Thursday, June 23, 2011

God the Economist. Book Review Part 3

Part 1 and Part 2.

I have previously looked at how Meeks argues the classical liberal concepts of liberty, exclusive property rights, and scarcity conflict with the ideas of the biblical economy. But Meeks does not examine the potential consequences of some of his ideas. Today I address the idea that production is the primary purpose of an economic agent.

Chapter Five includes a theology of work, redeeming the concept of work from both the Greek ascetics who looked down on it as something to avoid, the post-Enlightenment Puritans who saw work as a sign of salvation, and the modern world where work is the means by which we chase goods for status and well-being.

The classical economists believed that the wealth of a nation was determined by its productivity-- how much its people produced. Modernly, we try to measure the amount of goods and services produced domestically, it's called gross domestic product (GDP). GDP measures both income and output of a nation, and since 1941, GDP per capita is seen as the simplest measure of a nation's well-being or standard of living. Every textbook contains a Robert Kennedy quote on the limits of GDP-- GDP doesn't tell us how happy we are, or how spiritual, or how creative, or how free, etc. Several countries are considering attempting to dethrone GDP with an index that includes happiness and other measures. I think one reason for this is that the rate of GDP and productivity (output per worker) growth has slowed in several Western countries and this is seen as some failure of various economic policies, which naturally call for a solution. Replace the index with one that measures other things, and the lack of economic growth doesn't look so bad.

Tyler Cowen's Kindle Single The Great Stagnation contains some hypotheses about the U.S. productivity slump since 1973. He notes that the rate of major technological progress has slowed down since the late 1800s. The refrigerator was a huge technological leap, but since then we've only come up with fancier, only marginally better, refrigerators. Cowen would prefer to see the stagnation end. He recommends opening up to more trade so that there can be wider markets and more specialization, and a societal shift from honoring "unproductive" (Smith's term) workers like athletes, actors, and politicians to honoring scientists and entrepreneurs (so that more people will want to be productive). Cowen notes, however, that people may be becoming content to produce and earn less. For example, Internet access is relatively cheap but provides seemingly endless streams of entertainment and knowledge.

We know that the West experienced this productivity boom (and the East is currently experiencing it) due to a movement to the market system-- liberty, democracy, property rights, and a price mechanism--and away from absolutism. As Brad Delong pointed out with this chart on his blog, we've seen what happened in this century when countries eschewed markets, it robbed them of "80-90% of their productivity." Material Well-Being in 1991: Matched Countries on Both Sides of the Iron Curtain:

GDP correlates with other variables related to well-being: literacy, education, health, political freedom, etc. If we're concerned about certain peoples' exclusion from prosperity (as Meeks is), we should be advocating for increasing their access to markets, not eliminating the market. However, Germany and Mexico above had wider income inequality than Cuba or the USSR. Meeks is bothered by this inequality in capitalism as it shows "domination" can occur in a market system. But is the inequality important or the overall level of income? The poorest German was much better off than the poorer Cuban by just about any measure of well-being. In Cuba and the USSR, the absolutist state dominated, something I'm glad Meeks also rejects as a good way to organize society.

As I discussed in my last post, nobody argues that the market is a panacea or creates income equality, but rather that it stands the best chance of allocating scarce resources more efficiently and improving the lot of the whole of society in a way that history has shown socialism and central planning does not.

So, the market system = greater GDP. But, should this matter? Should we be focused on increasing GDP per capita or something else?

I would imagine that God would have been unhappy if the Israelites had measured GDP. God forbade taking a census-- he did not want Israel to look at itself in a mirror and admire its perceived might. God wanted Israel to rely on Himself for strength, rather than itself. This idea seems to be echoed in God's anger with Israel's insistence in having a king (1 Samuel 8). Some people use this passage as biblical support for the classical liberal idea of liberty-- God is warning Israel not to trade liberty for security because it's a false trade. God indeed warns Israel that they will be dominated and exploited by their kings. But Israel wasn't rejecting their liberty overall, they were rejecting God (v. 7-8). They were rejecting God's economy and leadership, in order to be like the other nations around them (v. 5).

God also directly forbid certain forms of technological progress that seemingly would decrease Israel's dependence on God (Joshua 11:6, 2 Samuel 8:4). Hamstrung horses aren't as useful as non-hamstrung. God also forbids that Christians look at individuals through the prism of wealth (James 2:1-9). Much of Jesus' ministry was about telling the poor, the sinners, the children, and other seemingly unimportant, unproductive, propertyless people that they were invited to enter the Kingdom (Meeks' Chapter Four covers this).

This matters to me because there are a lot of Christians in America who are complaining and casting blame on various politicians for our slow economic growth. Yet at the same time, they are also calling for women to return to homemaking, fathers to spend less time at the office, and an end to consumerism and debt. This is a logically inconsistent position. One reason for the rapid economic growth we had overall from the late 1800s to 1973 was because of the large increase in women and minorities being accepted into the workforce-- formerly "idle" workers in terms of GDP were suddenly active. Production and income increased. Most married households are now two-income households.

But, was that a good thing? Many Christians make the argument that it's not. But what they don't seem to realize is that national output and income would decrease dramatically from its current level if mothers suddenly stayed home or if households gave up their eager pursuit of goods and income. This doesn't seem to jive with their political statements away from the pulpit.
The reaction I have when reading liberal Christians who want to eschew markets totally is "We would never have made it much beyond subsistence living if these people had what they wanted." There would be no telephones or internet. No "green revolution" of Norman Borlaug and improved crop yields. Vastly lower life expectancy. There was starkly little technological progress in the millenia from Genesis to the fall of Rome compared to the rapid progress that was made in just the last few centuries. Technological progress only really took off after the fall of the Roman Empire's autocratic control (see Rodney Stark's book, or even Jared Diamond's Guns, Germs, and Steel).

But if at the same time we were closer to the biblical economy of Leviticus 25, or of the very early church in Acts, would that be a bad thing? Would you trade your iPad for that? (This is a seriously tough concept for me to wrestle with.)

Matthew 16:26: "For what will it profit a man if he gains the whole world and forfeits his soul? Or what will a man give in exchange for his soul?" Could we replace "man" with "nation"?

As Meeks points out, the market system relies on humans with unlimited wants and needs. As certain needs and wants are met, more arise as a result, and the market allocates resources continually to achieve them ad infinitum. Being able to continue economic progress as measured by output is the point of having a market system.

(It's interesting that economists from Ricardo to Keynes envisioned a "steady state" where we would achieve so much technological progress that there would be nothing left to invent or need. They couldn't imagine we'd keep inventing things. Keynes even envisioned this result for our current times.)

But as Part 2 pointed out, we can only achieve that kind of satiation in Christ. So, I think God would rather his Church be satisfied with Him and inviting others into that satisfaction than worrying about whether America is going to outpace China or India.

So long as we're operating in a neoclassical world with fallen men which therefore live in the presence of scarcity, democratic capitalism is the best way to organize our society as it will ensure the greatest amount of production and income. If the goal is to alleviate poverty in Bolivia or Bangladesh, increasing their access to property and markets is the way to go. My personal preference for a central bank that pursues a NGDP target makes sense-- that's the best way to achieve the goal of stable economic growth and low unemployment.

But if we're operating in a God-fearing world where people are in the Vine (John 15), and following God's definitions for property rights, freedom, and scarcity, then GDP growth just isn't important. Where there is lack from human weakness, God will supply. Rather than relying solely on our productivity to meet our needs, we rely on God.

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