The Economy Is about More than Money

A System of Choices

The economy is not just money. It’s the complex system of choices we make about all our resources (including money), all our time, and all our standing in the eyes of others. Every choice we make throughout the day that involves managing these resources is an economic choice.

And let’s face it, that’s pretty much all our choices, at some level! There is no area of life that is not economic in at least some way. Even prayer involves economic decisions, because you are making a choice about how you use your time. You might even be making the wrong choice! As C. S. Lewis said, in the middle of a prayer “you may realize that, instead of saying your prayers, you ought to be downstairs . . . helping your wife to wash up. Well, go and do it.”1 The scriptural injunction to “pray without ceasing” (1 Thess. 5:17) means we should do everything in a prayerful way, not that we should stop working (Ex. 20:9), resting (Ps. 127:2), and enjoying life (1 Tim. 6:17) in order to do nothing but pray. That means making economic decisions about when to pray and when to work, rest, enjoy, and so forth.

Economics

Economics

Greg Forster

This book draws on the legacy of the Christian tradition to introduce readers to the study of economics, challenging them to carefully apply biblically rooted economic values. Part of the Reclaiming the Christian Intellectual Tradition series.

Exchange and Specialization

The economy is not all there is to life, however. We wouldn’t want to reduce everything to merely economic concerns and nothing else. The everyday life of a marriage or a church involves making economic decisions, but they are not economic institutions at their core. Faithfulness to a spouse or to God cannot be reduced merely to how we manage resources.

To avoid the danger of thinking that the economy is literally everything, let’s look at a narrower way we can define the economy. When we talk about “the economy,” we usually mean the special activities and institutions that exist specifically to help us manage economic decisions.

Here it is useful to look at two key concepts from academic economics: exchange and specialization. Exchange simply means buying, selling, or trading. Specialization means focusing the use of your resources on fewer things—typically on the activities in which you get the biggest “bang for the buck,” in which you can produce the most beneficial results from a given investment of resources.

Every choice we make throughout the day that involves managing these resources is an economic choice.

You and I both need shirts and shoes. I could make my own shirts and shoes, and you could make your own shirts and shoes. But if I’m a better shoemaker and a worse shirt-maker than you, while you’re a better shirt-maker and a worse shoemaker than me, we’ll both be a lot better off if I spend my hours making shoes and you spend your hours making shirts. Then we can trade, your shirts for my shoes.

Money is a tool that allows us to make these exchanges more efficiently. Instead of trading goods for goods, which is inconvenient and imprecise, we can buy and sell. I make shoes and sell them, and use the money to buy your shirts; you make shirts and sell them, and use the money to buy my shoes.

People have widely varying talents and interests, and that means we are all better at some things than others. Most of us have only a few things that we can do well enough that it makes sense for us to invest lots of time in them. When people have to manage limited resources—including limited time!—they figure out pretty quickly that they can get more done by specializing in the things they do best, then exchanging with others to take care of the things they don’t specialize in. This principle was recognized as far back as Plato in ancient Greece, and it has been the central pillar of the study of economics ever since.2

What we call “the economy” is millions of people around the world trading their work with one another. When we do our jobs, we are specializing—devoting our work hours to doing one kind of work. When we buy and sell, we are meeting our needs and desires by exchanging with others who, in their jobs, are specializing in the kinds of work we need. We can sum up “the economy” as the vast system of exchange that helps us all use our resources more efficiently than we could on our own. Each of us, as an individual, makes use of the world. The world provides us with material objects (goods), opportunities for different kinds of activities (time), and relationships with others (reputation). We each use what the world provides. The economy allows us to exchange with others so we can make better, or at least more efficient, use of the world.

Notes:
1. C. S. Lewis, Mere Christianity, in The Complete C. S. Lewis Signature Classics (New York: HarperOne, 2002), 102.
2. In Plato’s Republic, Socrates describes the principle of specialization, or division of labor, more or less as economists hold it to this day. See Plato, The Republic of Plato (New York: Basic Books, 1991), 47 (370b–370c).

This article is adapted from Economics: A Student’s Guide by Greg Forster.



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