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Misesian Economics and the Bible

One of the several magnificent intellectual achievements of the Austrian economist Ludwig von Mises (1881—1973) was his development of a comprehensive science of human action, called “praxeology.” One of the main conclusions drawn from praxeology is that free markets will result in more prosperity than government-directed economic activity–a position that naturally makes Misesian economics popular with conservatives. At the same time, one aspect of praxeology often poses a gigantic stumbling block to conservatives of deep religious convictions. They have been perplexed and put off by Mises’ insistence that, in praxeology, he had developed a Wertfrei (value-free) science of economics.

Praxeology and the Bible

Man is a moral being, the argument goes. Therefore, man’s economic behavior–his inner choices and consequent outer actions–inevitably involve questions of right and wrong, good and bad–that is, of ethical or moral values. Seen in that light, praxeology strikes these individuals as counterintuitive or unrealistic at the very least, intrinsically flawed if not utterly fallacious, and perhaps even scandalous. There is only one problem with this line of thinking: It is a mistake based on a non sequitur. Just because Mises posits a value-free science of economics, it does not follow that he does not believe that man’s economic behavior is devoid of moral content.

The basic tenet of praxeology is that humans make choices, and those choices result from the ineluctable fact that humans choose that which they value more over that which they value less. That is how humans act, which is just as empirical a question as how blood circulates through the body. Why humans make the choices they do is a separate question. Why a person values what he values, and whether his choices are morally good or bad–these are extremely important matters, but they are the province of religion, psychology, and maybe even biology, not of economics.

The “classical school” of economic thought–the generally free-market economists whose theoretical models dominated the Anglophonic world from the appearance of Adam Smith’s Wealth of Nations in 1776 up until the neoclassical revolution of the 1870s–in fact had been guilty of trying to divorce economic behavior from morality. This error was enshrined in their reification of homo economicus. “Economic man” was a theoretical device or concept by which the classical economists endeavored to distill man’s economic behavior from the rest of his being–often with ludicrous results, as you can imagine. Misesian praxeology, rather than perpetuating this error, corrects it. Mises abandoned the convoluted efforts to pretend, for the sake of economic analysis, that humans were coldly calculating, soulless, profit-maximizing beings. Instead, he readily acknowledged that humans are complex beings whose economic behavior is informed and influenced by the unique, ever-changing combination of the various religious, psychological, biological motivations (his values, goals, perceptions, desires, and the like) competing for supremacy within the individual as he is confronted with the particular set of circumstances surrounding him at a given point in time. Mises emphatically eschewed as futile and impossible any attempt to separate economic action from the totality of the individual.

In the individual human consciousness, economic values and ethical values coexist and often affect each other. Praxeology acknowledges this reality, as does the Bible. Both Mises and the Bible have much to say about human action, but Misesian economics focuses on the descriptive aspects of human action, while the Bible’s orientation is toward the prescriptive. That is not to say, though, that Mises ignores the impact of ethical values on human behavior, nor that the Bible is silent on the value-free, descriptive aspects of human action. In fact, the Bible lends considerable support to Misesian praxeology.

The Descriptive and the Prescriptive

In the Bible, as in life, the descriptive and the prescriptive are both present. Naturally, the prescriptive tends to be more explicit (after all, the purpose of the Word of God is to provide guidance for how to live a good life in this world, and how to receive salvation). The descriptive, by contrast, is often implicit–that is, it is treated in Scripture in a matter-of-fact manner as the morally neutral background against which the drama of human life, with its never-ending battle of good against evil, takes place. For example, the fact that the law of gravity pulls things downward is not good or evil; it is simply the way this world normally works. [I emphasize “normally,” because Jesus’ promenade on the lake (Matt. 14:25—32), and Elisha making the iron ax float (2 Kings 6:1—7), indicate that gravity, like other natural laws of this physical world, is not immutable or eternal but a temporal law, which at any time may be superseded by a divine, spiritual law.]

The Bible makes it clear that the same aspect of human life can have both a value-free and a value-laden context. Take human sexuality, for example: That human procreation can ensue from sexual intercourse is a statement of fact, not a value judgment. It is simply a recognition of natural law (once again, a temporal law, as the Immaculate Conception proved). An entirely separate issue is the value-laden question of when sexual intercourse is moral.

Similarly, the Bible deals with economic phenomena in both value-free and value-laden contexts. The logical starting point for discussing the Bible’s dualistic treatment of economic concepts is the starting point of Misesian economics–the fundamental premise that individual human beings make choices motivated by a desire to increase their happiness (or at least to diminish their sense of “uneasiness,” as Mises somewhat negatively phrased it). From this axiom, Mises developed what he termed “economics in the broad sense” in his 1922 masterpiece, Socialism–a concept that evolved into the less cumbersome term praxeology by the time his magnum opus, Human Action, appeared in 1949. When the Bible deals with this identical concept, it uses a simple word common in the contemporary lexicon of economists: profit. Of course, when the Bible mentions “profit,” it often includes wise counsel about what goals are worthy of man’s striving and what pursuits will leave him empty, unfulfilled, and alienated from God; nevertheless, the clear tenor of the Bible is that the impulse to strive to improve one’s sense of well-being is not inherently good or evil but simply the way humans are. The Master Himself acknowledges the human person’s faculty for rational economic planning in his statement, “Which of you, intending to build a tower, sitteth not down first, and counteth the cost, whether he have sufficient to finish it?” (Luke 14:28).

Catallactics and the Bible

Similar to the parallel between Mises’ “praxeology” and the Bible’s “profit,” is the striking congruence between what Mises called “economics in the narrow sense” in Socialism and “catallactics”–the science of exchange within a monetary framework, what most people think of as “economics”–in Human Action, and the biblical usage of the word gain. (Note that in both the Bible and Human Action the reader will find some overlap between the concepts of profit and gain, praxeology and catallactics.) Indeed, the equivalence of the Misesian terms with the biblical terms is at times so uncanny that one could be excused for wondering if Mises hadn’t borrowed the praxeological-catallactic paradigm from the Holy Scriptures. However, you can rest assured that he did not, for Ludwig von Mises was a man and scholar of unimpeachable honor and integrity, who never would have “borrowed” an important idea without giving full attribution, as is attested by the fastidious use of footnotes in his books.

The dualistic biblical approach to economic concepts–dealing with them in a Misesian value-free descriptive sense as distinct from a prescriptive, value-laden context–also occurs with regard to “price.” Christian theologians in particular have been wrestling with the concept of a “just price” at least since the time of Thomas Aquinas. The problem with this quest is that, in reading the Bible, one sees that prices in general are neither just nor unjust but morally neutral, being determined by the interplay of supply and demand. The most vivid example of this in the Bible is the Syrians’ siege of Samaria. After the city was cut off from all sources of supply, prices soared to unbelievable heights as extreme scarcity increased the marginal utility of the remaining economic goods many times over. When divine intervention caused the Syrians to abandon all their belongings and flee, four lepers found the camp deserted. They then notified the besieged city, whose occupants thereupon helped themselves to the abandoned goods. Quite naturally, prices promptly returned to normal, as the equilibrium between supply and demand was restored (See 2 Kings 6:24—7:18).

The natural law value-free phenomenon of prices tending to equilibrate supply and demand by no means implies that one’s moral values–one’s sense of right and wrong–never affect the price one charges or pays. Abraham and King David each received generous offers of gifts–Abraham a burying place for Sarah, and David a plot of ground and the necessary paraphernalia to build an altar and make offerings to the Lord (See Gen. 23 and 1 Chron, 21:18—26). Both of them decided that it was not right for them to take advantage of their exalted rank. Each instead insisted on paying the price that to them seemed most just, which, in each instance, appears to have been the market price–“as much money as it is worth” in Abraham’s words, and “the full price” in David’s. These great men of God clearly did not behave like homo economicus–but they did behave praxeologically.

Another example of an economic phenomenon that can be either value-free or value-laden is “interest.” Historically, Christendom struggled with the question of whether interest is moral or immoral. Today, interest is still forbidden in some Muslim lands. Interestingly, the one time that the Savior mentioned the subject was a parable in which the two industrious servants were praised by the returning nobleman for having increased the value of the resources he had entrusted to them, and the timid servant was denounced for not even putting the money entrusted to him in a bank where it at least would have earned “usury” (Luke 19:23). Here was an implicit recognition of the fact that there is a time value to money–that is, that a dollar normally is worth more today than next year; hence borrowers are willing to offer a future premium for the use of the dollar today. Like prices being determined by supply and demand, this is a morally neutral phenomenon. The Old Testament does not proscribe usury in toto, but only in specific applications, such as when Nehemiah excorciated the Jews for using their own children as collateral–thus profanely valuing human life (or at least the lives of the chosen people of God) less than mammon (Neh. 5:1—10).

Spiritual Law Trumps Natural Law

I hope to have demonstrated that the Bible, rather than refuting the notion of a value-free economics, actually corroborates its existence. The biblical treatment of natural law economics, i.e., praxeology, is sparse–occasional details in the earthly backdrop to the great drama of the divine reaching and redeeming the human–but unmistakably present. Whereas the Bible briefly records incidents illustrating natural-law economic phenomena, the writings of Mises amply elucidate them. Mises, not the Bible, is the expositor of the natural laws of economics.

Let me hasten to add that this does not mean that Mises has given us the final word on economics, for natural law is never ultimate law. The Bible plainly shows us that spiritual law trumps natural law in economics as surely as it does in physics and biology. The Bible clearly indicates the existence of higher laws of economics in episodes such as the sudden appearing of water to Hagar and Ishmael (Gen. 21:14—19); the Hebrew refugees being sustained in the wilderness by manna, quail, and water gushing out of rock (Ex. 16:11—18 and 17:5,6); the widow’s supply of oil not being depleted but more than meeting her needs (2 Kings 4: 1—7); the feeding (to satiety with food left over) of far more people than could normally be fed by what appeared to human sense as a woefully inadequate quantity of food (2 Kings 4:42—44; Mark 8:1—21). Mises was silent about the spiritual, divine laws of economics that are manifested in the Bible–the laws that demonstrate that, to the heavenly minded–the Christ-imbued consciousness–there is no lack; that good is always present, that supply is always more than sufficient to meet legitimate demand; that an illimitable God of love can bestow nothing less than abundant evidence of His love for man to those who trust in Him.

Moses, Mises, and Private Property

There is another classification of economic phenomena about which both Mises and the Bible speak, and that is political economy. When economic phenomena shift more into the realm of the normative–into political issues such as taxation, a public policy on debt, the redistribution of wealth, workfare versus welfare–then the Bible necessarily eclipses Mises as the greater authority. Mises has much to contribute to understanding the economic implications of such policies, but the Bible, for those of us who accept it as our guide to right and wrong, must be the primary source from which to derive the moral values that are codified in human legislation.

It is significant, though, that there is one political-ethical issue confronting all societies that both Mises and the Bible insist is of paramount importance, and about which they are in full and perfect agreement: the principle of private property. Moses and Mises addressed this issue from different angles. Moses relayed the fundamental moral teaching of God’s revealed law “Thou shalt not steal” to mankind. Mises demonstrated by irrefutable logic that if a society desires prosperity, then the only rational choice is for governments to honor and protect each individual’s property rights.

Mises hoped that rationality could accomplish what a prophet could not: to get all mankind eventually to agree on the superiority of the private property order. Mises based that hope on the fact that virtually all men have the faculty of reason, whereas rational men often disagree over the authority of a particular prophet and the consequent authority of his message. My own suspicion–which only future centuries will confirm or disprove–is that Mises’ hope is in vain. I say this for two reasons: First, I believe that only Christ, and not human reason, is capable of vanquishing the sin that rebels against the will of God; second, whereas it is possible for virtually everyone to grasp the simple concept “Thou shalt not steal,” I doubt there will ever be an age when most people choose to slog through Human Action or even some simpler exposition of praxeological science.

One of Our Own

That having been said, I will close with a word of benediction for what Mises has accomplished in his work as an economist. Mises demonstrated definitively to human reason why private property is an indispensable principle on which to base any society. In doing so, he did not discover a new principle but vigorously defended an old one–a principle that is not just economic but moral; not only rational but religious; not merely humanly wise but divinely inspired.

Indeed, what greater intellectual achievement can there be than to confirm the truth that God’s law is the right way, obedience to which brings abundant blessings? We who uphold the Judeo-Christian tradition should be proud to claim Ludwig von Mises as one of our own.