Our hometown newspaper often quotes my views on the latest economic issues. When it does so, I am typically identified as a “local economist.” Because of this, people in the community will sometimes ask me questions about the economy. This happened recently. After a meeting of our local economic development council, an individual approached me and asked an interesting question: “If I wanted to learn more about economics but could read only one book, what book should I read?”
My first thought was: That’s a tough question. My mind raced through such excellent books as Wealth of Nations by Adam Smith, Capitalism and Freedom by Milton Friedman, Road to Serfdom by F. A. Hayek, Economic Facts and Fallacies by Thomas Sowell, and a long list of other noteworthy books. All of these books are essential reading for the student of economics. However, these books, as good and essential as they are, did not satisfy me as being the one book someone should read on economics if restricted to just one book. Then, it dawned on me. There is one book that explains better than any other what must be known to understand economics. That essential knowledge is the nature of man and the book that explains the nature of man better than any other is the Bible. I think the questioner was taken aback by my answer, but he recovered quickly and asked: “Why the Bible.” This article is a summary of what I told him.
Economics is the study of how people allocate scarce resources. Understanding economics does not require a college degree—it just requires that you understand human nature. The Bible teaches that we are born in sin—we all have feet of clay and are prone to greed, selfishness, and exploitation. Because of this, it is important that we have an economic system that minimizes the irresponsible side of human nature and encourages the responsible side. The economic system that does the best job of minimizing the darker side of human nature and bringing out the better side is the free market. The free market liberates human potential, mitigates our darker tendencies, and results in more people pulling America’s economic wagon than riding in it. According to the Bible, the only people who get to ride in the economic wagon are the elderly, infirm, widows, and orphans. The Bible also tells us: 1) he who does not work shall not eat, and 2) the poor are to be helped through Christian charity, not government coercion.
In Genesis 1:28, God tells man to subdue the earth and have dominion over His creation. This verse is the basis for one of the cornerstones of free-market economics: private property. Economic freedom—as opposed to government coercion—coupled with private property allows people to exchange land, capital, labor, goods, and services in ways that meet their needs. This is the concept of self-interest, another cornerstone of free-market economics. Self-interest is a powerful human motivator. It is what drives people to exert the effort, intelligence, and risk necessary to build better lives for themselves, their families, and their communities.
Liberals—knowing better I am sure—confuse self-interest with selfishness. There is no question that people can be selfish. Never forget the dark side of human nature. But in a free market, selfishness is tempered by competition, another essential element of free-market economics. Because in a competitive free market I must meet your needs in order to meet mine, the human tendency toward greed and selfishness is tempered.
It is in socialist economies that the dark side of human nature rears its ugly head as the rule rather than the exception. With socialism, a few people at the top of the government control every aspect of the economy through centralized planning and government ownership of the means of production. The law of supply and demand is tossed out and replaced by government control. Socialism encourages the worst in human nature because it: 1) Eliminates personal responsibility, 2) Is susceptible to the tragedy of the commons (the tendency of people to abuse property that they don’t own—property that belongs to everyone so in reality it belongs to no one), 3) Encourages people to ride in the economic wagon rather than help pull it, and 4) Promotes government sponsored monopolies.
This specific weakness of socialism—monopolistic control—encourages the worst in human nature because it puts so much power in the hands of so few, and power corrupts. In a free-market economy there is competition rather than monopolistic control. Consider this simple comparison. With a free-market, if you are unhappy with the service, prices, or products at Wal-Mart, you can take your business to K-Mart, Target, or a long list of other competitors. Because of this—and because of human nature—Wal-Mart works hard to provide good service and good products at competitive prices. In a socialist economy, there is no alternative to the government controlled version of Wal-Mart.
To get a glimpse of how socialism works, think of the current situation with the Veteran’s Administration (VA). Veterans who need financial help with medical care or who have disabilities must go through the VA. They have no other option. If they are treated poorly by the VA, they cannot take their business elsewhere. The VA is currently three years behind in processing the claims of veterans. We have veterans dying before their VA paperwork is processed and there is no competitive motive for the bureaucrats at the VA to do a better job. That is human nature and that is how it is to live in a social economy.
While I recommend the various book on economics listed at the beginning of this article, before reading them, read the Bible. You won’t understand the other books until you understand human nature, and you won’t understand human nature until you read the Bible.