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Let’s start with the basics

If we don’t understand first principles in economics, we can do a lot of harm

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Let’s start with the basics
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The subject of economics is challenging for many believers as assumptions about its complexity intimidate many away from a comfortable grasp of the subject. At the same time, a grasp of economics has never been more important for Christians, as the bedrock of our social cooperation and aspirational beliefs is under attack from many who have decided that free enterprise is fundamentally greedy, unfair, or at the very least, insufficient.

Having devoted my life to a defense of an economic belief system directly rooted in a Christian worldview, I insist upon teaching economics with “first principles” as our starting point. Once we assert, then reinforce, key first principles, doing economic calculation, policy formulation, and application ought to be a lot easier. Temptations may exist, still, to vary from our principles. But without such first principles in place, the ability to defend any system of economics, let alone one rooted in a world and life view that “thinks God’s thoughts after Him” will be impossible.
The basic starting principles I have used in teaching economics to Christian high school students are as follows:

1. God created us with dignity in His image.

2. Humans act.

3. Human flourishing is our chief aim.

4. There’s no free lunch, trade-offs exist in any system.

5. Sin entered the world.

6. Human beings have individual responsibility and agency.

The first principle, that God made us in His image and likeness and gave us a dignity and elevated status in the creation is pivotal. If one believes that economics is the study of human action around the allocation of scarce resources, it behooves us to understand humans and their actions. And if we are to understand human thinking, actions, and processes, we must understand the human person and human nature.

For a believer, this understanding starts with creation, and what God created us for. The dignity God gave humanity in creation was not selective. It did not pick some people to be productive economic actors and others to be mere consumers. It was universal. Rarely have I seen someone get economics wrong who gets anthropology right, and rarely have I seen one get economics right when they get anthropology wrong.

Those who attempt to do economics out of a belief that utopia is possible are capable of doing great harm.

The second point, that “humans act,” is loaded with profound wisdom despite its brevity and simplicity. The assumption in much of modern economics that humans need to be manipulated, controlled, directed, and centrally planned fails to understand the God-created rationality, reason, instinct, preservation, and capacity humans have. We study economics—indeed, we have economics—because humans act. And any attempt to study economics without the basic principle in place of human action is dangerous.

We study economics for something that transcends data, metrics, and even the optimal mix of risk and reward. At its core, economics is about the human person, and our unique aim as believers is for an economic activity that drives human flourishing. This focus on a good life—a material and spiritual peace, joy, and well-being (a “shalom”)—is our aim, and this commitment must never be forgotten in the wonkiness of data and figures.

Those who attempt to do economics out of a belief that utopia is possible are capable of doing great harm. The world was created with scarcity, and when we operate as if there are no trade-offs, we not only find ourselves unable to avoid the reality of trade-offs, we make decisions without a regard for consequences that ought to be considered. Whether it is in micro decisions we make on an individual basis or macro decisions made in public policy, we must never lose sight of the reality of scarcity and its lessons about trade-offs.

Christians fundamentally operate from a belief in creation, fall, and redemption. Economics must understand created reality, but also must understand the fall. Any economic system that wants to deny man’s fallen nature is doomed to fail. Economics cannot perfect mankind, but rather must operate around the reality of sin.

Finally, we posit as a basic tenet that human beings are responsible actors with God-given agency. We do not reduce humans to robotic atomistic beings devoid of agency or free from the consequences of their decisions. Humans must be responsible for the decisions they make not merely as an ethical assertion, but as a tremendous gift for its harnessing power to bring about change, progress, and growth.

Out of these basic six principles, a lot of work is still to be done in economic theory and practice. But taking these principles with us will lead to a more prepared and equipped workman, and the application of a worldview that pleases God, and fosters the human flourishing economics seeks to create.

David L. Bahnsen

David is a financial adviser and frequent WORLD Radio guest. He serves as chief investment officer of The Bahnsen Group, a national wealth management firm managing more than $3.7 billion in client capital. He is the author of There’s No Free Lunch: 250 Economic Truths.

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