On the Christian Need for Austrian Economics

Introduction

There have been a number of excellent introductory evaluations of Christ’s tendencies towards individual freedom[1][2][3] but not one that strictly addresses one of the founding sciences that have brought about the modern freedom/liberty movement and why it should matter to a member of the Christian faith. The founding science to be discussed is Economics and while it is a very broad science which can include many aspects of philosophy, it primarily deals with our consumptive and productive human aspects; and thus one’s material well-being. Because of how knowledge of Economics affects the well-being of individuals and groups, Christians have a need to understand the basics as their actions within society will have lasting consequences on their neighbors.

Why Economics?

If economics is defined as “the social science that analyzes the production, distribution, and consumption of goods and services”[4] then why as Christian’s do we care? Well, if half of the foundation for the Law that Christ stated is to “Love thy neighbor”[5] then it follows that we are to care about our neighbor’s material well-being.  Economics is the social science that can be used to assist understanding the how and why of our neighbor’s well-being. How can we truly “love thy neighbor” if we purposely disregard knowledge of whether our actions benefit or hinder him?

There are the simple actions that most people understand as hindering – like stealing from or physically hurting your neighbor – and Economics as a general science can offer some further explanation on why those are poor decisions but Christian’s don’t (or shouldn’t) need an explanation on why that is against our morals and the Law. Where Economics can really shine for Christians is in understanding the long term effects of our social actions, how society works and where some of the major, sinful fallacies are.  I use the term “sinful” here to denote actions or thoughts in society that can be shown to be breaking the golden rule; actions that are thus unloving to your neighbor.

Due to the spread of Democracy theoretically most individuals in this world can promote policies that affect our neighbors.  This greatly increases the importance of understanding – at least on a basic live – Economics.  It offers an understanding of societal relations, how money flows, why prices are critical to society, what effects policies can have on the short and long term. All this can be initially grasped without a university degree; the basics are not hard in this science just as they aren’t difficult in many other sciences. The basics of Calculus can be understood in an hour but it will take a lot of study if you want to apply it to unique cases. Same with Economics, the basics are yours to keep whenever you want them enough to spend a couple hours on it; but proficiency and unique application takes time. I am not recommending a lifelong study of Economics to all Christians in this article, even if I think it would be a decent use of our time.  What I am recommending is a basic understanding of it in order to affect some of the philosophic fundamentals that drive our current Economic understanding and through that what actions we promote that fit the Christian Ethic. Understanding Economics is critical to furthering our understanding of Ethics with relation to any actions that involve our neighbors and society. Henry Hazlitt can explain how one’s economic viewpoints affect and drive one’s ethical justifications:

It is commonly assumed that there is little relation between the ethical and the economic point of view, or between Ethics and Economics. But they are, in fact, intimately related. Both are concerned with human action, human conduct, human decision, human choice. Economics is a description, explanation, or analysis of the determinants, consequences, and implications of human action and human choice. But the moment we come to the justification of human actions and decisions, or to the question of what an action or decision ought to be, or to the question whether the consequences of this or that action or rule of action would be more desirable in the long run for the individual or the community, we have entered the realm of Ethics. This is also true the moment we begin to discuss the desirability of one economic policy as compared with another. [6]

A Rational Approach for Why We Should Care About Economics (On Means and Ends)

Hazlitt discusses something above that can help us to better understand why Economics is important to Christianity. He describes Ethics as what ought to be and Economics as an Analysis of Human Action. Put the two together and you have a deductive approach (as opposed to Empirical Science or science that deals with measurable and empirical phenomena) that relates to How We Get what Ought to Be.

Humans are rational beings that act to constantly fulfill desires (ends) or to satisfy what is currently unsatisfactory. We seek ends. As Hazlitt explained the moment we decide what ought to be is when we bring Ethics into play. Our individual understanding of Ethics greatly affects our desired ends; most Christians understand the importance of Ethics so I won’t delve into that too much. To use a simple example – one that doesn’t involve Ethics, but does involve other sciences – let it be said that in the morning, I desire a quick and nourishing breakfast. Breakfast is an end. The means are a whole different matter, and are dictated by my desires that it be quick and nourishing. How do I choose the means? Well, my understanding of history allows me to apply a time-value to the variety of means available. From my personal history I know that Cereal is fast, and marinating and broiling a slab of steak is slow. The Science of Health allows me to choose means that are nourishing. Sugar-Cereals do not nourish while Eggs and Broccoli do. Thus, my understanding of History and Health allow me to choose means that are best suited, given my current state of knowledge, to satisfy my ends. So what did I eat for breakfast? Eggs, Broccoli, Cheese and some breakfast salami – Both a fast means and nourishing means that satisfied my end desire. If we don’t study Health or don’t care to remember History, our decision making becomes severely limited and our desires may not be fulfilled in the best manner. Humans constantly seek to learn and improve their environment and well-being so as to better satisfy their ends and to satisfy more of them.

Economics is a science (though not an empirical science like Health, but more of a deductive science like Ethics) that allows individuals to better realize the implication of a wide array of means to better satisfy their ends. You want a healthier, longer lasting life? Better give some study time to Health otherwise how will you know Sugar can greatly reduce your years of life as well as the quality of living while alive? How will you know that a vitamin fortified Sugar Cereal still probably isn’t that good for you? You want to increase your pay in your job? Better study up whatever science pertains to your job whether it be engineering, economics, business, sales, or programming.  Do you seek to live in a society that flourishes in the material sense and has an abundant amount of quality, material goods cheaply available? Economics is vital to understanding how to attain these goals. Just like how a rudimentary study or instruction on General Health allows you to choose better means to satisfy your desired end of living longer and living healthier; a rudimentary study on Economics allows one to realize what forms of government and government policies are unfeasible. If the Russian’s or Chinese had a better understanding of economics they could have understood where Communism was leading the countries, as Economics dictated that it is impossible for Communism to last[7]. Sorry to tell you Marx; but Economics had you pinned long before it was shown by History to be unsustainable. If the early Catholic church had an understanding of modern Austrian Economics they could have potentially stalled or reversed the decline of the Roman Empire as Economics teaches that monetary debasement and pyrrhic military advances destroy wealth and can bring down an empire.

Why the Austrian School of Economics?

Many sciences have different “schools of thought” that may disagree or emphasize different aspects of the science. Economics is no different. Some of the modern schools of thought are the Chicago School, Keynesian, and Austrian. Some older schools of note are Scholasticism, Mercantilism and Marxian. There are plenty of other schools but going into that and all their differences is probably just as dry as detailing out the minute differences between church denominations (Assembly of God, Presbyterian, Baptist, Lutheran, …). It is not my desire, nor I’m sure yours to read a dry account on the differences between all these schools of thought. However I will say that if you are reading this, you probably agree that something isn’t right in the current majority of economic thought if it leads to the volatility and upheavel we’ve seen in recent times (and probably will continue to see for at least a few years).

In nature, volatility exists usually because something caused naturally stable systems to become unbalanced at which point most natural systems then try to correct itself. The same could be said for human action in society. If something in society is wrong, or unbalanced – like our current economic affairs – and if society is formed through human’s acting to bring about their desired means then either our means are off or our ends. Generally all our ends are at least a little off as no Human is ever perfect (one exception applies) but most of our ends are similar to one another; we want ourselves & our family to prosper. If we are friendly then we want our friends to prosper as well and if we are quite the humanitarian then we want the human race as a whole to prosper. In the end, it isn’t likely that our desired ends are to blame, but rather the primary culprit for the current economic woes are our Means or how we go about “prospering”, which as described earlier can be analyzed using Economics. Unfortunately, mainstream Economic theory seems to disagree that anything is fundamentally wrong anyways and didn’t see the economic storm until it had already arrived.

Why do I bring this up? Because Austrian Economics was one of the few schools of economic thought that properly postulated that this bust would come. So if, once convinced of the importance of Economics and it is decided to learn the fundamentals of economics, steer towards Economic theories that actually match reality and don’t require a different type of human (Marxian and Nazism). Steer towards theories and ideas that actually make sense if you pause for a moment to reflect on them. Few Doctors study medieval-styled blood-letting anymore as a means to fulfill the end of Longevity and Good Health for their patients. Why? Because in many cases it doesn’t actually fulfill the desired ends, but does the opposite. Nor should one study economic theories that are defunct and don’t actually increase the long-term prosperity of individuals and society (history). Austrian Economics properly determined that Communism is unsustainable and will lead to economic collapse, not the economic prosperity (ends) that Marx said Communism (means) would bring about. Austrian Economics properly stated that low-low interest rates would cause a housing bubble and bust in a manner that would leave us worse off as opposed to the Keynesian Nobel Prize winning Paul Krugman who encouraged a housing bubble to get us out of the Tech Bubble Bust[8]. Austrian Economics has properly taken the stand that money creation and expansion will cause bubbles, busts, price inflation, savings erosion and destruction not the economic prosperity that mainstream economics states.

While the above examples are all relatively recent (as the modern Austrian School is post WW2 ) the Austrian School itself also has a long, rich intellectual history.  A history that can be used to evaluate and determine the logical growth and foundations of its past and current theorists. This history can be easily and directly traced to the late 1800’s and Eugen von Böhm-Bawerk but can even be traced back to at least some of the Scholastic Schoolmen of the old medieval universities[9]. The Austrian Economic theories themselves haven’t been around since the Scholastics, but the intellectual foundation is rooted in those who first started to develop economic theories based in God’s gift of reason.

Economics and the Christrian Worldview

In closing it is best to turn our attention to economics and the Christian worldview. Economics deals with how we should attain our goals and shifting those methods can have wide life effects. For anything to alter or add to our worldview it needs to fit with the fundamentals of the Christian worldview.  The fundamentals of most of our differing Christian worldviews are built upon Christ’s teachings where we believe that following Christ’s teachings will have the best result for us and society as a whole. Christ taught that love and non-aggression is not to be our way. We are not to lord our God-given authority over anyone like the Gentiles do; instead the more we serve the better off we are.[10] This is one of the baselines of Austrian Economics, that aggression and force as a “means” has unintended consequences and doesn’t arrive at the “ends” sought. That is why Communism failed, because it relies on aggression to sustain itself and in doing so it disrupts the natural price structure and collapses. Economic Bubbles are created by inflating the money supply which aggresses upon the savings of those who are forced to save in that money and they burst when the lie can no longer be maintained. That is why mainstream economics continues to fail us to this day; it relies on principles that are against Biblical principles and against worldviews that attempts to align itself to Christ’s teachings.

You want to prosper in this life and the next? Christianity teaches Love God and love your neighbor as you would love yourself which perfectly pairs with what Austrian Economics about prosperity and removing force and thus encouraging freedom in society.

Do not lord yourself over others through force, fraud, or policy. Study Economics and come to realize just how much of this economic destruction is preventable and thus how much of it is made by our own actions and beliefs. It is commonly said that to change the world you have to change yourself; let’s start with understanding what ends our actions actually give and what actions we need to do to attain our ends.

If you want advice on where to do so, try these:

Henry Hazlitt’s Economics in One Lesson (Easy to read, medium length book)

Free Ebook – http://mises.org/books/economics_in_one_lesson_hazlitt.pdf
Purchasable Book: http://mises.org/store/Economics-in-One-Lesson-P33.aspx
Summary: http://wiki.mises.org/wiki/Economics_in_One_Lesson

How an Economy Grows and Why It Crashes (Economics from the basics as an easy to read story)

Book Website: http://www.peterschiffonline.com/books/how-an-economy-grows-and-why-it-crashes/

Inclined to Liberty: The Futile Attempt to Suppress the Human Spirit (Short Pamphlet)

Book Website with Free EBook version: http://inclinedtoliberty.com/

Gary North’s Economic Commentary on the Bible (Extremely long, but includes easy to read introduction on Biblical Economics)

Link to Home Page of commentary: http://www.garynorth.com/public/department57.cfm

The Church and the Market: A Catholic Defense of the Free Economy (Book length, not just for Catholics)

Book Link: http://mises.org/store/Church-and-the-Market-P199.aspx

Sources

  1. Jesus Is An Anarchisthttp://www.anti-state.com/
  2. Christian Morality and Libertarian Realityhttp://www.lewrockwell.com/
  3. Was Jesus A Libertarian?http://www.thefot.us/jesuslbt.html
  4. Wikipedia: Economicshttp://en.wikipedia.org/wiki/Economics
  5. Matthew 22:36-40
    “Teacher, which is the great commandment in the Law?” And he said to him, “‘You shall love the Lord with all your heart, and with all your soul, and with all your mind.’ This is the great and foremost commandment. The second is like it, ‘You shall love your neighbor as yourself.’ On these two commandments depend the whole Law and the Prophets.”
  6. Henry Hazlitt, The Foundations of Morality Ch30
  7. Ludwig von Mises: Socialismhttp://mises.org/books/socialism/contents.aspx
  8. Krugman/Housing Bubblehttp://articles.businessinsider.com/2009-06-17/wall_street/30063851_1_interest-rates-housing-bubble-policy-makers
  9. Faith & Libertyhttp://mises.org/store/Faith-and-Liberty-The-Economic-Thought-of-the-Late-Scholastics-P170C0.aspx
  10. Mark 10:42-45
    “But Jesus called them to Himself and said to them, “You know that those who are considered rulers over the Gentiles lord it over them, and their great ones exercise authority over them. Yet it shall not be so among you; but whoever desires to become great among you shall be your servant. And whoever of you desires to be first shall be slave of all. For even the Son of Man did not come to be served, but to serve, and to give His life a ransom for many.”
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