Tag Archives: Capitalism

Jay Richards: eight common myths about wealth, poverty and the free market

I have a key that will unlock a puzzling mystery
I have a key that will unlock a puzzling mystery

Have you read Jay Richards’ book “Money, Greed and God?” Because if you haven’t, he’s written a series of articles that summarize the main points of the book.

The index post is here.

Here are the posts in the series:

  • Part 1: The Eight Most Common Myths about Wealth, Poverty, and Free Enterprise
  • Part 2: Can’t We Build A Just Society?
  • Part 3: The Piety Myth
  • Part 4: The Myth of the Zero Sum Game
  • Part 5: Is Wealth Created or Transferred?
  • Part 6: Is Free Enterprise Based on Greed?
  • Part 7: Hasn’t Christianity Always Opposed Free Enterprise?
  • Part 8: Does Free Enterprise Lead to An Ugly Consumerist Culture?
  • Part 9: Will We Use Up All Our Resources?
  • Part 10: Are Markets An Example of Providence?

Parts 4 and 5 are my favorites. It’s so hard to choose one to excerpt, but I must. I will choose… Part 4.

Here’s the problem:

Myth #3: The Zero Sum Game Myth – believing that trade requires a winner and a loser. 

One reason people believe this myth is because they misunderstand how economic value is determined. Economic thinkers with views as diverse as Adam Smith and Karl Marx believed economic value was determined by the labor theory of value. This theory stipulates that the cost to produce an object determines its economic value.

According to this theory, if you build a house that costs you $500,000 to build, that house is worth $500,000. But what if no one can or wants to buy the house? Then what is it worth?

Medieval church scholars put forth a very different theory, one derived from human nature: economic value is in the eye of the beholder. The economic value of an object is determined by how much someone is willing to give up to get that object. This is the subjective theory of value.

And here’s an example of how to avoid the problem:

How you determine economic value affects whether you view free enterprise as a zero-sum game, or a win-win game in which both participants benefit.

Let’s return to the example of the $500,000 house. As the developer of the house, you hire workers to build the house. You then sell it for more than $500,000. According to the labor theory of value, you have taken more than the good is actually worth. You’ve exploited the buyer and your workers by taking this surplus value. You win, they lose.

Yet this situation looks different according to the subjective theory of value. Here, everybody wins. You market and sell the house for more than it cost to produce, but not more than customers will freely pay. The buyer is not forced to pay a cost he doesn’t agree to. You are rewarded for your entrepreneurial effort. Your workers benefit, because you paid them the wages they agreed to when you hired them.

This illustration brings up a couple important points about free enterprise that are often overlooked:

1. Free exchange is a win-win game.

In win-win games, some players may end up better off than others, but everyone ends up better off than they were at the beginning. As the developer, you might make more than your workers. Yet the workers determined they would be better off by freely exchanging their labor for wages, than if they didn’t have the job at all.

A free market doesn’t guarantee that everyone wins in every competition. Rather, it allows many more win-win encounters than any other alternative.

2. The game is win-win because of rules set-up beforehand. 

A free market is not a free-for-all in which everybody can do what they want. Any exchange must be free on both sides. Rule of law, contracts, and property rights are needed to ensure exchanges are conducted rightly. As the developer of the house, you’d be held accountable if you broke your contract and failed to pay workers what you promised.

An exchange that is free on both sides, in which no one is forced or tricked into participating, is a win-win game.

On this view, what you really need to fear as a consumer is government intervention that restricts your choices in the marketplace.

Free trade in the real world

This is not a theoretical problem, either. Millions of people in the Ukraine are protesting against Vladimir Putin and his restrictive Russian policies in order to get more economic freedom by signing a free trade deal with the European Union.

Rick Pearcey posted about it on the Pearcey Report: (H/T Nancy Pearcey)

France24.com reports:

Hundreds of thousands of protesters swarmed Ukraine’s capital Kiev on Sunday, where the country’s opposition leaders urged them to continue heaping pressure on President Viktor Yanukovich to sack his government and abandon plans for closer ties with Russia.

Many of the demonstrators who gathered at the city’s central Independence Square are furious with the government over its decision to back out of a historic agreement with the European Union in favour of a possible trade deal with Russia, Ukraine’s Soviet-era ruler.

The protest . . . is just the latest sign of mounting tensions in Ukraine over the past two weeks, raising fears over the country’s political and economic stability.

That’s a real crisis: freedom-loving people fighting for their right to be prosperous by adopting the economic policies that produce wealth.

If you care about poverty, it’s often tempting to think that it can only be solved one way – by transferring wealth from the rich to the poor. But that is a very mistaken view, as any economist will tell you. The right way to create prosperity is by creating laws and policies that unleash individual creativity. Letting individuals create innovative products and services, letting them keep what they earn, making sure that the law doesn’t punish entrepreneurs – that incentivizes wealth creation. Fixing poverty does not mean transferring wealth, it means giving people more freedom to create wealth on their own. Free trade between nations is an important way that we encourage people to create better products and services that what they have available in their own countries.

Economists agree on the benefits of free trade

Who could possibly disagree with free trade? Well, many people on the left do. They favor imposing restrictions on free trade. For example, people on the left favor making those who import goods pay tariffs, which makes it harder to trade with other nations. People on the left want to pass rent control laws to block landlords and tenants from trading more freely. People on the left want to pass minimum wage laws that block employers and workers from trading wages for labor more freely. But economists generally don’t agree with any of restrictions on free trade. In fact, even across the ideological spectrum, the majority of economists view free trade as a wealth creating policy, and restrictions on free trade as a wealth destroying policy.

Harvard economist Greg Mankiw explains what most professional economists agree on.


Here is the list, together with the percentage of economists who agree:

  1. A ceiling on rents reduces the quantity and quality of housing available. (93%)
  2. Tariffs and import quotas usually reduce general economic welfare. (93%)
  3. Flexible and floating exchange rates offer an effective international monetary arrangement. (90%)
  4. Fiscal policy (e.g., tax cut and/or government expenditure increase) has a significant stimulative impact on a less than fully employed economy. (90%)
  5. The United States should not restrict employers from outsourcing work to foreign countries. (90%)
  6. The United States should eliminate agricultural subsidies. (85%)
  7. Local and state governments should eliminate subsidies to professional sports franchises. (85%)
  8. If the federal budget is to be balanced, it should be done over the business cycle rather than yearly. (85%)
  9. The gap between Social Security funds and expenditures will become unsustainably large within the next fifty years if current policies remain unchanged. (85%)
  10. Cash payments increase the welfare of recipients to a greater degree than do transfers-in-kind of equal cash value. (84%)
  11. A large federal budget deficit has an adverse effect on the economy. (83%)
  12. A minimum wage increases unemployment among young and unskilled workers. (79%)
  13. The government should restructure the welfare system along the lines of a “negative income tax.” (79%)
  14. Effluent taxes and marketable pollution permits represent a better approach to pollution control than imposition of pollution ceilings. (78%)

Now when you are talking to a Democrat, you are talking to someone who disagrees with most or all of those common sense economic policies. For example, Obama’s backers in the labor movement inevitably endorse higher import tariffs, which discourage free trade between countries. No economist supports these tariffs on imports, because history has shown (e.g. – Smoot-Hawley Act) that tariffs destroy economic growth and reduce wealth creation. And that’s what I mean when I talk about economic illiteracy – I mean ignoring what we know from economics and our own experience with bad policies when we make policy.

Democrat economic policies don’t work because they are making policies that are based on economic myths. We know that these myths are myths because of economics is a mathematical science, and because we have tried good and bad policies in different times and places. We have calculations and we have experience to know what works and what doesn’t work. If you want to help the poor, you have to respect what economists know about how wealth is created. The solution is not to “spread the wealth around”, it’s to encourage people to create more wealth by inventing things that people freely choose to buy.

Wayne Grudem debates Richard Glover on the Bible, poverty and foreign aid

Two horses fight it out, may the best horse win!
Two horses fight it out, may the best horse win!

A great episode of the Unbelievable podcast. This is a great debate. I really enjoyed it. All three speakers were excellent putting forward their points. It’s nice to hear an American voice, a British voice and an Australian voice debating an important issue. HIGHLY RECOMMENDED.


Wayne Grudem is a theologian known for his conservative approach to both doctrine and economics. His new book “The Poverty of Nations: A Sustainable Solution” (co-authored with economist Barry Asmus) makes the case that pouring aid into developing countries is a failed strategy. Grudem debates whether the Bible supports free market, capitalist economics with Australian economist and theologian Richard Glover who wrote a critique of the book for the Australian Bible Society.

 The MP3 file is here.



  • The Bible speaks to all of life, including economics, stewardship, government
  • The study of economics helps us to understand how to take care of the poor
  • My job is to apply the teachings of the Bible to all of life


  • What’s your thesis in the book?


  • A good system is one where the poor have the opportunity to earn and save from their labor
  • Book is a response to a Kenyan couple Grudem met at a London conference on business and Christianity
  • Book is not concerned with how individuals and groups can do charity to help the poor
  • Our church already does that and we support individuals and groups doing charity
  • The book is concerned with how should nations be transformed in order to grow economically
  • What should the laws, policies and cultural beliefs of a nation be in order for it to not be poor?
  • The book lists factors that have moved nations from poverty to prosperity in different times and places
  • The thesis of the book is this: government should set their people free to be able to produce more
  • We advocate freedom in economics: freedom to work, freedom to save, freedom to start businesses
  • We believe that this free enterprise view is consistent with the Bible in a number of places
  • E.g. – private property is good for prosperity (thou shall not steal) but forbidden by communism


  • What about the church sharing in communities in Acts 2 and Acts 4?


  • That is not redistribution of wealth among individuals and businesses by a secular government
  • Those passages showed that there was voluntary sharing among Christians, which is not communism


  • What’s wrong with Grudem’s book?


  • The book emphasizes the Bible and the goal is to help the poor in poor countries
  • Criticism 1: the book doesn’t engage with non-free-market perspectives on economics
  • Criticism 2: the book doesn’t survey all that the Bible says about economics


  • For 1) what is one of the views that is not considered?


  • Jeffrey Sachs says that nations need a leg up before they can grow economically
  • Ha-Joon Chang says that free enterprise was not how the wealthy nations became wealthy


  • We do engage with other points of view, especially Jeffrey Sachs in the book
  • The trouble with leftist views on economic development is that it does not work in practice
  • NO COUNTRY has even been lifted out of poverty by foreign aid
  • He says we don’t cite enough from the wisdom literature: we have 64 citations in the index
  • He says we don’t cite enough from the gospels: we have 42 citations in the index
  • He says we don’t cite enough from the epistles: we cite 22 of 27 epistles in the index
  • Some economists won’t criticize cultural and moral values that hurt prosperity
  • As Christians, we think that moral and cultural values are part of the problem that needs solving


  • What about foreign aid?


  • Foreign aid doesn’t help: a lot of the money goes into government and rulers can be corrupt
  • Instead of encouraging people to start businesses, it tells people to go into government to get aid money
  • Economists (lists 3) are saying that foreign aid entrenches corrupt government in power, does no good


  • If it’s not working, should we keep doing it?


  • When there is an immediate need, we should do it, even if it is not a long-term solution: we need both


  • Should we stop foreign aid completely?


  • Voluntary charitable giving from individuals and churches to help poor countries is good
  • Me and my co-author are both active on our church board that helps poor countries with urgent needs
  • Food and doctors are urgent needs, and we should help, but it doesn’t lift countries out of poverty
  • We need a long-term solution that helps poor countries produce their own food and doctors
  • We are criticizing 1) government to government aid and 2) IMF/World bank to government aid
  • We have had pushback because 500,000 people make a living from this foreign aid industry
  • No country has ever been lifted out of poverty into sustainable prosperity
  • That’s the definition of insanity: continuing to do the same thing that has never worked


  • Does the Bible support free enterprise as a way of creating sustainable prosperity?


  • When I said the Bible was absent from his book, absent was a bad choice of words
  • But the hundreds of references he listed were not dealth with *in depth*
  • In the Scriptures, God is the one who provides (e.g. – in Ephesians, Sermon on the Mount)
  • The Bible is less focused on his people making money, and more focus on sharing basics, like food
  • Secular governments should just take it from people who have food and give it to hungry people
  • In 2 Cor 8-9, Paul talks about voluntary sharing so everyone will be equal


  • Does 2 Cor 8-9 undermine the free enterprise system you champion in the book?


  • The sharing in the Bible solves cases of urgent need, it does not lift countries from poverty to sustainable prosperity
  • Some older translations say “equality” in 2 Cor 8:13-14, but newer translations (e.g. – ESV) say “fairness”
  • The Greek word is translated as “fairly” the only other place it appears in the NT (Col 4:1), in every translation
  • God uses the means of human work and productivity to provide (daily bread is baked, doesn’t just fall from Heaven)
  • In general, there’s no provision in Scripture for a person to be dependent on donations for their entire lives
  • God promises Israel fields and mountains to tend and mine, but prosperity is from work, not depending on others


  • Does the Bible support this focus on work?


  • Working is highly praised in Scripture, (lists Bible passages that favor work over dependency)
  • Countries that were exposed to this notion of work and productivity have been more prosperous


  • Jeffrey Sachs and other development economists don’t say you can be prosperous through dependence
  • They say that it is a necessary part of leading to nations out of poverty into poverty


  • It’s never worked. What nation has become prosperous through foreign aid?


  • There are lots of nations, especially in Africa, where foreign aid has helped lift them out of poverty


  • Name one country in Africa where foreign aud has lifted them out of poverty into sustainable prosperity


  • I can’t think of one right now.


  • Our book contains a map of Africa and we looked at every nation’s per capita income
  • No nation has been able to rise out of poverty through dependence on foreign aid
  • The only close one is Botswana, but they have abundant freedoms, Christian morals, less corrupt government
  • So Botswana is the best case and they became prosperous through becoming productive, not foreign aid


  • Is he right to say that charity is a short-term solution, but that it’s not good long-term for prosperity?


  • Yes, and work is a very important focus in the Scriptures as he says.
  • But since the Fall work has been much harder, and may not have the outcomes that we would like


  • I also believe in emergency aid for when catastrophies happen, like floods and famines
  • But dependence on foreign aid enriches corrupt rulers and does not create the productivity that leads to sustained prosperity


  • Can foreign aid be used to give poor nations a leg up on becoming prosperous?


  • Dambisa Moyo, Oxford-educated economist from Zambia, says stop the aid, it’s doing more harm than good
  • Jeffrey Sachs’ view is that foreign aid hasn’t worked yet, but just keep trying a bit more
  • What works: limited government, rule of law, fair courts, documented property rights, low taxes, stable currency
  • People are creative and want to work, we just have to get government out of the way and let people work, earn and save


  • Is this free enterprise system supported by the Bible?


  • The wealthy nations of the world did not become wealthy through productive work and free enterprise policies
  • Ha-Joon Chang: free enterprise policies have never brought a country from poverty to wealth
  • E.g. – wealth is created through tariffs (not by innovating and by economic freedom?)


  • I’ve read Ha-Joon Chang’s book, and his examples are very selective and limited
  • Index of Economic Freedom: the freest countries are the most prosperous, the least free countries are the most poor
  • When you look at macro data, instead of very selective examples, the free enterprise system is best for prosperity


  • The book doesn’t do enough to engage with leftist economists (he doesn’t say which ones)
  • Just because nations who are free are rich, doesn’t mean freedom causes productivity
  • There are parts of the Bible that doesn’t support the free enterprise system (he names none)


  • The Bible is focused on work not dependency, and charity not government redistribution
  • The best way to help the poor in other countries is by encouraging work and productivity

Seven policies that conservatives oppose, because they cause poverty

Women for bigger government, higher taxes
Women for bigger government, higher taxes

The list is from John Hawkins, who runs Right Wing News. It’s posted at Townhall.com, though. (H/T Lindsay)


Keeping Americans poor in a prosperous country like America is not as easy as you think. After all, this is the “land of opportunity.” Legal immigrants pay tens of thousands of dollars and wait years for the opportunity to come legally and illegal immigrants often risk their lives just so they can get here and do menial work. This is the country that made Bill Gates, Steve Jobs and even OPRAH into billionaires and it’s a nation where you can have everything from hoverboards to medicine for your pet delivered right to your door. So when there’s so much wealth and opulence everywhere, how do you lock Americans out of that success?

No matter what you do, there will always be a few poor people around, but to really maximize those numbers there are very specific government policies abetted by a few cultural attitudes that will make all the difference.

Here’s the list of policies that make people poor:

  1. Making Sure Taxes And Regulations Are Sky High
  2. Encouraging Dependency
  3. Encouraging People To Have Babies Out Of Wedlock
  4. Demonizing Success
  5. Screwing Up The Education System
  6. Having Massive Immigration
  7. Ratcheting Up Their Expenses

I partially disagree with him on #6, where he goes after skilled immigrants. I think it’s right to go after unskilled immigrants, and immigration through family sponsors, since those people may use more social programs than they pay for in taxes. I don’t mind if they come, so long as they are barred from social programs. Failing that, we should only allow skilled immigrants to come – they pay in more than they use up.

However, if he was talking about illegal alias, and not skilled workers, I agree 100%. Everyone who is here should be here legally with a work permit, and there should be enforcement to punish employers who cheat.

Here’s the one I really like, though – the one I think my Democrat co-workers would not be surprised by:

7. Ratcheting Up Their Expenses: Of course, if you want to create more poor Americans, it’s best to tax the middle class as much as possible, but in a country where they can vote you out of office, you have to be careful about directly reaching into their wallets. So, how do you take their money without their realizing that you’re responsible?

Have the Federal Reserve print money non-stop, which drives up inflation. Over time, that reduces the purchasing power of the middle class as the cost of everything seems to creep up. It’s also important to go after cheap sources of energy like oil, coal, natural gas and nuclear power. Not only does that drive up the cost the middle class pays across the board for products, it also hits people directly when they heat and cool their homes. Exploding medical costs are also helpful and Obamacare has done an amazing job of this. Medical costs are skyrocketing for the middle class and helping to drive them towards poverty. As an extra added bonus, middle class Americans who can no longer afford to pay for their medical care because of Obamacare will also be hit with a tax penalty. If your goal is to hurt middle class Americans financially, you could not do much better than Obamacare.

There are many ways to impoverish working people more than just raising their taxes. Just make them pay more for everything by regulating and taxing the people who create the services and products that people buy.

How Christianity shaped Margaret Thatcher’s conservative politics

Margaret Thatcher and Ronald Reagan
Margaret Thatcher and Ronald Reagan

This is from the Daily Signal, and is really recommended for Christians who are tempted by the policies of the left.

Check it:

Few people are aware that former British Prime Minister Margaret Thatcher, one of the foremost politicians of the 20th century, was a lay Methodist preacher before she entered politics.

There has been very little examination into the role that her Christian faith played in her politics.

“Economics is the method; the object is to change the soul,” Thatcher once declared, revealing that the way she conceived her free-market ideology was as much about transforming values as about improving Britain’s ailing GDP.

More profoundly, there was a strong religious basis to Thatcher’s politics—one that stemmed from her strict Methodist upbringing and, more specifically, the chief influence in her life, her father, who was a greengrocer, councilor, and Wesleyan lay preacher.

In sourcing the origins of her free-market ideology, it is not in the pages of Frederick von Hayek’s “Road to Serfdom” or Milton Friedman’s monetarist theory where we find the answer, but in the sermon notes of her father, Alf Roberts.

Contained within his sermons, one finds the theological basis of what would later become the cornerstones of Thatcherism: an individualistic interpretation of the Bible, a nod to the spiritual dangers of avarice, praise of the Protestant work ethic, virtues of thrift and self-reliance, and finally, a divine justification for individual liberty and the free market.

In short, Thatcherism always owed more to Methodism than to Monetarism.

Thatcher herself was a preacher before she formally entered politics while a student at Oxford University. Even though she later transferred this missionary energy from the pulpit to the podium, her religious values remained an underlying core.

Indeed, on becoming leader of the Conservative Party in 1975, Thatcher (much like Ronald Reagan) saw it as her chief mission to completely undermine the moral credibility of socialism and communism and reconnect the broken link between Protestant and capitalist values in Britain.

Preaching from the pulpit on several occasions, Thatcher unashamedly asserted the Biblical case for the sovereignty of individual liberty and the “invisible hand.”

“Do not be tempted to identify virtue with collectivism,” she preached from the pulpit of St. Lawrence Jewry Church in London in 1978. “I wonder whether the State services would have done as much for the man who fell among the thieves as the Good Samaritan did for him.” According to Thatcher, “[i]t was to individuals that the Ten Commandments were addressed.” She continued, “We are called on to repent our own sins, not each others’.”

“What mattered,” in her words, “was Man’s relationship to God.”

Thatcher’s interpretation was that as Christianity was a call to men individually, so it should follow that political choices reside with the citizen rather than the state.

“The Road to Serfdom” and “Free to Choose” are two of my favorite economics books, and very suitable for laymen. If an understanding of the free enterprise system isn’t yet part of your Christian worldview, it might be a good idea to get studying! After all, Christians are not concerned with policies that make us feel good regarding the poor. We are concerned with policies that actually do good for the poor. There is a big difference.

Was Hitler a Christian? Is Nazism similar to Christianity?

A conflict of worldviews
A conflict of worldviews

One of the strangest things I have heard from atheists is the assertion that Christianity is somehow connected to the fascism, such as the fascism that existed under Adolf Hitler. Two posts by Jewish author Jonah Goldberg from National Review supply us with the facts to set the record straight.

Let’s start with the first post.

Here are some of the points:

1) Hitler wanted Christianity removed from the public square

Like the engineers of that proverbial railway bridge, the Nazis worked relentlessly to replace the nuts and bolts of traditional Christianity with a new political religion. The shrewdest way to accomplish this was to co-opt Christianity via the Gleichschaltung while at the same time shrinking traditional religion’s role in civil society.

2) Hitler banned the giving of donations to churches

Hitler banned religious charity, crippling the churches’ role as a counterweight to the state. Clergy were put on government salary, hence subjected to state authority. “The parsons will be made to dig their own graves,” Hitler cackled. “They will betray their God to us. They will betray anything for the sake of their miserable little jobs and incomes.”

3) Hitler replaced Christian celebrations with celebrations of the state

Following the Jacobin example, the Nazis replaced the traditional Christian calendar. The new year began on January 30 with the Day of the Seizure of Power. Each November the streets of central Munich were dedicated to a Nazi Passion play depicting Hitler’s Beer Hall Putsch. The martyrdom of Horst Wessel and his “old fighters” replaced Jesus and the apostles. Plays and official histories were rewritten to glorify pagan Aryans bravely fighting against Christianizing foreign armies. Anticipating some feminist pseudo history, witches became martyrs to the bloodthirsty oppression of Christianity.

4) Hitler favored the complete elimination of Christianity

When some Protestant bishops visited the Fuhrer to register complaints, Hitler’s rage got the better of him. “Christianity will disappear from Germany just as it has done in Russia . . . The Germanrace has existed without Christianity for thousands of years . . . and will continue after Christianity has disappeared . . . We must get used to the teachings of blood and race.”

5) Hitler favored the removal of mandatory prayers in schools

In 1935 mandatory prayer in school was abolished…

6) Hitler favored the banning of Christmas carols and nativity plays

…and in 1938 carols and Nativity plays were banned entirely.

7) Hitler abolished religious instruction for children

By 1941 religious instruction for children fourteen years and up had been abolished altogether….

And now the second post.

8) Hitler opposed the ideas of universal truth and objective moral absolutes

…Just as the Nazi attack on Christianity was part of a larger war on the idea of universal truth, whole postmodern cosmologies have been created to prove that traditional religious morality is a scam, that there are no fixed truths or “natural” categories, and that all knowledge is socially constructed.

Practically everything this man believed was 100% anti-Christian. But he fits in fine on the secular left.


Adolf Hitler was a man influenced by two big ideas: evolution and socialism. His party was the national SOCIALIST party. He favored a strong role for the state in interfering with the free market. He was in favor of regulating the family so that the state could have a bigger influence on children. And he favored the idea of survival of the fittest. His ideas are 100% incompatible with Christianity and with capitalism as well. Christians value individual rights and freedoms, small government and the autonomy of the family against the state. The differences are clear and significant.