Economics 101

Dealing with the Real-Life Consequences of Economic Ideas

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Ideas have consequences. John Piper articulates this when he tells the story of Victor Frankl, who was imprisoned in the Nazi concentration camps of Auschwitz and Dachau. Regarding ideas, Frankl wrote:

I am absolutely convinced that the gas chambers of Auschwitz, Treblinka, and Maidanek were ultimately prepared not in some ministry or other in Berlin, but rather at the desks and in the lecture halls of nihilistic scientists and philosophers.

Christians understand that ideas matter, as this understanding applies to our faith and our lives within the body of Christ. That’s why the apostle Paul encouraged the church at Philippi to dwell on that which is pure and right – because what we think about has consequences in the real world.

Real World Issues Are Spiritual Issues

Despite this truth, we often separate this part of our lives from the the public square. The ideas that you hear on the evening news cover important topics for Christians to be engaged in, including:

  • Which policies best care for the poor?
  • Are there limits on public debt?
  • Should we regulate businesses?
  • How do we improve healthcare?

How we answer these questions should be based on God’s truth, which includes the economic way of thinking. We may think that these issues don’t carry the same weight as our other spiritual issues.  However, questions such as these are spiritual issues.  

The Real Life Consequences of the Economic Ideas Dominating the 20th Century

The economic debate between economists John Maynard Keynes and Friedrich Hayek provides a striking example of how economic ideas have major consequences. Their debate, covered so well in the book Commanding Heights and its three-part PBS documentary corollary, is fundamentally about the whether the state or the market is best poised to promote flourishing.

Keynes took the position that:

  • The market is unpredictable and subject to systemic failure.
  • The state is an important corrector of those market failures.
  • Federal spending has a “multiplier effect” meaning you get more growth than you spend.
  • Government spending is a positive force for economic growth.

In contrast, Hayek believed that:

  • The market is best able to bring dispersed individuals together, through trade, to serve one another.
  • This service leads to wealth accumulation.
  • Wealth accumulation benefits all members of society, especially the poor.

Hayek was belittled for his ideas. Keynes was heralded. Economist Peter Boettke points out that Keynesian theory relies on scientism, formalism, and excessive aggregation. This theory presumes that we know more than we actually ever could about “managing” an economy. These are the same ideas that led Soviet leaders to attempt to “manage” their economy through command and control.

It is no coincidence that the twentieth century was the bloodiest century in human history. The ideas of totalitarianism and communism started in the universities and made their way into policy. These policies had devastating and unthinkable human consequences. Deaths resulting from direct government action against citizens in the twentieth century reached 262,000,000.

We are called as Christians to engage in the culture and be a force for good. We can and should fight against bad ideas. The contention between the ideas of Keynes and Hayek mattered. Likewise, Christians need to understand and engage in the economic debates on the news. These issues all have important consequences for life as we know it today as we work to further God’s coming kingdom.

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  • So very right. This is why I teach economics as moral philosophy and not as “social science”.

  • Ron Ivey

    How did Hayek see the human actor in economics? As an independent rational individual making social contracts or as a person in a web of relationships and responsibilities to family, neighbor, community and nation? Also, should the perogatives of capital and financiers drive the direction of democracy? If we believe in limited government should we also believe in limited corporations? Does Hayek explore the notion of the common good, the common wealth of landscape and culture and how our economic choices impact these shared treasures?

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