Tim Hogg writes: Economists have never played a larger role in society than they do today. Economics is, ultimately, a tool to shape society. The dialogue between the church and economists has enormous potential to bear fruit; if the gospel can change my life, it can change economics.
Frustration and impatience can sometimes be the result of dialogue between economists and theologians (I am as guilty of this as the next economist), but we cannot let misunderstandings get the better of us—there is too much at stake.
This post is a brief (and naturally selective) primer for Christians on why and how to engage with economists, written by an evangelical Christian who happens to be a practicing microeconomist.
Economists as priests
For better or worse, economists play an increasingly important role in society, far beyond the confines of traditional (and dismal!) economic heartlands of tax policy or GDP statistics. Almost every government policy will come with an economic impact assessment stapled to the back, and you may rest assured that economists are at the centre of the government’s decisions regarding tackling the current pandemic. Indeed, as provocatively put by Tomas Sedlacek in The Economics of Good and Evil, economists are expected to…
perform interpretations of reality (as if capricious Olympus had been replaced by capricious Wall Street), give prophetic services (macroeconomic forecasts), reshape reality (mitigate the impacts of the crisis, speed up growth), and, in the long run, provide leadership on the way to the promised land.
This is misplaced trust; Jesus saves, economists do not.
Economics versus the gospel?
In the face of this, it is natural to ask whether economics is doomed, and should be abandoned as a bad job. This line of thinking can also get wrapped up in the (oft-seen on the Internet) argument that capitalism is morally bankrupt.
But you don’t have to be a capitalist to be an economist (Karl Marx being one of the more famous economists). Indeed, one can be an economist and be anywhere on the political spectrum. And this is precisely the point. Economics, like biology or maths or psychology, is primarily a tool, rather than an ideology.
It is a tool to illuminate what is at stake when making difficult trade-offs in the allocation of scarce resources—which is what the Christian idea of stewarding creation is all about. For example, should we increase industrial fishing to feed the hungry, or decrease fishing to protect the oceans? We might start to answer that question by quantifying the impact on the poor and on the environment of different policies.
It is a tool to help us understand institutions and behaviour. Caring for the poor is all about understanding (i) why people end up in poverty and (ii) what makes effective policy in alleviating that poverty—for example, by giving women greater control of their finances through offering restricted-access savings accounts in the Philippines. As a behavioural economist, I am hugely excited by the potential for behavioural experiments in alleviating poverty.
And it is a tool to help us analyse the incentives. Misaligned incentives leads to well-intentioned policy causing unintended consequences. For example, a laudable policy in the USA which aimed at reducing discrimination by employers against former prisoners (‘ban the box’) actually led to more discrimination by employers against racial minorities, as they were perceived to have a higher risk of being former prisoners.
Economics thus remains a powerful empirical tool in the armoury of anyone wanting to shape society. Wouldn’t it be great for the church to play a larger role in shaping society? Influencing the thinking of economists would be one effective way of doing so.
Crossing the secular divide
However, the tool of economic analysis is based on deep assumptions about the nature of the world—and (perhaps unlike the fields of biology, maths and psychology) these assumptions are rarely uncovered. Indeed, economists are taught at university that theirs is the noble search for objective and verifiable facts, not based on anything that could be construed as opinion or a point of view. As claimed by Steven Levitt and Stephen Dubner in Freakonomics:
Morality, it could be argued, represents the way that people would like the world to work, wheareas economics represents how it actually does work.
This is misleading. Economic analysis typically makes a host of underlying, unwritten assumptions in assessing how the world works—assumptions that are deeply philosophical and moral in nature.
To take one example, microeconomic theory rests on the assumption that satisfying a person’s preferences (‘maximising their utility’) is the ultimate good. The pursuit of individual satisfaction enshrines hedonism as the ultimate source of human purpose at the heart of economic theory. But we rarely pause to ask ourselves whether an individual’s preferences are good, either for the individual or others.
One has only to think of addiction to realise that our preferences can be destructive, rather than life-giving. The purist economist answer to a destructive addiction would be: “Well, the individual clearly has a preference for self-destruction, and is maximising their utility by pursuing it.” The end justifies the means, even if the end is patently not the best long-term outcome for the individual!
Economics has no framework to evaluate the goodness of preferences. While economics does consider the effects of actions on the utility of others (called ‘externalities’), in practice this is (at best) a partial solution.
This is partly because economists are taught to focus on policy interventions that can be described as a ‘Pareto improvement’. These are policies that do not reduce the utility of anyone, while increasing the utility of at least one person. For example, imagine the hypothetical scenario where a small elite are fabulously wealthy, while 99% of the population are dirt poor and starving. Redistribution of some resources to the poor would save millions from famine, but would not be a Pareto improvement, because they gains by some (the poor) would be offset by the losses of other (the wealthy).
Thus we can be tempted dodge some of the toughest of trade-offs in order to preserve the sanctity of individual economic preference—without even recognising that we are making philosophical and theological claims.
Finding (true) hope
Unaware of deep assumptions, economists can overreach without realising that their philosophical foundations are built on sand. Take for example the chapter on ‘Privatising Marriage’ in the seminal (and otherwise excellent) book Nudge by Richard Thaler and Cass Sunstein. They argue that any and every organisation ought to be able to define marriage as they wish, so (for example) it could become a ten-year contract. Is it really the case that marriage is primarily an economic reality, so that it should be economic perspectives which drive the policy approach to this institution?
Secular thinkers, such as Michael Sandel, also critique economists for overreaching (markets do, after all, have moral limits – whatever Freakonomics might say). But secularism cannot offer true hope, as the true and ultimate solution to the problems of the human condition are only to be found in the gospel. We cannot hope to truly solve the problems inherent in ‘horizontal’ relationships between people and our planet, until we understand the primary ‘vertical’ relationship with God.
Thus secular divide between economics and theology is a false one, even without considering what God has directly said about economics.
And one only has to cast a vague glance in the direction of the Old Testament to see that God has a lot to say about the economic life of Israel. And it is similarly clear that the new covenant demands our all, leaving nothing—not even our economic lives—untouched. It should therefore be obvious that as the church we do, in fact, have much to say about economics. Here are two brief examples.
Example 1: the primacy of relationships
The missing element in the discussion on personal utility and preference is arguably that of the relationships. The economic principles we find in the Bible are mostly (if not totally) concerned about the nature of the relationships between economic actors, rather than individual utility. The Bible lays down clear guidelines for different sorts of economic relationship (see After Capitalism: Rethinking Economic Relationships by Paul Mills and Michael Schluter). The twin concepts of love and justice are meaningful only when considered in a relational framework.
As described in The Relational Lens: Understanding, Managing and Measuring Stakeholder Relationships by Aschroft et al., relationships are the cornerstone of the economy and are thus worthy of economic analysis:
Creating value, managing risk, achieving performance in a fast-moving business environment, improving wellbeing, building social capital, developing nations: all these challenges are affected by the health or otherwise of relationships.
And small steps are often a good place to start. As I have argued elsewhere, the health of relationships might be a sufficiently concrete concept to incorporate into the existing framework for economic analysis.
Example 2: ownership does not confer the right to consume 100%
Well-defined and enforceable property rights are essential to a well-functioning economy. But do we have the right to consume 100% of the fruit of the resources we possess? Economic theory would say that, after taxes have been paid, the resources are yours in entirety. However, as explained by Donald Hay in Economics Today: A Christian Critique, the Old Testament teaches us otherwise.
From the creation story (Genesis 1:28-30) and the parable of the talents (Luke 19:11-27), we know that all our resources (and even our personal skills and abilities) are God-given. Despite private ownership, the earth is the Lord’s and everything in it (Ps 24.1).
Regarding the stewardship of those gifts, we are told to follow the example of Abraham (Genesis 14:17-24) and tithe our income, that is, to give away 10% to the work of God. So does that leave us with the right to consume the remaining 90%? Not exactly. We have an obligation to use our resources to provide for the disadvantaged (Deuteronomy 15:4), to be generous to the needy (Proverbs 14:31). For example, the Israelites were told to leave the edges of their fields unharvested, leaving this part of the harvest for poor people and foreigners (Leviticus 23:22). In other words, the possession of resources confers a responsibility to bless, rather than a right to consume.
Turning to the New Testament, we see that Jesus’ words to the ‘rich fool’ are consistent with the idea that our God-given resources are to be used for God’s glory (e.g. provision for the disadvantaged) rather than for our own consumption (Luke 12:13-21).
I hope you are also starting to see the applications of Biblical principle to economic thought.
How to engage with economists
First, I would strongly encourage both the church and economists to engage with each other. There are bound to be misunderstandings along the way, but learning to speak each other’s languages with a degree of grace and humility cannot be a bad first step.
Second, seek what God’s word tells us about economic principles. For example: our collective and individual calling to stewardship; the importance of relationships; our right and obligation to work; and the obligations that accompany personal stewardship of resources. If possible, explore this with economists together, as some very patient people have done with me! Indeed, this was how I started on my journey to dig into how my faith (should) affect my economics.
Third, don’t throw the baby out with the bathwater. Yes, economics has some hidden underlying assumptions—but it remains a powerful tool for shaping society. I suspect that in many cases economic analysis will stand almost unchanged, but with a greater recognition of the assumptions involved to get there, and what this means when interpreting the results.
Fourth, try not to get sucked into the left-right political debate until you’ve established a common ground on the purpose of economics and the power of the gospel to speak into how we use economics.
There are a number of excellent blogs, articles and books on the dialogue between economics and theology. For example, see the St Paul’s Institute and the Jubilee Centre. For economists, I highly recommend reading Economics Today: A Christian Critique by Donald Hay. I got my copy for £3.26 on eBay, generating a vast amount of consumer surplus.
Tim Hogg is a practicing microeconomist, specialising in behavioural economics. He is married to Rachel and attends All Saints Woodford Wells, London. He hopes to one day own a dog, possibly a Cavapoo [ed: a great choice!].