Monday, May 11, 2009

Does God Want You to be Bankrupt?

Article by Ron Lieber in the NY Times.

This part catches my eye (bolding mine):

However strongly we believe in free markets (not, perhaps, as fervently as we did a year or two ago), the theme of forgiveness does run strongly through religious writings of all sorts. In the Old Testament, for instance, Chapter 15 of the book of Deuteronomy calls for the forgiveness of debts once every seven years.

Religious leaders were aware, however, of the chilling effect that could have on lending (particularly in the sixth year). “The Torah says don’t think that way, don’t be stingy” in that sixth year, said Rabbi Mark Washofsky."

I could replace "stingy" with "rational" here. This is one part of Scripture that is clearly God calling us to behave spiritually, rather than rationally. I wrote a series on this subject before, I would add this topic as a chapter in the book (if I ever write one).

It's perfectly rational behavior not to lend to someone when you know you're not going to get paid back, yet we're called to do it anyway. That is unprofitable and the loan just shouldn't be made, especially if you have shareholders to answer to. The borrower also has a clear incentive to not pay off his debts, just hold out for year 7. But not repaying your debts is called stealing, so he too is being called to behave spiritually.

Our markets require rational behavior in order to work properly. Economists would consider God's markets disfunctional.


wwje said...

So, how do you reconcile God's dysfunctional economics with what you learned as a trained economist?

JDTapp said...

In short, God's way works when everyone is obedient to God. It's a call to deny ourselves and do the irrational because we know it pleases Him. It would work best in a sinless heaven. Israel was always trying to find ways around His commands, they were disobedient.

We operate in a fallen world where every non-believer is a follower of the prince of the power of the air and everyone pursues his own self-interest and not God's. That leads to the systems we have in place today, capitalism being the one that gives us the most economic freedom.

But, the Church should strive to live up to God's standard. That may not mean swapping back the land we bought from another believer every 7 years, but it definitely means we shouldn't be selfish with our property. Definitely means we shouldn't steal and should look to forgive others' debts. Definitely means that profit shouldn't always be our underlying motive.

JDTapp said...

To answer your question more directly, my training teaches me to study the choices people make in the presence of scarcity. We can model people's behavior mathematically, given certain assumptions.

A Christian's "irrational" behavior can be explained by adding to his utility function how much he values heavenly reward. There has to be something motivating him to accept less profit, to loan out when he knows he won't be repaid, to forgive debts, etc. When you incorporate that heavenly incentive in, the behavior makes sense.

It's just different than the behavior of a non-Christian who has a different utility function.