No Free Lunch: Economics for a Fallen World: Third Edition, Revised

Chapter Ten: It’s all About the Institutions! 227 INTRODUCTION In chapter 9, we examined the role of the entrepreneur in markets. We found the entrepreneur to be the driving force in innovation and improvement in our economy. Moreover, we saw that many of the functions and attributes of entrepreneurship are found in any society. Nevertheless, we see much more innovation in some countries than in others. What is it that allows some countries to innovate and have more entrepreneurial spirit than others? As Christians, we understand that all humans are created equal in God’s sight, yet not all cultures are (there is a reason you hear about the Israelites and not the Hittites, Canaanites, etc.). So, just as some cultures are more closely aligned with godly values than others, leading to better moral results, so some cultures are more open to entrepreneurship than others, leading to better economic results. This cultural openness to entrepreneurship can be seen in what we’ll call the institutions of the culture. Cultures that have better institutions will have better economic results than those with poor institutions. What are the institutions that lead to success? That is what we’ll explore in this chapter. THE MARKET PROCESS As we examine institutions that enable the market process, we will see that institutions help to overcome pervasive ignorance of the future. We don’t know what is going to happen, so how do we possibly plan for it? Institutions help us navigate what John Maynard Keynes called the “dark forces of time and ignorance,” which point us toward an uncertain future. To understand the role of institutions better, we must first see how time and uncertainty fit with entrepreneurial planning. TIME The Bible uses the word TODAY 190 times, with many uses focusing our attention on personal, current, required actions. For example: Exodus 32:29 – “Then Moses said, ‘Dedicate yourselves today to the LORD—for every man has been against his son and against his brother— in order that He may bestow a blessing upon you today .’” Deuteronomy 7:11 – “Therefore, you shall keep the commandment and the statutes and the judgments which I am commanding you today , to do them.” Joshua 24:15 – “If it is disagreeable in your sight to serve the LORD, choose for yourselves today whom you will serve: whether the gods which your fathers served which were beyond the River, or the gods of the Amorites in whose land you are living; but as for me and my house, we will serve the LORD."