What Politicians Will Never tell You about Economics
What is the first principle of economics? Some economists will claim that it’s supply and demand, while others insist that it’s scarcity or the division of labor. The first principle of economics is “thou shalt not steal.” Economics is ethical before it is practical.
Almost all modern definitions of economics, like contemporary definitions of “government,” assume that the State, civil government, is the starting point in understanding economic theory and practice. To grasp these, so the argument goes, the role the State plays in economic decision making in the allocation of scarce resources must first be considered. For many, this is a reasonable and moral starting point when resources are scarce and people have needs.
On the other side of the economic spectrum, classical liberals, libertarians, anarcho-capitalists, and even some conservatives contend that the means of production should be privately owned, economic decisions also should be made privately with goods and services exchanged in a free market with little or no positive (active) State intervention.
The role of civil government in economic matters should be minimal, being limited to the protection of individual rights and property. This follows the older definition of the word “economy” found in Noah Webster’s 1828 American Dictionary of the English Language: “Economy — Primarily, the management, regulation and government of a family or the concerns of a household.” The use of “political economy” as a definition does not appear until the eighth and ninth entries, and yet it’s the primary definition today.
Modern economic theory presupposes that markets need to be regulated so there will be a “just” accounting for everyone. If there is inflation (an increase in the money supply), interest rates are raised to decrease the amount of capital available for people to spend. Less money means fewer economic transactions (demand decreases) which results in lower prices to get people to spend.
If the economy is sluggish, governments will increase the supply of money to stimulate growth. If one segment of society is being left behind economically, taxes will be raised and income redistributed to smooth out the inequities in the name of “social justice.”
The advocates of a free market and those who declare for a managed market claim to promote justice with their policies. Again, there is little argument over wanting to establish a just marketplace, the question is, how do we account for justice? What is its source? Mutual consent? Public opinion? Enlightened self-interest? Those involved in economic transactions believe and hope for an agreed upon set of rules (laws) that apply to all equally, especially since “we live in an imperfect universe.” Like reason and justice, how do we account for the validity of these rules?
The Bible begins with two uncontested presuppositions: First, God exists, and, second, He is the Creator of “the heavens and the earth” (Gen. 1:1). A third presupposition logically follows from the first two: “The earth is the LORD’s and all it contains” (Ps. 24:1; see 1 Cor. 10:26). Not only the land, but the stuff of creation also belongs to God: “For every beast of the forest is Mine, the cattle on a thousand hills” (Ps. 50:10).
Private (personal) property rights are based on the fact that God is the Prior Owner who delegates a derivative ownership to His creation. The creator/creature-ownership paradigm is the model for how we establish the principle of private property and the laws that go with it. If I own a piece of property and decide to sell it or give it away, the transaction has legitimacy because I had legal title to the property, and I voluntarily decided to part with it. In the same way, God’s original ownership makes subsequent ownership possible and meaningful. Without the reality of prior ownership, the idea of private property does not exist.
The average American has only vague notions of these ideas. While most Americans would agree that stealing is wrong, they don’t seem to have a problem if some other entity steals for them. Consider this series of examples. If John has a financial need, would it be right for him to rob his neighbors to supply that need? Most people would say no. Would it be right for John to get some of his friends to steal for him? Again, most people would say no. What if John convinces enough people to create a civil government that takes money from his neighbors to pay for things John and others need? I suspect that a lot of people would call the third option “economic justice.”