Yesterday we looked at biblical principles found in the Four-Chapter Gospel — principles that impact how we approach economics. A failure to understand this connection is one reason Christians do not see any relationship between biblical and economic principles.
As I suggested yesterday, there is another reason Christians do not make the connection between markets and morality.
The second reason that Christians mistakenly believe free markets must be immoral and at odds with Christian values is that they do not really understand free markets. Free enterprise is an economic system whereby wealth and the means for creating wealth are privately-controlled and owned. Adam Smith referred to it as a system of natural liberty.
Free enterprise does not occur from top-down design, but rather it is an informal system that emerges from human exchange fueled by self-interest. It is ongoing trade in which an individual or individuals are free to create and operate businesses for profit with minimal governmental interference.
In free market economies, the government provides an institutional setting for the free exchange among market participants by upholding the rule of law which protects the right to own and transfer property.
In 1776, Adam Smith was one of the first authors to specifically write about free enterprise with the publication of his book An Inquiry Into the Nature and Causes of the Wealth of Nations. He argued that the wealth of nations could be increased by allowing the individual to seek his own self-interest, and by removing governmental control over the economy. He reasoned that this theory rested on three major principles:
1. People are motivated by self-interest.
Based upon his observation of human nature, Smith concluded that people are motivated by self-interest. He wrote,
It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.
Smith went on to say that “neither intends to promote the public interest,” yet each is “led by an invisible hand to promote an end that was not part of [his] intention.” Free markets, then, help mitigate greed by encouraging us to serve others as part of our broader self-interest.
2. Property rights are important.
Adam Smith recognized the importance of private property. Property should not be held in common, but owned and freely traded in a free market system. Profits generated from the use and exchange of private property rights provide the mechanism that drives economic growth.
3. Limited government is essential.
Adam Smith believed that for free markets to work, it was necessary to minimize the role of government. He argued that we should decrease the role of government and increase the role of the free market.
Bringing clarity to this misunderstanding about the definition of markets is an important step in answering questions about markets and morality.
I’d like to end with a brief biblical definition of markets offered by Dr. Anne Bradley in a previous post:
…free enterprise…It means being free to choose your vocation, being free to understand your calling and pursue it with integrity. This is precisely how we are created – as unique individuals with a purposeful contribution to make. There is inherent morality in free enterprise in that it provides us a greater opportunity to contribute to Christ’s Kingdom, in the here and now. We may not understand how we are making the contribution, but we are. We are serving others through our work.
In my next post I will look at the economic principles found in the story of creation and the Garden of Eden.
Do you agree with this definition of what a market is? How would you explain markets to someone?