bear his burden in good cheer; another is utterly oppressed by what objectively (i.e., to an outside evaluator) appears to be the same magnitude of burden. Who is to say whose evaluation is correct? Only the omniscient God can do this, and His evaluation is not objectively measurable by the economist. This does not refute its existence. God imputes. God judges. God renders final judgment. There will be a day of reckoning—of counting and evaluating.
3. Pure Subjectivism
An exclusively subjectivist view of cost and choice can lead to some very odd conclusions. (So, for that matter, can any other exclusive line of human reasoning.) G. F. Thirlby followed the logic of the one-time decision and concluded: “Cost is ephemeral. The cost involved in a particular decision loses its significance with the making of a decision because the decision displaces the alternative course of action.” This is Buchanan’s view. Thirlby said emphatically that “cost figures will never become objective; i.e., it will never be possible to check whether the forecast of the alternative revenue was correct, because the alternative undertaking will never come into existence to produce the actual alternative revenue.”
What does this mean for the accounting profession? What does it do to the very concept of personal or corporate budgeting? He did not say, but he did not stop, either. Following the persuasive logic of subjectivism, Thirlby concluded that “The cost is not the things—e.g., money—which will flow along certain channels as a result of the decision; it is a loss, prospective or otherwise, to the person making the decision. . . . cost cannot be discovered by another person who eventually watches and records the flow of those things along those channels.” Then of what objective use are accountants? Why was the advent of double-entry bookkeeping such a revolutionary event in the history of civilization? He did not say.
Furthermore, what does such a view of budgeting do to the idea of the free market as a social institution for producing economic order—objective economic order? What does such a view do to the idea of the stock market, since money prices for shares are the means by which decision-makers evaluate the past performance of all other participants in the market? What does the price of a share of corporate stock have to do with expected future performance of that corporation’s management? What is the link, if any, between present share prices and future economic performance? How do we get from subjective value to objective share prices and back again? How do we preserve our capital? For that matter, how do we measure our capital? How can we bridge the gap between the world of purely subjective costs and objective market prices? Buchanan insisted: “Only prices have objective, empirical content. . . .” Then precisely what empirical content does a price possess or reveal, and how do we discover it or make effective use of it—subjectively and objectively, personally and socially? In short, what does an objective price have to do with individual subjective value? What is the economic meaning of a price—individually and socially, subjectively and objectively? This is the number-one epistemological problem that has beset modern economics since the 1870s. Modern economic theory rejects the idea of a God who imputes economic value authoritatively.
Buchanan made this statement: “Any profit opportunity that is within the realm of possibility but which is rejected becomes a cost of undertaking the preferred course of action.” But Buchanan neglected any consideration of the economics of a rejected opportunity that is not in fact—objective fact—within the realm of possibility. We normally call such an opportunity a loss. Wouldn’t avoiding a loss be a benefit of undertaking the preferred course of action? If the decision-maker’s first choice is to reject the objectively impossible (i.e., unprofitable) course of action for whatever reason, and also to reject the second, objectively possible, course of action for whatever reason, won’t he remain in the profit column overall? I do not want to press this line of reasoning too hard because it bogs us down too deeply in the philosophical problem of available and unavailable information, but we need to recognize at least the nature of the epistemological problem: if everything is completely subjective at the moment of decision, what does “the realm of possibility” have to do with anything? Maybe the decision-maker believes that he could achieve something great if he just had the courage of his convictions, when in fact he would have gone bankrupt. Is his true cost the forfeited unattainable greatness or the forfeited inevitable bankruptcy? If all costs at the time of his decision are purely subjective, then his cost must be the forfeited greatness he believed he would attain. This, clearly, is nutty—logical but nutty. So is any theory of cost and choice that is exclusively subjective.
The economist, no matter how hard he tries to tie human decisions exclusively to the action-taker’s subjective evaluations, cannot escape the bedrock realm of possibility. Possibility is his measuring rod for discussing cost, a “ruler” without which all economic discussion becomes theoretically impossible. On the other hand, no matter how hard he tries to make objective that realm of possibility, through probability theory and other statistical techniques, he cannot escape the subjectivity of the decision of the acting individual who is responsible for his actions. The economist needs—yes, needs—a scientific theory of cost that is both subjective and objective without being eternally dialectical. Such a scientific theory does not exist in humanistic theory.
For as long as individuals make choices, they will face scarcity. For as long as there is human action, men will face scarcity. There is no scarcity in hell (Luke 16), and there will be none in the subsequent lake of fire (Revelation 20:14–15). That is because no human action is possible in hell and the lake of fire. Men are not able to improve their conditions through voluntary exchange. Hell and the lake of fire are the only places in creation where men can escape scarcity. People will remain finite, but they will no longer be under the constraints of the dominion covenant. There will be no exit.
Scarcity today is cursed by God. It will not be cursed in the post-historical new heaven and new earth (Revelation 21, 22). But there will still be the scarcity that is associated with finitude. We are not omniscient, omnipresent, and omnipotent. God is. But God in His grace has given us tools of dominion that enable us to overcome steadily the curses of scarcity. To the extent that men conform themselves to God’s Bible-revealed laws, they will live in a society that progressively reduces the limits imposed by God’s curses. This is the biblical basis of the hope of economic growth.
In this chapter, I have described a few of the epistemological problems associated with evaluating costs and benefits. Humanists have no idea of a sovereign God who imputes meaning to our actions. This God also imputes costs and benefits to our actions. Because He is sovereign, His imputations are economically and judicially objective in history and at the final judgment. Because we are made in God’s image, we have some perception of these objective imputations. We can estimate costs and benefits. We are required to do this. “For which of you who desires to build a tower does not first sit down and count the cost to calculate if he has what he needs to complete it? Otherwise, when he has laid a foundation and is not able to finish, all who see it will begin to mock him, saying, ‘This man began to build and was not able to finish.’ Or what king, as he goes to encounter another king in war, will not sit down first and take advice about whether he is able with ten thousand men to fight the other king who comes against him with twenty thousand men? If not, while the other army is still far away, he sends a delegation and asks for conditions of peace” (Luke 14:28–30).
_______________________________
The complete manuscript is here: https://www.garynorth.com/public/department196.cfm