Christianity And Economics Part 2: What Is Money?

This is part two of a series that seeks to integrate the Christian world-view and Economics.

Money is an integral part of Western society and – really – you can’t live without it. I don’t think I need to iterate, except for this one time, that money is immensely important. Especially for Christians: Jesus talked about money frequently and you need money to help other people in terms of food, shelters, etc. So at face value money is important and ought to be carefully discussed and examined.

But aside from whether or not money is important, let’s look at another issue: what is money?

 

Leading To Our Answer

Some cultures in the past (and most likely some today) used the bartering system whereby transactions were accomplished by trading things. For example, if I wanted to have some bread – and you happen to be a bread maker – then I would offer you an object or thing that I possessed (maybe a hat, some wood, or some other thing that I could make, etc.) for that bread.

It’s essential to recognize what’s happening: If we are bartering then I am giving you something and you are giving me something in return. But, you will only want to accept the trade if my object is similar in value compared to the thing I want back from you.

 

For example, if I wanted to trade my hat for your house you would rightfully refuse me. Why? Because a hat does not have the same value as a house. Here’s the point we all need to understand: transactions are based upon perceived value.

What do I mean? Let’s compare two cases. In both cases, I want to trade you my hat for some bread. By the way – it’s a really nice hat. Now, in the first case you produce so much bread that you end up throwing some away everyday. So, trading my hat for your bread is worth it because we perceive that bread is worth around the same as the hat (plus, you need a new hat). Simple enough.

But image now that there is a famine across the entire country. Bread is in high demand but there aren’t very many bread makers around. Now, would you trade me your bread for my hat? No. Why not? Because the perceived value of bread has now increased beyond what the hat is worth.

In other words, we perceived that bread is worth a lot because it is (a) in high demand and (b) in low supply. Now people are going to have to trade things that are of comparable value – instead of a measly hat (although it does look nice).

 

Value and Money

What else does this imply? This means that everything you own is worth something. But here’s the key: the things that are worth the most are the things other people need and want the most. Just like in the cases above, when bread was needed and wanted by more people, the value of your bread increased.

But do people only need physical objects? Of course not. People need skills, ideas, time, opportunity, etc. Aren’t good ideas valuable? Isn’t time valuable? Of course!

But how do you barter ideas? Time? You can’t because they are by nature things you cannot simply hand over in an exchange.

I’m sure you can see where this is going. What if we made something that could represent or symbolize the worth of both our physical objects and immaterial objects?

Well, that’s money. It is a representation of perceived value, in a sense. Just think of it, if you make money you most likely acquired it by either selling a physical object or an immaterial object like an idea or time.

When you work for a company you are paid for your time. Employers value time and recognize that someone’s time is valuable. Thus, they give you money to represent the “giving” of your time (and labor) to them. In other words, the money you earn represents the value of the time and labor you gave to the company.

On top of that, if you have advanced skills in a particular field then you will be paid more – because skills are valuable and they mean that you can complete tasks that others cannot.

The same rules apply as the bread cases: a skill that is in high demand but low supply (not a lot of people have that skill) are going to be the most valuable skills. Thus, jobs that require very specific and advanced skills pay the best. It’s the same as having bread when everyone else needs it and cannot find it anywhere else.

If I have an idea, I can patent it and sell it to a company who wants it. Same idea applies.

 

Where does it come from?

But where does money come from? I’m not asking where does it physically come from – the mint (in Canada). Many people have the idea that an economic system is like a pie. You’ve heard it, “If the rich are getting richer then they must be getting richer at the expense of the poor.” Right? Because, after-all, they taking more of the pie.

 

However, economic systems are simply not static. They aren’t like a pie. The pie is a lie.

So, the question isn’t “where does money come from”, it’s “where do new valuable things come from?” Money just represents objects, ideas, skills, etc. So what we are really trying to ask is “where do these things come from?”

And this is where the Christian world-view begins to connect. God creates humanity in His image. Part of the divine “image” is that God creates. He created us, He created nature, etc. But since humanity is made in God’s image, that means we are “mini-creators.” We have the ability to create things. New things.

Let’s say we have an economic system. At this moment I come up with an idea that can make computers hundreds of times faster. Is this idea valuable? Of course! Everyone will perceive that idea are very valuable. So, the inclusion of that idea into an economic system (which, again, includes physical and immaterial objects) has just added more to our system as a whole! The pie is getting bigger! And, the poorer are not more poor. My additional wealth simply did not affect the poor.

When we take trees and convert them into useful things, like houses, paper, etc. the value of the tree has just increased. That is, now we perceive those things (which are still made of the same wood) are more valuable. Again, the pie is getting bigger. And again, the poor are not affected. We didn’t take anything away from the poor in order to gain value – we added something new.

So understanding one of the most basic theological truths of the Christian world-view actually helps us to define how economic systems grow. We can create new things. New things add more value to our system. And it clears up the fundamental fallacy that economics systems are like pies.

When news things are added to the economic system the government has to add more money to the system. The more new things are created, the more perceived value that system as a whole has –which means that we need more money to represent all the new value that has been added.

I hope this has been a helpful explanation (or attempt) of what money is, where it comes from, and how economic systems are not like pies. Just as God’s mandate to create always adds more value to the system, so do our creations add to the system.

God doesn’t take away from other things or materials to create (at least He doesn’t have to) – but He can create ex nihilo (out of nothing). Likewise, many of our creations are ex nihilo too – ideas, concepts, etc. New ideas are not made from pre-existing materials. They aren’t made from any materials at all. Thus, God’s, nor our, ex-nihilo creations take away from the poor – but simply add more to the system as a whole.

 

Next time we’ll look at what implications these ideas have for how we should view poverty and wealth.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: