Foundations of Economics

A Christian View

Ritenour

• Publisher: Wipf and Stock
• Year: 2010
• ISBN:
  9781498271325
• Topic: Théologie et religion
• Subtopic: Religion

Foundations of Economics: A Christian View is an introduction to economics from an explicitly Christian perspective. It maintains that there is no conflict between Christian doctrine and economic science, properly understood. Therefore, Foundations of Economics has three goals: to demonstrate that the foundations of economic laws are derived from a Christian understanding of nature and humanity; to explain basic economic principles of the market economy and apply them to various economic problems, such as poverty and economic development; and to show the relationship between Christian ethics and economic policy. Foundations of Economics: A Christian View accomplishes these goals by rooting the fundamental principles of human action in the Christian doctrines of creation and humanity, and integrating them with the Christian ethic of private property. This volume explains the relevance of economics for fulfilling the cultural mandate set forth in the first two chapters of Genesis, by demonstrating how economics can help us in our task to be fruitful and multiply and have dominion over the earth, without spoiling creation, starving to death, or descending into a barbaric struggle for survival.

1

The Biblical Foundations of Economics

Perhaps the question adults ask each other more than any other when they first meet is, “What do you do?” When I respond, “I’m an economist,” more often than not, I get one of two requests. I either receive a feeble plea to help someone balance their checkbook, or I am asked to supply the inside scoop on what the stock market is going to do in the near future. Both of these requests belie ignorance regarding what is economics.

The term economics is itself derived from the Greek word oikonomikos which originally meant relating to household management. To the ancient Greek, then, economics really did involve balancing the checkbook, or at least keeping track of the family budget, closer to what we used to call home economics.

However, the body of knowledge we today call economics is a social science, not household management theory. It is social in that it focuses on interpersonal action. It concerns itself with people . . . who need people.

Economics is a science. A science is “a systematic arrangement of the laws which God has established, so far as they have been discovered, of any department of human knowledge.”1 Economics is not just the regurgitation of singular, unrelated facts about how people behave. It is a body of thought that provides a number of principles that we can apply as we seek to answer important questions like, what will happen if we raise the minimum wage, decrease income taxes, put price controls on prescription drugs, or bail out insolvent mortgage companies.

A science involves the systematic arrangement of facts and truths. Science helps us make sense of the plethora of facts we experience, and by discovering the operation of general laws, science helps us arrive at true solutions to problems we face in the world. Note also that a science is not about arranging a body of opinions or suggestions, but a body of truths so that we show the operation of real laws that are in force in the world in which we live. When I was in college, I many times heard my friends sympathetic to the welfare state bemoan that while communism is great in theory, it is a pity that it does not work in practice. To the contrary, if a certain economic policy is bad in practice, it usually means that it is bad in theory. Not only did communism fail miserably in practice, it did so precisely because it is a failure theoretically. Austrian economists Ludwig von Mises and Frederick Hayek demonstrated the theoretical failure of socialism as far back as the 1920s and 1930s, but few wanted to listen.2 Although they had ears to hear, they heard not. It took seventy years of economic stagnation, culminating in the fall of the Soviet Union, for many scholars to take a second look at the arguments of Mises and Hayek. The object of economics is to discover economic principles that are true, so that policies developed in light of those principles will be suitable for achieving our goals.

What Is Truth and How Do We Know It?

Almost two thousand years ago, a certain Roman governor of Judea asked the question, “What is truth?” An observer standing there could have been excused for replying, “Truth is looking you right in the face.” However, when most contemporary scientists (social or otherwise) ask the same question, they are usually not inquiring about the nature of Christ, but about the truths of the universe that Christ brought into being—whether scientists acknowledge the source of all truth or not.

So what is truth? The Oxford English Dictionary defines truth as “Conformity with fact; agreement with reality.” A statement is true then, if it is factually correct and if it agrees with reality. It is possible for a statement to be factually correct and yet be untrue. For example, I can usually illicit a goodly amount of sympathy by telling the story of my brief life in telemarketing. I begin by explaining how at one point in my life, after having resigned from the United States Bureau of Labor Statistics, I moved back to Iowa and found a job working as a telemarketer with a firm in Omaha, Nebraska. They were in desperate need for workers because of an account that was fabulously successful. The firm was taking credit card applications over the telephone for a card issuer in the Midwest. There was a huge response that caught the telemarketing firm off guard. I responded to an advertisement to work telemarketing at a wage that was $2.50 above the norm for that type of work. Well, it did not take long for the popularity of the credit card to run its course and the calls slowed down and the firm was forced to let some people go. Because I was one of the most recent hires, I was one of the earliest to be laid off. I was given the news one week before Christmas. By stopping the story here, I can usually generate sighs of Oh no! as well as a general sympathy with my cause. It also tends to go away as I tell them, as Paul Harvey might say, the rest of the story. It turns out that my getting laid off a week before Christmas was no big deal, because I was living with my parents, so I did not have to worry about paying for housing or food. Suddenly it becomes clear that what some selected facts seemed to indicate regarding my plight, turns out to be not the whole truth. Indeed, people can communicate things that are not true, while only relating facts that are correct. Therefore we must understand truth to be something that is factually correct and that also corresponds to reality. It is rather easy to define what truth is; it is a bit harder to establish how we know truth.

The discipline that seeks to answer the question, “how do we know?” is a branch of philosophy called epistemology. The word epistemology is derived from Greek and means the study of knowledge. About the time I get to this topic in the course I teach, I usually get at least one student who asks me why we go over this topic. After all, this is a book about economics, not philosophy. True enough. However, as you make your way through this book, you will find that several principles, such as the law of marginal utility, the law of comparative advantage, or the law of demand, are presented as economic truths. It seems to make sense to spend a little time up front examining just how, exactly, we do know anything, so that we can be sure that the law of demand really is a law instead of some opinion of demand dreamt up by another ivory tower sophist. Besides, the word epistemology is good to toss into your vocabulary when your parents ask you what they are teaching you at college. This is especially good if it is their hard-earned money that is paying your tuition.

Throughout the history of philosophy there have been generally four schools of thought regarding how we know. The first theory of epistemology we will examine is skepticism. Actually, skepticism is more like the anti-epistemology. When people think of someone who is a skeptic, they usually think of someone who doubts something, such as someone doubting whether our politicians always tell the truth. A philosophical skeptic is a little different. The fundamental proposition of skepticism is that knowledge is impossible. You may have heard it put this way: there are no absolute truths. It is fairly easy to spot the problem with this theory of knowledge. The claim that knowledge is impossible implies that we at least know that knowledge is impossible. “There are no absolute truths,” he said absolutely. Consequently, skepticism is internally inconsistent and, therefore, cannot possibly be true. If it is true then it is false.

Another closely related theory of knowledge is relativism. Relativists do not claim that truth does not exist, but that different people, different groups, or different cultures have different truths, all of them equally true. Many advocates of multiculturalism hold this view. Contemporary American philosopher Richard Rorty also argued that truth is relative to its cultural setting. In this sense, truth is what your peers let you get away with saying. Like skepticism, however, relativism falls quickly flat on its own propositions. Notice, for example, that the claim that truth is relative to different people, groups, or cultures, is a universal claim. It is always asserted absolutely, as if it applies to everyone. The relativist asserts the proposition that for all people, groups, and cultures, it is true that all people, groups, and cultures have their different truths that are all equally true. But if this proposition truly applies to everyone, everywhere, in every culture, it contradicts what is being asserted. If this proposition is indeed true for all people, groups, and cultures, then at least one truth is not relative. Again, if relativism is true, then it is false.

A third theory that attempts to explain how we know truth is empiricism. At some point in your education, you may have heard something referred to as empirical. If knowledge is empirical, that means it is based on experience. Empiricism claims that knowledge is only the result of experience. Note that it does not argue that we learn some things by experience, but that all knowledge is the result of experience. British philosophers John Locke and David Hume were in this camp, as well as a lot of modern scientists. Empiricists are rather like intellectual Joe Fridays imploring, “Just the facts, ma’am.”

Empiricists have argued that at birth our minds are merely blank slates upon which our experience impresses ideas, and these ideas are the source of all of our knowledge. These ideas are the result of sense experience and inner experience. Ideas of sense experience are what one would expect: sensations like red, hot, spicy, and fuzzy. We know the bacon has burned by smelling the odor of rancid charred pork. Physical scientists use their sight to gain knowledge when looking at their various measurement instruments. You can learn whether it is a hot and muggy day by going outside and feeling the moisture and heat in the air. People learn musical technique largely through hearing sounds coming from their voices or instruments.

People can also learn by their sense of taste. The truism that appearances can be deceiving was brought home to me very clear while a student in college. One day while making my way down the cafeteria food line, I spotted a delicious looking bowl of vanilla pudding waiting for me like gold at the end of the rainbow. Filled with gastronomical joy, I placed a bowl on my tray and thought of the culinary delight that awaited me as I consumed my salad, overdone green beans, and patty melt. Imagine my shock, then, as I passed that first dollop of the pale yellow pudding into my mouth, only to be made dreadfully aware that the pudding I had been longing for was not vanilla after all, but lemon! What a sour tang abused my taste buds and proceeded to travel about my mouth. You know, the kind that makes your teeth hurt. It was my sense of taste that brought home the fact that what looks like vanilla can actually be lemon. In other words, appearances can be deceiving.

Ideas of inner experience come as we reflect on our sense experience. We use our mind to undergo mental operations such as thinking, perceiving, and doubting. By using both ideas of sensation and ideas of reflection, it is argued, we derive ideas of relation. We can combine the ideas of spicy, red, and wet to form the idea of Louisiana hot sauce. We can consider Louisiana hot sauce, mustard, ketchup, horseradish, pickle relish, and Tabasco sauce to form the concept of condiment.

Empiricism is an improvement over skepticism and relativism in that it does not assert that there is no truth, or that different cultures have different truths that are all equally true. Empiricism does not immediately descend into self-contradiction. However, it does have its own problems that leave it wanting as a valid epistemology. Remember that empiricism does not argue that some knowledge is the result of experience. Empiricists argue that all knowledge that can be known is the result of experience. Ah, as Hamlet would say, there’s the rub.

When an empiricist makes the claim that we can only know if something is true based on experience, one is tempted to ask him, where is your data? The only way empiricists could make such a universal claim, based on their own epistemology, would be if they had actually experienced all of the facts in the universe. No one has done that, so using their own epistemology, empiricists do not have enough knowledge to know whether their claim is true or not.

In fact, there are several truths that are not based on experience. Our knowledge of time, for example, is not the result of an image of time being impressed upon our minds. The concept of time does not stem from our experiences, but we use this concept to make sense of our experience. We understand experiences as occurring sooner and later because we use the already present concept of time to interpret our experience.

Neither are the truths of geometry and arithmetic based on our experience. Mathematicians do not go about measuring triangles to demonstrate the principles of Euclidean geometry. Even when teachers instruct children in principles of addition by taking two pennies and combining them with two more pennies to make four, such instruction relies on the children already possessing knowledge of number...