The Clashing Worlds of Economics and Faith

July 7, 2008

Transitioning

Filed under: Uncategorized — jdtapp @ 8:11 pm

Welp, the discussion hasn’t arisen like I’d hoped.  Lucas is busy with his mentorship this summer and I’ve been busy with a newborn and job hunting.

I’ve just taken a faculty position at Southwest Baptist University.  I’ve shared this book with a colleague and we’ll hopefully find some ways to integrate it into our classes or foster a discussion.  So, I look for the blog and discussion to develop in new ways starting this fall.

May 28, 2008

Chapter 2- Allocation of Resources

Filed under: Uncategorized — Tags: — jdtapp @ 8:27 pm

Again, economics is the study of the choices people make in the presence of scarcity. We have limited resources to fill our wants. So, who should get what?

Halteman’s gasoline example is a fair one. How should one solve this problem both ethically and efficiently? Capitalism essentially solves the dilemma with the auction method.  We can illustrate that it’s the most efficient, but ethical and equitable are subjective measures.

If gasoline were distributed equally to everyone then some people would have more than they need and others less. Those with more would likely sell to those with less. The sellers would be forced to charge a price the buyers would be willing to pay, and thus the gasoline would end up being allocated efficiently, meaning everyone gets their optimum amount at a given price. So, it is most efficient just to allow the market to handle the allocation. In any market the price will be what the market will bear.

In the oil crisis of 1973, the U.S. set a ceiling on the price of gasoline. The artificially low price created long lines of people buying gasoline, eventually leading to a shortage.

Generally speaking in economics (and pages 29-34), price motivates production. People need food, goods, and services. The amount people work depends on how much they are willing to produce (vs. how much leisure time they’re willing to give up) at a given price for their production. A rational person analyzes the tradeoffs between leisure and work.

supply curve

Here is a basic supply curve. As the price for something goes higher, people are willing to produce more of it. A price ceiling (say if P1 or P2 were mandated), ends the point at which people are willing to produce the good. If the cost for producing an additional gallon of gasoline (the marginal cost) is greater than the revenue from selling an additional gallon, then the producer will stop production. In 1973, this was seen all over the U.S. economy. There are some poignant video clips of poultry farmers throwing baby chicks into barrels to drown and dairy farmers pouring milk out on the ground because it cost too much to take it to market for the price that the government mandated be offered for the service. Things became very inefficient. That’s why economists react in horror to talks of price controls for gasoline today.

However, there are other reasons listed for working. In the former USSR, unemployment was illegal. A person had little motivation to produce other than the government telling him to do so and reminding him constantly that the government-provided goods and services he enjoyed was made possible by everyone working. The government made decisions about what should be produced, where, when, and by whom, and how many resources it should take to produce it. Economists and engineers were trained solely for that purpose. The rationale was that science and mathematics could determine allocation more efficiently and equitably than pure market forces.

On pg. 29, the author mentions that Christians “have more than their own material gain as a motivation for work.” We should also work to serve others and use our occupations missionally. This might be a radical departure from working simply to meet our needs, but I think the importance in working missionally should be on how we work, and not necessarily why we work (Colossians 3:17).

The key to capitalism is that “the production market is brought together with the allocation market, exchange activity goes on continuously with people spending and receiving money and reacting to market signals.”

A good story illustrating the complexity of how the market produces goods is shown in this short story, “I, Pencil” by Leonard E. Read. No one person produces a pencil. It’s produced by thousands of people who have never met each other but were simply pursuing their own self-interests and responding to market signals.

On pg. 31, Halteman reminds us that in the Middle Ages, production and profit-seeking were considered unspiritual. Monks and priests who devoted their lives to service and study were held up as examples of überspiritual. Post-reformation, economic activity was looked upon more favorably and a person’s material abundance was seen as evidence of God’s blessing. (This could create another motivation to work—to be seen as “blessed.”).

To sum up Halteman’s points and my examples above, a controlled economy produces inefficiencies. The government might set out for a noble cause (like more affordable gas for all) but will end up with unintended consequence of shortages and a population unmotivated to produce goods at the mandated price. “History shows that markets organize economic resources far better than planners” (35). The capitalist model of production requires a great amount of freedom to let the market determine the price.

The author closes by saying we will now “explore the notion that believers must go beyond the best the secular world can do in life,” and suggests there might be an alternative value system.

Discussion Questions:

  1. Of all the moethods of allocation, do some feel more/less Christian than others?
  2. Is it true that allocation systems cannot be evaluated purely on how Christian they appear to be, but also on how they structure production incentives?
  3. Is it necessary for Christian people to have the material reward incentive in order to be productive, or is working a natural response to God’s gift of resources and grace?
  4. Illustrate, with examples from various cultures, the three motivations to work. Should others be added?
  5. – if anyone is familiar with those texts please comment.
  6. If optimal production-input combinations depend on the relative scarcity of the factors of production more than on the conclusions of intelligent engineers, what strategy for third-world economic development would you recommend?
  7. Why might someone argue that auction class registration will lead to better classes than a first-come, first-served method?

April 22, 2008

Chapter 1- The Economic Context

Filed under: chapter — Tags: — jdtapp @ 2:08 am

This chapter introduces some of the key concepts that the book will deal with. In order to think about the choices people make, it’s important to think about the world we live in. We live in a world where resources (time, money, natural resources, etc.) are scarce. “Scarce” doesn’t mean “hard to find,” it simply means limited. There’s not enough for everyone to have everything that they want and need. The world got that way because of sin. In the Garden of Eden there was abundance for all, and it will be that way again in heaven.

Economics is the study of the decisions people make in the presence of scarcity.

So, given that the wants are greater than resources, what do we do?

1. Do we simply choose to want less?

2. Do we figure out ways to produce more?

3. Do we figure out how to distribute what we have in a more effective manner?

Those are the three ways of approaching the problem of scarcity.

The author hints that he will talk later about how Christians should choose to want less. He also points out that this concept might go against the “natural tendency” of personal freedoms and wanting more instead of less.

He also mentions that

“since per capita economic growth was not an expected outcome of economic behavior throughout most of history, it is easy to understand why Jesus, in the first century, was oriented more toward conservation and redistribution than toward expanded production” Pg. 18.

So, there’s something about the ideas & systems in place in Jesus day that is inherently different from our own today. That’s an important point.

In today’s world figuring out ways to produce more is the norm. A country’s economic well-being is often crudely measured by its economic output divided by the population (GDP per capita). By finding ways to increase output, you find ways to increase standards of living for everyone.

Distribution leads to questions about fairness. What system allocates goods and services both efficiently and equitably? We currently use democratic capitalism. What did they use in Jesus’ day? What other options are available? Do any of you think about these things?

This ties into the author’s depictions of worldviews (Pg. 20). In ancient times, it was God and authorities who were seen responsible for a people’s well-being. Distribution was decreed by God’s Law or by king’s degree. In the Middle Ages, it got a little more complicated. Social structures and religious authorities defined how people live. God was seen as less-involved, having left the world to operate on the Natural Laws which He created.

I’ve been reading a book about how the mathematics of probability and forecasting didn’t develop until after the Reformation. After the Renaissance, people began to question authorities and look for scientific explanations; beginning to think more for themselves. This freedom led some societies down a secular path, embracing science and rejecting spiritual.

This leads to the Modern worldview where the world and the people in it seem to be following all-natural patterns. Economists have developed models for people’s behavior which can often be explained in mathematical jargon and graphs. I will often refer to “rational” behavior as the behavior of people operating under their natural tendencies (perhaps I should call it “natural” behavior). But, Spirit-led behavior looks different than natural behavior and cannot easily be explained by economic models.

Lastly, the Postmodern worldview where all truth is relative and there are no anchors. “What is true for you? From what traditions do you come?” (Pg. 22).

I find this paragraph interesting:

“It took the church many decades to integrate the Enlightment (modern) view of the world with historical Christianity. Some things, earlier considered wrong, now had to become acceptable. Examples include commercial activity, climbing a socioeconomic ladder, and charging interest” (Pg. 22).

These are all practices that seem to be up to the individual believer, providing she does not take it too far.

Do you think that modern Christianity has justified the acceptance of practices earlier considered “wrong,” possibly sin?

The author then outlines the layout of the book.

Discussion Questions:

1. Is it true that people of all income levels and social structures feel a constant sense of shortage, whether of things or of time?

2. Is it a Christian virtue to be satisfied and stop striving for more?

3. From the brief description of modern and postmodern worldviews, what challenge do you see for the Christian in each worldview?

Feel free to comment on any of the above questions.
Let’s get the discussion started!

February 25, 2008

An Invitation

Filed under: Uncategorized — Tags: — jdtapp @ 4:30 pm

The purpose of this blog is to foster a new idea in blogging- an interactive book study. We’ll be going through The Clashing Worlds of Economics and Faith by James Halteman.

clashingworlds.jpg

Dr. Halteman is a Christian professor of economics at Wheaton College and he will also be looking in on this discussion.

If you’d like to participate, you need to do 3 things.

1. Email me, or comment and give us your email address. I’ll send you the initial invitation that explains what this study is all about.

2. Buy the book (it’s available for less than $5 at Amazon or Half.com).

3. Participate on the blog. I would like to have different participants write posts to start discussion on different chapters.

If you have no economics background, great! Economics is a way about thinking about the choices people make, and not just the economy. We’ll be posting some links and resources here to help better clarify the difficult topics.

We’ll have representatives of different schools, seminaries, and backgrounds. All of us have a couple things in common: We are Christians, and we want to know how to think about economic issues and better understand how we should interact with the world around us.

Welcome!

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