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

Chapter One: Introduction to Economics 5 TOWARD A BIBLICAL ANTHROPOLOGY When thinking about economics, we gravitate toward things such as money, markets, and people exchanging things. But the most basic part of economics is about individuals making choices—how human beings decide one action over another. It could be what show I stream in Netflix or what job I take. Since any choice picks one thing over another, the concept of cost comes immediately into play: what must I give up to get what I want? There are necessarily tradeoffs inherent in any choice, a recognition that comes naturally to us. From our earliest ages, our parents would give us “if you do this, then this will happen” descriptions of both positive and negative outcomes. If I eat all my dinner, I would get a piece of pie . Incentives—positive and negative—shape our actions; we are seldom actually forced to do something. The incentives usually lead us to do what “others” want. Each of us has our own internal valuations (subjective preferences) that guide our evaluation of tradeoffs. Each choice we make forces us to mentally compare alternative futures based on the choice. We have an expectation that any action will lead to a better future than would otherwise happen. That’s our definition of rationality: people do the best they can in their choices to make their day or life go just a little bit better. Our individual choices also reflect our participation in social groups. To get what we want, we find that it is usually better to work with others than to do everything ourselves. As we focus our efforts, we can become very proficient. Bigger tasks can be broken down into smaller tasks, and many different hands can tackle those tasks they do best. Markets emerge as people find it beneficial to produce more than they need and exchange their surplus with others. These social exchanges are a major area of choice for each of us. Do we sleep in every day, or get up and work for others? What price would I charge to get out of bed by 5:30 a.m.? How much money would it take me to do the risky job of working on skyscraper construction? So the study of economics is a study of how humans choose. This suggests that to understand economics, you must understand humans. And this means people must look to the operating manual for humanity, the Bible, to understand who they are. We begin our study of economics by developing a Biblical anthropology, or understanding of man. GENESIS 1 In the beginning, God… This is the beginning—the beginning of all wisdom. The opening words of scripture point to a beginning of time and all reality. In this eternity past, prior to creation, there was God when there was nothing else. He is the uncaused causal agent, self-existent, and He alone is independent.