Posts tagged with: Human

comparativeadvantageNote: This is the latest entry in the Acton blog series, “What Christians Should Know About Economics.” For other entries in the series see this post.

The Term: Comparative advantage

What it Means: The ability of an individual or group of individual (e.g., a business firm) to produce goods or services at a lower opportunity cost than other individuals or groups.

Why it Matters: There is a story of the distinguished British biologist, J.B.S. Haldane, who found himself in the company of a group of theologians. On being asked what one could conclude as to the nature of the Creator from a study of his creation, Haldane is said to have answered, “An inordinate fondness for beetles.”

When we examine creation to uncover what it reveals about the character of God, one of the things we discover time and time again is the Creator’s fondness for diversity. Like Haldane, we can see this by looking at biology (e.g., there are more species of beetle than birds or mammals combined). But we can also find it when we turn to economics.

A primary example of God’s enthusiasm for diversity is the concept of comparative advantage. While the definition of the them makes it sounds dull and wonky, comparative advantage is a beautiful, theologically profound norm of creation.

Fully appreciating the nuances of the ideas requires timely reflection. But understanding it can be achieved when a few minutes. In this brief video, economist Donald J. Boudreaux does a masterful job of explaining how, when combined with trade, comparative advantage improves human communities.

Since the era of Adam Smith economists have been asking, “What creates wealth?” One key answer is specialization and trade. On a timeline of human history, the recent rise in standards of living resembles a hockey stick — flatlining for all of human history and then skyrocketing in just the last few centuries.

As economist Don Boudreaux explains, without specialization and trade, our ancient ancestors only consumed what they could make themselves. How can specialization and trade help explain the astonishing growth of productivity and output in such a short amount of time—after millennia of famine, low life expectancy, and incurable disease?

Blog author: jsunde
posted by on Friday, February 14, 2014

heart mosaic1In the spirit of Valentine’s Day, I offer this wonderful bit from Jennifer Roback Morse’s transformational book, Love and Economics, in which she observes a particular vacancy in modern discourse and policymaking:

Economics has been a successful social science because it focuses on things that are true: human beings are self-interested and have the capacity for reason. But it is equally true that we have the capacity to love. This capacity is no less human, and no less defining of who we are. Too much of our public discourse has proceeded as if these two great realities of the human condition, reason and love, were in conflict with each other. The Right favors the cold, calculating, tough-minded approach of the intellect: man is essentially a Knower. The Left favors the warm, fuzzy, emotional approach of the heart: man is essentially a Lover. Yet the Left at its most extreme has given us the cold, impersonal state and its bureaucracy as the answer to social problems. At the same time, the Right at its most extreme has given us the irrationality of trying to reduce man to the sum of his bodily needs…

…It is time to cross this divide in the sphere of public discourse as well. The consequences of going off the deep end into either the direction of Love or Reason and ignoring the other can be grim indeed.

Noting the French Revolution’s bloody altar to the “Goddess of Reason,” and, somewhat inversely, the Russian Revolution’s chaotic attempt to unite humanity under “one giant family,” Morse argues that the American Revolution was distinct because it preserved the “underlying social and cultural order.” It unleashed the powerful forces of freedom and individualism, but did so in a way that kept love for the other in focus. (more…)

oil-field-workerIf the PowerBlog has a favorite atheist libertarian economist, it’s probably George Mason professor Don Boudreaux. Although he isn’t a believer, he sometimes stumbles upon what I would consider to be Christian insights. Consider, for instance, his take on the term “natural resources”:

In nearly all contexts, words and phrases inevitably convey not only information (such as, as Deirdre would say, “telephone numbers”), but also ideas – notions – interpretations – perspectives – biases – prejudices – spins -approval or disapproval – informal theories – attitudes and judgments – unconscious conclusions. And much of all this that is conveyed by our words and phrases goes unnoticed. This fact is neither good nor bad; it’s simply part of the human condition.

Take the term “natural resources” … This phrase suggests that some things of value to human beings occur naturally – without any human effort or creativity. But that suggestion is wrong. Nothing is naturally a resource; nature alone invests nothing with resourcefulness; ultimately, resources – all resources – are created by human beings. Nature creates raw materials, but never creates resources. Raw materials and human artifacts are made into resources only if, and only when, and only insofar as, human creativity figures out a way (or ways) to employ those materials and artifacts in ways that satisfy genuine human desires.

The point, here, is that the term “natural resources” can be misleading about the role of nature in creating human bounty. Nature exists, to be sure; but human bounty is created by human creativity; nature in matters economic is not the prime mover. Nature’s role in determining who is and who isn’t materially wealthy is much smaller than we are sometimes led to believe when focusing on “natural resources.”

Here’s why I think this is a biblical insight.