How Did God Create Economics? (EconThinking #3)

One of the challenges to understanding economics is that you can’t reach out and touch it.

Ok, sure, you can touch money. But money isn’t economics, even though lots of people think it’s all economics is about. (Let’s clear that up here and now: money is just an economic tool and nothing more. Economics exists without money: think barter.)

So what is economics? A lot of universities with tenured economics professors say economics is a science. Yet calling it a science is a recent development – Adam Smith considered it part of moral philosophy. Is it possible that calling economics a science that employs the same methods as physics, chemistry or biology creates some confusion as to what economics really is?

The fact is, economics isn’t a science in the modern experimental sense of the word, and here’s a simple way to prove it: if God had never created man, would physics, chemistry, and biology still exist? Yes. How about economics? Well… No. After all, if God never created man, there would be no people to make choices and steward the world.

And this is our first clue as to what economics really is.

Economics is bound up within the mind of man in a very unique way. As we said in the last post, God stamped the need to fulfill the creation mandate into our very souls. How did He do this? He made us in His image.

The easiest way to understand being made in God’s image is to think of a mirror. God is rational, and so are we. God is purposeful, and so are we. God is relational, and so are we. God is creative, God is powerful, God is intelligent – and so are we. For those aspiring theologians out there, yes – we are limited and God is unlimited. But in stressing how different we are from God, we often forget how much we’re just like Him.

This means God created economics when He formed men and women to live and act within the context of His creation. Economics doesn’t exist “out there;” rather, economics exists “in here.” Economics is what enables us to follow the creation mandate. Which means, at base, economics must be pretty simple and obvious to everyone.

For instance, you know that if your only source of food is your garden, and you grow 10 tomatoes, you can’t eat 15 tomatoes. They just aren’t there.

Or, if for dinner, when you eat one of those tomatoes, then two, then three, you know you’re going to want to eat that fourth tomato a lot less than that first tomato.

Or, if you have five green tomatoes and two ripe red ones, you’re going to value those red tomatoes more than the green ones; however, if your wife loves fried green tomatoes, she’ll value the green ones over the red.

Finally, if you have to weed the garden, fix the trellis, and pick tomatoes, then if three members of your family work together it’s going to get done more quickly and more effectively than if one person does it all by himself.

Now, to pull back the curtain, we’ve just demonstrated four basic economic principles (and there are many more). Because these principles are consistent throughout all of creation, we can call them economic laws. They are built into the way we interact with each other and with the creation.

Furthermore, these principles always work because God providentially ensures that both the creation and the people made in His image maintain their regularity and consistency. This is what He promised Noah when he left the ark: “While the earth remains, seedtime and harvest, cold and heat, summer and winter, day and night, shall not cease.” (Gen 8:22, ESV)

But, you say, that’s just everyday life.

Exactly! Economics is about everyday life. It’s about the choices we make to grow tomatoes instead of green beans, or green beans instead of asparagus. And eventually we may sell some of those tomatoes for money that we can use to buy mozzarella cheese and pepperoni to make pizza. (But that’s another principle.)

You may be asking: ‘can you prove people act like this in the same way you prove E=mc² or that water is two hydrogen atoms and one oxygen atom?’ No. The physical sciences use inductive reasoning, that is, arguing from observed details toward general conclusions. When economics tries to do this, it becomes a jumbled mess. Why? Because you can’t use inductive reasoning solely to explain the way people act (hence the confused state of modern academic economics). People aren’t like atoms – they’re made in God’s image.

But you can prove economics using deductive reasoning. That is, arguing from general truths about the creation, then using our God-given logic to sort them out into particular principles. For instance in terms of our tomatoes, we quickly demonstrated the principles of economic scarcity, diminishing marginal value, subjective value, and division of labor.

This brings us back to Adam Smith, who was much closer to the truth when he called economics a moral philosophy. Economics has everything to do with the way God made our minds and the choices He wants us to make as stewards of His creation.

And, although this would make most tenured economics professors shudder to hear it, economics is most certainly moral.  But we’ll look at what that means for our economic thinking the next time around.

Next: The Good, the Bad and the Economic