Faithful Economics: The Moral Worlds of a Neutral Science

Chapter 3. Market Behavior and Christian Behavior

35 Market Behavior and Christian Behavior INTRODUCTION The dominant tradition that economic behavior is motivated by rational selfinterest is based on the notion that to be factual and predictive one must also be independent of any value position or normative judgment. Reliance on the narrow assumption of self-interested behavior, however, ignores the importance of certain rules of conduct that influence much of people’s interactions with one another. To the extent that religious beliefs affect values and in turn the normative judgments on which policy is based, it is important that Christian economists participate in the policy-making process. The participation must go beyond mere commentary, incorporating the scholarly rigor expected by the mainstream of the discipline. For many students, the first year of graduate school in economics is a time of total immersion in the subject. They live, eat, think, and breathe economics, spending long nights working on complex problems in economic theory. There is a purpose to this intense experience, however; at the end of the year, students come out thinking like an economist. If the training has been successful, they are not just able to analyze an economics problem in the appropriate way, but have developed an intuitive sense of what the right “economics answer” to a problem might be even before they confirm that with more formal analysis. They learn to look at the problems of the world through economics-tinted Rebecca M. Blank Chapter 3 hend133002_ch03.qxd 12/02/05 10:41 AM Page 35 glasses, worrying about efficiency and incentive structure, and assuming that the people and institutions around them behave in accordance with the assumptions of the economic model. I never felt that this immersion experience was as successful for me as for others. I came to realize that I viewed the world through a structure firmly established in my mind long before I started graduate work in economics, and not even that first year of “all economics, all the time” could dislodge it. More than 20 years of Sunday-school training, along with a heavy dose of social-action involvement, had left me with a perspective on individual and institutional behavior grounded in Christian theology. I never took the economic assumptions about individual behavior entirely seriously. I understood them to be a very useful model that could be used to analyze important economic questions. But I never made the mistake (at least as I defined it) of thinking that the economic model of behavior was a satisfying description of human activity. I knew it was at best a partial view of the world. In this essay, I want to examine what economics teaches about behavior versus some of the core Christian teachings about behavior, and discuss where the two come together. My musings in this short essay are heavily based upon a much longer presentation published in the book Is the Market Moral? A Dialogue on Religion, Economics, and Justice (Blank & McGurn, 2003). I would encourage anyone with a deeper interest in this subject to consult that book, since in many places this essay provides only a short summary of topics discussed at greater length there. THE ECONOMIC MODEL OF BEHAVIOR This section provides a brief summary of issues that are taught in Economics 101 on most college campuses. The competitive market is at the core of mainstream economic thought, and when economists speak of “competitive markets” they have a very precise model in mind. The classic description of a competitive market is a spot-market, an auction market where everyone comes together and bargains out loud over prices and quantities. One can observe such a market at the Chicago Board of Trade, where traders yell back and forth and settle deals in the moment. But even those markets where transactions occur over time and across space have many of the elements that competitive markets describe. The Benefits of the Competitive Model of Markets The model of competitive markets that economists use is very powerful. From this model, one can predict how buyers and sellers are going to behave and the resulting price and quantity outcomes. Even more importantly, however, competitive markets result in some very real long-term economic benefits. First, a competitive market provides incentives for creativity and for entrepreneurship. 36 Market Behavior and Christian Behavior hend133002_ch03.qxd 12/02/05 10:41 AM Page 36 The competitive market rewards creative entrepreneurs who communicate more effectively why...