I have a broad definition of Economics. It is a study of the way that life in the world works, in all its aspects.
That means that Christian Economics is a study of the way that God wants the world that he created to function. It is a study of how God wants the people that he created to live on earth.
See God's Economy.
Economics claims to be a science. The problem with this claim is that the scientific method depends on the ability to do repeatable experiments. For example, chemistry advances by checking if hypotheses are correct by doing experiments that are repeatable. If a hypothesis fails repeated experiments, it is deemed not to be true.
The problem for economics is that is a subject that deals with the behaviour of people and society, so it is usually not possible to set up an experiment to test whether an hypothesis or theory is correct. People do not like being experimented on. An economist cannot do experiments on an economy, because every economy is different, and changes over time, so any experiment would not be repeatable.
The best that Economics can do is establish models that approximate how the economy operates. Economists use their models to explain historical events, or to make predictions about what will happen if certain changes occur. Unfortunately, the same historical events can be explained by various models. What happens can usually be explained by several different models, so making a correct prediction or explanation does not prove a model is correct. Most predictions by economists are wrong, so faith in their models is risky.
Economists tend to rely on the weight of opinion to decide which is the correct model. They sometimes reach a consensus about which model is best, but they never reach full agreement. Consensus is good, but unfortunately, it is not the same as using the scientific method.
Models have to be a simplification of reality. This means that economics is not really a science, in the true sense of the word.
Climate change faces the same problem. Climate scientists cannot do repeatable experiments, so they have to rely on models, too. Predictions about future climate change depend on the accuracy of climate models. The outcome of the model depends on the assumptions built into the model, and there is often disagreement about these assumptions.
Environmentalists often say that people should accept the weight of scientific evidence for climate change. The problem with this is that climate models cannot be tested in the way that the scientific method requires. It is not possible to set up repeatable experiments, because there is only one world, and it is not possible to repeat climate situations to test the model.
The best that climate scientists can do is to test their preferred model to see if it can explain weather events in the past, or to make predictions and see if they happen. That puts them in the same boat as economists. Weight of opinion is not the same as scientific method. Using the word “scientific” to make the case for climate change is a bit misleading.
Evolutionary theory has the same problem. It is not possible to do an experiment to test if humans could evolve into apes, because this is not repeatable in a laboratory. Small steps in the evolutionary process can be tested in artificial conditions using the scientific method. But the overall process cannot be tested using the scientific method. For this reason, evolutionists often resort to depending on consensus of scientific opinion. However, that is not the same as scientific method.
When climate scientists and evolutionary biologists speak of the weight of scientific evidence, they are playing the same game as economists. Judging by the reliability of economic models this is not a very effective method for arriving at the truth.
Economists like to simplify the world to make their models easier to manipulate. Optimising one variable is much easier than optimising five variables with variable weighting between them. Therefore, they have chosen to ignore love of family, love of neighbour and responsibilities to others. They focus exclusively on love of self, and their models concentrate on optimising self-love. That makes their models easier to estimate, but it means they no longer reflect reality. For some purposes, this might not matter, but in many situations it will make their conclusions unrealistic.
This simplification of reality means that economists tend to attribute all economic growth to people pursing self-interest. The emphasis on self-interest has caused Christians to worry that their morality is inconsistent with economic development. Their worries are unjustified. The emphasis on self-interest is a distortion of reality, so we do not need to change our morality to fit with economics. Christians values deal with economic reality. Economics needs to adjust its theory to fit with economic reality. Not the other way round.
The New Testament does not outline a Christian economic system. The letters to the early church make many statements that are relevant to economic issues, but they do not describe an economic system. The book of Acts describes the economic behaviour of the early church (Acts 2:42-47; 4:32-37), but it is not clear whether this was a permanent change, or a temporary response to events in Jerusalem under judgment. Luke does not give enough detail to build an economic system on.
Jesus made many sharp statements about money, but he gives very little context. His brevity suggests that he was assuming that his listeners understood what he was taking back. This was the case, because everything he said about money, related back to the instructions for economic life.
The prophets made many comments about money and wealth, but they did not attempt to describe an alternative economic system. They did not need to because God had already given a perfect economic system to Moses.
Paul, Luke, Jesus and the Prophets, all pointed back to the Torah, when writing and speaking about economic issues. Christians who want a righteous economic system must go back to the Instructions for Economic Life to find God's core teaching about economics. Christian economists should study the Torah to get understanding of God system of economics.
At the economic level the main impact of an economic crisis will be a reduction in the division of labour. Trade will become more difficult, which will reduce the level of specialisation. New Zealand may not be able to afford to import so many autos, computers and flat screen television. A decline in the volume of trade and in the degree of specialisation will make us all worse off, but it does not mean we have to return to self-sufficiency and subsistence.
Whatever happens, we should maintain as much division of labour as possible. When trade gets more difficult, we might need to shift to sharing to get the benefits of specialisation, but we should not return to subsistence unless that is the only alternative. Sharing can strengthen the division of labour when trade weakens it. A return to self-sufficiency should not be necessary, if people have learnt how to share.
I take a morality approach to economics. I am not interested in what will work. My focus is on what is right or wrong.
The consequence of this approach is that it is important to be precise about which actions are wrong and who is taking the wrong action. Vague statements will no do.
This is why I have investigated the concept of bailment when discussing the banking system. I wanted to establish whether banks are acting immorally or not. My conclusion is that when a bank takes a demand deposit and records it as an asset on their balance sheet, they might not be stealing, but they are being very devious, because they make very little effort to explain to depositors the legal implications of their action. They do not say, “You have just become a creditor of the bank”.
On person made the following response. The focus should be on fiat currency. That is where the fraud is occurring. That is where the thieving is going on.
This raises an important issue, but the comment is too vague. Fiat currency may be morally wrong, but we must specify more precisely the actions that are morally wrong. The moral agent responsible for the fraud or theft must also be clearly specified. Is it the government, or the banks, or people accepting the fiat currency?
According to Walking the Talk The impression is conveyed that the goods and services that people, businesses and governments currently buy are somehow made available by 'the planet' and then unequally - and hence inequitably - distributed among countries. In fact, rich countries are rich because their citizens produce more per head, not because they have secured privileged access to 'the planet's goods', or to its 'resources'. (The Role of Business in the Modern World p. 91). Some 80% of people live in developing countries and have
David Henderson has an interesting comment about this statement.
to live off 20% of the planet's goods.
We must do some careful thinking before deciding who has sinned in this situation.
The City Council has decided to close the Edgeware Swimming Pool. They claim that the pool is not well used and the costs of operation are increasing. The people of Edgeware are out protesting. A group is standing beside a busy road with banners calling for passing cars to honk their horns in support. Others have signs on their fences. This illustrates the problems that arise when economic decisions are turned into political ones.
Think about some examples. There is a video shop in Edgeware. This shop remains open, because the revenue received from renting videos exceeds the cost of running the shop. If people stopped using the shop and revenue declined dramatically, the owners would have to close the shop. The criteria for this decision are simple. If the people of Edgeware are willing to spend enough to cover the costs of running the shop, it will stay open. If they start spending there money somewhere else, it will close.
Consider a business thinking of opening a gymnasium in Edgeware. If the gymnasium can get enough paying customers to cover the costs of running the gymnasium, it will proceed. If the is insufficient people willing to pay the fee that the gymnasium charges, it will have to close.
When the city council provides services, economics is irrelevant. The politicians have no sensible criteria for deciding whether the pool should stay open, because the entry fees to the pool are totally unrelated to the cost of operating the pool (including the cost of capital). Politicians can only respond to political noise, but they never know how many people are making it. If the noise is loud enough, they have no choice but to keep the pool open, because their main objective is to not lose their seats at the next election.
The only way to find out how much the people of Edgeware value their pool is to look at how much money they are willing to pay to use it. Honking of horns tells us nothing, because honking a horn costs nothing. If people are spending their money on other things, they must value them more. From appearances, it seems that most place a higher value on videos than swimming.
Political decisions are totally detached from economic reality. They tend to be bad decisions, because they are based solely on political noise which is cheap.
City Councils should not be making decision about services like swimming pools. If there is sufficient demand for a swimming pool in Edgeware, I would expect an entrepreneurial person to provide one. If there are insufficient people in Edgeware willing to pay an entry fee that covers the full cost of operation, then they do not want a pool that badly.
No doubt someone will raise the issue of the poor with no place to swim. The answer is obvious. I doubt that the City Council has responsibility or authority to care for the poor, but even if it does, there are better ways of assisting the poor than providing a swimming pool at Edgeware. I suspect that the poor people in the area get more pleasure from the video shop down the street from the pool.
