Saturday, August 06, 2011

Normative Economics

Academic economists like to distinguish between Positive Economics and Normative Economics. Positive Economics describes how things work. For example, if prices go up, demand will go down. Normative Economics describe what should be. It seeks an ideal economy.

Most modern economists concentrate on Positive Economics. Having no agreed ethical standards, they have no option. They use economics in a pragmatic way. They seek policies that will work, that will produce a desired outcome. The best that they can do is find policies that will produce economic growth or reduce inflation.

What will work does not matter for Christians. What matters to us is what is right, even if it does not work well. The fact that a market system is very productive does not make it right. The fact that market system produces inequality does not make it wrong. These are questions of what works. Christians should be asking what is right, according to God’s standards.

For Kingdom economics, all issues are ethical questions: what should be done? This is Normative Economics. Christians have God’s standard of what is right and wrong, so we are in a great position to do say what should be done. Two questions should be asked about every economic policy. Is it morally right? Does it comply with God’s word? A good economic policy complies with God’s standards.

Economists are arguing about whether Quantitative Easing will be effective. The answer is that easing out what money will buy is immoral (Deut 25:15,16).

We should understand that morally correct economic policies might not always produce the results that people desire. However, Christians should always be advocates for the right policies, not effective policies. In the long term, obedience to God will lead to blessings, so everything will be okay, but it the short term, the right economic policies may make people worse off. However, they are still the right policies. God’s way is the best way.

1 comment:

Anonymous said...

Tantalizing introduction! I look forward to reading your thoughts on potential economic policies and God's guideposts on how to judge them.