What are some of the essential elements of economic progress? There are four key elements I’d like to explore today. Before jumping in, let’s get a biblical take on the background for economic progress.
The Cultural Mandate & Economic Progress
In Genesis 1:28 we read,
God blessed them and said to them, “Be fruitful and increase in number; fill the earth and subdue it. Rule over the fish in the sea and the birds in the sky and over every living creature that moves on the ground.
Theologians call this the Cultural Mandate. It is where God gives humanity its job description. This is part of God’s plan to bring us along the path to flourishing. Taking dominion requires that we subdue the earth by taking the resources we are given and making more with them, not by pillaging those resources.
God knew exactly what he was doing when he created us. He made us with distinction and vast natural resources at our disposal. He knew our individuality would bring us together to serve one another and create a greater level of flourishing than we could otherwise achieve.
Economic progress comes primarily through trade, investment, better ways of doing things, and sound economic institutions.
Why is it that we are so much better off than we were two hundred years ago? Economic progress. Let’s spend some time on each of the dimensions of economic progress so we better understand it.
Economic progress only comes when we trade with one another. Trade creates wealth because it allows us to focus on our gifts. We get to do what we are good at doing, and then trade for things which we are bad at doing. This concept is fundamental to a Christian understanding of our anthropology.
God created us differently, with unique abilities to offer each other. Markets are mechanisms that allow us to become better off precisely because we are not forced to produce by ourselves all that we need to survive.
IFWE scholar Art Carden explains this concept in this video:
We make investments in things and in people. Economic growth in the last century has much to do with the types of investments we have been able to make.
Workers in the United States have higher average levels of education than many other workers around the world. These investments in human capital are important for increasing our individual productivity.
We also invest in what Gwartney et al call “productive assets like tools and machines” which also increase our productive capacity. Think about working on a typewriter versus a laptop.
These investments make us more productive. They depend on human creativity and entrepreneurship. I used to own an old Nokia phone with a black and white screen that couldn’t do much other than place a call. I thought it was the best thing ever. Now I can’t imagine life without my smartphone, which allows me to pay bills, secure my home and grocery shop.
Better Ways of Doing Things
Last week, I mentioned that we will never have to worry again about an ice famine. This is because we figured out a better way to preserve food. Innovation and human ingenuity brought us complex machines that help us store food, and we never have to concern ourselves with how those complex machines work.
Alfred Whitehead described innovation this way:
Civilization advances by extending the number of important operations which we can perform without thinking about them.
Sound Economic Institutions
Think of institutions as the “rules of the game.” These rules help make behavior more predictable. They can act to constrain crony behavior, and smooth out human interaction.
Nobel Laureate Douglass North describes institutions as:
…humanly devised constraints that structure political, economic and social interaction. They consist of both informal constraints (sanctions, taboos, customs, traditions, and codes of conduct), and formal rules (constitutions, laws, property rights). Throughout history, institutions have been devised by human beings to create order and reduce uncertainty in exchange.
Institutions change over time based on human experience. Customs, norms, manners and well-established arrangements are all institutions. These include:
- Your child’s allowance.
- Banking systems.
- Freedom to contract.
- Rule of law.
- Private property.
Trade, investment, innovation, and sound economic institutions are important for bringing about higher levels of flourishing for everyone across the globe. At IFWE we have three pillars which we think capture our mission: creativity, purpose and freedom. These pillars are, not coincidentally, also the cornerstones of economic growth and prosperity.
What elements do you think are essential for economic progress?