Mises Daily Articles
The Myth of the Just Price
[The Lou Church Memorial Lecture in Religion and Economics at the 2008 Austrian Scholars Conference at the Mises Institute. An MP3 audio version of this talk is available for download. You can see the video here.]
The concept of the just price is the basis of a great deal of erroneous economic thought that permeates our supposedly free market, capitalistic society. Laws regarding usury, loan sharking, price gouging, ticket scalping, dumping, profiteering, equal pay, price discrimination, predatory pricing and lending, product bundling, and antitrust — these are all prime examples of this fallacious way of thinking. Opinions expressed on these practices, and things like pay for supermodels, executives, actors, and athletes, as well as nebulous concepts of fairness, are likewise predicated on just price theory — regardless of whether the opinionist has any concept of basic economics or has ever even heard of just price theory. Regulations establishing price ceilings, price floors, a minimum wage, a living wage, a family wage, rent control, government subsidies, price supports, and in many cases tariffs, also result from the pursuit of the just price.
The term just price is customarily disguised with a euphemism. So, just like SCHIP, Medicare, and Medicaid are never called socialized medicine, and just like refundable tax credits are never referred to as income transfer programs, attempts to establish a just price are usually cloaked in terms of market failure remedies or consumer protection laws. The mention of just price theory either invokes a blank stare, or, in the case of those familiar with the term, the dismissal of the notion as a discredited medieval religious doctrine.
All myths, of course, are not created equal. For instance: The use of the term just price is very different from another widely held myth — that of the just war. The principle of the just war underlies our protracted war in Iraq, as well as our global crusade against terrorism. In its essence, the doctrine concerns the use of force: when force should be used and what kind of force is acceptable. Although many would now argue that the war in Iraq does not meet the criteria for a just war, they fully accept the concept as legitimate. In fact, it is the norm rather than the exception when discussions about the war turn to just war theory. Americans who don't view themselves as particularly religious, as well as those who have never studied the finer points of theology and don't generally participate in theological discussions, have suddenly taken to cloaking their positions with the rhetoric of just war theory.
But aside from the knowledge and usage of the terms, there are some important philosophical differences between the concepts of the just price and the just war. There are many individuals who recognize the myth of the just price, yet believe to the contrary about the just war. The former is viewed as detrimental to the operation of free market capitalism, while the latter is held up as a model for warfare. A more significant distinction is simply and bluntly this: Although full implementation in society of the concept of the just price might result in economic hardship, the loss of liberties, and a command economy, acquiescence in just one point of just war theory might result in the deaths of thousands of people.
I don't suppose there is anything I write and speak about with more fervor than the biblical, economic, and political fallacies of religious people. Whether it is Christian support for victimless crimes, educational vouchers, the military, preemptive war, or the pseudo-Christianity and faith-based socialism of President Bush, I have always tried to declare "the whole counsel of God" and destroy Christian reliance in and defense of the state. As anyone knows who is familiar with my rewrites from a warmonger perspective of Psalm Twenty-three, the Beatitudes, and the Lord's Prayer, I have always taken a radically biblical approach to debunking religious fallacies and dethroning the great god-State. And since there is no reason to stop now, I can therefore passionately say about my subject that, in the absence of fraud, not only is any price agreed upon between a willing buyer and a willing seller the just price, that alone is what makes it the just price.
It is my desire in this talk not only to break the myth of the just price, but to present the biblical case for laissez-faire. But why the biblical case? Truth is truth, is it not? "Two plus two equals four" is true whether written by an apostle on a parchment or a teacher on a chalkboard. Agreed. But because the concept of the just price has religious overtones, it is essential that the biblical case be made. And not only that, for the Christian the Scripture not only contains truth, it is truth. The Bible is our final authority in all matters — secular and sacred — not the natural law, not denominational creeds, not the decisions of church councils, not papal encyclicals, and not Human Action, however highly Christians regard — and rightly so — the economic thought of Ludwig von Mises. The clarion call for the Christian is "Thus saith the Lord," not theological treatises, not confessions of faith, not religious traditions, not a system of philosophy, and not "Thus saith Man, Economy, and State," however much Christians are indebted to Murray Rothbard for deepening our understanding of the potential of the free market and the perniciousness of state intervention into that market.
The Biblical Concept of Justness
The concept of justness is a biblical one: God sends rain "on the just and on the unjust" ; Christ died for our sins, "the just for the unjust" ; there will be "a resurrection of the dead, both of the just and unjust." Now, the expression just price is nowhere to be found in the Scriptures. This ipso facto does not, of course, mean that the concept should be dismissed out of hand. After all, the word trinity is not in the Bible either. The Scripture does have some general principles as to when something is just and to what needs to be done justly. For instance: A just man does what is "lawful and right," judgment and rule are to be done justly, servants are entitled to what is "just and equal," and we should follow that which is "altogether just."
Although there are numerous references in the Bible to things being sold (houses, land, animals, people, food), there is generally no mention of what the items were sold for. Twice each we read of an item being sold for "full price," the price of an object being above rubies, and something being "of great price." There are only a few references to a specific price paid for something, the most well-known examples being Esau selling his birthright for "one morsel of meat" and Judas betraying the Lord for thirty pieces of silver.
Although the Scripture doesn't speak of a "just price," we do read of a "just weight" four times, a "just measure" five times, and a "just balance" two times. In fact, it even says in the Book of Proverbs that "a false balance is abomination to the LORD: but a just weight is his delight." Since following what is "altogether just" would apply to our commercial transactions, the absence of fraud would be essential for the price of any commodity to be said to be just. But one will search the Scriptures in vain for any other concept of what constitutes a just price.
The Just Price
Right or wrong, the concept of the just price will forever be associated with the medieval Roman Catholic philosopher and theologian Thomas Aquinas. Born about 1225, Aquinas is universally acknowledged as the greatest theologian of the Catholic Church. In his great summary of theology, the Summa Theologica, Aquinas discusses the concept of the just price in the section in his "Treatise on Prudence and Justice" called "Of Cheating, Which Is Committed in Buying and Selling."
As Rothbard and others before and after him have pointed out, Aquinas equated the just price, as did the Romanists, Canonists, and theologians that preceded him, with the common market price established by the "common estimation" of buyers and sellers. However, as Rothbard explains: "Unfortunately, in discussing the just price, St Thomas stored up great trouble for the future by being vague about what precisely the just price is supposed to be." The just price could not, in fact, be determined with precision. Indeed, it might even lie within a certain range and vary according to circumstances.
The idea that there is a just price in a monetary economic exchange is not just a medieval phenomenon. It is perhaps almost as old as commercial activity itself. The concept has been found recorded in ancient Babylonian inscriptions. This should come as no surprise, for since the beginning of time there has been no shortage of people who thought it was their business to mind everyone else's business. This is especially true of government bureaucrats who, in the name of serving the public interest and protecting the economically disadvantaged, violently intervene in the free market. Aristotle's erroneous concept of equal value in a commercial exchange not only contributed to centuries of muddled economic thinking; it was revived and employed "as a philosophical justification for the medieval doctrine of the just price."
One reason for the focus throughout history on the price paid by a buyer in an exchange was the unwarranted suspicion of merchants and mercantile activity. Aristotle, like his teacher Plato, disdained moneymaking, labor, commerce, and especially retail trade. Many of the early Church Fathers regarded greed to be the basis of commerce. Immoral means were considered the rule rather than the exception when it came to commercial activities. One party's gain in a transaction was thought to only be achieved by another party's loss. These ideas continued into the Middle Ages — the positive attitude toward the merchant of the great Church Father Augustine notwithstanding. Two ecclesiastical formulas overshadowed the profession of medieval merchants: "He who buys cheap in order to sell dear, seeks shameful profit," and "It is difficult among buyers and sellers not to fall into sin."
Under Roman law, the price in a transaction was determined solely by the interaction of buyer and seller. Exception was only made for a minor who had been mistaken. Under the Justinian Code there were certain instances, such as the sale of land, where protection was accorded, not to the buyer, but to the seller, if the land was sold for less than half its value. Laissez-faire in transactions was the norm. Since all men wished to buy cheap and sell dear, it was expected that buyer and seller would each try to outwit the other. Fraud, of course, was not tolerated from either party.
Unfortunately, the Roman legacy of freedom of bargaining was sometimes augmented in the Middle Ages by some erroneous ideas. Frowned upon were buying and selling for gain, speculative transactions, buying goods and selling them for profit without improvements, selling goods at a price higher than their purchase without necessity, and price increases on credit sales because it was considered to be concealed usury, which was "universally prohibited and defined in the broadest terms." Distinctions were made between what was allowed in the commercial transactions of the laity and clergy. In addition to the market price, the just price could also be the price "fixed by governments or government-privileged guilds."
There were, however, two viewpoints that were decidedly in the minority. One, that the just price was only that beyond labor and expenses that enabled the seller to maintain his social status. And two, that the just price was the cost of production plus compensation for labor and risk incurred. The former has inaccurately been taken as typical of the scholastic doctrine of the just price; the latter has given rise to the labor theory of value of Smith, Ricardo, and Marx. It should be pointed out that medieval discussions of labor, expenses, risk, and profit were generally for the purpose of justifying mercantile profits rather than determining just prices.
Like his predecessors, Aquinas maintained the necessity of a just price in every transaction. In examining his teaching as a whole, we see a number of principles:
- The merchant performs a valuable service
- The merchant can conduct business without sinning
- Buying and selling are to the advantage of both parties
- Misrepresenting the condition of goods in a sale is fraud
- Price is influenced by changes in supply and demand
- Price can vary according to location
- Price can vary according to time
- Price is a function of utility
- The just price is an estimate, and cannot be fixed with mathematical precision
- The just price is the current market price
- Price should represent the true value of goods
It is this last concept that sends Aquinas off course. Instead of considering value as purely subjective, he maintained that "if either the price exceed the quantity of the thing's worth, or, conversely, the thing exceed the price, there is no longer the equality of justice: and consequently, to sell a thing for more than its worth, or to buy it for less than its worth, is in itself unjust and unlawful." A seller who "has received more than he ought must make compensation to him that has suffered loss, if the loss be considerable." Just as "no man wishes to buy a thing for more than its worth" so "no man should sell a thing to another man for more than its worth."
To his credit, Aquinas prescribed neither the authorities by whom nor the means by which any deviation from the just price was to be enforced. He never explicitly called for any state action other than the establishing of weights and measures. And lest my Catholic friends feel that I am picking on them, I should say that Luther challenged neither the notion of intrinsic value nor the immorality of taking interest. For Catholics in particular, I wholeheartedly recommend The Church and the Market: A Catholic Defense of the Free Economy, by the Mises Institute's Tom Woods.
It would be left to the Thomistic Spanish Scholastics of the sixteenth-century to emphasize that there was no objective way of determining price. The jurist Francisco de Vitoria and his disciples in the School of Salamanca maintained that price was simply based on supply and demand, without regard to labor costs or expenses. The inefficiency of producers, the misfortune of speculators, and any other negative consequences of incompetence or bad luck were to be borne by sellers and buyers alike. Even the seller of luxuries, superfluities, and frivolities could, in the absence of "fraud, deceit, or coercion," accept any price that a buyer was willing to pay. Contrary to Jean Gerson, chancellor of the University of Paris, who had earlier "suggested that price fixing be extended to all commodities, on the ground that no one should presume to be wiser than the lawmaker," followers of the School of Salamanca like Martin Azpilcueta and Luis de Molina "opposed all price regulation because it was unnecessary in times of plenty and ineffective or harmful in times of dearth."
To say that these ideas were neglected is a colossal understatement. The history of economic thought is the history of the attempt by special interest groups and government nannies to set or regulate prices of goods and services. Here we are four hundred years later in the United States of America — that great bastion of capitalism and free markets — and what do we see? We see nothing but interventionism, which, as Mises reminds us, "is a method for the transformation of capitalism into socialism by a series of successive steps." Here are some examples.
The Minimum Wage
Congress recently raised the federal minimum wage because, in its infinite wisdom, it decided that the just price for labor was a minimum of $5.85 an hour. However, Congress has already decided that its just price for labor will be unjust on July 24th of this year, necessitating a new minimum wage of $6.55 an hour. And with econometric precision, that figure has already been decreed to be unjust on July 24th of next year, and rise again to $7.25 an hour.
One does not have to be an economist to see the detrimental effects of minimum-wage legislation. It is an undeniable fact that businesses' labor costs will increase. This will result in profits decreasing unless the increased costs can be offset by raising prices. If this is not possible, then a business is forced to either go out of business or live with a lower profit margin.
But it is not just businesses that are harmed by minimum-wage legislation. Because the minimum wage raises employment barriers for the unskilled and uneducated, it causes unemployment.
And even more important than the economic case against the minimum wage is the fact that minimum-wage laws violate freedom of contract. They infringe the right of an employer and an employee to make whatever wage agreement they choose. Minimum-wage laws also foster the notion that the government is responsible for our well-being and prosperity.
Sugar Price Supports
Congress has worked overtime to ensure that US sugar producers receive a just price for their sugar. With the exception of a brief four-year period at the end of the nineteenth century, the United States has maintained import duties on all imported sugar since 1798. Since their reimposition in 1894, these tariffs have been in place for the sole purpose of propping up the domestic sugar industry.
The combination of low import quotas, high tariffs, marketing allotments, high support prices, and access to nonrecourse loans makes sugar processing in the United States a sweet deal. The result of all this is an artificially high price for sugar — two to four times the price of sugar sold on the world market. Under the nonrecourse loan program, if the government-manipulated market price of sugar drops below the set loan rate of $0.18/lb for cane sugar or $0.22/lb for beet sugar, then processors can forfeit their sugar as loan repayment.
The gang of thieves in Congress who accept $2 to $3 million in bribes each congressional election from their sugar daddies in the sugar industry are costing American consumers hundreds of millions of dollars a year through higher prices on not just sugar, but anything made with sugar. The taxpayers are also getting screwed when nonrecourse loans are repaid in sugar, which then must be stored and disposed of.
But why stop with sugar? Why not bacon and eggs or liver and onions? Aren't producers of these items entitled to a just price for their goods? Why the special protection for sugar? Is sugar essential to national security?
Price-gouging laws are predicated on the fallacy that there is a just price for every good and service, and even more so during bad weather or some government-declared state of emergency. The US House passed the Federal Price Gouging Prevention Act last year. This proposed law would make it "unlawful during a period proclaimed by the President as an energy emergency to sell gasoline or any other petroleum distillate at a price that: (1) is unconscionably excessive; or (2) indicates the seller is taking unfair advantage of the circumstances of an emergency to increase prices unreasonably."
According to the statutes of my state (Florida): It is unlawful during a state of emergency declared by the governor "for a person or her or his agent or employee to rent or sell or offer to rent or sell at an unconscionable price within the area for which the state of emergency is declared, any essential commodity including, but not limited to, supplies, services, provisions, or equipment that is necessary for consumption or use as a direct result of the emergency."
And how does the state of Florida determine that a price is unconscionable? Simple. According to Florida statutes, Title 33, Chap. 501, Sec. 160:
The amount charged represents a gross disparity between the price of the commodity or rental or lease of any dwelling unit or self-storage facility that is the subject of the offer or transaction and the average price at which that commodity or dwelling unit or self-storage facility was rented, leased, sold, or offered for rent or sale in the usual course of business during the 30 days immediately prior to a declaration of a state of emergency, and the increase in the amount charged is not attributable to additional costs incurred in connection with the rental or sale of the commodity or rental or lease of any dwelling unit or self-storage facility, or national or international market trends; or the amount charged grossly exceeds the average price at which the same or similar commodity was readily obtainable in the trade area during the 30 days immediately prior to a declaration of a state of emergency, and the increase in the amount charged is not attributable to additional costs incurred in connection with the rental or sale of the commodity or rental or lease of any dwelling unit or self-storage facility, or national or international market trends.
I have been accused of using long sentences in some of my articles, but that was a 196-word sentence.
But if you thought that it would be okay for someone to help a Floridian during a state of emergency by offering him goods and services at a lower than market price, then think again. It is a crime in Florida to offer goods and services for sale to the public during an emergency unless one possesses a Florida business license.
But it gets worse. There can be price gouging when no state of emergency exists. The US Department of Energy maintains a website with a "Gas Price Watch Reporting Form." Because the Department of Energy is "very concerned about the impact of gasoline prices on American families," it is working, not only to address "supply issues," but also to "make sure American families are being treated fairly."
So, if you know nothing about supply and demand, refinery capacity, gasoline futures, world surplus production capacity, and the price of a barrel of crude oil, but believe there may be price gouging, you are instructed by the Energy Department to "contact your local authorities and fill out the form below."
Anyone with any economic sense knows that price gouging is nothing more than charging what the market will bear. Price-gouging laws violate the property rights of resource owners, they hinder the price system's signaling ability, they contribute to the misallocation of resources, and they cause shortages.
Antidumping laws are among the most illogical attempts by governments to maintain a just price for a good because, rather than being concerned with protecting the consumer from high prices, antidumping laws punish foreign producers for daring to offer to consumers low prices. So, in the eyes of government economists, the just price of a good might actually be a price higher than someone is willing to pay.
A foreign manufacturer is normally accused of dumping when the price of a product it exports to another country is below the product's cost of production or the price it charges for the product in its own country. Antidumping laws are even more insidious than the dubious concept of predatory pricing. A foreign firm can be charged with dumping, and have to pay antidumping duties, for the crime of trying to compete in the US marketplace.
Antidumping laws are not designed to protect the public, they are designed to product domestic producers from foreign competition. They are merely another form of protectionism to ensure that selected US firms receive just prices for their goods. And who decides what constitutes these just prices? Why, the firms do, along with any congressmen they can bribe or otherwise convince. Since many tariffs are gradually being reduced or eliminated, antidumping laws allow countries to preach free trade while practicing protectionism. Like the removal of tariffs and the practice of real free trade (as opposed to government-managed trade), the elimination of antidumping laws results in increased competition, which leads to lower prices for consumers, more efficient production methods, and more innovation.
Nothing in history has resulted in more attempts by governments to establish a just price than the question of usury. Ethically, usury is an exorbitant interest rate. Legally, usury is an illegal interest rate. But in what is now viewed as its archaic or obsolete sense, usury is simply the price of interest charged on a loan for the lack of use of the money and the risk of loss. Thus, we have this artificial distinction between usury and interest.
Beginning with the fourth-century prohibition against the clergy charging interest on a loan, usury of any kind was almost universally condemned throughout the Middle Ages. The charging of interest on a loan came to be viewed as theft. Not surprisingly, usurers — that is, moneylenders — were despised. In Dante's The Divine Comedy, he has usurers in the seventh circle of hell along with blasphemers and sodomites. Aquinas, unfortunately, in spite of the "inner contradictions" in his treatment of usury, contributed greatly to the "irrationality" and "arrant nonsense" that characterized medieval usury doctrine. The distinction between usury and interest arose because of the attempt to circumvent the medieval condemnation of usury. As Rothbard explains: "Jurists and theologians had to engage in ingenious and artful twists in reasoning in order to make exceptions from the prohibition and to accommodate the growing practice of lending money and charging interest on a loan."
Although Luther shared the scholastic aversion to taking usury, the French reformer John Calvin is often credited with releasing the world from the shackles of medieval usury. Calvin, however, was no Claudius Salmasius, a Dutch Calvinist of the seventeenth century who has "the honor of putting the final boot to the usury prohibition." Calvin tempered his acceptance of taking usury with some qualifications: usury shouldn't be taken from the poor, no one should engage in usury as his form of occupation, usury should be practiced with equity and charity. The problem with Calvin's latter condition is obvious: what rate of interest is equitable and charitable? In other words: What is the just price of borrowed money? And once a just interest rate is determined, who is to regulate its enforcement? Why, the state, of course. That's why there was a ceiling on interest rates in Calvin's Geneva. And that's why all of the fifty states regulate interest rates in the twenty-first century.
To say that usury is a complicated area of law is a tremendous understatement. The laws vary widely from state to state. According to Florida statutes:
It shall be usury and unlawful for any person, or for any agent, officer, or other representative of any person, to reserve, charge, or take for any loan, advance of money, line of credit, forbearance to enforce the collection of any sum of money, or other obligation a rate of interest greater than the equivalent of 18 percent per annum simple interest.
Although the state of Florida doesn't actually know what the just price for borrowed money should be, it claims to know that the maximum rate of interest that can be charged is 18 percent. An increase in this amount by the slightest percent would render the rate unjust and subject the lender to criminal penalties.
And what is the basis of this rate? It is not based on the prime rate, federal funds rate, the discount rate, or the LIBOR rate. It is not based on the rate of US treasury bonds, notes, or bills. It is not based on the market rate. It is not even based on some historical average. The maximum rate is 18 percent because lawyers, economists, and legislators in the employ of the state of Florida say so, that's why. Yet, if one crosses the border into Alabama, the rate drops to 8 percent. What is just in Alabama is unjust in Florida.
The case against usury laws has been made for hundreds of years. In Great Britain, Jeremy Bentham penned a defense of usury back in 1796 in which he made the sane proposition that
no man of ripe years and of sound mind, acting freely, and with his eyes open, ought to be hindered, with a view to his advantage, from making such bargain, in the way of obtaining money, as he thinks fit: nor, (what is a necessary consequence) any body hindered from supplying him, upon any terms he thinks proper to accede to.
The American poet William Cullen Bryant wrote a powerful critique of usury laws back in 1836. Here he points out what the authors of the Community Reinvestment Act should have realized:
There is an intrinsic and obvious difference between borrowers, which not only justifies but absolutely demands, on the part of a prudent man disposed to relieve the wants of applicants, a very different rate of interest. Two persons can hardly present them selves in precisely equal circumstances to solicit a loan. One man is cautious; another is rash. One is a close calculator, sober in his views, and unexcitable in his temperament; another is visionary and enthusiastic. One has tangible security to offer; another nothing but airy one of a promise. Who shall say that to lend money to these several persons is worth in each case an equal premium?
And as Rothbard has pointed out, moneylending is a business in the market like any other business: "If the number of usurers multiplies, the price of money or interest will be driven down by the competition. So that if one doesn't like high interest rates, the more usurers the better!"
I have maintained that, in the absence of fraud — not in the absence of ignorance, laziness, greed, or stupidity — not only is any price agreed upon between a willing buyer and a willing seller the just price, that alone is what makes it the just price. A just price for an item does not exist independently of a transaction between buyer and seller. It is both impossible and immoral for any governmental body to institute, regulate, control, or recommend what is a just price. It is impossible because the state is not omniscient; it is immoral because the state has no authority to intervene in the market.
Even if it were possible to establish the just price of goods and services outside of a market transaction, no governmental agency or regulatory body, even with the army of economists in the employ of the US government that is now 4,800 strong, is capable of determining what that just price should be. It simply can't be done — unless, of course, we want to ascribe omniscience to the state. And as Mises explains: "Once price control is declared a task of government, an indefinite number of price ceilings must be fixed and many of them must, with changing conditions, be altered again and again."
Okay, says the nonbeliever in state omniscience, but the state is still smarter than the citizenry. The masses need consumer protection, lest they enter into unregulated and unmonitored unjust exchanges. We need the state to watch out for us and prevent us from entering into these unjust exchanges, or at least warning us aforetime or informing us afterward. True, people voluntarily engage in these unjust exchanges, but they don't realize that they are unjust.
Now I see the light: The state is not a god, it is just a nanny. But the state is some nanny. It is the only nanny that forces you to hire her. It is the only nanny that moonlights as a policeman to the world. It is the only nanny that employs coercion, compulsion, threats, fines, and imprisonment.
This brings up the question of the role of the state. I have maintained that it would be immoral for the state to intervene in the market. In the natural order of things, it is normal to engage in commerce with whomever and regarding whatever one desires. Why should it be considered criminal if your neighbor forcibly interferes with your buying, selling, renting, leasing, borrowing, and lending, but benevolent if the government does it? The purpose of government is supposed to be to protect life, liberty, and property. And as one of the anti-Federalists stated: "For any government to do more than this is impossible, and every one that falls short of it is defective."
If there is such a thing as a just price, then the extent to which it influences one's pricing decisions should be a function of religion, ethics, and morality — not a function of law. I will even grant that it might be immoral under certain circumstances to charge a particular price. But that doesn't mean that it should be illegal. Vices are not crimes. Saying that the just price is a moral imperative is one thing, but making it a legal device is something else that opens up the deadly can of worms of government intervention that can never be closed. The separation of market and state is just as important as separation of church and state.
The Biblical Case for Laissez-faire
There are two reasons why I must present the biblical case for laissez-faire. The first I have already mentioned: the Scripture is the Christian's authority, not a particular school of economics. The second reason is a very distressing one: the economic views of the typical Christian economist parallel that of Karl Marx and John Maynard Keynes.
The inequality of wealth is a particular problem for all three individuals. Here is Marx in his Das Kapital:
In proportion as capital accumulates, the lot of the labourer, be his payment high or low, must grow worse…. Accumulation of wealth at one pole is at the same time accumulation of misery, agony of toil, slavery, ignorance, brutality, mental degradation at the opposite pole.
Here is Keynes in his General Theory:
The outstanding faults of the economic society in which we live are its failure to provide full employment and its arbitrary and inequitable distribution of wealth and incomes.
But here is Robert L. White, a Christian, in Biblical Economics: Economic Myths versus Biblical Values, published just a couple of years ago:
The working of the market economy over the last 20 years has resulted in increasing inequalities, persistent poverty, chronic unemployment, and more persons without health insurance.
These increasing inequalities are "far beyond what could be considered fair and just according to historical standards."
White holds master's degrees in economics and divinity, and has worked as both a pastor and an economist. He was actually one of those 4,800 government economists I mentioned previously. I hope that White's Gospel preaching was more biblical than his economic pronouncements. Here is some more of White's "biblical economics":
If some have too much and others have too little, the answer from the Bible is that nobody should have too much and nobody should have too little. Everyone should have enough.
There is enough to go around so long as each of us takes only what each person needs.
The concept of fairness is that people are obligated to give back in proportion to what they have received.
Social justice requires that a just society be characterized by a continual improvement in the prospects of the least advantaged.
There is no theoretical or empirical reason to expect all of society's economic objectives to be met systematically by the market. In other words, justice, equity, and fairness cannot be assumed to occur automatically, and therefore need to be intentional goals and objectives in the realm of public policy.
According to White, the free-market economy is an "idol." There is a cultural war waging "between the prevailing 'free-market' ideology and biblical values." Today's "prevailing economic ideology" promotes "greed and consumerism over the common good." The lesson we are supposed to receive from Jesus' feeding of the multitudes is that "if bread is broken and shared, there will be enough for all." Because he believes that "the rich have been getting richer and the poor poorer," White deplores reductions in tax rates. He rightly decries increased defense spending, but only because it diverts the funding of social programs. He favors national health care and environmentalism. He is also very concerned about global warming and greenhouse gas emissions. In short, he rejects laissez-faire in favor of government intervention.
White, of course, is not alone. When noted Christian economist Donald Hay proposed eight biblical principles relating to contemporary economic life, he not only specifically excluded private property rights, he also stated that "the government should not hesitate to use the traditional tax and transfer mechanisms to ensure that those without the means to acquire the basic necessities of life are provided for." But White is typical. His trinity is the state, the earth, and social justice. He is a statist through and through.
Contrary to White, I believe that the whole spirit of the New Testament is one of laissez-faire.
By laissez-faire I mean no government intervention — no protectionism, no granting of privileges, no redistribution of wealth, no antipoverty programs, no unemployment programs, no subsidies, no price fixing, no regulation, no antitrust laws, no labor legislation, no central planning, no nanny state.
Thus, a laissez-faire economic system encompasses free markets, the free price system, free trade, entrepreneurship, consumer sovereignty, private charity, private ownership, private means of production, private property, private goods, private initiative, private innovation, freedom of contract, freedom of choice, individual responsibility, as well as the risk of loss and the potential for failure. And as Rothbard explains: "The laissez-faire or free-market doctrine does not assume that everyone always knows his own interest best; it asserts rather that everyone should have the right to be free to pursue his own interest as he deems best."
It is only natural that men have the freedom to be left alone and to do what they will with their own. Christian statists like Robert White can neither establish nor confirm their position from the New Testament without reading their conception of social justice back into the Bible, applying to the government admonitions given to individuals, and opaquely misreading the Scriptures through interventionist glasses.
First of all, we need to reexamine the subject of wealth in the Bible. We know that there are some negative things said in the Scriptures about riches and rich men. We are told in the book of Proverbs that "riches profit not in the day of wrath: but righteousness delivereth from death." We read in the book of Luke about the rich man in hell, the rich man who built greater barns to lay up treasure for himself, and the rich men who merely cast out of their abundance into the treasury.
But it is not riches per se that are disparaged in the Bible. Rather, it is trusting in riches, boasting in riches, coveting riches, or obtaining riches unlawfully. Some of the greatest men in the Old Testament were also some of the richest. Men like Abraham, Job, David, Jehoshaphat, Hezekiah, and, of course, King Solomon, who, because he was blessed by God, "passed all the kings of the earth in riches and wisdom." In the New Testament, the man who received the body of Jesus from Pilate and properly buried it in "his own new tomb" was a rich man, Joseph of Arimathaea.
The New Testament admonishes the rich, not to become poor, but to "be not highminded, nor trust in uncertain riches, but in the living God, who giveth us richly all things to enjoy; that they do good, that they be rich in good works, ready to distribute, willing to communicate." And contrary to Marx and the US government's estate tax, parents ought to lay up for their children, and "a good man leaveth an inheritance to his children's children." It is not money itself but the love of money that is vilified in the New Testament.
As Rothbard recognized: "Fulminations against excessive love of money do not necessarily imply hostility to commerce or wealth."
Thank God for rich men who use their money wisely. Many Christian ministries have been funded by wealthy individuals, as has the Mises Institute. There is no imperative or implication in the New Testament for the state or any individual to seek the redistribution of wealth.
Secondly, we likewise need to revisit the subject of poverty. Neglecting or oppressing the poor is greatly disparaged in the Bible. We read in the Proverbs:
He that despiseth his neighbour sinneth: but he that hath mercy on the poor, happy is he.
He that oppresseth the poor reproacheth his Maker: but he that honoureth him hath mercy on the poor.
However, the idea that individuals, let alone the state, should seek to eradicate poverty is never advanced in the Old or New Testaments.
God told the people of Israel in the Book of Deuteronomy: "For the poor shall never cease out of the land: therefore I command thee, saying, Thou shalt open thine hand wide unto thy brother, to thy poor, and to thy needy, in thy land."
There is a similar statement about the poor in the New Testament. While Jesus was in the town of Bethany before his crucifixion, a woman anointed his head with some costly ointment. When some of his disciples became indignant because they felt that the ointment could have been sold and given to the poor instead of being wasted, the Lord disagreed and said that the woman had "wrought a good work." But then he added: "For ye have the poor with you always, and whensoever ye will ye may do them good: but me ye have not always." From this we can draw two conclusions.
One is that there are some things more important than supporting the poor. Christ did not come to eradicate poverty. Having compassion on the poor is no ticket to heaven. It might be a ticket to being a successful Democratic Senator, but it won't secure you a cool place in the afterlife. Christians in the New Testament are admonished to do other good deeds besides providing for the poor. These Christian responsibilities include supporting widows, loving one's neighbor as oneself, doing good to all men, but especially Christians, distributing to the necessity of the saints, being hospitable, looking on the things of others, being content with food and raiment, and maintaining good works. It is the individual Christian that is to voluntarily perform these charitable works, not some nanny state that feigns omniscience. A Christian who fails to perform his responsibilities answers to God, not to the state, and not to any other Christian. The Bible teaches that "it is more blessed to give than receive," but it also teaches individual freedom and individual responsibility.
The second thing is that relief for the poor is voluntary. Christians in the New Testament are admonished to "remember the poor," just as they are instructed to do many other good deeds. The Apostle Paul records that Christians in Macedonia made "a certain contribution for the poor saints which are at Jerusalem." But what could be more unchristian than to not provide for the needs of the poor out of your own pocket, while you lobby the government to collect money by force from your neighbor to give it to the poor after it is filtered through the federal government's vast bureaucratic maze?
Another subject to examine is the nature of the merchant. Contrary to the unwarranted suspicion of merchants that we find throughout history, including among some sectors of Christianity, the Bible nowhere condemns mercantile activity as an action or a profession. A virtuous woman is even compared to the merchants' ships that bring food from afar. The Church Father Augustine not only correctly pointed out how merchants "perform a beneficial service by transporting goods over great distances and selling them to the consumer," but also that deceit and fraud were not endemic to trading. After all, even "shoemakers and farmers are also capable of lies and perjuries."
Christians, of course, are not to lie, cheat, or steal in any of their business transactions. They are to walk honestly when it comes to unbelievers, and provide things honest in the sight of all men. Furthermore, they are commanded to not be slothful in business. It is true that those who said "To day or to morrow we will go into such a city, and continue there a year, and buy and sell, and get gain" were condemned, but this is only because they were boasting and didn't add: "If the Lord will, we shall live, and do this or that." Jesus commends getting gain by means of trade in his parables of the talents and the pounds. Yes, Christ did drive the moneychangers out of the temple with the words: "Make not my Father's house an house of merchandise," but only a blockhead could get from that that he was opposed to a genuine house of merchandise.
The historical aversion to moneylenders was certainly not derived from the New Testament. Usury is only mentioned twice, and in a favorable sense. This, of course, does not negate the principle found in the Proverbs that "the borrower is servant to the lender." Because those who advocate some kind of intervention in a transaction to ensure that the buyer receives a just price usually implicate the seller in some way, I thought this proverb of Solomon that mentions a shrewd buyer quite interesting: "It is naught, it is naught, saith the buyer, but when he is gone his way, then he boasteth."
Employment in the Bible is based on the right to freely contract.
In the parable of the vineyard, a landowner contracts with some laborers early in the morning for a day's work, then another group later in the morning, and then two other groups at different times in the afternoon. Finally, when there is but an hour in the day remaining, the landowner contracts with a fifth group. At day's end, when it was time to get paid, all the workers were paid the same amount. The first group of laborers then murmured because, even though they agreed to a certain wage, the eleventh-hour workforce received the same amount.
But what was the landowner's reply to the first group? The Bible tells us that "he answered one of them, and said, Friend, I do thee no wrong: didst not thou agree with me for a penny? Take that thine is, and go thy way: I will give unto this last, even as unto thee. Is it not lawful for me to do what I will with mine own? Is thine eye evil, because I am good?"
I suppose the first group of workers could form a union and strike for higher wages. Although there is nothing wrong with collective bargaining per se, in a real free market, and without government protection for unions, employers could freely fire employees who refused to work. It may not be in their best interests to do so, but there is no reason that they shouldn't have that option.
The biblical solution to the problem of unemployment is a simple one — work. If a man will not work then he should not eat. If a man provides not for his own house then he is to be counted as worse than an infidel. But a man should also labor to give to him that is in need.
This should not, however, be confused with the Marxist dictum that many Americans think appears in the Constitution: "From each according to his ability, to each according to his needs." Marx, or from whomever he stole the precept, got his idea from the Book of Acts in the New Testament. There we read that the early Christians, because of an impending famine, "every man according to his ability, determined to send relief unto the brethren which dwelt in Judaea." We also read that the early Christians in Jerusalem "had all things common," and sold houses and lands, with the money being distributed to "every man according as he had need."
Only someone ignorant of what communism is would make the mistake of equating these actions with state ownership of property and the means of production. As Mises wrote about this in Socialism: "It is a communism of consumption goods, not of the means of production, a community of consumers, not of producers."
Marx was very selective with his Scripture, for in the parable of the talents, the talents are given "to every man according to his several ability." There is also no evidence that this radical degree of Christian charity was ever practiced outside of Jerusalem or was to serve as a model for future churches. And besides, this is charity, not communism, and as such was purely voluntary. Ask someone in the Soviet Union if he could opt out of the system.
Two specific cases are recorded that make this clear. Barnabas sold some land and gave the money he received to the apostles. Ananias did likewise, but lied about how much he sold his possession for and "kept back part of the price." He was subsequently rebuked by the apostles and punished by God. What we should note, however, is that he was told: "Whiles it remained, was it not thine own? and after it was sold, was it not in thine own power?" The right of private ownership and control of real or personal property is both absolute and biblical. A man that plants a vineyard is entitled to the fruit thereof. A man that feeds a flock is entitled to the milk thereof. A husbandman is entitled to be the first partaker of his fruits.
Laissez-faire is natural, moral, and biblical.
People exchange goods in a market economy to their mutual advantage. Each party to an exchange values what he receives more than what he exchanges for it. Both parties are better off after an exchange than they were before the exchange. In a free market, suppliers compete with suppliers and buyers compete with buyers. Suppliers do not compete with buyers. The only exchanges that result in winners and losers are Christmas gift exchanges between parents and children. But even that is a voluntary loss. Competition for business between suppliers reduces prices, which is to the advantage of the consumer, while the bidding of consumers against each other for goods raises prices, which is to the advantage of the supplier. The free market allows suppliers (who naturally want the highest price they can get for their goods) and consumers (who wish to acquire those goods at the lowest price possible) to come together in harmony.
There is no such thing as market failure. Why do people think it ludicrous to say that the market has failed to provide everyone in the United States with a new Cadillac every year, but not that it is just as absurd to say that the market has failed to provide everyone with adequate health insurance? The free market facilitates exchange, fosters efficiency, provides incentives for productivity, requires no government oversight, and is perfectly compatible with biblical Christianity. Free exchange is fair exchange. Free trade is fair trade. The just price is the freely agreed upon price.
The only problem with the free market in the United States is that it is not free. Not only is government intervention the rule rather than the exception, even so-called defenders of the free market regularly call for more government oversight, like the former chief editorial writer at the Wall Street Journal, who made these two statements in the course of defending the morality of the market:
"In theory we can think of many ways in which legitimate markets need to be curbed."
"Government regulation and intervention may be necessary in many parts of our lives."
With defenders of the free market like this, who needs enemies?
Government interference in the market cannot make the market more competitive; it can only distort the market. Attempts to regulate markets by the government always have unintended consequences that are often worse than the problems that government regulations were meant to cure. Although he was writing against the government's foreign interventions, what Arthur Silber said applies to its economic interventions as well. In fact, he sounds here just like Mises:
Intervention always leads to more intervention: the first intervention leads to unforeseen and uncontrollable consequences, which are then used as the justification for still further intervention. That intervention in turn leads to still more unforeseen and uncontrollable consequences, which are then used as yet another justification for still further intervention. The process can go on indefinitely, and the ultimate consequences are always disastrous in the extreme.126
Our cry is not greed, profit, or materialism — it is simply laissez-faire. All we want is for government to stay out of the market. We don't need a nanny state any more than we need an omnipotent state. We don't need your usury laws. We don't need your trade laws. We don't need your labor laws. We don't need your antitrust laws. We don't need your price controls. We don't need your regulations. We don't need your wealth redistribution schemes. And we certainly don't need any Christian economist defending any of these things as if they had any biblical basis. Economic myths die hard, and especially the myth of the just price. Economic ignorance is great, and extends to the highest levels of society — just look at the recent crop of presidential candidates and Congress's latest economic stimulus package. In the tradition of the Mises Institute and its namesake we must continue our labor of economic education.
 1 Matthew 5:45.
 1 Peter 3:18.
 Acts 24:15.
 Ezekiel 18:5.
 Deuteronomy 16:18; 2 Samuel 23:4.
 Colossians 4:1.
 Deuteronomy 16:20.
 1 Chronicles 21:22, 24.
 Job 28:18; Proverbs 31:10.
 Matthew 13:46; 1 Peter 3:4.
 Hebrews 12:16.
 Matthew 27:3.
 Leviticus 19:36; Deuteronomy 25:15; Proverbs 11:1, 16:11.
 Leviticus 19:36; Deuteronomy 25:15; Ezekiel 45:10.
 Leviticus 19:36; Ezekiel 45:10.
 Proverbs 11:1.
 Raymond de Roover, "The Concept of the Just Price: Theory and Economic Policy," The Journal of Economic History 18 (Dec., 1958), 424.
 Murray N. Rothbard, Economic Thought Before Adam Smith: An Austrian Perspective on the History of Economic Thought, vol. I (Cheltenham, U.K.: Edward Elgar, 1995), 52.
 John W. Baldwin, The Medieval Theories of the Just Price: Romanists, Canonists, and Theologians in the Twelfth and Thirteenth Centuries (Philadelphia: American Philosophical Society, 1959), 8.
 Ibid., 10.
 Ibid., 47.
 Ibid., 34.
 Rothbard, Economic Thought Before Adam Smith, 41.
 de Roover, 420.
 Thomas Aquinas, Summa Theologica, trans. by Fathers of the English Dominican Province (New York: Benziger Brothers, 1947), II, ii, q. 77, art. 1.
 Ibid., II, ii, q. 77, art. 2.
 de Rover, 427.
 Ibid., 425.
 Ibid., 426.
 Ludwig von Mises, Planning for Freedom, 4th ed. (Grove City: Libertarian Press, 1980), 26.
 H.R. 1252, 110th Congress (2007).
 Florida Statutes, Title 33, Chapter 501, Section 160.
 Rothbard, Economic Thought Before Adam Smith, 56.
 Ibid., 54.
 Ibid., 45.
 Ibid., 144.
 Florida Statutes, Title 39, Chapter 687, Section 3.
 Jeremy Bentham, Defence of Usury (London: T. Payne and Son, 1787), 2.
 Quoted in Joseph L. Blau, ed., Social Theories of Jacksonian Democracy (Indianapolis: Bobbs Merrill, 1954), 210.
 Rothbard, Economic Thought Before Adam Smith, 144.
 Ludwig von Mises, Bureaucracy (Cedar Falls: Center for Futures Education, 1983), 7.
 Philadelphiensis, quoted in John P. Kaminski and Gaspare J. Saladino, eds., The Documentary History of the Ratification of the Constitution, vol. XIV (Madison: State Historical Society of Wisconsin, 1983), 351.
 Karl Marx, Capital: A Critique of Political Economy, trans. by Samuel Moore, et al. (New York: Modern Library, 1906), 708-709.
 John Maynard Keynes, The General Theory of Employment, Interest, and Money (New York: Harcourt, Brace and Co., 1935), 372.
 Robert L. White, Biblical Economics: Economic Myths versus Biblical Values (Lanham: University Press of America, 2006), 10.
 Ibid., 29.
 Ibid., 32.
 Ibid., 31.
 Ibid., 35.
 Ibid., 10.
 Ibid., 1.
 Ibid., 53.
 Ibid., v.
 Ibid., 33.
 Ibid., 28.
 Ibid., 21.
 Donald Hay, Economics Today: A Christian Critique (Leicester, UK: Apollos, 1989), 78.
 Ibid., 175.
 Murray N. Rothbard, Man, Economy, and State: A Treatise on Economic Principles with Power and Market, scholars ed. (Auburn: Ludwig von Mises Institute, 2004), 1300.
 Proverbs 11:4.
 Luke 16:19.
 Luke 12:16.
 Luke 21:1.
 2 Chronicles 9:22.
 Matthew 27:60.
 Matthew 27:57.
 1 Timothy 6:17-18.
 2 Corinthians 12:14.
 Proverbs 13:22.
 Rothbard, Economic Thought Before Adam Smith, 32.
 Proverbs 14:21.
 Proverbs 14:31.
 Deuteronomy 15:11.
 Mark 14:6.
 Mark 14:7.
 1 Timothy 5:9-10.
 Galatians 5:14.
 Galatians 6:10.
 Romans 12:13.
 Philippians 2:4.
 1 Timothy 6:8.
 Titus 3:8, 14.
 Acts 20:35.
 Galatians 2:10.
 Romans 15:26.
 Proverbs 31:14.
 Rothbard, Economic Thought Before Adam Smith, 34.
 Ephesians 4:25; 1 Thessalonians 4:6; Ephesians 4:28.
 1 Thessalonians 4:12.
 2 Corinthians 8:21; Romans 12:17.
 Romans 12:11.
 James 4:13.
 James 4:15.
 Matthew 25:16-23; Luke 19:15-19.
 John 2:16.
 Matthew 25:27; Luke 19:23.
 Proverbs 22:7.
 Proverbs 20:14.
 Matthew 20:13-15.
 2 Thessalonians 3:10.
 1 Timothy 5:8.
 Ephesians 4:28.
 Acts 11:29.
 Acts 4:32.
 Acts 4:35.
 Ludwig von Mises, Socialism: An Economic and Sociological Analysis, trans. by J. Kahane (Indianapolis: Liberty Fund, 1981), 374.
 Matthew 25:15.
 Acts 4:36-37.
 Acts 5:2.
 Acts 5:4.
 1 Corinthians 9:7.
 2 Timothy 2:6.
 For this paragraph, I have closely followed Stephen C. Perks, The Political Economy of a Free Society (Taunton, UK: Kuyper Foundation, 2001), 51.
 Rebecca M. Blank and William McGurn, Is the Market Moral? A Dialogue on Religion, Economics & Justice (Washington DC: Brookings Institution Press, 2004), 84.
 Ibid., 82.
- 126. Arthur Silber, "Walking into the Iran Trap, II: The Folly of Intervention."