I wasn’t planning to write another post about economics so soon after my taxation blog, but there was an interesting blog post written from the covenanter theonomic perspective about free markets which I thought was interesting enough to respond to. The original article is found here: https://mintdill.wordpress.com/2016/07/18/fair-market-price-setting-commission-oppressing-the-poor-monopolies-price-gouging-concerning-scarcity-and-supply/
To get some preliminary thoughts out of the way before I dissect where I do and do not agree with the blog linked here on economics:
1. I will only be covering this subject from the perspective of scripture and logic. In other words, I won’t be dealing explicitly with either the Westminster Confession or the Westminster divines. The reasons for this are because the writer I am responding to is MUCH more knowledgeable about both than I am, I do not doubt that most of all of the divines are in agreement with him, and while I believe the use of confessions is important they are not infallible. However, I will say up front that as written I dont disagree with any of the specifics in WLC 142 that the blog uses to support its position.
2. I greatly respect both the man who wrote this blog and the excellent exegetical work he has done in general. Furthermore, while I do not agree with the scriptural conclusions of this particular article, I respect that the author at least made a strong attempt to justify his position with scripture. He did not simply appeal to a vague notion of natural law or “the Bible doesn’t say we cant.” He recognized furthermore that he had to make a positive case from scripture for government intervention in the economy, and he made a good effort to do so. I have nothing but respect for this.
3. When I talk about “free market economics” it should be assumed that I am exempting obvious cases where scripture does have government’s interfering with markets in particular circumstances. Sabbath legislation is the most obvious instance where scripture interferes with the market for moral reasons. In addition, anti-prostitution laws (discussed in the first blog) do restrict any possible market on prostitution, etc. But I am dealing with the general structure of the economy here, particularly the issues mentioned in the blog, not these exceptions.
So, free markets or fair markets? What does the scripture teach.
To the first place, we must go to the established principle of scripture that the Israelites (and by extension, Christian nations) are not to add to the law of God.
Deuteronomy 4:1-2
“And now, O Israel, listen to the statutes and the rules that I am teaching you, and do them, that you may live, and go in and take possession of the land that the Lord, the God of your fathers, is giving you. 2 You shall not add to the word that I command you, nor take from it, that you may keep the commandments of the Lord your God that I command you.
Some people believe these passages are dealing only with worship, but I see no reason to think this given that the Pentateuch includes plenty of judicial instructions as well as worship ones. Deconstructing this entire objection would probably be worthy of a post in and of itself, so for now I’m simply going to operate based on what I believe the correct understanding of this text is, namely that civil magistrates should not legislate on matters where the Bible does not.
With that being said its impossible to document all the ways the Bible does not say the government should interfere with economics, so instead I will deal with the cases where it is asserted that the Bible does give authority to interact with such things.
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“You shall do no injustice in judgment, in measurement of length, weight, or volume. You shall have honest scales, honest weights, an honest ephah, and an honest hin: I am the LORD your God, who brought you out of the land of Egypt.” – Lev. 19:35-36//
Sure this isn’t dealing with just currency. I get that. If I were to claim I’m selling you two liters of water, but actually its only one and a half liters, that would be dishonest. It is in fact fraud, a form of theft. And the law that the thief must pay back double is certainly enough to criminalize such behavior, we don’t need to find another specific instance saying that particular kind of theft is unlawful. I certainly agree with this.
But all this really teaches should be illegal is fraud, and this is something that every “reconstructionist” and even every libertarian I’ve ever heard of would agree to. The writer goes on to argue that this command implicitly gives the civil magistrates authority to prohibit “price gouging” and even to decide what types of prices are fair and not fair, and I simply don’t see anything like that in the text. If I sell you 2 liters of water for 2 dollars but you think it should only have been one dollar, that simply doesn’t violate anything in this text. It might be taking advantage of your distress, or it might not, but there’s certainly no simple law that could easily distinguish between the two. But its certainly not fraud, and seeing as it is not the job of governments to discern people’s hearts, its also not their job to assume that high prices are inherently malicious.
Now, if the prices are based on lies I would agree that that’s a different issue. For instance if I sell a medication and claim that it can cure headaches, and it actually doesn’t cure headaches, that’s fraud. But that’s a very different issue than some civil magistrate claiming that I’m selling it for too much even if I am being completely honest about how many doses, what the medication will do, etc. To read that into this text seems like a stretch in my mind. Its not just a different case law application, its a completely different issue.
The writer points out Deuteronomy 25:13-16 in support of his idea, but the issue is the same. Dishonestly measuring and weighing things is crime. If I say I’ll pay you two ounces of gold, but I use a scale that records an ounce and a half as two ounces, that’s stealing and a crime. But that is very different from me honestly charging two ounces where the rest of the community thinks a lower price would be fair.
Michael says:
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The use of a false weight or measure involves both deceit and theft; deceit, because it is purported to be what it is not; theft, because it leads the buyer to spend more money than the commodity is actually worth and thus punishable by the civil magistrates as a form of theft and a violation of the Law of God.//
I agree with this, but it is how we define “actually worth” that I think is the issue. Let’s say I promise that some medicine I have will cure headaches, but in reality you have to take twice as much as I claimed in order to cure a headache. In that case I’m selling it for more than its worth because I lied. You paid me an amount of money thinking (and me telling you) that one pill would be enough to cure the headache, thus you’re actually (effectively) only getting half the amount of medication I told you you would. I have no problem with magistrates punishing something like that as fraud, assuming it was proven.
But this is quite a different matter than me simply charging a high price for the medicine but being honest about that. The solution to that is not government intervention. There is no theft in this case. Rather the solution is competition. If the price is high, someone else can enter the market and sell for a lower price and make a profit. This is how capitalism works. Now it is true that our own unrighteous government often interferes with such free market transactions, unjustifiably uses force to prevent lawful transactions, and this is theft. But that’s a different issue. Furthermore, fraud is an issue that is distinct from the difficult to define concept of “oppressive pricing.”
Two more passages he uses quoted below:
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“’Thus says the Lord GOD, “Enough, you princes of Israel; put away violence and destruction, and practice justice and righteousness Stop your expropriations from My people,” declares the Lord GOD. “You shall have just balances, a just ephah and a just bath.” Ezekiel 45:9-10
“The people of the land have violently oppressed by spoiling and robbing, and have vexed the poor and the needy: yea, they have oppressed the stranger against right. And I sought for a man among them, that should make up the hedge, and stand in the gap before me for the land, that I should not destroy it, but I found none.” – Ezekiel 22:29-31
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Ezekiel 45 is addressing princes, and thus seems far more likely to be addressing oppressive taxation (which we addressed last time), eminient domain, or government using coercion to prevent the poor from prospering than anything else. And Ezekiel 22 is talking about robbery, plunder, and violence. Neither of these passages says anything even remotely applicable as a case law to regulate prices, rather these laws condemn the people of the land for violence, theft, and destruction, and also condemn princes for plundering. Not only do these passages not teach that sufficiently high prices should be made illegal, they also don’t provide any kind of a framework for determining what such prices would be, which means that the only way such a law could be implemented would be autonomous man deciding what is and isnt fair, which I know isn’t what Michael wants either.
Martin Luther says (which the blog writer uses as proof):
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The rule ought to be, not: I may sell my wares as dear as I can or will, but: I may sell my wares as dear as I ought, or as is right and proper. For your selling ought not to be a work that is entirely within your own power and will, without law or limit, as though you were a god and beholden to no one; but because this selling of yours is a work that you perform toward your neighbor …
But in order not to leave this question entirely unanswered, the best and safest way would be for the temporal authorities to appoint over this matter wise and honest men who would appraise the cost of all sorts of wares and fix accordingly the outside price at which the merchant would get his due and have an honest living, just as at certain places they fix the price of wine, fish, bread and the like. …
the next best thing is to hold our wares at the price which they bring in the common market or which is customary in the neighbourhood. In this matter we can accept the proverb: “Do like others and you are no fool.” Any profit made in this way, I consider honest and well earned, since there is risk of loss in wares and outlay, and the profits cannot be all too great.
But when the price of goods is not fixed either by law or custom, and you must fix it yourself, then indeed no one can give you any other instructions except to lay it upon your conscience to be careful and not overcharge your neighbour, and seek not avaricious gain, but only an honest living. …
In deciding how much profit you ought to take on your business and your labour, there is no better way to reckon it than by estimating the amount of time and labour” –Martin Luther, On Trade//
There are many problems with this. The first one is that Luther simply asserts that allowing people the freedom to determine their own prices makes them as gods. But he doesn’t prove it. Its also not the case that the seller is autonomously determining the price. Prices are essentially agreements between buyers and sellers on a broader scale. If a seller continually inflates his prices he may find himself without a buyer. THAT is the correct punishment, not government involvement.
The second issue is that the merchant’s living is only “not honest” if (as discussed previously) he is not honest. For instance if the merchant claims he put ten hours of work in when he only put 5, or claims that the goods work better or are more numerous than truly they are, or otherwise engages in fraud, than I would agree that isn’t an honest living. However simply the fact that he makes a lot of money does not mean his living is not honest.
The third issue is that the labor theory of value isn’t accurate. It is possible for any number of reasons to produce a better and more worthwhile product in five hours than in seven, and if people are willing to pay more for the better product, it is absurd to punish the skilled man’s innovation by limiting his profit. Furthermore a man could work for a very long time and yet not produce something valuable enough that people are interested in buying it. Value isn’t determined by labor done, but the worthwhile nature of a product to a consumer: again, assuming the seller sells honestly rather than engaging in fraud.
Furthermore I wonder if the logistics of the government literally spelling out that this or that must be selled for this and that price has been considered. This would undoubtedly create a bureaucracy far more large than anything that existed in Israel.
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So yes, I support Price fixing for a Fair-Market System through a Price Fixing Ministry of Justice and believe it is based on Scriptural law both explicit as well as good and necessary inference. It is better to be decided in the multitudes of people in counsel then in the greedy mind of one as long as that counsel of people are not bought by businesses and corporations to also enforce their form of price gouging and monopolies..//
Yeah its pretty much inevitable, especially in the type of low tax regime that we both believe the scripture teaches, that businesses would abuse and buy out such an organization. But worse, its not Biblical. There’s no basis for “the multitudes of people” to decide what I sell my property for. This is the same type of reasoning behind eminent domain.
The issue is that money is a signal of how much something is valued. Markets naturally adjust so that supply is equal to demand and that if you value something enough to pay for it, you get the thing. There is no reason for merchants to charge so much that demand outweighs supply, because in that case they simply have wares that they don’t get to sell at all, and what good is that to them? But if prices are artificially kept low, supply winds up being less than demand and people have to do without. Furthermore this discourages new and innovative ways of producing more products that people want. Simply put, it is not good economics. There’s also nowhere in scripture where such a bureaucracy is taught. God’s law simply doesn’t teach this.
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That also must be prevented! In fact I question that legitimacy of the concept and idea of corporations in the first place based on divine law but that I will leave for another day to write about.//
I agree with the author that the limited liability corporation is a human fiction and has no basis in scripture, but since he does not address the issue further, I wont either.
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It is also extremely wicked to raise the prices of products just because of scarity or a shortage in supply.//
This is also bad economics, though I understand it seems like common sense to people the first time they hear it. It seems horrible to raise prices to take advantage of people who are in a disaster. And I agree that its wrong IF the intent is to take advantage, though intents cant really fall under legislation. However, there are other reasons for prices to rise in disaster situations, perfectly legitimate ones.
1. The supply is shifting to meet the demand. If the supply is not allowed to raise to meet the increased demand, it will be very difficult for even those who have desperate need to buy anything as the shelves will continually be cleaned off by the desperate masses that are being provided goods at a far cheaper price than a business can actually afford to provide them (given the circumstances). Whereas with so called “price gouging” the supply raises to meet the demand, people are more likely due to the increased prices to be more frugal and only buy what they need, and those who most desperately need something will be able to get it if they are willing to pay for it. This principle can be abused but is not in and of itself invalid.
2. Allowing “price-gouging” also gives economic incentive for those outside the disaster area to help out. For instance after a hurricane a company might transport water into the disaster area IF they can be adequately compensated, but its going to be more expensive to deliver the goods. While I’m not going to dispute that it would be charitable and praiseworthy to deliver them at a loss or without profit, that would be charity, which I don’t see any merit for government to enforce, and I don’t think Michael does either. A business could just as easily choose not to sell rather than sell for what they consider beneficial. It is absurd to say that a business could refuse to sell in a disaster area, but that they could not sell above certain prices. This simply isn’t good economics, and if Martin Luther or the Westminster divines thought this, I respectfully disagree with them.
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Even more heinous is to purposefully buy up entire supplies of goods so as to engross the price or create a monopoly in such wares as to fix your own price of what YOU think is fair or to corner the market by the preventing of others to sell similar like products or even at a lower cost.//
I cant think of any praiseworthy reasons to do this, and so I’m inclined to think its immoral. What I more question though is not whether its moral but whether its actually possible. If you raise your prices too high someone will inevitably innovate to beat you. There’s a good article on this here: https://mises.org/library/truth-about-robber-barons (I will note that the writers at mises.org [with the exception of Gary North] are both economic and social libertarians, whereas I’m an economic libertarian and a social theocrat, thus I don’t exhaustively condone everything they say, I also recognize that this is a long article but it explains how the issue of monopolies is more complicated than it might seem.) But though I don’t know that its possible to do successfully, I’m inclined to think that trying to reduce your prices super low in order to buy everyone else out is immoral. I cant think of any good reason to do that. That said I’m not convinced there’s a basis for the civil magistrate to interfere with something like this. But even if it could be proven that the civil magistrate should break up deliberate attempts to artificially create a monopoly by reducing prices so low that you lose money off your goods (and your competetors cant keep up), this wouldn’t be a basis either for breaking up so called “natural monopolies” (where the monopolist becomes a monopolist by creating the best product) or for any of the other proposals in the original blog.
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These are all issues and matters that are explicitly and categorically condemned within our confessional standards and a Christian as no business practicing any of these practices. These are issues that are required to be suppressed at the national levels and ARE within the realm of civil magistracy.
Such monopolies of commodities, especially of the necessities of life, are so clearly unjust that they are to be prohibited by civil legislation..//
Unless we take the route of all sin being civil crime, I still don’t see where we’re getting a case law allowing the prohibition of these practices. I MIGHT see my way to being convinced that deliberately selling at a loss is fraudulent, but I’d need to see that case developed more…. it would also have weird implications for disaster relief and stuff like that (since one could sell at a loss for charitable reasons.) I’m open to hearing such a case but I’m not currently convinced one way or the other. But again, even if that particular thing could be established as fraudulent, the rest really cant.
Some more passages from Michael and quick responses:
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“Hear this, you who trample the needy, to do away with the humble of the land, saying, “When will the new moon be over, So that we may sell grain, And the sabbath, that we may open the wheat market, To make the bushel smaller and the shekel bigger, And to cheat with dishonest scales, So as to buy the helpless for money And the needy for a pair of sandals, And that we may sell the refuse of the wheat?” Amos 8:4-6//
This passage is dealing with commerce on the sabbath (which I’d certainly agree is forbidden), and on new moon festivals which have now been abrogated. It also talks about changing the definitions of measurements from their established ones, which is again a form of fraud. But again, openly selling a bushel for X price is different than promising a bushel and actually giving half a bushel. Its not the same thing. None of this passage supports government control over prices.
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“A merchant, in whose hands are false balances, He loves to oppress. And Ephraim said, “Surely I have become rich, I have found wealth for myself; In all my labors they will find in me No iniquity, which would be sin.” Hosea 12:7-8//
I think the reader knows what I’m going to say at this point, but again, this is about fraud, not price controls. And even if it were about “unjust prices” there’s certainly nothing in this passage that would justify magisterial involvement, but its not even about just prices.
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“Differing weights and differing measures, Both of them are abominable to the LORD.” Proverbs 20:10
“A false balance is an abomination to the LORD, But a just weight is His delight.” Proverbs 11:1
“A just balance and scales belong to the LORD; All the weights of the bag are His concern.” Proverbs 16:11
“Differing weights are an abomination to the LORD, And a false scale is not good.” Proverbs 20:23
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More condemnations of fraud. Excellent. 🙂
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Sadly, many people are so caught up in Americanism they can’t see any other way and call others who advocate such as socialist but which is furthest from the truth. And it should be pointed out that America or even American ways are not always the right or biblical way.
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As a theonomist there are certainly aspects of Americanism that I disagree with. And the kind of free markets I advocate arent exactly popular in America anyway. With that said, I’m not interested in playing a definition game regarding what is or is not socialist. However, I will say that though I respect some of the men (including the writer at mint, dill, and cumin) who are great on a lot of theological issues though support price controls, I cannot with a clear conscience say that I see this as anything but statist. I do not believe Michael Daniels is a statist holistically speaking, but I think this particular policy would qualify as statist as it gives the State very vague and undefined power over even basic commerce, even in cases where no clear sin is being committed.
Let’s think through a very simple application of the law that’s being advised here. Let’s say I have something that I want to sell for four dollars. Let’s say that the seller is willing to pay 4 dollars for it. But let’s say the “official price” for the thing is two dollars and seventy-five cents. I don’t want to sell it at that price. Its worth three dollars and fifty cents to me. I’d rather just keep it. But the person who I’m selling to is willing to pay 4 dollars.
Should I really not be allowed to make that exchange? Is that what’s being proposed over at mint, dill, and cumin? I can only say that it seems like the logical implication that the government would prohibit that exchange. And that doesn’t make sense. I’m not going to say all value is subjective. But economic value certainly is. The monetary value of things like food, wine, buildings, cars, etc. is subjective and fluctuates with demand and supply. To try to make those things somehow objective and to be determined by a government bureaucracy is at the least absolutely untenable, and doesn’t really have Biblical basis anyway. If I thought this were Biblical I’d support it despite all the potential abuses I see, but seeing as I don’t even see Biblical warrant I am forced to say that this type of thing is both rife with potential abuse and also impossible to administer in a manner that is not authoritarian.
While it is true that OPPRESSING the poor is grievous sin, it has not been proven that charging a price that buyer and seller agree on, but that others in the community may think is “too high” in and of itself qualifes as oppression. And while a seller may have oppressive or greedy intent, this is not provable, and intents arent under civil jurisdiction anyway.
And also I will note, again, that a seller does not autonomously determine his prices. Buyers and sellers agree on prices. That is how economics work. And I see no Biblical basis for government to start interfering with that. With respect and love for all my Christian brothers and sisters on either side of this, I was not convinced to abandon my “free market” principles for a “fair market” by this. Not because I don’t want a fair market, but because properly understood, a free market is a fair market.