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Free markets are information systems designed for virtuous people

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Note: This article is part of the ‘Principles Project,’ a list of principles, axioms, and beliefs that undergird a Christian view of economics, liberty, and virtue. Click here to read the introduction and other posts in this series.

The Principle: #22A — Free markets are information systems designed for virtuous people.

The Explanation: As a self-identified evangelical Christian, I share a common trait with all other self-identified evangelicals: we self-identify with the information system that goes by the name of evangelicalism.

That tautology—the people who self-identify as evangelicals are the people who self-identify with evangelicalism—may not be very useful in understanding what evangelicals believe, but it can be helpful for us to recognize that evangelicalism, like all other religious tradition, is a shared information system.

To claim that evangelicalism, or Catholicism, or Orthodoxy is an information system is merely to say that, whatever else they may be, these traditions provide a systematic means of creating, collecting, filtering, processing, and distributing information about a particular form of Christianity.

Consider, for example, one of the particular subsets of evangelicals that I myself belong to—the Southern Baptist Convention (SBC). To say I am a member of that denomination conveys information about me to outsiders that is both broad (e.g., I am Protestant, and therefore not Catholic or Orthodox) and narrow (such as Baptist views on believer’s baptism, congregational church government, local church autonomy, and liberty of conscience). This information system also helps to shape the way I think about other aspects of the faith, as well as my place within the larger tradition of Christianity.

Because the SBC serves as a form of information system, I can use it fruitfully in my own decision-making processes. For instance, if I move to a new city and look for a new local church home, I can search out what SBC congregations are in my area. Knowing that a church is aligned with the SBC provides information about what I can expect in such areas as beliefs, worship, and ecclesiology.

But what would happen if the information system became distorted? Imagine I become a member of First Baptist Church of Rome, Texas because it claims to be an SBC church. After joining the church, though, I find that the pastor refers to himself as the “Bishop of Rome” and believes he’s the latest in a continuous succession of Texans whose apostolic line can be traced back to St. Peter.

This church and its pastor would obviously not be in line with the views of the Southern Baptist Convention. A distortion in the information system (i.e., the delusional belief of the misguided pastor) prevented the signal from conveying useful information that would help me in my decision-making. The only way to fix the problem is to introduce either a systematic corrective action (e.g., remove the pastor and reestablish the Baptist bona fides of the church) or a personal one (e.g., I have to find a new church).

From this example we can see that information systems can be useful in making decisions but that they can also become distorted and in need of correction.

Like denominations and religious movements, markets are also—whatever else they may be—a type of information system. A market serves as an information system in that it creates, collects, filters, processes, and distributes information about the economic preferences of people within a society. The “market” is simply a summary term for a variety of voluntary exchanges of tangible commodities or non-tangible services that are undertaken between two people or between groups of people represented by agents. The information in this particular system allows people to know whether and under what conditions they are willing to engage in the exchange. These exchanges are engaged in because both parties benefit; if they did not expect to gain, they would not agree to the exchange.

To say that a market is a “free market” is to say, in part, that when it functions as an information system (creating, collecting, filtering, processing, and distributing information) it largely does so free of distortions. In other words, to be a free market, a market must be (mostly) free of distortions.

While it is possible to have individual or small markets that are free of distortions (e.g., I trade with you and we are both honest people), when the markets became larger or are aggregated together, it becomes much less possible to prevent distortions from entering the system. As Christians we recognize this is a natural outcome of living in a sinful world. But where Christians tend to disagree is about what mechanisms are necessary or most useful in correcting such distortions when they occur.

Christians that endorse free enterprise tend to believe that, when structured properly, the markets themselves tend to provide their own self-correcting mechanisms. We believe this is typically the preferred form of weeding distortions from a market. However, there is disagreement within this group (such as between political conservatives and political libertarians) about whether market distortions can ever be corrected by governmental intervention.

While free market advocates believe government intervention in markets should be either verboten (libertarians) or rare and limited (conservatives), liberal Christians tend to prefer such interventionism be frequent and as expansive as they believe is necessary to achieve their aims.

The problem with this preference for interventionism is that it forgets the purpose of markets is to facilitate exchanges for the mutual gain of both parties. Rather than improving the gain of both parties, government intervention more often than not creates greater levels of distortion. This distortion frequently provides an unfair benefit to one party over another—and often to detriment of society as a whole.

When governments intervene, no matter what the claimed intention, the result almost always favors the rich and powerful over the poor and powerless. Hundreds of years of governmental intervention into markets has shown this empirical claim to be true.

What is needed for free markets to flourish is not a more powerful and interventionist government but a more virtuous citizenry. That is the reason the Acton Institute exists—to promote a free and virtuous society characterized by individual liberty and sustained by religious principles.

In summarizing the Institute’s purpose, Acton co-founder and president Father Robert Sirico has said:

[Lord] Acton realized that economic freedom is essential to creating an environment in which religious freedom can flourish. But he also knew that the market can function only when people behave morally. So faith and freedom must go hand in hand. As he put it, ‘Liberty is the condition which makes it easy for conscience to govern’.

Free markets are one of the most powerful information systems God ever designed. But we must never forget that they were designed for virtuous people. Without virtue, neither markets nor people can ever truly be free.

 
Image source: Pexels

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Joe Carter Joe Carter is a Senior Editor at the Acton Institute. Joe also serves as an editor at the The Gospel Coalition, a communications specialist for the Ethics and Religious Liberty Commission of the Southern Baptist Convention, and as an adjunct professor of journalism at Patrick Henry College. He is the editor of the NIV Lifehacks Bible and co-author of How to Argue like Jesus: Learning Persuasion from History's Greatest Communicator (Crossway).

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