Economics 101 & Public Square & Theology 101

The Miracle of the Market

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The English man of letters G.K Chesterton once wrote that “We are perishing for lack of wonder, not for lack of wonders.” I believe that this is so in our understanding of economic life. We in the West have come to assume that the grocery store shelves will be fully stocked when we go shopping, and that we’ll find what we want most of the time.

Jesus taught us to pray for our daily bread. We should be grateful for our daily provisions, but many fail to understand the process by which that prayer is answered. We are not to sit around waiting for manna. The idea of trading and markets has been with us from the beginning.

Adam’s sons raised different animals and presumably traded with each other, cities were built in the post-flood world, and all the patriarchs engaged in trade, as did Job. Furthermore, God protects the essentials of a free market in the Ten Commandments with his protection of property: “Thou shall not steal.” Private property is the basis for all markets; people cannot buy, sell, or trade without ownership.

In the history of human existence, the ability to easily obtain not only our needs, but our wants as well has been available to a relatively small group of people for a relatively small amount of time. Some climate scientists speak of the “hockey stick” sort of picture in graphs of global temperatures over time. A less understood but equally-dramatic “hockey stick” is the increase in material well-being that has occurred in the last three hundred years.

The Miracle of the Market

In 1958, Leonard Reed demonstrated the miracle of the market with a little fable called “I, Pencil.” It has since been made into a short video, and you can watch IFWE’s updated version, “I, Smartphone,” here. The point of all these efforts is to show how many people must cooperate in thousands of ways to bring us products that we take for granted.

The miracle of the market is that many people involved in producing a good or service may not ever know the end product. Some, though not all, might not even care.

This cooperation, which can span continents and even generations, happens by appealing to each person’s self-interest. To be clear, the appeal is to each person’s self- interest, not their selfishness or greed. Jay Richards and Anne Bradley define this distinction in a previous IFWE op-ed, writing,

Greed (corporate or not) has traditionally been counted as one of the “seven deadly sins,” an excessive desire for possessions that allows us to hurt ourselves and others. Self-interest is different. Every time you take a breath, eat a meal, or brush your teeth, you act in your self-interest. That’s good, not bad.

Taking a job in order to provide for yourself or your family is in your self-interest. And in pursuing that self-interest, you may end up serving others without even realizing it. We do not get pencils by telling each person involved that students need pencils for school, and we should all work together to make it happen. Students need pencils, and we convince people to produce them by appealing to their own interests and needs.

Simply stated, the miracle of the market is that each person, in pursuing his or her own interests with no regard to students’ needs, manages to meet those students’ needs anyway. We get socially-beneficial results from self-motivated actions, and that is a miracle so counter-intuitive that many do not believe it even though they live in the middle of it.

How many times do we hear politicians, pastors and others urge young people to shun a business career and serve other people? They miss the whole point. Business does serve people. This was one of Adam Smith’s greatest insights:

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. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.

The market system accepts that man is sinful and self-interested, and turns that tendency toward promoting societal good. Students get their pencils and take notes in school and learn. This goes far beyond what anyone involved in the production of pencils necessarily intended.

Conclusion

The market system is a wonder. It has only prevailed in a few countries for a few hundred years, but in that time it has raised the people living in those countries from poverty to the highest levels of opulence.

This was not inevitable. It was not a function of time. It was a miracle that has become so expected in these countries that few stop to consider how life used to be not so long ago, how life could have been, or what life is like in many other places.

In the next few posts, we will discuss the market system in detail, how the price system works, and how it is consistent with biblical teachings.

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