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The Key to Understanding Christian Advocacy of Free Markets

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Do no harmAll Christian ethics can be summed up in one command: “Love your neighbor as yourself” (Matthew 22:39). And within that command is the provision, as the Apostle Paul said, “Love does no harm to a neighbor” (Romans 13:10). This is why the Christian approach to public policy should begin with a simple standard: Because we love our neighbors, we should not support policies that we suspect will cause them harm.

Unfortunately, while the rule is simple to state it can be difficult to apply. We don’t always know or agree on what policies will cause harm. Still, any type of policy that is presumed or known to cause harm should be carefully scrutinized. A prime example is government regulations.

As economist Scott Sumner says, “One of the most basic ideas in economics is that the vast majority of regulations are harmful.”* He gives the example of a regulation on banks than forbids them from charging fees for the use of ATMs. This regulation appears to be “pro-consumer,” but as Sumner explains, the actual effect is likely to harm bank customers:

Banks will see this as a cost increase, and pass the cost on to consumers in other ways. Can I be sure this will occur? No, but it’s very likely. Suppose I told you that Congress passed a 10-cent increase in the gas tax. What would you expect to happen to gas prices at the pump? Most people would expect a 10-cent increase. In fact, the oil industry is perhaps the industry where taxes are least likely to be passed on to consumers. That’s because the supply of oil is less elastic that the supply of almost any other good, including banking services. So if you think gas taxes are passed on to consumers, then you should be even more certain that I’m right about the elimination of bank fees being passed on to consumers in other ways, such as fees on deposits, or lower interest rates on deposits.

OK, but so far this is a wash. If consumers pay less in one place and more in others, does the regulation actually hurt consumers? Yes it does, because it also hurts bank efficiency. Eliminating ATM fees will reduce the profit maximizing number of ATMs, which will make banks less efficient. Since tellers cost more than ATMs, the cost increase passed on to consumers will be larger than the saving from ATMs.

Sumner argues that there are only a few types of government regulations that are justified, “Primarily environmental mandates (or taxes), and perhaps a few anti-trust rules.”

So does that mean there should be no regulation of markets?

No. In fact, there can be no such thing as an unregulated market. The question is who should do the regulating, legislators or consumers. As Howard Baetjer Jr. explains,

A big economic problem the world faces is semantic. That is, “regulation” has come to mean “government regulation.” We don’t seem to be aware of the alternative: regulation by market forces. That’s a problem because it leads us to accept so much government meddling that we would be better off without.

We want the aims of regulation — regularity and predictability in markets, decent quality and reasonable prices for the goods and services we buy — and thinking that government regulation is the only way to get those, we accept a vast array of unnecessary, wrongheaded, and usually counterproductive mandates and restrictions.

But government regulation is not the only kind of regulation.

To regulate is to make regular and orderly, to hold to a standard, to control according to rule, as a thermostat regulates the temperature in a building. Market forces do this continually as competing businesses offer what they hope will be a good value, then customers choose among the various offerings, then the competing businesses react to customers’ choices. That process is the market’s regulator.

Baetjer gives some examples of how the market provides less harmful forms of regulation.

Not everyone will agree, of course, with this assumption that markets do a better job of regulating than do governments. But I use this as an example of what many of us believe should be obvious.

Part of the reason it is not obvious is because many of us Christian advocates of market freedom fail to be persuasive. The moral case for free markets has frequently been made so poorly and stated so incompetently that it’s not surprising that people fail to understand our perspective.

Because of our inability to make a persuasive case for free markets, many well-meaning people assume we must simply have bad motives. The reality is that most Christians who champion markets do so for a noble reason: we truly believe the alternatives harm our neighbors.

You don’t necessarily have to agree. But if you want to understand why we think the way we do, you don’t have to read Hayek or Mises. All you need to know is that we’re doing what we think is best to follow Romans 13:10.

 

Note: I don’t know whether Scott Sumner is a Christian or not. I use him not as an example of someone who agrees with Christian ethics but merely as someone who understands the harm of regulations.

 

 

Defending the Free Market: The Moral Case for a Free Economy

Defending the Free Market: The Moral Case for a Free Economy

Father Sirico argues that a free economy actually promotes charity, selflessness, and kindness, and why free-market capitalism is not only the best way to ensure individual success and national prosperity but is also the surest route to a moral and socially-just society.

Visit the official website at www.defendingthefreemarket.com

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).

Comments

  • Excellent! Thank you! We need to break ourselves of the habit of talking about the free market as if it were a thing or a concrete social institution like a school or a church community or family. The free market is none of these. It is rather the term we use for the aggregate of people’s economic decisions. At the same time because we are creatures, our decisions are only relatively free. Because we are sinners, they are sometimes not even relatively free. And what is true about you and me is equally true of government officials and the regulations they seek to enforce on our economic decisions. They are, at best, the fruit of the imperfect knowledge of limited creatures. And, again as is true for my decisions, regulations are sometimes the fruit of sin masquerading as virtue.

  • It’s pretty clear from history that the only state regulation needed is the protection of life, liberty and property from the abuse by the state or others. Those are essential to freedom. Any additions do nothing but harm people.

  • Steven Simms

    Excellent article – nails the principle. I think a great friendly addition would be contrasting categories of regulation that may be beneficial and a proper role of government and those that are almost always harmful and why:

    Harmful:
    – Provides benefits to a small group at the expense of everyone else: Price controls, licensing laws for many professions, anti-Uber regulations, food truck restrictions
    – Protecting consumers from themselves (when market self-regulation could suffice): Banning raw milk sales, laws preventing lemonade stands/homemade food sales
    – Others …

    Beneficial:
    – Laws that enable the orderly functioning of markets (civil law may be the best option in most cases)
    – Environmental regulations when there are no defined property rights
    – Laws ‘regulating’ (making regular) trade across state lines and preventing inter-state protectionism.

    That said, great article and call to PERSUADE.

    • The formula “protection of life, liberty and property” was intended to do just that. Jefferson changed it to the pursuit of life, liberty and happiness and just confused everyone. The theologians of the University of Salamanca gave us the original. The idea was that people form governments in order to provide a power to protect their lives, liberty and property from the envy and greed of others. Government should be limited to those and if it tries to tax the people to do more then it is guilty of theft.

      Even environmental laws fall under the slogan. Destruction of the environment happens because of public ownership of land and water. People don’t destroy things they own or allow others to do it. Stronger private property laws and more private property eliminates environmental problems. The Nature Conservancy is a good example. As along as vast swaths of land in the US is state owned we will have huge environmental problems.

  • I agree. There is definitely a need for making a persuasive moral case for free-markets (or at least attempting to do so), especially because of the populist political climate we are in right now.

    People tend to be angry because they feel they are being deceived, and disenfranchised by those in power. They are acutely aware of the corruption in the system, but may not understand the true nature of it, or the best way to diminish it. They see the obvious immorality of these things, and so when populist solutions come up, they naturally see them as moral solutions as well.

    Even Christians are not always open to listening to what they may (automatically) perceive as an offensive or opposing view, unless it can clearly be shown to be morally superior, especially in positive terms— such as promoting the common good, or encouraging economic mobility. Also, corruption is a huge issue, and specific, realistic and effective ways to eliminate it should also be emphasized as well.

    In most cases people are just misinformed, or are getting overwhelmed by so much conflicting information and ideology–like I was, until I read many (many, many) posts and articles on this site, and began to put it all together. I admit this (my ignorance of concepts such as the free-market etc.) mainly to offer you some encouragement. Your posts on this site are intelligent, informative and well written. More importantly though, as a Christian who is very concerned about morality in politics, I view your consistent attempts to connect the concepts you write about to Christianity as clearly admirable.

    The truth may not always be popular, but many Christians will recognize that if something is true, it’s at least worth learning about. If you can show that it is also moral (especially in this political climate)— even better.

  • Philosophical Actuary

    Excellent article Joe.

    “Part of the reason it is not obvious is because many of us Christian advocates of market freedom fail to be persuasive. The moral case for free markets has frequently been made so poorly and stated so incompetently that it’s not surprising that people fail to understand our perspective.”
    In addition, I would add that advocates of the free market often draw conclusions too broad from too limited considerations and concern for harm, for example, is often limited to the economic or when it is expanded often brings along unexamined ethical and political (and usually metaphysical) presuppositions.
    Any argument about government regulation of the market must first begin by understanding the Sovereign’s authority over society (including the market) and the market’s subordination to the common good, which is the proper aim of the law. Anything less is likely sophistry.

    • What do you mean by capitalizing “Sovereign?” Are you referring to God? God has already made it clear that he is sovereign over all things. But he has limited human sovereignty a great deal. In the Torah he limited the power of the government over the market to the role of protecting life, liberty and property.

      I have no idea what you mean by subordinate the market to the common good. The greatest common good that the market can deliver comes only from a free market subject to the laws regarding life, liberty and property. Making the market the play toy of self-righteous destroys the market and society. That’s not ideology. That describes the history of every nation on earth for the past 150 years.

      • Philosophical Actuary

        “What do you mean by capitalizing “Sovereign?””
        My passing thought when writing the above was to emphasize Sovereign as the supreme and ultimate authority in his domain. I am the Sovereign of myself and my property within my private domain. In interacting with the community I enter the domain of a greater Sovereign, namely the government at its various levels.

        “I have no idea what you mean by subordinate the market to the common good.”
        The market exists only because of and for the sake of the common good. It is therefore subordinate to the common good. If the activity of the market violates the common good, it undermines itself and the society of which it is a part.

        • Well the concept of common good is very subjective. It can be defined as anything anyone finds good. But if you define it as the system that causes the most flourishing in terms of prosperity and peace, history has proven that free markets and limited government provide the most common good of any other system.

  • Free marketeers have never at any time or any place advocated for totally unregulated markets. The claim that they have is another example of the vast number of lies promoted by socialists and believed by the gullible. As Mises used to say, that would be tyranny by bullies. Freedom always requires laws protecting life, liberty and property.

    Actually, Adam Smith made the case for the morality of free markets. “Wealth of Nations” was merely the application of “Theory of Moral Sentiments” to the market. Free markets haven’t received the moral attention they deserve since 1900 because even free marketeers had become convinced of the moral superiority of socialism by then. They were convinced because they had abandoned traditional Christianity and reverted to the ancient morality based on envy.

    Socialism is nothing but envy elevated to a virtue by redefining it as justice. Even Piketty had to admit in his best seller that his policies would not help the poor; they would do nothing but destroy the wealthy.