Updated: 4/13/20
Now then, prepare a new cart with two nursing cows that have never been yoked. Tie the cows to the cart, but take their calves home, away from them. Then take the ark of the Lord and place it in the cart. Put the golden figures that you are returning to him as a guilt offering into a box to one side of it. Then send it off and let it go its own way. Then watch; if it goes up on the way to its own land to Beth Shemesh, then it is the Lord who has executed this great disaster. But if not, then we will know that it is not his hand that afflicted us; instead, we will know that it happened to us by chance (I Samuel 6:7–9).
I have analyzed this passage in Chapter 13, "Theories of Causation," in my commentary on the historical books. The Philistines had a problem. They had defeated the Israelites. Their victory had come despite the presence of the Ark of the Covenant inside the Israelite camp. As a token of their victory, they brought the captured Ark inside the boundaries of Philistia. Every time the Ark was brought into a Philistine city, disasters followed. In Ashdod, the leaders put the Ark in the city’s temple in front of the image of the city’s deity, Dagon. This image was found the next day bowing before the Ark. The priests put it upright again. The next morning, it was found bowing to the Ark, but with its hands and head broken off. Meanwhile, people in the city were struck with hemorrhoids (I Samuel 5:1–6). They drew the correct conclusion: “When the men of Ashdod realized what was happening, they said, ‘The ark of the God of Israel must not stay with us, because his hand is hard against us and against Dagon our god’” (v. 7). The leaders decided that Gath should have the honor of being the residence for the Ark. They sent the Ark to Gath.
The people of Gath were immediately struck with hemorrhoids (v. 9). They sent the Ark to Ekron. The leaders of Ekron did not want the honor (v. 10). The Ekronites had figured out cause and effect here. “So they sent for and gathered together all of the rulers of the Philistines; they said to them, ‘Send away the ark of the God of Israel, and let it return to its own place, so that it does not kill us and our people.’ For there was a deathly panic throughout the city; the hand of God was very heavy there. The men who did not die were afflicted with the tumors, and the cry of the city went up to the heavens” (vv. 11–12).
We see here the speeding up of assessment and decision-making. In Ashdod, it took at least two days. In Gath, it took one day. The Ekronites knew what would happen even before the Ark entered the city. They all drew the same conclusion: the hand of God was on them, and the Ark was the reason. They all adopted the same policy: send the Ark somewhere else. Ekron’s leaders knew enough to recommend sending the Ark back to Israel. But the decision-makers hesitated. That would be an admission of defeat. It would mean that the military victory they had enjoyed was due to God, not to the strength of the gods of Philistia. The token of that military victory was the Ark itself. So, they waited another seven months (I Samuel 6:1–2).
The priests still refused to face the problem squarely. So, they hedged their bets. On the one hand, they recommended a trespass offering: five gold pieces fashioned in the shape of hemorrhoids, one for each city (I Samuel 6:17). That would publicly announce to God that they knew who was behind their specific affliction. Also to be included were golden mice (v. 18). On the other hand, they proposed a test. The test was the cart and the undomesticated cattle. Take the cart and the cattle to the edge of the nation. Let it loose. See where the cattle take it. Normally, the cattle would go home. If they went into Israel, the Philistines could then logically conclude that God had been behind all of their afflictions.
The priests still wanted to leave a theological escape hatch. If the Ark could be kept in the land safely, its presence would publicly testify to the victory of the gods of Philistia. The defeat of Israel would then not be seen by the Philistines as God’s judgment on Israel, with Philistia serving as His agent of wrath—a kind of backdrop to the history of God’s covenant with Israel. That was what Philistia was. The priests suspected this, which is why they designed the test. But they wanted a way out of this public admission of second-place temporary status in history. This way out would be determined by cattle.
Modern science uses the science of statistics to identify causation. In subatomic physics, probability replaces causation. For atomic physics and everything else, there is an endless epistemological battle between those who regard deviations from randomness as the test of causation vs. those who affirm logic as the source of causation. This goes back to the rival schools of pre-Socratic philosophy: Heraclitus (randomness) vs. Parmenides (logic). This debate has never been resolved.
The priests of Philistia adopted a version of randomness: a pair of milk cows. Their calves were separated from them. Normally, the cows would follow their calves. If the cows, which had never before been yoked, headed back across the border into Israel, then causation in this case was not chance-based. It was ordered by God. The cows would normally follow their calves. Unless their calves wandered into Israel, the cows would not wander into Israel. The test was rigged in favor of the gods of Philistia. The priests did not let the calves make the decision. Who knows? One might have stayed in Philistia, while the other went into Israel. That would be chance. Instead of flipping a coin—coins had not yet been invented—the priests could have let the calves decide the issue. The calves didn’t. God did.
Like loaded dice, like a rigged roulette wheel, or like marked cards, the test was rigged. It was stacked against the God of Israel. The priests talked chance, but they did not really believe in it. They believed in self-interest: in this case, the self-interest of a pair of cows. The test was designed to favor the cows’ self-interest. But, just in case God really was in charge this time, it would cost the nation some of its gold reserves. That was what happened. “The men did as they were told; they took two nursing cows, tied them to the cart, and confined their calves at home. They put the ark of the Lord on the cart, together with a box containing the golden mice and the castings of their tumors. The cows went straight in the direction of Beth Shemesh. They went along one highway, lowing as they went, and they did not turn aside either to the right or to the left. The rulers of the Philistines followed after them to the border of Beth Shemesh” (I Samuel 6:10–12).
The Bible is clear: there is no such thing as chance. There is providence, but there is no chance. There is no randomness. Especially, there is no impersonal randomness. There is a sovereign God who has a decree governing history, and who fulfills His decree predictably. But this predictability is perfect only in the eyes of God. He imputes perfection to His decree by His sovereignty. Men cannot do this. Men are not God. They are not omniscient. They do not understand all of the facts of the universe. But they do understand some things. The Bible is clear on this: “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). This is an easy verse number to remember. Do not forget it.
Men want to believe that they live in an orderly universe. They want to believe that some men can discover the laws of causation that govern the universe. If such laws exist, and if men can discover them, then the rest of humanity can pursue their individual goals with some degree of legitimate hope of achieving them.
Beginning in the fourteenth century in the West, mathematicians began to discover patterns in men’s lives that can be described mathematically. This was the origin of statistics. This offered new hope to men that they could achieve greater predictability in their lives. This would protect them from disasters. It might also enable them to succeed through an understanding of causation. It was not until 1662 that statistics began to be used systematically for greater understanding. Wikipedia reports: “The birth of statistics is often dated to 1662, when John Graunt, along with William Petty, developed early human statistical and census methods that provided a framework for modern demography. He produced the first life table, giving probabilities of survival to each age. His book, Natural and Political Observations Made upon the Bills of Mortality, used analysis of the mortality rolls to make the first statistically based estimation of the population of London.” This was a Western discovery.
1. Insurance and Risk-Sharing
From early days, men who were involved in various forms of shipping recognized that they could reduce the threat of total loss by coming to agreements with each other regarding the transfer of risk. A group of shippers agreed that if one or more of their ships went down, they would be rewarded by the profits of the other shippers. They were willing to take a reduced rate of profit from the uncertainties associated with shipping in order to decrease their risk of loss. Ancient Chinese traders used such arrangements. So did the Babylonians. The code of Hammurabi mentions such arrangements.
Ancient shippers realized that there was no way to predict a rate of loss associated with shipping when only a few ships were involved. But if a larger group of ships was involved, then risk could be shared among the owners. There would be sufficient statistical predictability of the contracts to reduce the risk of total loss from a storm or piracy.
These arrangements became far more widespread in late medieval and Renaissance shipping arrangements in the West. Shipping insurance became more predictable. The mathematics of loss enabled shippers to reduce the likelihood of major disasters destroying their wealth. This understanding became widespread among Western European shippers no later than the thirteenth century. Such arrangements were condemned by the Pope as usurious. The first known insurance contract dates from Genoa in 1347. In the next century, maritime insurance developed widely.
The statistics of insurance has been one of the great discoveries in the history of man. It has especially favored the West. The discovery of double-entry bookkeeping and the statistics of insurance were made at about the same time. These discoveries greatly benefitted the development of Western business techniques.
2. Benefits to the Middle Class
Insurance allows the pooling of risk. Insurance is a way for individuals to convert economic uncertainty to risk. There is no way to deal statistically with the uncertain events of a person’s life, but it is possible to deal statistically with risk-based events in life, as long as a large enough number of insured individuals is involved. This has enabled middle-class people and even poorer people to gain the benefits associated with great wealth. Consider fire insurance. A fire can be devastating financially. A family has most of its wealth tied up in its home. A very rich person can suffer the loss of his home and afford to rebuild. This is not possible for people who are not exceptionally rich. So, a form of loss that was economically devastating throughout history can be mitigated through fire insurance policies. The first policies were sold in 1676 in Hamburg.
The statistics of insurance have been found to prevail in many areas of life. This has mitigated the effects of major losses in the lives of families that have been able to afford insurance policies. This has advanced dominion remarkably. The setback associated with a devastating loss can be mitigated by the payment of money by an insurance company. People can hedge against major setbacks in their lives. They are willing to accept reduced discretionary income in order to protect themselves from catastrophic losses.
The development of insurance was made possible by developments in mathematical application. But the main source of insurance contracts has been the free market. The mathematical techniques associated with insurance coverage have spread throughout the economy as a result of profit-seeking activity on the part of entrepreneurs of insurance. Most of the companies’ returns have been the result of the sharing of risk. There is no way to know whether a particular insurance company is going to survive and prosper. Survival is therefore an aspect of uncertainty, and therefore an aspect of entrepreneurship. But the insurance industry as a whole is highly likely to survive almost any economic setback. This is because the income of the companies is based on risk-sharing. There are underwriters who reduce the risk of certain kinds of policies across multiple companies.
Insurance’s great benefit is this: it makes our lives more predictable. The disasters of life strike us down, but they do not strike us down with the same intensity that they did prior to the discovery of insurance. The personal catastrophes in our lives are not predictable, but our long-term ability as individuals to recover from these catastrophes is made less expensive through insurance.
We want to reduce the uncertainties of life. There is no program to achieve this. Uncertainty is an aspect of Deuteronomy 29:29. As a fall-back position, we want to reduce the impact of the negative uncertainties of our lives. We have found ways of mutually shifting statistical uncertainty to others, which converts the economic effects of uncertainty to risk.
Only in 1921 did the nature of this arrangement become part of a conceptual interpretation of statistics. In his classic book, Risk, Uncertainty, and Profit, youthful economist Frank H. Knight made a distinction between uncertainty and risk. Risk has to do with statistically predictable outcomes. These predictable outcomes are the basis of all insurance contracts. In contrast, uncertainty is not predictable, statistically speaking. It is not possible to create a profitable insurance industry by writing insurance policies on uncertain events. Such events have no probability. Knight used this analysis to distinguish between insurance and entrepreneurship. Entrepreneurship has to do with uncertainty, not risk. Entrepreneurial profit is the result of statistically unpredictable outcomes.
Humanistic economic theory explains the success of insurance in terms of cosmic impersonalism and chance. Economists see the universe as grounded in chance, yet they also see the universe in terms of unbreakable law. Once again, it is Heraclitus vs. Parmenides. The fusion of cosmic indeterminism with cosmic determinism in the form of insurance contracts cannot be explained in terms of humanistic presuppositions regarding cosmology. But the enormous success of these contracts has not been in any significant way inhibited by the lack of an explanation.
3. Gambling vs. Entrepreneurship
Gambling is an ancient practice. Men place their wealth on the line. They do so in games of chance, which seem to be impersonal. Nevertheless, some gamblers believe in luck, which is not random. They speak of lady luck, as if luck were personal. Other gamblers believe in fate, which also is not random. Gamblers understand fate both personally and impersonally. This perpetual dualism between luck and fate is common to every society. Men want to explain the seemingly coherent aspects of causation in the universe, but they do not wish to invoke a sovereign God. That would interfere with their own claims of sovereignty. They would rather be ruled by luck or fate than by a personal God in terms of His decree.
Gambling is not the same as entrepreneurship. Gambling is part of a zero-sum game. The winners benefit at the expense of losers. The game is played for the sake of excitement. It does not reduce uncertainty in life. It is not an example of uncertainty in life. The uncertainties of life are inescapable. We do not have the ability to predict uncertainty in our lives. In contrast, gambling is consistent with the laws of statistics. It offers no benefit to society, other than the thrill of winning and losing. Rothbard has summarized the difference between gambling and entrepreneurship.
It is not accurate to apply terms like “gambling” or “betting” to situations either of risk or of uncertainty. These terms have unfavorable emotional implications, and for this reason: they refer to situations where new risks or uncertainties are created for the enjoyment of the uncertainties themselves. Gambling on the throw of the dice and betting on horse races are examples of the deliberate creation by the bettor or gambler of new uncertainties which otherwise would not have existed. The entrepreneur, on the other hand, is not creating uncertainties for the fun of it. On the contrary, he tries to reduce them as much as possible. The uncertainties he confronts are already inherent in the market situation, indeed in the nature of human action; someone must deal with them, and he is the most skilled or willing candidate. In the same way, an operator of a gambling establishment or of a race track is not creating new risks; he is an entrepreneur trying to judge the situation on the market, and neither a gambler nor a bettor. (Man, Economy, and State, 8:9)
The innovations associated with insurance are the result of contracts. Contracts are part of a well-developed program of reducing unpredictability in our lives.
The biblical model for a contract is a biblical covenant. The four major covenants are these: individual, family, church, and state. The final three agreements are made between individuals and under God. They are sealed by a self-maledictory (cursing) oath. Remove the self-maledictory oath, and we have a contract.
1. Interdependence
A contract is an agreement between individuals or organizations in which each party agrees to perform certain tasks. It is an aspect of the division of labor. Each party to the contract becomes dependent on the performance of the other. There is an inescapable interdependence in all contractual relationships. We become more dependent on others as a result of contracts.
The reason why we enter into these contracts is that we fear becoming totally dependent on ourselves as individuals. We recognize our own limitations. We understand that our inability to perform a particular task in an efficient way is a threat to our wealth, security, and mental well-being. We seek out others who will agree to perform these tasks in exchange for money or in exchange for the performance of other tasks for which we are better equipped.
A contract can be legally binding or not legally binding. Generally, a contract is legally binding, but people enter into agreements with each other that are not enforceable in a civil court. In societies in which there is widespread trust, the use of verbal promises, which are contracts, is much more widespread. People do not want to enter into agreements with each other if there is a strong probability that in order to settle a broken agreement, the participants in the contract will have to go before a civil judge.
2. Predictability
There is a phrase in the English language: “My word is my bond.” This is an assertion of personal reliability. Put differently, it is an assertion of personal predictability. Somebody who makes this assertion is claiming for himself moral superiority to people who enter into a contract or agreement, and then break their word. Again, the model of this is a covenant. The most important section in the Bible on the rules governing covenantal vows is Numbers 30. Most of the chapter is devoted to the vows taken by women. It begins as follows: “Moses spoke to the leaders of the tribes of the people of Israel. He said, ‘This is what the Lord has commanded. When anyone makes a vow to the Lord, or swears an oath to bind himself with a promise, he must not break his word. He must keep his promise to do everything that comes out of his mouth” (Numbers 30:1–2). [North, Numbers, ch. 16] Solomon wrote: “When you make a vow to God, do not delay to do it, for God has no pleasure in fools. Do what you vow you will do. It is better not to make a vow than to make one that you do not carry out. Do not allow your mouth to cause your flesh to sin. Do not say to the priest's messenger, ‘That vow was a mistake.’ Why make God angry by vowing falsely, provoking God to destroy the work of your hands?” (Ecclesiastes 5:4–6). [North, Ecclesiastes, ch. 16]
A contract does not have the same degree of authority that a covenant does, but the attitude that people have towards covenants should also prevail with respect to contracts. A person who fears God greatly, and who fully understands that a promise that has come out of his mouth or into a written contract must be honored, is a more reliable partner in a contract. His performance will be more predictable. Therefore, someone else who becomes dependent on this person by transferring responsibility to him in a contractual arrangement does not bear the same degree of uncertainty that is associated with a contractual arrangement with someone who does not fear God or man. Such a person is not trustworthy. He is predictably unpredictable. He is more likely to default on the terms of the contract, which increases the expense of the other partner in fulfilling the obligation associated with the contract.
Individuals enter into these contracts because they want increased predictability in their lives. They want to become more confident about the outcomes of their work. They recognize what Ecclesiastes recognized: “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. If two lie down together, they can be warm, but how can one be warm alone? One man alone can be overpowered, but two can withstand an attack, and a three-strand rope is not quickly broken” (Ecclesiastes 4:9–12). [North, Ecclesiastes, ch. 14] It is better to share the profits of a venture with someone who is reliable in order to increase the predictability that there will be profits in the venture.
An inescapable aspect of all forms of economic theory is this: a theory of incentives. The question of incentives is ultimately the question of final judgment. There will be winners and losers. The gospel is based on an assumption: individuals wish to avoid permanent negative sanctions, and they also wish to gain the benefits of permanent positive sanctions. Basic to all covenantal thought is the issue of sanctions: point four of the covenant.
Covenant theology does not assert that every individual pursues his individual self-interest. There is such a thing as covenantal blindness. Individuals self-consciously and willfully adopt an outlook that is suicidal. Solomon wrote: “Now, my sons, listen to me, for those who keep my ways will be blessed. Listen to my instruction and be wise; do not neglect it. The one who listens to me will be blessed. He will be watching every day at my doors, waiting beside the posts of my doors. For whoever finds me, finds life, and he will find the favor of the Lord. But he who fails, harms his own life; all who hate me love death” (Proverbs 8:32–36).
Without a theory of sanctions, free-market economic theory could not exist. From the days of Adam Smith until today, economists have assumed that individuals respond in a predictable way to the expectation of sanctions: positive or negative. The structure of free-market economic theory is based on the doctrine of self-interested behavior. The theory is this: self-interested personal behavior leads to predictable behavior, and predictable behavior becomes part of a process that leads to increased per capita wealth. Self-interest within the legal framework of private ownership is the source of the wealth of nations, according to Smith.
The logic of economic theory is this: “if . . . then.” If there are positive sanctions associated with individual performance, then there is greater likelihood, meaning greater predictability, of positive outcomes. This theory does not assume that people are machines. They can make decisions that are not consistent with their personal self-interest. They can make mistakes. But, despite all of the mistakes, and despite all of the uncertainties of human behavior, a system of incentives increases the predictability of individual behavior and therefore also corporate behavior.
In the case of the negative sanction of bookkeeping losses, individuals and institutions that do not satisfy customer demand find that their losses increase. This leads to their reduced influence in the economy. Their consumption of scarce resources in the quest for profits will be reduced. This frees up scarce resources for other entrepreneurs to purchase in their quest for profits. This increases efficiency. That is to say, it reduces waste.
There is therefore a twin pattern of causation in the economic realm. There is the pattern produced by positive economic sanctions. There is also the pattern produced by negative economic sanctions. Successful entrepreneurs increase their wealth. They increase their control over scarce economic resources. They put these resources to use in order to benefit paying customers. Unsuccessful entrepreneurs experience the opposite effects. The predictability of outcomes is greater under the conditions of a private property legal order than under all rival legal orders. This predictability is the result of two factors. First, individuals in a private property legal order are allowed to retain the fruits of their labor. They become personal beneficiaries of their own successes. There is predictability between success as determined by paying customers and increased individual wealth. This predictability is an incentive for individual entrepreneurs to meet the demands of customers with a minimal expenditure of scarce economic resources. They become owners of this residual: the difference between revenues and costs of production. Second, there are negative sanctions for individuals who make mistakes. They suffer losses. This removes their influence in the market for capital goods, labor, and raw materials.
Entrepreneurship deals with uncertainty. In doing so, successful entrepreneurship reduces the impact of uncertainty in the lives of consumers. Consumers can be confident that, when they go to a supermarket, or they seek to order something online, they will be able to find what they wish to buy. They do not have to spend time forecasting what they are likely to want to purchase a week from now or a year from now. They are confident that the market process will predictably produce sellers who are willing to sell them what they want at a price they are willing to pay. As society has grown more complex as a result of economic growth, the predictability of the market process has increased. Individuals have more choices as they grow richer, and they are able to find sellers who are willing to satisfy their demand at prices they are willing to pay.
Men seek greater predictability. They do not wish to be tossed around by the inherently unpredictable forces of history. They seek ways to make the outcomes of their decisions more predictable and also more favorable. They are self-interested actors.
The Bible offers a theory of predictability: the decree of God. The universe is not random. It is personal. God is the Creator and Sustainer of our lives. The Bible places Bible-revealed ethics at the center of this predictability. We are to obey His laws. “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).
The development of insurance in the West has been one of the great benefits of what was originally a Christian view of cause-and-effect. Men believed in a sovereign God who sustains the universe. They believed in the power of the human mind to discover laws of causation that apply both to the heavens and to human affairs. They saw this ability of mankind in terms of the grace of God.
Humanism has borrowed this worldview from Christianity. It has developed theories of causation that are not dependent upon concepts of God’s creation, providence, and decree. But humanism has not gone beyond the insights of Parmenides and Heraclitus. The unbreakable laws of the cosmos are in constant conflict with the inherently random processes of history. Humanists have no theory to integrate the two explanations. They go back and forth in a dialectical fashion, generation after generation.
Christian economics offers a theory of causation that is based on the pursuit of self-interest. Men are warned to choose life (Deuteronomy 30:15–20), which is life in the providence and grace of God. The ultimate self-interest is participation in the kingdom of God (Matthew 6:33). [North, Matthew, ch. 15] This offers predictable success. The basis of this success is service to God and man. This is not taught by humanistic economic theory.
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