Updated: 4/13/20
But Jesus called them to him and said, “You know that the rulers of the Gentiles lord it over them, and their great ones exercise authority over them. It shall not be so among you. But whoever would be great among you must be your servant, and whoever would be first among you must be your slave [servant], even as the Son of Man came not to be served but to serve, and to give his life as a ransom for many” (Matthew 20:25–27).
In every society, there are multiple hierarchies. Without hierarchies, it would be impossible for private owners or civil magistrates to assign leadership within any institution. It would therefore be impossible to assign legal and moral responsibility to decision-makers within these institutions. According to the Bible, the basis of all authority is God’s delegation of responsibility, meaning the legal right to make decisions, to specific people. He holds them accountable to Him. This is clear in the parable of the talents (Matthew 25:14–30). [North, Matthew, ch. 47] This is the second parable leading up to Jesus’ description of the final judgment. (The first parable was the parable of the ten virgins.)
Every society benefits from the division of labor. This begins with the family. It extends to all other social arrangements. Here is the biblical principle that undergirds the division of labor. “Two are better than one, because they have a good reward for their toil. For if they fall, one will lift up his fellow. But woe to him who is alone when he falls and has not another to lift him up!” (Ecclesiastes 4:9–10). [North, Ecclesiastes, ch. 14]
Rulers exercise leadership as people who are in a chain of command. A leader has the authority to bring institutional sanctions, both positive and negative, on those people who are under his jurisdiction (juris = law; diction = spoken). He gains their cooperation in institutional ventures by means of this authority to reward and punish. This assumes that people respond predictably to incentives and disincentives. This assumption is fundamental to the science of economics. The representative biblical models are heaven and hell, which are temporary. These reflect the final sanctions: the new heaven and new earth (Revelation 21, 22) and the lake of fire (Revelation 20:14–15). These are eternal.
A civil ruler gives orders. Subordinates are supposed to respond predictably. Jesus understood this. The story of the Roman centurion with the sick servant illustrates this.
When he had entered Capernaum, a centurion came forward to him, appealing to him, "Lord, my servant is lying paralyzed at home, suffering terribly." And he said to him, "I will come and heal him." But the centurion replied, "Lord, I am not worthy to have you come under my roof, but only say the word, and my servant will be healed. For I too am a man under authority, with soldiers under me. And I say to one, 'Go,' and he goes, and to another, 'Come,' and he comes, and to my servant, 'Do this,' and he does it." When Jesus heard this, he marveled and said to those who followed him, "Truly, I tell you, with no one in Israel have I found such faith" (Matthew 8:5–10).
The centurion was a military commander. He exercised authority. His subordinates obeyed him. He recognized that Jesus had similar authority over nature. Jesus could heal at a distance. He had supernatural power. The centurion recognized that he was under Jesus’ authority regarding the fate of his servant. He invoked the language of subordination as a way to persuade Jesus to speak a word of power on his behalf and also on his servant’s behalf. This was a request, not a command. Jesus healed the servant on this basis. This was all about hierarchy. The centurion wanted Jesus’ cooperation. He knew that he could not gain this by speaking his own word of power. He also recognized that Jesus was unlikely to be motivated by an economic offer. He knew he could not buy Jesus’ cooperation with money. So, he asked for a favor: grace. He admitted to Jesus that he did not deserve this favor. In this respect, he was like the Canaanite woman.
And Jesus went away from there and withdrew to the district of Tyre and Sidon. And behold, a Canaanite woman from that region came out and was crying, “Have mercy on me, O Lord, Son of David; my daughter is severely oppressed by a demon.” But he did not answer her a word. And his disciples came and begged him, saying, “Send her away, for she is crying out after us.” He answered, “I was sent only to the lost sheep of the house of Israel.” But she came and knelt before him, saying, “Lord, help me.” And he answered, “It is not right to take the children's bread and throw it to the dogs.” She said, “Yes, Lord, yet even the dogs eat the crumbs that fall from their masters' table.” Then Jesus answered her, “O woman, great is your faith! Be it done for you as you desire.” And her daughter was healed instantly (Matthew 15:21–28).
She also was pleading for an unearned gift. She verbally acknowledged her subordination to Jesus. She knew that she could not command Him. She also knew that she could not buy His healing powers. So, she begged. [North, Matthew, ch. 34]
This raises a practical question: “How can we gain the cooperation of others?” Jesus taught that His cooperation was not available by means of an earthly chain of command. No one could order Him around. Two gentiles recognized this: the centurion and the Canaanite woman. They both needed something that was not commercially available: supernatural healing. Neither power nor money would suffice. They became supplicants. But this strategy cannot work in the marketplace. No one without civil authority can lawfully order another person to do something for him. This independence from coercion is a crucial aspect of political freedom.
Smith is famous for two passages: his description of the pin makers and his explanation of the motivation for voluntary exchange. The first passage is found in Chapter 1 of The Wealth of Nations. Without capital and without cooperation, common pin makers would have to become highly skilled craftsmen with low individual output. People remember this example. It has proven to be unforgettable. But the more fundamental question arises: “How can the cooperation of pin-makers be secured?” They are individual producers. Smith answered this question in his other famous passage. He wrote of the need of every individual for cooperation. Read it carefully.
In civilized society he stands at all times in need of the co-operation and assistance of great multitudes, while his whole life is scarce sufficient to gain the friendship of a few persons. In almost every other race of animals, each individual, when it is grown up to maturity, is entirely independent, and in its natural state has occasion for the assistance of no other living creature. But man has almost constant occasion for the help of his brethren, and it is in vain for him to expect it from their benevolence only. He will be more likely to prevail if he can interest their self-love in his favour, and shew them that it is for their own advantage to do for him what he requires of them. 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. Nobody but a beggar chooses to depend chiefly upon the benevolence of his fellow-citizens. Even a beggar does not depend upon it entirely. The charity of well-disposed people, indeed, supplies him with the whole fund of his subsistence. But though this principle ultimately provides him with all the necessaries of life which he has occasion for, it neither does nor can provide him with them as he has occasion for them. The greater part of his occasional wants are supplied in the same manner as those of other people, by treaty, by barter, and by purchase. With the money which one man gives him he purchases food. The old clothes which another bestows upon him he exchanges for other clothes which suit him better, or for lodging, or for food, or for money, with which he can buy either food, clothes, or lodging, as he has occasion (I:II:2, bold face added).
Smith’s central idea is this: the coordination of individual work through the market’s process of voluntary exchange leads to the highest output and therefore the greatest wealth, both individual and national. Maximized production does not come from central planning, which rests above all on incentive of fear of the civil government. Smith criticized the economics of seventeenth-century British mercantilism, which defended the use of state power to coordinate foreign trade.
What humanist economists have ignored, as have Christian defenders of state intervention in the name of biblical ethics, is this: Smith’s defense of the free market was an extension of Jesus’ principle of Christian rulership through servanthood. “But whoever would be great among you must be your servant, and whoever would be first among you must be your slave [servant]” (Matthew 20:26–27) [North, Matthew, ch. 41] The free market’s incentives are based on mutual service, not coercion or begging. Every form of state planning relies on the threat of coercion. Coercion generates resistance by producers, who see a part of their output extracted by the state with nothing provided in return.
A popular defense of Christian economic ethics rests on a combination of charity and begging. This arrangement limits the scope of cooperation by limiting the motivation for cooperation. Generosity ceases when a donor runs out of funds. He must then replenish the funds through productivity. A system of giving to the poor and needy in this outlook is conceptually separate from the production process, unlike Smith’s concept of joint production through mutual exchange. This system of exchange based on gifts is asymmetric. On the one hand, few people donate. On the other hand, the arena of people who want free money or free goods and services is huge. So, non-profit exchanges are sporadic and infrequent. In contrast, the number of exchanges between people in a profit-seeking market is beyond calculation. Exchanges are continual. People are being satisfied constantly. They have an incentive to repeat exchanges with others whose performance they trust. The free market is international and continual. It involves the vast majority of adults.
Jesus offered the solution to the problem of social coordination: the principle of service. But He did not discuss the correlation of this principle with the price system in a free market. This correlation is the most important insight of modern economic theory. Adam Smith deservedly gets credit for it. This was a major conceptual breakthrough, despite its simplicity. It is not inconsistent with Jesus’ teachings on service. It is an extension of this principle in the area of market exchange.
I am making what might be regarded as an outlandish statement here. I am saying that this is the key insight of free market economists. This insight is the fundamental insight that separates all rival systems of social ethics and personal ethics from the logic of economic theory. I am aware of no previous philosophical or religious system that proclaimed that the best way to achieve social coordination and thereby achieve individual goals is by means of seeking profitable exchanges.
Military brotherhoods and other secret societies are based on a strict distinction between members and nonmembers. There is always a system of hierarchical control in every brotherhood that is based on either an oath to the organization or on a concept of shared risk, especially the risk of death. Religious organizations, in contrast, rely more heavily on the doctrine of love, which implies self-sacrifice on behalf of others. This can also be present in the military hierarchy, but the focus of the military hierarchy is victory on the battlefield, not a peaceful life based on mutual service. There is always a hierarchy in the religious organizations. There have to be ways of settling disputes, which are inevitable in a sinful world. The same is true of families. Families are based on love, which implies sacrifice on the part of parents for their children. Then, when the parents are feeble, the family rests on the sacrifice of children to the parents. There is a form of exchange, but it is non-monetary. It is not normally based on contract.
Smith appealed to self-love. By self-love, he meant self-interest. This is what made his analytical system unique. This is the key to all free-market economic theory. This is what distinguishes free-market economic theory from all other forms of social organization. It is not based on coercion. It is not based on love of the brethren. It is self-consciously based on self-love.
What makes possible the widespread social division of labor is a system of sanctions that is applied by the marketplace: profit and loss. Institutionally, this is not a hierarchical system. Conceptually and operationally, it is. Consumers are at the top because they possess the most marketable commodity: money. This is why there really is such a thing as consumer authority. It is applied individually. There is no coercion involved. There is no chain of command that is governed by a system of rules. There is only one rule: high bid wins. That single rule is the basis operationally of the entire auction process.
The tremendous advantage of this system is that it operates without personal feelings of love. Love is always in short supply. We cannot increase our quantity or quality of love by means of the auction principle of high bid wins. The emotional connection associated with love is highly limited. This means the division of labor is limited within an organization that is governed by the principle of sacrificial love of others. The market, in contrast, is governed by the principle of self-love. We seek our own goals. We pay the price for seeking our goals. We bear the responsibilities associated with achieving our goals.
This motivation is consistent with the temporary biblical sanctions of heaven and hell, and also with the permanent sanctions of the new heaven and new earth and the lake of fire. Christians are highly self-interested with respect to where we will spend eternity. I am unaware of any major theologian within Christian orthodoxy who warns Christians not to be self-interested with respect to where they will spend eternity. On the contrary, they are highly focused on this individual goal. Jesus built the Christian church on these twin doctrines. They were not taught in the old covenant.
Jesus was clear that we have to love God above all else. We must seek first the kingdom of God and his righteousness, and all other positive sanctions will be added unto us (Matthew 6:33). [North, Matthew, ch. 15] We are not to take advantage of other people’s weaknesses. This is also consistent with the Mosaic covenant, which imposed a system of morally compulsory loans at zero interest to poor brethren in the faith (Deuteronomy 15). [North, Deuteronomy, ch. 36] Nevertheless, there is nothing in the gospel that prohibits efficient service to others that produces a profit. The question is this: “What is your ultimate motivation?” If it is ultimately self-love at the expense of the love of God, then it is a suicidal impulse. This is the religion of mammon. But when people become wealthy on the basis of efficient service to consumers, which enables consumers to achieve their goals less expensively, they should not have moral qualms about their wealth. Their wealth is in serving others.
Jesus was clear that the basis of success in life is service to others. He made it clear that the hierarchical authority of the church should be based on service to others, not based on the goal of personal power. There is great responsibility associated with the possession of power. Rulers are held to a higher level of accountability than the ruled are. They have greater responsibility.
There is no escape from personal responsibility. This is why Paul argued that church elders should receive payment for their services. They have great responsibility. They have to focus their time on leadership. This service has to be paid for. “Let the elders who rule well be considered worthy of double honor, especially those who work with the word and in teaching. For the scripture says, ‘You shall not put a muzzle on an ox while it treads the grain’ and ‘The laborer is worthy of his wages’” (I Timothy 5:17–18). The criteria for exercising rulership in the church are rigorous (I Timothy 3). A church officer should not be a seeker after money. “He must not be addicted to wine, not a brawler, but instead, gentle, peaceful. He must not be a lover of money” (I Timothy 3:3).
The general principle of service leads to an elevation of authority. It applies in every area of life. It applies in the family. But every institution should be governed by the general principle of advancing the kingdom of God. No institution is autonomous. No institution should be governed primarily by the goal of increasing its authority irrespective of its service to those under its authority, who impute legitimacy to it.
The supreme advantage of the free market as a form of social organization is this: it harnesses the creativity of people with rival worldviews. The tremendous potential for personal wealth, influence, and lifestyle that the market offers to entrepreneurs persuades them to sacrifice for others who do not share their views of the way the world works and ought to work. They become servants of others despite the fact that they may care little for others. The result is long-term per capita economic growth on a scale never before achieved in history.
The free market has transformed the world as no other institution ever has in a shorter period of time: about two centuries. The economic world of 1800 was a world of the ancient past. It was closer to the world of 1800 B.C. than it was to our world. The vast increase in the division of labor and specialization that has taken place since 1800 has changed the world forever. It was the free market that accomplished this. It was not the church. It was not the state. It was not the family. However, the free market is dependent socially, judicially, and morally on the church, the family, and the state. It cannot function without justice. It cannot spin justice out of its own entrails, the way that a spider spins a web. But, as a means of social transformation, nothing has compared with the free market as an engine of positive transformation in as short a period of time. The principle of service is the basis of success in the market process. But it is implemented more by the principle of self-love than the principle of love for others. This constitutes the most important revolution institutionally in the history of man since the destruction of the temple in A.D. 70. I hope that this multi-volume book provides the intellectual, moral, and spiritual framework to explain and justify this transformation of the world.
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