Thursday, April 30, 2009

Epochal Events

We live in a decimal world. Human commentators measure change in terms of years, decades and centuries. Newspapers nominate a “man of the year”. At the beginning of a decade, they prognosticate about shape of the next decade. At then end of century, they try and draw out the themes of the century and guess if the next one will be different. At the turn of a new millennium, they really get carried away. Many Christians think the same way.

God does not operate in a decimal system. He does not see history in decades and centuries. God is eternal, but he sees human history in “time and seasons”. Paul told the Thessalonians that they already understood about times and seasons, as they already understood them.

Now as to the times and the epochs, brethren, you have no need of anything to be written to you (1 Thes 5:1).
To see history as God sees it, we must understand the times and in which we are living.

The word "epoch" is derived from a Greek word, which means pause. It is used to describe the breaks between the acts of a play. In God’s plan each new season is started by an epochal event which marks the end of the old season and the beginning of the new one. God breaks in and changes the "state of the play" and starts a new stage of history.

The key epochal events in the Old Testament were the flood, the tower of Babel, the Exodus and the Exile. The incarnation, crucifixion, resurrection and ascension of Jesus was the ultimate epochal event that marked the transition into the new covenant.

The New Testament age has six seasons and the transition from each season to the next is generally marked by an epochal event. We are currently at an epochal point in history, when the world passes into a new season. A season called the Times of the Gentiles is coming to an end. The short season called the Time of Distress is about to begin. The epochal events that mark the end of the times of the Gentiles are described in the four horseman of Revelation 6.

The first two horsemen have already been released. I have been watching the world for a sign that another next horseman has been released.

Free Markets (22) - Economic Providence

Many people expect free markets to act as economic providence. They assume that when Adam Smith referred to an “invisible hand” working through markets, he was saying that it can “work all things together for good”. The common assumption is:

Invisible Hand = Providential Force
Anyone who understands how markets function knows that this is not true.

Markets are not rational entities, so they cannot act to produce a perfect world. Adam Smith understood this well. He only referred to the invisible hand three times in his writings. He used the term to describe situations where a business owner acting in self interest does things that benefits society in a way that he had not intended. Smith never described the “invisible hand” as a hidden divinity that would work all things for good. He had a more realistic view of the way that free markets function.

A belief that free markets work everything for good is totally unrealistic. Those who equate markets with providence have trusted in a false religion.

Different thought have arisen, so I will get back to this series after the weekend.

See this full series at Markets add Value.

Wednesday, April 29, 2009

Free Markets (21) - Governments and Value

Governments do something different. They give their services away free, so they do not have to add value to ensure that people want them. We assume it is good that governments do not make profits, but this makes them dangerous. People do not have give anything up in exchange for government services, so the government does not have to worry about supplying products that than will make them better off.

Governments functions by taking from one person and giving it to another. This is a zero sum situation. Governments can only help one person by taking from another person. They do not add value, but shifts it from person to another.

A government will usually destroy value. The process of taking from one and giving to another has a cost, so governments never give as much as they take. They always keep some of what they takes, so governments inevitably destroy value. Economists call this deadweight costs.

The difference is important.

  • Businesses operating in a free market create value to make a profit.
  • Governments using coercion to transfer value add dead weight costs.
Profits result from benefiting people.
Deadweight costs are hard to justify.

Tuesday, April 28, 2009

Free Markets (20) - Theology and Value

Theologians are expert on values.

  • God is good
  • Murder is evil
They understand these values, but when it comes to economic issues they get confused. Free markets allow business to create value, yet theologians make statements like these.
  • Free markets are morally flawed.
  • Capitalism is evil.
  • Making money is wrong
  • Profits are bad
They tend to support actions that destroy value and object to institutions that add value. Despite their expertise, they seem to be confused about value.

Theologians tend to see profits as a sign of immoral behaviour. They assume that money is made by cheating people. This is not true. Successful businesses must offer things that people want. This is not easy, because people will only buy products that:
  • are more valuable to them than the price they have to pay for it;
  • are more valuable to them than any other product at the same price;
  • makes them better off than they were before making the purchase.
If a business cannot produce things at a price that fulfils these conditions, buyers will go to other producers or buy different products. Producers who do not make people better off will not make a profit for long.

Adding Value
Profit is a crude measure of the extent to which the business has made people better off. The costs of production reflect the value of components, materials and labour used in production. The price received reflects the value to buyers purchasing the product. The difference between sales and costs reflects the additional value created by the producer.
Profit = income – expenditure
Profit ≈ value added
This is new value that did not exist before. The producer created the value by making the product and by finding people who valued it.
To make a profit, a business must add value. They must take some components and put them together in a way that makes them more useful to other people. The components must be worth more when put together in the product than they were worth separately. That is adding value.

We want producers to add value, so we implicitly want them to make a profit. Therefore, profit is good. This is acknowledged in the scriptures.
All hard work brings a profit, but mere talk leads only to poverty (Prov 14:23).

The plans of the diligent lead to profit as surely as haste leads to poverty (Prov 21:5)
Businesses make money by adding value. They must have produced goods or services that made people better off, so making money is good.

Monday, April 27, 2009

Free Markets (19) - Serving Consumers

To succeed in a free market, businesses must serve consumers. Imagine a florist who is passionate about yellow flowers but hates red and white ones. She loves them so much that she decides that she will only stock yellow flowers. To sell flowers, the florist will have to meet two conditions.

  • She will have to find clients who want yellow flowers.
  • She will have to sell yellow flowers at least as cheap as other florists.
This florist business would almost certainly struggle.
  • When no yellow flowers are available, the florist shop will be empty.
  • Most towns will not have enough people wanting yellow flowers.
  • The shop will be quiet on Valentines Day when red roses are popular.
  • The florist would lose clients wanting white flowers for weddings.
  • The florist might be able to persuade some people wanting red flowers to buy yellow ones, but that would be hard work.
  • If a belief that yellow flowers bring bad luck prevailed, none would sell.
  • The florist could try and get the government to pass a law outlawing red flowers and white flowers, but that would be almost impossible.
To increase sales, the florist will have to overcome her dislike for red and white flowers enough to make them available to customers.

Consumers can indulge their preferences for flowers provided they are willing to pay for them, but once the florist decides to sell flowers to the public, she loses that freedom. She does not have to change her preferences, but she is faced with a stark choice between serving her customers and losing sales. Selling in a free market will force her to respond to the preferences of her customers.

Free markets force businesses to serve their clients. A business that does not provide the goods and services that their clients want will lose customers. A business that produces the things its staff enjoy producing, or the things that it thinks people should buy, will eventually fail. A successful business must serve its customers. Free markets set consumers free, but they are very constraining for businesses.

Serving the Church?
Pastors do not understand the tyranny of the market, because they work in a different world. They are not called to serve their customers, but to change them. A pastor is selected for his theological views and he is expected to preach that line to his church. He does not change his message to match the tastes of his listeners, but preaches what he believes God wants them to hear. A pastor is expected to implement his vision for the church. Those who are not stirred by his vision are advised to seek another church.

The pastor is charged with changing the thinking and behaviour of his people to be more like his own. His purpose in life is to persuade people to like yellow flowers (gospel truth). He would be failing in his duty, if he allowed them to choose any coloured flowers (pluralism). This means the pastor’s customers are usually wrong. If the pastor has the ear of God and preaches clearly, backsliders and rebellious people will reject his message (you can’t make me like yellow flowers). A response that would be a sign of failure to a business is actually a sign that a pastor is preaching boldly.

Businesses must serve customers to succeed. Pastors do not understand the tyranny of the consumer, because they do not have to serve them to succeed.

Sunday, April 26, 2009

Free Markets (18) - Information and Efficiency

Producers and consumers need good information to make wise decisions. Markets do not make decisions, but they are excellent conveyors of information. To make sales, producers must share information to the market about the products and prices they are offering. Consumers and producers can use this information to enlighten their decisions.

Prices draw consumers towards the most efficient producer. If two sellers are offering exactly the same a product, but one offering a much lower price than the other, a wise consumer will accept the best offer. The efficient producer will be encouraged to produce more. The offers of inefficient or greedy producers will be rejected. They are not forced to change, but they will feel the pressure, if the want to sell their products.

Prices provide producers with information about the value of the resources they have used. This information flows right through the economy from extraction of raw materials to the retailing of final goods. Wise businesses respond to market information by adapting their production processes to eliminate waste and increase efficiency.

Markets do not “work all things together for good”, but they do convey some of the information that people need to make good decisions. Market information will never be perfect and it will never be complete, but the wisdom of consumers and producers would be severely constrained without it.

Saturday, April 25, 2009

Free Markets (17) - Efficiency

Efficiency is Human
This following statement frequently heard.

The market is efficient.
This statement is not true. Markets cannot think, assess, decide or act, so they cannot decide what is efficient. Markets cannot be wise.

Efficiency is a human concept. Only people can be efficient. Some are clever, others are highly skilled, but everyone is better off, if producers want makes wise decisions. An economy becomes more productive as wise producers find more efficient ways to do complex tasks.

Japanese auto makers found ways to make their production processes more efficient, which enabled them to offers better cars at lower prices. This wisdom and efficiency resides in the Japanese managers and engineers, not in the market. Free markets provided a way for consumers to access their efficiency and buy high-quality cars a low price.

Specialisation and Efficiency
Specialisation generally increases efficiency. When a person can concentrate on one set of tasks, they the can learn to do them more effectively. Specialisation benefits everyone, but people can only specialise, if there is a way for other others to obtain what they have produced (without using force or theft, and not relying on compassion). Markets where goods and services can be offered for sale allow people to specialise in the activities which they do best.

The people who designed my computer produced an efficient product. If there were no markets and no specialisation, they would spend their days cultivating crops and hunting game. They would be worse off and I would be worse off too, because I could not make a computer in a thousand years.

Freedom to offer goods for sale on a market allows people to specialise, but the person who chooses to specialise immediately comes under pressure to operate efficiently. A person or business that decides to produce goods to offer in any market immediately faces a compelling dilemma. They must offer the goods for sale at price sufficient to cover their production costs, but pushing their offer price to high will dramatically reduce their sales.

The market producer must choose between higher prices and more sales. This dilemma forces an ambitious business to reduce the costs of production by finding ways to be more efficient. This allows them to increase their income, without increasing prices and losing sales. Markets facilitate efficiency.

This full series is at Markets and Efficiency.

Friday, April 24, 2009

Free Markets (16) - Preventing Mistakes

Advocates for market regulation are really wanting to prevent people from making mistakes. This is a noble ideal, but is impossible to apply in practice. Regulators would need two forms of knowledge to prevent mistakes when buying and selling.

  1. They would need to know what everyone should want and need. Parents may know what is good for their children, but a market regulator can never know everything that other people need.
  2. They would need perfect knowledge of the future.
Market regulation assumes the regulators have exceptional knowledge of both human needs and perfect knowledge of the future. These godlike regulators simply do not exist.

Political power amplifies the impact of mistakes. Ordinary people make mistakes that affect themselves. They sometimes make mistakes that harm their families. Politicians and regulators can make mistakes that damage the entire economy and harm the whole of society.

Business Cycles
The business cycle is caused when widespread mistakes are made worse by government policies. Ups and downs in economic activity are the result of changes in human mood. There will always be times of widespread exuberance and times of mass fear. Markets reflect these moods, but do cause them.

Joseph explained to Pharaoh that the seven good years would be followed by seven bad years. This is normal. During good years, people naively assume they will continue forever. They live it up, when they should be putting the surplus aside for the bad years that will inevitability follow.

People decide how they will respond to changes in moods and season. We should not blame markets for the mistakes of fickle and foolish of people. Given time they will work themselve out.

The business cycle gets serious when governments amplify the mistakes of ordinary people. The laws that govern the modern banking system are flawed. This allows banks to exaggerate the business cycle by inflating the currency during times of exuberance and contracting leverage in response to fear.

Thursday, April 23, 2009

Free Markets (15) - Mistakes

Free markets are morally superior to theft and force. The reason is that an exchange in a free market will only occur, if both parties think that they will be better off after the transaction is completed. This is good, but transactions must be agreed on the basis of what buyers and sellers think and know at that time when time then the deal is finalised.

Mistakes are made because people have imperfect knowledge about the future. When buying and selling, we have to act on what we know at that time. We do not know what the future holds. If the future is different from what we expected then a transaction may turn out to be a mistake. If his brother arrives unexpectedly to stay for a couple of months, John might wish he had kept the car. He might begin to think that he had made a mistake in selling the car. Unexpected circumstances can turn good decisions into mistakes.

People make more mistakes when they are under pressure, Esau sold his birthright for a meal, when he was famished (Gen 25:29-31).This was a free market. Jacob did not have to sell his stew (although he probably should have had compassion for his brother). Esau freely sold his birthright, because it would bring no benefit until way in the future, whereas his hunger was there now. Short-term thinking places a higher value a meal in the present than on a future blessing. Esau made a mistake, because hunger clouded his judgment.

Mistakes also occur because people change their minds about what they want. Bob bought John’s car because it was blue. After driving the car for a month, he might get tired of blue and start thinking he would prefer a red car. As his thoughts about colour change, he might look back on the transaction later and think that he had made a mistake.

People make mistakes all the time when buying and selling, but if markets are functioning freely, they can be corrected easily, albeit at a cost. John can buy another car, if he chooses. If Bob decides that he really must have a red car, he can sell his blue car and buy a red one. He may lose some money in the process, but he is the only one who suffers for his mistake.

People learn from their mistakes. Bob will not want to make the same mistake twice, so he will think more about colour, before buying another car.

Wednesday, April 22, 2009

Free Markets (14) - Economic Power

Many people claim that economic power must be controlled. There is a lot of confusion behind this belief.

The basic assumption is that political power is good and economic power is bad. This is just assumed never proven. The reality is that political power has done terrible evil throughout history. There is no reason why political power should be trusted.

Economic power is never defined. A common assumption is that size equates with economic power. That is not true. General Motors is huge, but its economic power is fleeting. GM cannot force a single person to purchase a car. I bought a Honda several years ago and GM was powerless to do anything about it. GM wanted me to buy one of their cars, but I defied them. I defeated the Goliath of the auto industry all on my own.

In the last few months, General Motors have fallen by half and they have been powerless to prevent this. So much for economic power.

General Motors has done better with political power than using economic power. When they went down to Washington with the rest of the Big Three, they got billions of dollars from other people.

This is generally true. Economic power generally proves to be unreal. What appears to be economic power is generally political power. Those with economic power have generally gained it by persuading the political powers to give them a privileged position. People who are worried about economic power should be more precise about what they mean.

Tuesday, April 21, 2009

Free Markets (13) - Zero Sum

Option 3 and option 4 om my previous post are compulsory zero sum options. They both make John worse off against his will. He suffers with no choice. Theft and force are not good methods for transferring goods from one person to another.

Love and compassion are noble, but they do not extend very far. They cannot facilitate all the transfers of goods or services that are necessary for a well functioning society. Theft and force make some people worse off, so they are not a solution. Buying and selling in a free market is better. Trade is not as noble as love and compassion. Buying and selling in a free market are more noble than stealing or using force to get what you want.

I do not mind people criticising free markets, if they advocate love and compassion, especially if they choose to demonstrate love and sharing themselves. What I find is that most people criticising free markets claim to be acting out of love and compassion, but are actually advocates of force. This is quite deceptive. Critiquing markets because they do not meet the standards of love and compassion, but then proposing the use of force to remedy the situation is twisted logic.

Buying and selling in a free market are not as noble as love and compassion, but they are morally superior to theft and force. Those who want to regulate a market are advocates of force. The Bible teaches that force is justified to remedy theft, but it does not advocate forced compassion or love.

This full series is at Markets and Morality.

Monday, April 20, 2009

Free Markets (12) - Best Method of Exchange

Every transaction in a free market provides a benefit to both parties. The reason is simple. If either the buyer or the seller thinks they will not benefit, the transaction will not proceed. This is quite amazing. A process that benefits every participant and harms no one really builds up the harmony in society. People who complain about free markets do not understand how markets work.

There are only four other ways that Bob could get John’s car.

  1. Love. If Bob were John’s son, he might give him the car for free. Love is very generous, but it does not stretch very far. It is generally limited to close friends and families.
  2. Compassion. John might feel sorry for Bob and decide to give him the car. Compassion reaches further than love, but is less generous.
  3. Theft Bob could steal John’s car. This gives Bob what he wants, but John loses. The Bible forbids theft, so this is not viable option.
  4. Force Bob could persuade someone bigger and tougher than John to force him to hand over the car. This method has been common throughout history and can take various forms. Bob might simply thump John. He might get a gang of friends to intimidate John into signing over the car. Bob could persuade the government to confiscate the car from John and hand it over to him.
All four options have something important in common: they are zero sum. In each case Bob benefits, but John is worse off. In the first two options John freely chooses to be worse off, so that is acceptable. He still has the right of veto. If he decides not to show love or compassion he can keep the car. If he is forced to love, it ceases to be love and becomes force. If John is forced to show compassion, the transaction stops being option 2 and becomes option 4.

This full series is at Markets and Morality.

Sunday, April 19, 2009

Free Markets (11) - Benefits

Free markets are good, because well-functioning markets allow people to exchange things they do not want for things that they need. This enables them to improve their situation in life.

In a world without markets every person has to produce everything that they need. If there is no way of exchanging goods and services, everyone has to be self sufficient (unless a generous person gives them something or they steal from someone else). Making everything that you need is very difficult, so a self-sufficient rarely moves above subsistence level. People spend so much time producing food and shelter, they did not have time to develop and make other products that they may want.

A free market changes everything, because it allows people to specialise and trade. One person specialises in growing grain. Another specialised in catching fish. A third person specialises in baking bread. Each one does what he is most skilled in doing. By focusing on one task, each person can increase their skills and find ways to do a task more efficiently.

The person who specialises can produce more than they need to survive. They can trade their surplus production with others to get all the things they want. Trading in a free market improves the situation of almost everyone, because specialisation makes everyone more productive.

I do not have a clue about how to make a computer or a flat screen TV. I could not make a decent automobile, if I worked on if for a hundred years. If I made my own clothes, I would look like a caveman. However, by specialising in tasks that I am skilled at doing, I can afford to buy all these things and many more.

Not a Zero Sum Game
What takes place in a market is not a zero sum game. In a zero sum and action that makes one person better off makes someone else worse off. Consider a family that has only one doll. If they take it off one child and give it to another, the situation of one child improved, but the other is worse off. In a zero sum situation, benefitting one person always harms another.

The functioning of a free market is totally different. A market is not a zero sum game, because every transaction that takes place in a market makes both parties to the transaction better off. If Bob sells his car to John for $5,000, the transaction improves the situation of both. This is hard to believe, but it happens because different people place different valuations on the same good or service (the technical name for this is subjective value). The transaction described above benefits John, because the car was of more use to him than the $5,000. Bob also benefits because he places a greater value on $5,000 than he does on the car.

The experience of Bob and John is not a rare example. They same thing is repeated in every transaction that takes place in a free market. A transaction cannot occur unless both parties benefit. If Bob thought his car was worth more than John was willing to pay, he would not sell it. If John felt that Bob was wanting too much for the car, he would refuse to buy it. This is the situation with every transaction in a free market. Both parties to the transaction have a right of veto. If either the buyer or the seller thinks, they are will not benefit from the transaction, they can simply walk away.

Saturday, April 18, 2009

Free Markets (10) - Fallible

Those who have lost faith in markets had a false understanding of what markets can do. They tended to assume that allowing markets to function freely would lead to a perfect world. They assume that when Adam Smith referred to an “invisible hand” working through the market, he was saying that the invisible hand will “work all things together for good”. Anyone who understands how markets function knows that this is not true. Those who believed this view trusted in a false religion.

“The market” cannot think or act, so it cannot produce a perfect world. Adam Smith understood this well. He only referred to the "invisible hand" three times in his writings. He used the term to describe a situation where the a business owner acting in self interest does things that benefit the rest of society in a way that he had not intended. He never described the “invisible hand” as a hidden divinity that would work all things for good. He had a much more realistic view of the benefits that free markets bring.

This utopian view of free markets is really just a “straw man” set up so it can be knocked down. The idea that free markets work everything for good is totally unrealistic, but that does not mean that free markets are evil. Free markets cannot create perfection, but they provide considerable benefits. Those who are switching to faith in the government should understand these benefits before changing religion. The benefits of free markets will be described in the next three posts.

A perfect utopia cannot be created on this earth. Governments cannot create perfection. Markets cannot create perfection. The score is nil each.

Friday, April 17, 2009

Free Markets (9) - Faith

An economic commentator recently said,

We placed too much trust in the market.
This is now a common view, but the statement is really quite silly.

First of all “the market” does not exist. There is not one market, but millions of different markets. More important, markets cannot think, or act, or respond. We can observe people participating in markets and others organising markets, but the market itself is not personal. Therefore, the idea of trusting in “the market” does not make sense. Trusting in an entity that cannot think or act is foolish.

Those who trust in markets actually trust the people who buy and sell in markets. Some of these will be wise and some will be foolish. Only a naïve person would trust everyone.

A more important problem with this view is that those who were trusting the market will now have to trust something else. Most are suggesting that the government regulate the market. They are replacing faith in the market with faith in the government, but trusting the government is as unwise as trusting the market. Governments are not omniscient and they are not omnipotent. History demonstrates over and over again that governments stuff things up when they intervene in markets. The shift to faith in human government is dangerous.

God is the only one to trust. He is gracious, omniscient and omnipotent. He understands how the economy functions, so he is the only one worthy of trust. Those who are arguing about whether to trust in the market or trust in the government are missing the point. Only God is worthy of trust.

Thursday, April 16, 2009

Free Markets (8) - Cheats and Crooks

In a fallen world, dishonest people will penetrate the free market.

Sometimes the person selling the product will know more about its quality than the person thinking about buying it (economist call this asymmetric information). John may know that his car has a serious oil leak. If Bob knew about this problem, he might think that the car was not worth $5,000. He might have walked away from the deal. In a few situations, they buyer will know more about the market value of the goods than the person selling (the little old lady selling antique furniture to an experienced dealer).

The Bible condemns those who use deceit to take advantage of other in the market. The worst case is the person who uses false weights to cheat people when they are buying or selling.

Do not have two differing weights in your bag—one heavy, one light. Do not have two differing measures in your house—one large, one small (Deut 25:13-14).

The LORD detests differing weights,
and dishonest scales do not please him (Prov 20:23).
Those who deliberately cheat in the free market lose the blessing of God.

Those who can prove that the seller has cheated them can demand restitution, because the seller is guilty of theft.
A thief must certainly make restitution (Ex 22:3).
Unfortunately, in most situations, the buyer will have difficult proving that the other party took advantage of them.

The best protection against cheats and crooks is to be alert. The person who is doubtful about the quality of a product on the market should get and expert to check it out. The wise person purchases from people they know to be trustworthy. We live in a sinful world, so innocent people will sometimes be ripped off. They will sometimes be able to get redress, but often they will be disappointed.

Good information provides protection to buyers. Many markets provide information about the reliability of the person who is selling goods. eBay publishes buyer and seller feedback to expose people who are dishonest.

In most markets, all offers are made public. People can see what is being offered.
Dishonesty can be observed by other people.Don’t buy that, it’s over priced.
You can get that cheaper at Walmart.
Fee markets tend to expose dishonesty, because they are public.

Wednesday, April 15, 2009

Free Markets (7) - Morality

  • Markets are not moral.
  • Markets are not immoral.
  • Markets are amoral.
Markets cannot think, choose, or act.
  • People do these things.
People participating in a market are never amoral.
  • They can be moral
  • They can be immoral.
A market needs just one value from people to function: honesty.

When someone makes an offer on a market, the key moral consideration is whether they are honest or dishonest. Are they lying or speaking the truth?

We all know this. We generally just assume that most people are honest. Provided the price is not too high, we run the risk and trust most offers. We reduce the risk by going back to traders that have been honest in the past. When we find that someone is dishonest, we avoid them and tell our friends to do the same.

For a big purchase, we do other things to reduce the risk of being cheated by a dishonest person. When buying a car, we get it inspected by a motor mechanic. When buying a house, we get it inspected by a carpenter and we employ a lawyer to check the title is valid. This is normal.

Sellers that want to build a business that will last have to be honest.

Bad news travels. If a business rips people off, its customers will be disappear.
Making money in a free market by ripping people off is difficult. The rip-off artist cannot stay in the same community for long, but has to keep moving on to places where their dishonesty is not known. Modern communication makes this hard. In practice, it is easier to make money by making people better off.

A market only needs just one value to function. It does not need compassion, kindness, gentleness or love. So even if these values are missing from society, people can still buy and sell in safety, provided most traders remain honest.

This full series is at Markets and Morality.

Tuesday, April 14, 2009

Free Markets (6) - Offers or Orders

Offers are not limited to markets. Offers are every where. We make offers all the time.

  • Do you want to join us for a drink after work?
  • Do you want chicken for dinner?
  • Would you like to marry me?
  • Will you marry me?
Most offers are made to family, friends and family. The advantage of a market is that people can make offers to a broader range of people.

We are free to refuse and offer. The opposite of an offer is an order. We are not supposed to reject and order.
  • Clean up that!
  • Quick march!
  • Type that document again!
  • Stop at the lights!
Orders are appropriate in some situations, but we prefer offers to orders. People wanting to regulate markets are trying to replace offers with orders.

Monday, April 13, 2009

Free Markets (5) - Regulation

A market is just a place where a whole lot of people can display their offers. Once we understand this fact, it is obvious that statement about regulation of markets need a little more content, before making sense. Regulating marketing could mean a number of things.

  1. Preventing markets from forming. This does not make sense, because bringing many offers together in one place helps buyers.
  2. Limiting the types of offers that can be made. That does not make sense because an offer is benign. Nothing happens until an offer is accepted, so there is no point in preventing people from making offers, even if they are unrealistic.
  3. Controlling the price range that can specified in offers. Some people would like to ban offers at low prices. Others would like to ban high prices. Both options seem to be pointless, as if prices are too high or too low, whatever that means, people will not accept the offers.
  4. Preventing certain types of people from accepting offers. I suppose children could be prevented from agreeing to purchase cigarettes that are offered to them, but that is really the responsibility of parents. Some suggest that foolish people should be prevented from accepting offers that are unrealistic, but that might be very difficult to assess.
  5. Preventing people making offers that are deceptive or fraudulent. This problem is already dealt with by laws against theft and fraud, so I am not sure that regulation is needed for this problem.
  6. Enforcing delivery of offered products once the offer has been accepted by a buyer. Laws against theft and breach of contract already deal with the situation where exchanges are not completed, so what can more regulation do.
Markets benefit people by providing information about all the offers that are available. The law already deals with the problems that can arise in a market, so those who want more market regulation must be more precise about what they intend.

Sunday, April 12, 2009

Free Markets (4) - Delivery

The operators of market will specify the rules for payment and delivery after offers have been accepted. These will vary according to the type of market.

  1. Cash on delivery
  2. Twenty percent when the hammer falls and the balance within a week.
  3. No cheques
  4. Cash and credit card only.
  5. Free delivery within twenty kilometres
  6. Account balances settled at the end of the trading day.
If people do not like the rules applying in a market, they do need to participate in it. They are free to go to a different market or buy and sell or barter outside a market.

Saturday, April 11, 2009

Free Markets (3) - Public Offers

A market is a place where people can display and record offers. Putting a whole lot of offers together in once place simplifies life for potential buyers. They can look at all the offers and choose the one that is best for them.

In a few markets, buyers and sellers can make an offer. In stock exchange and other financial markets, both buys and sellers can make offers. A trade is completed when buyer and seller agree on a price. Electronic trading allows a broad range of offers by buyers and sellers to be observed by a large number of observers.

A buyer can go into a car yard and make an offer for a car.

I will only give you a thousand dollars for that heap of junk.
In most markets, only the sellers can make offers and the buyers just accept or reject them. In a shopping mall, offers are made by displaying the good for sale and attaching a sticky label that records the price the vendor is willing to accept. The buyer assesses the quality of the goods by observing them.

In a farmers market, produce being offered is put on display and the price that will be accepted is displayed. Buyers can accept or reject the offers.

Offers make a market. If all offers to buy and sell disappear, a market becomes an empty shell.

Friday, April 10, 2009

Free Markets (2) - Barter and Giving

A barter exchange is slightly different, but the basic process is the same. A barter exchange takes three forms.

  1. Service for service
  2. Service for goods
  3. Goods for Good.
The form of exchange is similar to the free market exchange
  1. Potential suppliers make an offer
  2. Two people agree to accept each others offers.
  3. The swap is completed.
Both are better off than they were before they made the exchange, because they both end up with something they wanted more than what they had before.

The difficulty of finding a coincidence of needs make bartering less efficient. Finding a person who wants what I have who wants what I have will be quite difficult.

Giving is an offer with a zero price.
  1. You can have my shirt.
  2. Yes it is free.
The person receiving the offer is free to accept or reject the gift.

Thursday, April 09, 2009

Free Markets (1) - Definition

Calls for markets to be regulated are common, but those who make them are not very clear about what they mean. We need a clear definition of a market.

Markets exist to facilitate the exchange of goods and service between people, so that people can dispose of things they do not need and purchase things they do want. In a money economy a free exchange has three components.

  1. A potential seller makes an offer.
  2. A buyer accepts the offer.
  3. The buyer and seller complete the exchange. The seller delivers the goods or services he has offered over to the buyer. The buyer pays the seller the price he had agreed to pay.
The free exchange can take various forms,
  1. Services for money
  2. Goods for money
  3. Labour for money
  4. Future goods for money
  5. Future services for money.
Offers are the heart of a market. In a money economy, an “offer” has four elements.
  1. The offer specifies the quantity of goods or services being offered for sale.
  2. The offer describes the quality of the items being offered.
  3. The offer specifies the price the seller is willing to accept.
  4. The offer explains how and when the goods or services will be delivered to someone who accepts the offer.
An offer is quite benign. No one has to accept the offer. If everyone thinks it is a bad offer, the offer will just be ignored. Plenty of goods offered on EBay are never sold, because they are unrealistic offers. There is nothing in the scriptures suggesting that making unrealistic offers is morally wrong, although it probably is wasted effort.

An offer only becomes binding when accepted by another person. Once a buyer has accepted the offer, it becomes a binding contract. The Bible condemns those who fail to complete contracts that they have freely entered. Failure to complete the contract is theft.

The Bible also condemns false or deceptive offers. An incorrect specification of the goods or services being offered is morally wrong. A lie about the quality of the goods is fraud. Using false weights is the most obvious example of cheating customers by lying about quality or quantity of the goods being offered.

Do not have two differing weights in your bag—one heavy, one light. Do not have two differing measures in your house—one large, one small. You must have accurate and honest weights and measures, so that you may live long in the land the LORD your God is giving you (Deut 15:13-15).
This full series is at Markets and Morality.

Coping with Social Collapse (14) - Conclusion

In previous posts, I have described several tools for security during the collapse of a society. The options chosen will depend on the circumstances faced. Some will not be needed unless the situation gets terribly desperate. Christians should seek God’s guidance before deciding their response to impending crisis.

One thing is clear. The current church paradigm (driving to a large church on Sunday to watch the performance of professional ministers) will not be viable. Western Christians should be this time of peace and plenty for the tougher years that lie ahead.

My earlier series on Preparation with Economic Crisis can be read here.

The complete series on Coping with Social Collapse is here.

Wednesday, April 08, 2009

Coping with Social Collapse (14) - Weapons

When Jesus went to the Garden of Gethsemane, he asked his disciples if they had any weapons.

Then Jesus asked them, "When I sent you without purse, bag or sandals, did you lack anything?" Nothing," they answered.

He said to them, "But now if you have a purse, take it, and also a bag; and if you don't have a sword, sell your cloak and buy one… The disciples said, "See, Lord, here are two swords." "That is enough," he replied (Luke 22:35,36,38).
This is an intriguing passage. Jesus reminded disciples that they did not take weapons when he sent them out on a mission. Even when going into hostile territory, they did not take weapons of defence.

Paul confirmed this practice, as he never produced a weapon when he ended up in some messy situations. He was willing to take a hiding for the gospel. Jesus will not establish his kingdom with physical power, so those who are at the forefront of the kingdom expansion must not carry weapons. This ensures that the power of the gospel is never confused or contaminated with military force.

The situation after the Lord’s Supper was different. They were not on a mission, but waiting for something to happen. The opposition was attacking By checking that they had weapons, Jesus seems to indicating that defence would be appropriate in this situation. If this interpretation is correct, weapons can be used when protecting a community from hostile attack. A group of Christian men can use force to protect their families from attack.

There are several limitations to this principle:
  1. Jesus said that two swords among twelve men was enough. He was not starting a war. Two swords would be enough scare off half a dozen attackers, but not much more. This passage only allows a couple of weapons to provide defence against a limited attack.
  2. When a large crowd “armed with swords and clubs” came against Jesus and disciples, he refused to allow them to fight (Matt 26:47). When outnumbered by opposing forces, there is no point in getting into a brawl. It is better to surrender than to start a pointless fight (Luke 15:31-32). Using weapons for defence is permissible, but wise heads will prefer not to use them. The will not engage in futile fighting.
  3. If the government is doing the terrorising, as happens in many places, resistance will be pointless, because the power of a militaristic government is usually unbeatable.
  4. The sword the disciples had was a “marcharia”, which is short sword or dagger designed for defence. It is quite different from the “romphaia”, the sword carried symbolically by the king on the white horse (Rev 19:21). The latter was a sabre or broad sword designed for attack in an offensive war. Jesus was not giving his disciples to permission to carry offensive weapons like AK47s. He only gave his disciples permission to carry weapons that are intended for defence (a small gauge shotgun).
  5. The entire group must be in agreement that the use of weapons is appropriate.
    When Jesus' followers saw what was going to happen, they said, "Lord, should we strike with our swords?" (Luke 22:49).
    This was a good question. Before drawing weapons, each person should get agreement with from the rest of the his group. One of Jesus crew did not wait for consensus.
    And one of them struck the servant of the high priest, cutting off his right ear (Luke 22:50).
    John records Peter as the one who drew the sword. Jesus rebuked him. There must be consensus in the group before weapons are used.
  6. When Christians are sending out apostles, or going into the world to heal the sick or proclaim the gospel, all weapons should be left behind.
  7. This passage is not a justification for survivalism. Heading for the hills with a stash of food and cache of weapons is a recipe for irrelevance. Christians should focus on life in the city, because that is where most people live. Our hope is city, not an idyllic rural paradise (Rev 21:2). Our challenge is to develop lifestyles that are viable in a city, whether peaceful or violent.
A group of Christians who have gathered together in a house or neighbourhood to protect themselves from violent gangs or marauding mobs should have a couple of weapons. This might be enough to scare off an attacking gang or a single intruder, but they should not engage in a battle with a large mob.

If their society collapses and official defence forces cease to be effective, groups of people might need to come together to protect their city from external attack.

Tuesday, April 07, 2009

Coping with Social Collapse (13) - Christian Enclaves

In rare situations where the social order has completely collapsed, Christians might need to get together in enclaves for protection. This should be a last resort, but history shows that minority groups can survive in a hostile culture by establishing an enclave in which to protect their culture.

An enclave is not the same as a ghetto. In political geography and diplomacy, an “enclave” is a territory whose geographical boundaries lie entirely within the boundaries of another territory. An enclave become a ghetto, if the population is inward looking and shaped by fear, but it does not have to be that way. An enclave can also be a stronghold or beachhead from which influence pushes out into the surrounding area.

Forming an enclave is not defeatist, but is a sensible strategy. Every general knows that a city cannot be won by single spreading soldiers throughout the city. Establishing a beachhead in a strategic locality and then expanding outward is a very effective way to take a city. An army takes a city by concentrating its power where the enemy is weak and then expanding out street by street and neighbourhood by neighbourhood. That is an excellent strategy for God’s people.

David established an enclave near the cave of Adullam, well outside Saul’s sphere of influence.

David left Gath and escaped to the cave of Adullam. When his brothers and his father's household heard about it, they went down to him there. All those who were in distress or in debt or discontented gathered around him, and he became their leader. About four hundred men were with him. (1 Sam 22:1,2)
David was able to form a community that lived by his values and standards. He formed an army of mighty men, which eventually destroyed Saul’s huge army (2 Sam 23). David pushed out from this base and eventually established his kingship over all Israel.

In the chaos that follows the total collapse of social structures, forming a Christian enclave might be the only viable alternative, but these situations will be rare for Christians in the western world. Numerous small groups spread throughout the community will generally be a better option.

Monday, April 06, 2009

Coping with Social Collapse (12) - Prophetic Confrontation

Christian prophets will confront the people and power wrecking evil against the people of the land. They will expose evil at all level of government and society. Even as the leaders of Israel were fleeing into exile in Egypt, Jeremiah continued to bring God’s word against them. He spoke these words to the escaping military leaders.

"I have heard you," replied Jeremiah the prophet. "I will certainly pray to the LORD your God as you have requested; I will tell you everything the LORD says and will keep nothing back from you." (Jer 42:4).
During a time of social collapse, Christian prophets should continue to speak God’s word against those who are causing the chaos.

Sunday, April 05, 2009

Coping with Social Collapse (11) - Caring for the Poor

As society falls apart, Christians should ramp up their efforts in caring for the poor and homeless. The best way to deal with evil is to resist it with love.

Do not be overcome by evil, but overcome evil with good (Rom 12:21).
Opportunities for helping people in trouble will abound. Rather than fleeing away, Christians should be running to meet the need.

Saturday, April 04, 2009

Coping with Social Collapse (10) - Fleeing

Fleeing Trouble
Paul often fled a city when trouble was stirred up.

They stirred up persecution against Paul and Barnabas, and expelled them from their region. So they shook the dust from their feet in protest against them and went to Iconium (Acts 13:50-51).

There was a plot afoot among the Gentiles and Jews, together with their leaders, to mistreat them and stone them. But they found out about it and fled to the Lycaonian cities of Lystra and Derbe and to the surrounding country (Acts 14:5-6).

They stoned Paul and dragged him outside the city The next day he and Barnabas left for Derbe (Acts 14:19-20).
When social chaos is confined to one region, fleeing trouble is a sensible response.

In some situations, migration may be the best option. Jacob found protection by moving away from Esau. Jacob found protection from a famine by migrating to Egypt (Gen 46:5-7). The problem with this option is that migrants can be treated badly. Jacob was cheated by his Uncle Laban. The Egyptians eventually enslaved the children of Israel. Christians should only migrate to escape trouble, if they have clear guidance from God. Migration from the frying pan to the fire is not wise.

Jesus' family migrated to Egypt to escape the persecution of King Herod.
So he got up, took the child and his mother during the night and left for Egypt, where he stayed until the death of Herod (Matt 2:14).
Jesus was kept safe, when all other children were being slaughtered.

Powerful Benefactors
God will sometimes raise up a powerful benefactor to protect people who have migrated to another country. Joseph was rescued from prison by Pharaoh (Gen 41). Nehemiah was protected by Artaxerxes king of Persia. Joseph and Nehemiah were raised up by political leaders who recognised their wisdom, diligence and honesty in the way they fulfilled their calling. This suggests that Christians should always be diligent and honest when doing their work, especially if they are working for people with power and influence. If Joseph had been bitter, twisted and lazy, God might not have been able to protect him.

Depending on a powerful benefactor can be risky. The Egyptians eventually turned against Joseph’s descendants. Martin Luther was protected by Fredrick the Frederick the Wise, the Elector of Saxony. Luther gained freedom to proclaim the gospel, but he had to compromise on political issues. When trusting powerful protectors, Christians should be careful that they do not compromise God’s standards.

Friday, April 03, 2009

Coping with Social Collapse (9) - Officials

Positions of Authority
Christians in positions of authority may be able to use their influence to protect people from unnecessary harm. When Paul was shipwrecked on Malta, Publius the chief official of the island cared for Paul after his father had been healed.

They honored us in many ways and when we were ready to sail, they furnished us with the supplies we needed (Acts 28:10).
Christians should be open to God placing them in positions of authority where they can use their authority to do good in times of trouble. Many Christians would assume that Obadiah had compromised when he accepted a key position in Ahab’s evil government.
Ahab had summoned Obadiah, who was in charge of his palace. (1 Kings 18:3).
Yet God used Obadiah to protect many of his people. We should not be ashamed to take positions of influence in evil governments, if that is God’s purpose. God may put Christians in high places to protect his people.

Honest Officials
Paul was protected several times by honest gentile officials.
The officers reported this to the magistrates, and when they heard that Paul and Silas were Roman citizens, they were alarmed. They came to appease them and escorted them from the prison, requesting them to leave the city (Acts 16:38,39).
The town clerk of Ephesus protected him from a riot (Acts 19:28-41). Paul used his rights as a Roman citizen to get protection from Gentiles rulers when he thought they might protect him. For example, he appealed to a Roman centurion when his life was under threat.
As they stretched him out to flog him, Paul said to the centurion standing there, "Is it legal for you to flog a Roman citizen who hasn't even been found guilty?" When the centurion heard this, he went to the commander and reported it….. The commander himself was alarmed when he realized that he had put Paul, a Roman citizen, in chains (Acts 22:23-30).
While in Corinth, Paul was protected by Gallio the proconsul of Achaia.
While Gallio was proconsul of Achaia, the Jews made a united attack on Paul and brought him into court…. So Gallio had them ejected from the court (Acts 18:12,16).
Christian lawyers will use legal means to protect people who are being persecuted by hostile governments or dishonest leaders. They should study the law to find ways to protect Christians in trouble.

Thursday, April 02, 2009

Coping with Social Collapse (8) - Hiding

Hiding in Secret
In some situations, hiding in a quiet place may be a sensible option. If a city is in an uproar, just keeping out of sight until things die down might be the best protection. Two days after the crucifixion, the disciples were hiding behind closed doors in an upper room.

On the evening of that first day of the week, when the disciples were together, with the doors locked for fear of the Jews, Jesus came and stood among them and said, "Peace be with you!" (John 20:19).
Jesus did not condemn the disciples for hiding, but offered them peace. He had told them to wait in Jerusalem until they received the Holy Spirit, so keeping their heads down made sense.

We should think strategically about where we live. A house on a busy public street might be a dangerous place to live. Those living in wealthy suburbs might be setting themselves up as unnecessary targets. Living in a small side street where the entrance can be closed off with a couple of cars might be a safer option. Christians should live where God wants them to be, but they should also think about where they will go during a temporary disruption of their city.

We do not always have to be heroes. Hiding from trouble might be the best option, if the crisis will be temporary.

Hiding Key People
Some of God’s people will have a role in hiding others from trouble. Obadiah was a key person in the court of Ahab. He hid a hundred prophets to protect them from the hostility of Jezebel.
Obadiah was a devout believer in the LORD. While Jezebel was killing off the LORD's prophets, Obadiah had taken a hundred prophets and hidden them in two caves, fifty in each, and had supplied them with food and water (1 Kings 18:3,4).
This was a short-term solution, as these people could only be kept hidden for a limited time. Obadiah was willing to risk his life, because he thought strategically. He knew these people would have an important role to play once the current troubles were over, so he protected them to strengthen his nation’s future.

Athaliah was the wicked mother of a king, who used violence to seize control of her nation. Jehosheba and some priests acted strategically to thwart her plans.
When Athaliah the mother of Ahaziah saw that her son was dead, she proceeded to destroy the whole royal family. But Jehosheba, the daughter of King Jehoram and sister of Ahaziah, took Joash son of Ahaziah and stole him away from among the royal princes, who were about to be murdered. She put him and his nurse in a bedroom to hide him from Athaliah; so he was not killed. He remained hidden with his nurse … for six years while Athaliah ruled the land (2 Kings 11:1-3).
During this temporary hiccup in the life of the nation, going into hiding for a short time made sense. Wise, brave people made this possible.

The complete series on Coping with Social Collapse is here.

Wednesday, April 01, 2009

Coping with Social Collapse (7) - Gospel

In many situations, audacious proclamation of the gospel may be the best form of defence. When Peter and John were released from prison, they gathered together with some disciples to pray. They did not pray that God would hide them, but that he would equip them to proclaim the truth boldly.

Indeed Herod and Pontius Pilate met together with the Gentiles and the people of Israel in this city to conspire against your holy servant Jesus, whom you anointed. Now, Lord, consider their threats and enable your servants to speak your word with great boldness. Stretch out your hand to heal and perform miraculous signs and wonders through the name of your holy servant Jesus." After they prayed, the place where they were meeting was shaken. And they were all filled with the Holy Spirit and spoke the word of God boldly (Acts 4:27-31).
Attack is often the best defence (in a spiritual sense). The disciples responded to persecution by proclaiming the gospel and healing the sick. If God’s people are healing the sick and releasing the captives, hostility will often disappear.