Wednesday, July 11, 2007

Economics and Christianity

For the past 3 weeks I have been taking an accelerated microeconomics class; I have crammed a whole quarter's worth of material into 3 weeks and it has been one of the most challenging things that I have ever done! It has been great though because it took me to the end of my rope--I could only study so much econ everyday and really only absorb as much as my brain could physically handle. I had to rely on the Lord to help me understand material in an area that was foreign and unnatural for me. The Lord was faithful and through him alone did I finish this course!

From what I have learned, I think that economics provides people in the world with a relatively accurate model that helps them predict the actions of self-interested, rational individuals. However, in his recent talk on the Cross, Paul DeCelles says that as Christians, we need to have a different economy. I have been trying to reconcile this idea with the way that economics assumes individuals act and how we, as Christians should approach business and economics.

One thing that got me started on thinking about this was when I was chosen to participate in a class experiment that would illustrate the concept of relative wealth. This concept--anyone who knows better than I, please correct me--says that people seek to acquire wealth, not only for what it can buy them, but for the ability it brings them to be wealthier than others. This concept is illustrated in the fact that most people would chose to make $100,000 while others make $90,000 than to make $110, 000 while most others make $120,000. While in the second case people would have $10,000 more than the first, they would rather make quantitatively less money, but have more than most people. This basically assumes that people are jealous and greedy.

In the experiment that my professor, another student and myself worked out in class, I was given $10. I had to chose an fraction of this amount to give to the other student that the other student could accept or reject. If he rejected the amount, neither he nor I would receive any money and the experiment would leave us both empty handed. If he accepted the deal, we would both walk away with our respective sums. My choice, then, had to take into account how much this other student would punish me for being stingy in the amount that I gave him. If I gave him $1, which would have been $1 more than he had before, would be punish me by rejecting my offer and depriving me of my share of the remaining $9? What about if I gave him$2 or $3? In the end, I played it conservatively and gave him $5, which he gladly took. once

After class, I got to thinking about this experiment. What would my professor and the class have thought if I had given this other student all $10, leaving myself with nothing? What if the Lord had wanted me me to give this other student all of the money? What if I had said that the Lord had wanted me to live in poverty and that I didn't want this money? Such behavior would be considered irrational by economists--they would never predict such actions.

I do not doubt that economic modeling is a very useful tool in the world. However, will it be useful in our cities? What about in our businesses? Will we market and price things based on the concept that people are self-interested? I'm still not really sure what I think about all of this, but I know that the Lord is calling us to do things that are not "rational" by the world's standards: we forgive debts, give to those who ask and embrace poverty and humility. I'd like to see the economic model for Christian society...although there's probably not much of an incentive to do so.

If anyone followed this and is interested in having more conversations about this, please comment.

5 comments:

August said...

When we choose to give up money in obedience to the Lord, we are behaving perfectly rationally, and we are acting in accord with the laws of economics. Obedience to God is more valuable than money. So the transaction becomes a trade, you give $10 to your fellow student, and you get the benefit of obedience to God. You'll also think you are more wealthy because of it.

Money just happens to be this thing that makes many transactions easier; economics covers the transactions, not the money. Did you know people are studying the economics of the family? Or the economics of religion? The first premise is that people are behaving rationally, then they go and try to figure out why they do what they do. It's the psychologists and sociologists that decide that people are irrational at the outset and then build theories on that.

Mp3s on a variety of subjects:
Econtalk.org
Particularly pertinent to our way of life- economics of religion and the one with Virgina Postrel, I think that one is called economics of style. You get extra points if you figure out why I mentioned the last one!

Miss Mary Virginia said...

I like August's comment! It also sounds like a bit of Choice Theory! I loved my economics courses. I love the idea that in the PoP we can choose to give more of ourselves/resources for our businesses than any other person in the business world would choose to give. We choose the business over ourselves which is a foreign idea to the secular world and has the potential to make our businesses wildly more productive. (This is also the idea of service and how the life of the PoP can work despite others thinking it's impossible.) Praise God!

Lisa said...

Thanks for sharing your thoughts Gina. I don't have any new ideas to add, but it's got me thinking now.

Gina said...

I agree with you, August. We are behaving rationally when we respond to the Lord in obedience. However, my point is that it does not appear to be rational to many who might observe our actions. I guess the fact that there are people going into the economics of family and religion shows that the more traditional model in economics does not accurately predict the decisions of people who value obedience and family more than material benefits. Thanks for letting me in on the fact that people are studying these areas, and for the great website!

August said...

Thanks Gina,

What do you mean by the traditional model? There are many economic models, and some of them are quite bad, like the Keynesian model for instance. Any model that suggests coercion is effective is extremely flawed. The state is never more effective than free people choosing for themselves.
The folks at www.acton.org are pretty good at bringing Christian thought and good economic models together.