{"id":6009,"date":"2009-10-14T05:51:24","date_gmt":"2009-10-14T05:51:24","guid":{"rendered":"http:\/\/blog.beliefnet.com\/jesuscreed\/2009\/10\/economics-at-the-jesus-creed-m-4.html"},"modified":"2009-10-14T05:51:24","modified_gmt":"2009-10-14T05:51:24","slug":"economics-at-the-jesus-creed-m-4","status":"publish","type":"post","link":"https:\/\/www.beliefnet.com\/columnists\/jesuscreed\/2009\/10\/economics-at-the-jesus-creed-m-4.html","title":{"rendered":"Economics at the Jesus Creed: Michael Kruse 6"},"content":{"rendered":"

\"WallStreet.jpg\"<\/span><\/p>\n

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

 <\/p>\n

The Nature of Wealth<\/p>\n

 <\/p>\n

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?<\/p>\n

 <\/p>\n

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. <\/p>\n

<\/p>\n

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<\/i>. Money is medium of exchange that we use to quantify the value of goods.<\/p>\n


\n<\/p>\n

<\/p>\n

Let’s probe
\ndeeper.  <\/span>Which is more valuable, a
\ndiamond or a bottle of water?<\/b> Water is absolutely essential to survival. Go
\nvery long without water and we die. Yet many people live long healthy lives
\nwithout ever owning a diamond. Surely a bottle of water is worth more than a
\ndiamond. Yet which costs more?<\/b><\/p>\n

 <\/p>\n

Economic
\nvalue is not tied to how important something is to our basic existence or to
\nwhat social good it brings. It is tied to what economists call marginal
\nutility. <\/p>\n


<\/i><\/p>\n

Utility<\/i> means the ability of
\nsomething to satisfy a human want. <\/p>\n

Marginal
\nutility<\/i> refers to the usefulness attributed to one additional unit of a
\nsomething. <\/p>\n

<\/p>\n

Most products have declining marginal utility. That means each succeeding
\nacquisition of something gives less utility than the one before it. A thick
\njuicy hamburger may have great utility for me when I’m hungry but a second one
\nis likely to have less utility. By the third or fourth burger, the marginal utility
\nis probably zero. <\/p>\n

 <\/p>\n

Therefore,
\nwhile water is absolutely essential, it is also so abundant and inexpensive
\nthat any particular bottle of water is of minimal value. Water is to be had inexpensively
\nelsewhere. But because diamonds are scarcer relative to the number of people
\nwho desire them, replacing a diamond, or obtaining an additional diamond, is
\ncostly. The price of an object is determined by people bidding for the next unit
\nof an good, based on the collective utility of bidders.<\/p>\n

 <\/p>\n

Wealth and
\nTrade<\/p>\n

 <\/p>\n

Consider a
\ngame teachers use to illustrate the benefits of trade. (I’m borrowing from Jay
\nRichards here.) The teacher purchases a number of items of similar cost and
\nrandomly distributes them to thirty students in a class. Each student is told
\nto rank how much they value their item on a scale of one to ten. The values are
\ntotaled for a class score.<\/p>\n

 <\/p>\n

Next, the
\nclass is broken into groups of five. The students are invited, if they wish, to
\nexchange their items with each other. (Scot gets a John Calvin 500th<\/sup>
\nBirthday commemorative figurine. I get a Cubs headband. We trade. [SMcK: Indeed!]) After
\nexchanging, each student is told to record how much they value the item they
\npossess and the values are summed again. The total class score goes higher.
\nStudents are then invited to repeat the same exercise with anyone in the class
\nand record their values. The total score goes still higher. <\/p>\n

<\/p>\n

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

 <\/p>\n

Wealth and
\nLabor<\/p>\n

 <\/p>\n

Marginal
\nutility has important implications for labor as well. If we aren’t going to
\nproduce everything we consume, then we will need to create something of value for
\nexchange. Value is determined by the collective utility of people in the market.
\nBased on the values communicated by market prices, and based on our gifts,
\npassions, and opportunities, we set about to transform matter, energy, and data
\nfrom less useful forms into more useful forms that meet other people’s wants
\nand needs. <\/p>\n

 <\/p>\n

This means
\nthat labor, like goods, has no intrinsic economic value. It has economic value
\ninsofar as it contributes to the production of something with economic value. I
\ncan become as proficient as I want at making square-wheeled wheelbarrows. If no
\none buys them, my labor has no economic value. And just like diamond example,
\nthe amount paid for a particular kind of labor is not related to its importance
\nfor the good it does. <\/p>\n

 <\/p>\n

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

 <\/p>\n

Until very
\nrecently in human history, the vast majority of people lived in small
\ncommunities with undifferentiated labor that rarely produced much of surplus.
\nThe range of goods produced was very narrow and there was little trade beyond
\nthe community. Prices were generally set by custom or by some authority. The
\neconomy was a static zero-sum game and the price of goods and labor were
\nperceived as inherent in the goods. For centuries, economic thinkers were
\ntrapped in this mindset. Political economists like Adam Smith, David Ricardo,
\nand Karl Marx subscribed to the labor theory of value, which says that the
\nvalue of a good is somehow tied to the amount of labor applied in making or
\nacquiring the good. As we have seen, this is in error. From the late nineteenth
\ncentury on, marginal utility has become the accepted determinate of value.<\/p>\n

 <\/p>\n

Theology and
\nWealth<\/p>\n

 <\/p>\n

One of the
\nmost common traps I see for Christian social thinkers is the materialist trap
\nof seeing economic value as inherent in goods or in labor. The human role of
\nproducing goods from natural resources, the socially constructed nature of
\nwealth, and the market as a dynamic information and incentive system moving
\ngoods to most valued uses, is invisible. Goods seem to have emerged in finished
\nform, with their own inherent value, and in fixed quantities. They need only to
\nbe distributed. <\/p>\n

 <\/p>\n

Thus, when
\ndisparities between people groups emerge, rather than asking why the less
\nwealthy group has experienced less productivity, developed insufficient social
\nconstructs to support wealth, and created inadequate markets to distribute
\ngoods, we frequently hear zero-sum thinking. We hear things like “the rich are
\ngetting richer and the poor are getting poorer,” or the “United States has 25%
\nof the world’s wealth and only 5% of the population” (with no awareness that
\nthe United States creates 25% of the worlds wealth), or as one quote I recently
\nread said, “You cannot abolish poverty unless you also abolish
\naffluence.” All of these are steeped in the zero-sum thinking of the
\nancient world … the world from which the Bible emerged. <\/p>\n

 <\/p>\n

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

 <\/p>\n

When people from
\naround the world who are in poverty are surveyed they do not identify lack of
\nmaterial goods as their biggest challenge. They identify shame and despair. In Compassion, Justice and the Christian Life<\/i>,
\nRobert Lupton writes:<\/p>\n

 <\/p>\n

“…when the
\nlabor you offer is unneeded in the marketplace or when your abilities are worth
\nless to employers than the amount of your welfare check, you are exchange-less.
\nIndeed, poverty may be defined as having little of value to exchange. And when
\nsociety subsidizes you for being a noncontributory, it has added insult to your
\nalready injured self-esteem.” (43-44)<\/p>\n

 <\/p>\n

When we move
\nto the international level we have prosperous nations subsidizing entire
\nnations. Apart from relief to stabilize people in crisis, it seems to me that
\npoverty alleviation is less about redistributing goods and more about restoring
\ndignity and inclusion in a dynamic wealth-creating economy.<\/p>\n

 <\/p>\n

The above
\nshould not be construed as a tacit justification for every aspect of the
\nexisting economic order. Rather, the intent is to show that critiques of
\neconomic behavior based on a zero-sum mindset and on assumptions of inherent
\neconomic value in goods and labor are errant.<\/p>\n

 <\/p>\n

There are
\nendless ramifications of seeing wealth as the socially constructed reality that
\nit is. What are your thoughts? What challenges or troubles you about this
\nunderstanding of wealth? What does this mean for theological reflection and
\nChristian mission? <\/b><\/p>\n

<\/p>\n","protected":false},"excerpt":{"rendered":"

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? 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