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Economics in Christian Perspective: Theory, Policy and Life Choices

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Reviewed by Michael J. Douma for www.libertarianchristians.com

I picked up this book because the authors teach at my alma mater, Hope College, in Holland, MI. Although I have not met them, I was interested to see what they had to say about the relationship between Christianity and economics. The authors include an appropriate proverb, tucked away on page twenty-four. "Without freedom," they write, "there is no responsibility." They could have added that without responsibility there is no freedom. In the tradition of classical liberalism, they on insist government's role in, most importantly, protecting property and enforcing contracts, but also in stabilizing the economy, and promoting positive, and discouraging negative externalities.

The major thesis of the work is that democratic governments, free markets, and cultural institutions (i.e. the church) as separate spheres have their own responsibilities that come together like a tripod to provide the proper balance of support for society. While I assume the authors are aware of the Dutch Calvinist theologian Abraham Kuyper, and are certainly influenced by him, they make no mention of his works. This is an unfortunate omission because they share much of Kuyper's worldview. Kuyper's concept of "sphere sovereignty" first articulated in the late nineteenth century, has been influential in political thought in the Netherlands and among Dutch immigrants in America. Sphere sovereignty teaches that the church has responsibilities equal to those of the government and should not be disadvantaged by government interference. Like Kuyper, the authors believe that God had called his followers to be active in the world, and not to shun it. This is one reason why Christians should not deride the market, but come to understand its potential for making Christian change. Indeed, the model presented in this book allows society multiple angles to solve social problems, much in the way Kuyper envisioned. Markets, morals, and governments must operate with a common goal in mind.

The authors are particularly adept in providing a Christian defense of the marketplace. Scarcity, the first law of economics, does not result from sin, they write, nor can generosity eradicate it. Markets can be used for good or evil, and will feed moral sin if allowed. But markets regulate overconsumption through prices, and provide new products through innovation. Dynamic markets can cause temporary job loss or dislocations but can alleviate them and provide gain and opportunity throughout. In the authors' view, the government should step in when markets fail, and "gently nudge" the markets to provide for the otherwise unmet needs of society. Cultural institutions, meanwhile, should serve to promote virtue, a public good which will direct the actions of individuals in the marketplace and in government.

In macroeconomic policy, the authors favor Milton Friedman's monetarism, briefly understood as economic stabilization through long-term steady rates of inflation. They see the ideas of Friedman as a new paradigm in the manner described by Thomas Kuhn in his book, The Structure of Scientific Revolutions. The authors label their views accordingly as "new classical." They make a standard but well-reasoned critique of John Maynard Keynes. Keynes thought there was a trade-off between inflation and unemployment. When government inflated the money supply, they created jobs, but when they held back on spending to decrease inflation the unemployment rate would rise. Claar and Klay argue that workers can not be easily manipulated, and the trade-off between inflation and unemployment, as shown in the Phillips curve, is not a direct relationship when workers are rational. In other words, people can anticipate inflation and react accordingly, and they won't work if their wages are worthless. Their Christian dismissal of Keynes may be a more novel approach. Keynesian discretionary spending policies are deliberately deceitful, the authors say, because they cause wide swings in the value of money, while the monetarist position is transparent and honest. The Federal Reserve, then, should make its policies clear in the long-term and avoid sudden jolts through fiscal controls. This begs the question whether any artificial increase in the money supply with resulting debasement of currency is not therefore also immoral. And if inflation is immoral, is it a necessary evil for macroeconomic stabilization?

Perhaps the greatest shortcoming of the book is that it attempts to do too much. The authors discuss internet file-sharing, economic trade-offs, patents, the injurious effects of wage-rate laws, Christian environmental stewardship, Pigovian pollution taxes, and why human life can not be given an infinite value in cost-benefit analysis, among other topics. The best sections are some of the shortest. For example, in addressing the tithe, the authors explain that it was originally a rent paid on land, not on income, and that only in the past two centuries have churches stressed the doctrine of giving ten percent. Yet, while the authors cover extensive ground, they sometimes lose track of their audience. This work is certainly not light reading for a layman, and is best suitable for college-educated Christians who have taken a number of courses on economics. The authors make good use of stories related to Holland, Michigan, so that a local audience might also find the work additionally appealing.

Ideologically, the authors appear right-of-center, but show an eclectic mix of influences. In asking how Christian morality should meet the marketplace, the authors appeal to the philosopher John Rawls to say that we should consider how our actions affect others, or rather, how our actions would affect us if we were in a different situation. Citing the Laffer Curve, they note that an increase in the tax rate does not always lead to an increase in tax revenue. Yet, they do not question the assumption of why government should attempt to maximize tax revenue in the first place.

This book, whatever its minor faults, reminds us that economics is moral philosophy. This alone is an important message. Markets can go a long ways in helping people, and we must acknowledge this. But in addition, we learn that Christians must recognize non-monetary incentives to act morally. We must also recognize the potential benefits of government while disparaging its evils. The authors' chapter on globalization provides a clear example of this philosophy at work. As Hernando De Soto explained in his book, The Mystery of Capital, it is the ability to turn property into capital that has allowed capitalism to succeed in the West and fail in the third world. Governments must protect private property rights to allow for capital to enter the market. That is, government can play a positive role. But government can also injure markets through excessive regulation or absurd tariffs. A caring Christian should recognize the ability of the market to alleviate poverty. But he should also support Christian organizations that have established long-term commitments to aid the poor.

There is considerable debate in the public square these days about a number of issues that have significant economic components. Globalization, environmental protection, and aiding the poor are just a few. Decisions we make in our personal lives are influenced by our assumptions about economic realities as well. So how might mainstream economics connect with Christian Values and principles?

Victor Claar and Robin Klay, both professors of economics at Hope College in Holland, Michigan, address these topics in the book. It's a wonderful read. The book has eleven chapters, each devoted to a particular issue like the role of government, creation care, discerning vocation and caring for the poor versus worrying about the income gap.

The writing style is engaging. If you have a just a rudimentary grasp of some basic economic concepts the book should be intelligible. If not, you may find yourself having to work some in a couple of spots. But what is truly refreshing is the careful and respectful manner in which differing views are presented on some controversial topics even as the authors reveal their takes on issues. The book is neither a social justice harangue nor a libertarian manifesto, just solid Christian reflection on the implications of mainstream economic thought.

The authors conclude the book with "Nine Big Ideas from Economics That Can Help You Be a Good Steward Every Day."

1. For everything you do, there is something you are choosing to leave undone.
2. The anticipated social benefit of any policy proposal must be seriously weighed against every likely social opportunity cost.
3. Actions speak louder than words.
4. Markets move precious resource from less-valuable to more-valuable.
5. Job creation is rightly viewed as a cost, not a benefit, of any initiative.
6. Free international trade is a proven way to help the world's poorest people.
7. Hope for a better future may require temporary discomfort today.
8. Corrupt governments keep the poor down.
9. Sunk costs are sunk.

I highly recommend this book for anyone wanting a thoughtful reflection on the interaction between faith and economics!

Amidst my MBA studies at a top school known for leading the way in economic thinking, I found this book to be a very helpful complement to the curriculum. Professors Clay and Claar demonstrate mastery of economic theory by explaining and exploring concepts in ways that will enlighten the mind of an educated economist and lay person alike. While most Christians will have studied economics from an agnostic perspective, this book helps to provide the Christian with a framework to think about how to bring God's values to bear on a wide variety of societal and policy issues. The topics include third world poverty, income disparities, unemployment, global trade and the role of government. The authors strive to provide the nuances of complex issues, but also offer clear, tangible suggestions as to how Christians might approach these issues. I highly recommend this book to anyone, economist or not, who is interested in developing more sophisticated, well-reasoned views on the great economic matters of the day through the lens of Christianity.

As a seminary grad and an aspiring armchair economist, I want to commend Victor Claar and Robin Klay for writing Economics in Christian Perspective. Inspired by the work of the Acton Institute, I have been seeking to gain a better grasp on contemporary economic issues, and was pleased to find their book listed under Acton's Studies in Ethics and Economics. For someone who formerly had great difficulty understanding (or even staying awake in) my undergrad economics courses, I can say that their book is a welcome re-introduction to the field, and probably one the most balanced and practical resources I have read to date on mainstream economics. I only wish I could have been exposed to this perspective earlier on in my education!

Victor Claar and Robin Klay do a nice job explaining economics and the virtues necessary for a free economy. They show the compatibility of capitalism and Christian teachings allowing that the values taught by all major religions are compatible with capitalism.

Examples in their book resonate because they are drawn from first hand experiences with economic conditions, organizations, and values in their home town. Claar and Klay show specifically how US protectionism led Lifesavers to close their US plant and move production to Canada and how incentives made a positive difference in the run down neighborhoods adjacent to the college where they teach.

Their comments about how lower, more competitive tax rates sometimes result in more revenue are timely given the debate in states and nationally about how to close the budget gaps. I found myself thinking about Fed actions in light of their good comments about the proper goal of supplying money at a steady rate. Their ideas about wage rates and the irony of minimum wage laws are enlightening and spot on. The chapter emphasizing the indispensable need for virtue in free society is particularly good.

In this time when free markets and the capitalist system are both under severe attack, this book is more relavent than ever. It is well written and presents a viewpoint on Economics from a Christian perspective that is badly needed today. So many Christian leaders, especially clergy, have a very poor understanding of economic matters and often take a point of view that is very detrimental to the poor. No person who calls himself a Christian can say they don't care about the poor. This book is a must reading for any Christian who cares about people and their well-being.

As a student of economics and christian, I am very pleased that exists christians who understand that theorical and applied economics have a relationship with many aspects of the life. And the authors show how we can relate the christian ethic and principles with the economic theory, and show that economics doesn't need to be a "godless" science (by the way, any area of scientific resarch doesn't need to be "godless").

One of the great points in this book is that this is not a worship of the austrian economics, neither liberation theology, and shows that both goverment and markets are necessary for economic development, but they add a third sector: churches, communities, charities and other institutions which work for the public welfare without direct influence of the goverment and markets. In the chapter "Work and Vacation", Klay writes about how her career evolved, and this helped me in my doubts.

The books also shows that markets can really be good for the people, specially for the poor. Instead of complain and do nothing, we should use the markets to help each others, and we should be careful with the temptations.

It's an analysis of policy and theory, but it does have controversial viewpoints, such as a critique of the minimum wage and the defence of a greater role for the market than the goverment.

But I have a complaint: the authors see the multinational corporations with pink glasses, and they don't acknowledge that the corporations are not so friendly with the governments of the third world nations or, sometimes, are friendly in corrupt affairs.

This is a good book and I recommend. The last chapter and the epilogue are perfect for their role: a conclusion, and they show how the gospel can change the community for better and, if we change the communitie, we can change the world.

P.S.: The book also focused in the mainstream economics, and I would suggest that in the next editions, there could be appendix on heterodox economics.