“Economics in Christian Perspective” Book Review

LibertarianChristians.com is pleased to welcome Michael Douma as our next guest poster, reviewing Economics in Christian Perspective: Theory, Policy, and Life Choices by Victor Claar and Robin Klay. The views expressed in any guest article should not be construed as the official position of LibertarianChristians.com and are the work of the guest author alone.

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Victor V. Claar and Robin J. Klay, Economics in Christian Perspective: Theory, Policy, and Life Choices (Downers Grove, Ill.: Intervarsity Press, 2006). 254 pages.

I picked up Claar and Klay’s 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 insist on the 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.

Buy Claar and Klay’s Economics in Christian Perspective: Theory, Policy, and Life Choices from Amazon.com and support LibertarianChristians.com.

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Michael J. Douma is a graduate of Hope College (’04) and a Ph.D. candidate in history at Florida State University. Douma is the author of numerous articles on Dutch American immigration history, and one book, Veneklasen Brick: a Family, a Company, and a Unique 19th Century Architectural Movement in Michigan (Eerdmans, 2005).