From Kevin DeYoung, posted at the Gospel Coalition. This is a must-read. (H/T Mary)
He lays out the general case for why employers hire workers in four points.
Here is point #2:
(2)The employer must believe that spending his money on new employees will be good for his business. We may wish that employers hired people just cuz. But that’s not the way the world works. When employers want to be charitable they give to church or to their alma mater. But with their business they know they need to make money. Consequently, they hire new workers only when they believe that paying more people will eventually be offset by making more money.
Ah, this is nice. And it goes on and on like that. Click here and read this sweet, sweet post!
But I have to steal this story about a capitalist cow who starts a business:
Mr. Moo sells milk. He charges $5 a gallon. Everyone in town wants milk so everyone pays Mr. Moo $5 a gallon. But Mr. Moo wants to make even more money. Maybe he’s greedy. Maybe he wants to give more to his church. Maybe he wants to buy a new car. Maybe he just had a new baby that needs food and clothes. Maybe he wants to bet on horses. No matter the reason, Mr. Moo (like almost everyone) wants to make more money. What should he do?
He could charge more for his milk, but he realizes that at $6 a gallon some of his customers will drive to the next town where milk is only $4.75. So instead he tries to lower his costs. He needs $4 to make a gallon of milk, but he’d like to do better. So next month he replaces his milkmaids with new milking machines. This requires a substantial up front investment, but within a year the milking machines have paid for themselves. Without having to pay milkmaids, his milk only costs $3 to produce. Now he charges $4.25—a savings to his customers and more profit for him.
This simple example shows how productivity fuels profits. Mr. Moo found a way to make the same thing for less money.
But, you ask, how is this good for anyone but Mr. Moo? Well, as the other farmers purchased their milking machines their costs went down too. So they started to lower prices, hoping to attract more customers. Mr. Moo did the same. Even if he is now getting richer, his customers are too. They save 75 cents on every gallon of milk (paying $4.25 when they used to pay $5.00). Now they have the same milk as before but more money. The economy has expanded.
And that’s not all, with more money in his pocket Mr. Moo goes out to eat more, which helps the local burger joint hire one more cook. And all the new machines need servicing, so the local repairmen hires an apprentice. The grocer spends less on milk so he can add another bagger. The doctor, who is saving money on dairy, has more money to spend so he donates to the local art museum which can afford to purchase two new paintings from an aspiring artist. No one knew Mr. Moo’s machines would help so many people and create so many jobs. No one really notices either, but it happens.
But what about the poor milkmaids? True, they are out of work. Their lives, at least in the short run, are worse because of the new innovation. Those dreaded milking machines seemed to have ruined everything. In fact, the mayor almost outlawed them. Others wanted to institute a new milking machine tariff to discourage farmers from buying them and to help save milkmaid jobs. But none of this happened. Instead farmers kept buying milking machines and milkmaids kept losing their jobs. Which was really hard on the milkmaids and their families.
And yet, that’s not the end of the story. Some of the milkmaids went to work for Mr. Pump who manufactures milking machines. His business was booming. He needed more workers to help make more machines. So he hired a few milkmaids. And remember, as the price of milk dropped, so did the price of cheese and pizza and yogurt. Everyone’s grocery bill was less. The whole town had the same stuff but more money. So Mr. Wall and Mr Mart decided to open a new thrift store. Mrs. Lovejoy, who started watching busy Mr. Wall’s and Mr. Mart’s kids during the day, decided to open a daycare. She hired some former milkmaids to help, as did Mr. Wall and Mr. Mart. A few of the married milkmaids decided they didn’t have to work anymore because groceries were cheaper than they used to be and the family could get by on less. It was hard and humiliating to lose their jobs, but five years later the whole town is better off because Mr. Moo bought his milking machines. There are more jobs. Families are able to purchase more things. And there is more ice cream for everyone.
Yes, I know cows are girls. Shut up!
I love it when conservative pastors step into areas outside of theology and knit together a full Christian worldview spanning patches from all areas of life. It’s especially good when they use evidence from the sciences, economics and history.
I find it alarming that the best people who do this are all Calvinists, though. Mark Driscoll, Wayne Grudem and Kevin DeYoung. Grrrr. Oh well. The bottom line is that we need pastors like this to be encouraging us to know how the world works, so that we can think about how we can read our Bibles and achieve the results that were are supposed to be achieving intelligently, instead of being tossed to and fro by our emotions, intuitions and intentions. (For example, what do you think lowers unemployment for the poor, young, minority workers? Raising the minimum wage, or lowering it? Click here to see why it is important to understand economics in order to help the poor with real results, instead of just feeling good while you hurt the poor)
If people who read these practical theologians could send me practical posts that they write where they encounter evidence from the real world, I can post them. I don’t know of many famous non-Calvinist theologians who I respect on economics and politics. I like Jay Richards, but he’s Catholic.
Click here for more on Christianity and economics from Dr. Ron Nash and Dr. Jay Richards and Dr. Wayne Grudem.
WINTERY KNIGHT 