Beliefnet
Jesus Creed

WallStreet.jpg

Today we turn to the topic of wealth. Let’s start with a simple question: What is wealth? The answer may not be as obvious as it seems. Consider the following.

 

The Nature of Wealth

 

How much would you say a diamond is worth? Our first inclination is to determine its size, cut, color, and clarity. But we have overlooked a fundamental question: Worth to whom?

 

A diamond I find while hiking will have great value to me. I know it can be exchanged for goods or money. However, if I find the diamond while hopelessly stranded on a remote island, then the diamond is of little value. It only has value in the context of a community engaged in exchange. 

No material item has intrinsic economic value. While connected with matter, wealth is a socially constructed reality that reflects a community’s valuation of tangible and intangible goods. Money is medium of exchange that we use to quantify the value of goods.


Let’s probe
deeper.  Which is more valuable, a
diamond or a bottle of water?
Water is absolutely essential to survival. Go
very long without water and we die. Yet many people live long healthy lives
without ever owning a diamond. Surely a bottle of water is worth more than a
diamond. Yet which costs more?

 

Economic
value is not tied to how important something is to our basic existence or to
what social good it brings. It is tied to what economists call marginal
utility. 


Utility means the ability of
something to satisfy a human want. 

Marginal
utility
refers to the usefulness attributed to one additional unit of a
something. 

Most products have declining marginal utility. That means each succeeding
acquisition of something gives less utility than the one before it. A thick
juicy hamburger may have great utility for me when I’m hungry but a second one
is likely to have less utility. By the third or fourth burger, the marginal utility
is probably zero.

 

Therefore,
while water is absolutely essential, it is also so abundant and inexpensive
that any particular bottle of water is of minimal value. Water is to be had inexpensively
elsewhere. But because diamonds are scarcer relative to the number of people
who desire them, replacing a diamond, or obtaining an additional diamond, is
costly. The price of an object is determined by people bidding for the next unit
of an good, based on the collective utility of bidders.

 

Wealth and
Trade

 

Consider a
game teachers use to illustrate the benefits of trade. (I’m borrowing from Jay
Richards here.) The teacher purchases a number of items of similar cost and
randomly distributes them to thirty students in a class. Each student is told
to rank how much they value their item on a scale of one to ten. The values are
totaled for a class score.

 

Next, the
class is broken into groups of five. The students are invited, if they wish, to
exchange their items with each other. (Scot gets a John Calvin 500th
Birthday commemorative figurine. I get a Cubs headband. We trade. [SMcK: Indeed!]) After
exchanging, each student is told to record how much they value the item they
possess and the values are summed again. The total class score goes higher.
Students are then invited to repeat the same exercise with anyone in the class
and record their values. The total score goes still higher. 

In the world of
international trade, it is not as simple as this but the basic point is true: Wealth has been created without creating anything.
Markets (i.e., people freely exchanging what they have for what they value
more) moves goods from less-valuable uses to more-valuable uses.

 

Wealth and
Labor

 

Marginal
utility has important implications for labor as well. If we aren’t going to
produce everything we consume, then we will need to create something of value for
exchange. Value is determined by the collective utility of people in the market.
Based on the values communicated by market prices, and based on our gifts,
passions, and opportunities, we set about to transform matter, energy, and data
from less useful forms into more useful forms that meet other people’s wants
and needs.

 

This means
that labor, like goods, has no intrinsic economic value. It has economic value
insofar as it contributes to the production of something with economic value. I
can become as proficient as I want at making square-wheeled wheelbarrows. If no
one buys them, my labor has no economic value. And just like diamond example,
the amount paid for a particular kind of labor is not related to its importance
for the good it does.

 

Kevin
Garnett, forward for the Boston Celtics, makes $25 million a year playing
basketball. Yet, the median salary for a paramedic is about $37,000 a year. Few
would doubt paramedics play a more vital role in society than athletes. So why
the difference?
The supply of people who can be recruited to become competent
paramedics is far more abundant than the supply of people who can play forward
at Kevin Garnett’s level. (Note: This is an extreme example to make a point. Don’t
get lost in whether or not you think people should value basketball. The issue
is that, just as with diamonds, there were will always be certain types of
labor we will pay more for than for labor which is more essential.)

 

Until very
recently in human history, the vast majority of people lived in small
communities with undifferentiated labor that rarely produced much of surplus.
The range of goods produced was very narrow and there was little trade beyond
the community. Prices were generally set by custom or by some authority. The
economy was a static zero-sum game and the price of goods and labor were
perceived as inherent in the goods. For centuries, economic thinkers were
trapped in this mindset. Political economists like Adam Smith, David Ricardo,
and Karl Marx subscribed to the labor theory of value, which says that the
value of a good is somehow tied to the amount of labor applied in making or
acquiring the good. As we have seen, this is in error. From the late nineteenth
century on, marginal utility has become the accepted determinate of value.

 

Theology and
Wealth

 

One of the
most common traps I see for Christian social thinkers is the materialist trap
of seeing economic value as inherent in goods or in labor. The human role of
producing goods from natural resources, the socially constructed nature of
wealth, and the market as a dynamic information and incentive system moving
goods to most valued uses, is invisible. Goods seem to have emerged in finished
form, with their own inherent value, and in fixed quantities. They need only to
be distributed.

 

Thus, when
disparities between people groups emerge, rather than asking why the less
wealthy group has experienced less productivity, developed insufficient social
constructs to support wealth, and created inadequate markets to distribute
goods, we frequently hear zero-sum thinking. We hear things like “the rich are
getting richer and the poor are getting poorer,” or the “United States has 25%
of the world’s wealth and only 5% of the population” (with no awareness that
the United States creates 25% of the worlds wealth), or as one quote I recently
read said, “You cannot abolish poverty unless you also abolish
affluence.” All of these are steeped in the zero-sum thinking of the
ancient world … the world from which the Bible emerged.

 

Uncritical
application of biblical passages touching on wealth to our present context
leads to well-intentioned but destructive actions. There is a widely held view
that poverty is a material issue. Shift material from one location to another
and the problem is solved. Clearly, in some urgent and disastrous cases, redistribution
of good is what is needed. But we do not exist for consumption. We are creative
beings made in the image of God for community. One way we realize this is by
using our creativity to transform matter, energy, and data from less useful
forms into more useful forms, and engaging others in exchange.

 

When people from
around the world who are in poverty are surveyed they do not identify lack of
material goods as their biggest challenge. They identify shame and despair. In Compassion, Justice and the Christian Life,
Robert Lupton writes:

 

“…when the
labor you offer is unneeded in the marketplace or when your abilities are worth
less to employers than the amount of your welfare check, you are exchange-less.
Indeed, poverty may be defined as having little of value to exchange. And when
society subsidizes you for being a noncontributory, it has added insult to your
already injured self-esteem.” (43-44)

 

When we move
to the international level we have prosperous nations subsidizing entire
nations. Apart from relief to stabilize people in crisis, it seems to me that
poverty alleviation is less about redistributing goods and more about restoring
dignity and inclusion in a dynamic wealth-creating economy.

 

The above
should not be construed as a tacit justification for every aspect of the
existing economic order. Rather, the intent is to show that critiques of
economic behavior based on a zero-sum mindset and on assumptions of inherent
economic value in goods and labor are errant.

 

There are
endless ramifications of seeing wealth as the socially constructed reality that
it is. What are your thoughts? What challenges or troubles you about this
understanding of wealth? What does this mean for theological reflection and
Christian mission? 

Previous Posts
Join the Discussion
comments powered by Disqus