One of the biggest debates throughout the history of economics is how value is defined and determined. I want to take a look at this question and what it means for our work and our faith.
How Do We Determine Value?
Value is in the eye of the beholder. Think about how you value things—what to eat for breakfast, for example. You have many possibilities: eggs, oatmeal, yogurt, fruit, muffin, donut, Danish, bagel, etc.
Maybe you have a few choices which you rotate between. We actually may choose things that we like less (oatmeal) over things we like more (eggs benedict). Does this make us irrational?
No, because only we can determine how and why these choices are made. Eggs benedict, while a nice treat is not an everyday option for me. It’s time consuming to make, very rich and high in calories, and requires lots of ingredients.
We all make choices that to an outsider may not seem to make sense. Each of us has many logical and psychological reasons why we choose one thing over another. These preferences can be from deep-seated places and thus difficult for us to articulate.
What is important is that you know you like several things well enough to keep them in your pantry. By keeping them on hand you demonstrate that you prefer them over all the things which are not in your pantry.
None of this value-determining process is irrational. In fact, it is well-reasoned. Part of it is built into God’s unique creation of you. Your likes and dislikes are hard-wired into how God created you.
The Scriptural Basis for Subjective Value
Economists refer to this value-determination process as subjective value. Value is in the eye of the beholder and is completely internal to the person making the choice.
Why is navy blue my favorite color and not orange? It’s really hard for me to understand the “why” of this choice; I just know it to be true. This relative truth about my favorite color drives the way I make choices over sweaters and curtains.
This all may sound very trivial. Who cares about curtains, sweaters and breakfast food? Well, it gets us to a deeper point about how and why we engage with one another in markets—otherwise known as trade.
It is important to understand that this notion of subjective value comes straight from the biblical truth about how we are created in God’s image: unique, different, and match-less. We see evidence of this uniqueness throughout scripture, that we are made distinctly male and female (Gen. 1:26-27), given different gifts (1 Cor. 12:4-11), and are being transformed into Christ’s likeness (Eph. 4:22-24).
Trade and Subjective Value
This means that the combination of our unique genetic makeup and our life experiences will cause us to have unique preferences. Our unique gifts are complementary to the unique gifts of others. And when we trade with others, value is created for both parties.
This notion is directly connected to comparative advantage. We want different things, and we specialize in different things. Trade is the only way to solve this problem effectively.
Trade allows us to specialize in what we are created to do, and then to trade our talents with others. They engage in that trade with us because they value things differently than we value them.
Part of economist Adam Smith’s insight over 200 years ago was that division of labor and specialization—which have everything to do with your vocation—are limited by the extent of the market. Therefore, a robust market society creates opportunities for all types of jobs. This means that more people have an opportunity to offer their skills and talents in the service of others.
Have you ever considered how many people are employed in the process of getting groceries to your local market in the U.S.? Consider all the different gifts, skills, and preferences that are needed to operate and produce:
- The computer systems that operate cash registers.
- The gas to transport produce and milk to the store.
- The bar codes that track inventory.
- The Cryovac machine which keeps your meats and cheeses fresh.
It’s important for us as Christians to understand these economic principles which stem from biblical truths, because market trade is how most of us live out our vocational calling.
It’s also important to understand the God-given human anthropology behind why trade is important for both the developed world and the poorest among us.
Editor’s note: Learn more economic principles that help us be good stewards of our God-given resources in Be Fruitful and Multiply: Why Economics Is Necessary for Making God-Pleasing Decisions.
On “Flashback Friday,” we take a look at some of IFWE’s former posts that are worth revisiting. This article was previously published on Nov. 13, 2012.