Part 1 - Understanding Economics
In this series, we’ll be talking about economics and financial matters, including money management, investing, and how to apply these principles in your personal life and in the marketplace. My goal is to dispel some common myths about the world of economics and finance and simplify some of the more complicated subjects to help God’s people gain useful knowledge they can apply to improve their own economy. My hope is that you find this to be thought-provoking and informative. Let’s rev up the economic engine of the Kingdom!
Why is it important to understand these things?
First, understanding these topics has a direct impact on the lives we lead and the things we can accomplish. Let’s say God has given you the passion to start a business. If you talk to an entrepreneur about the most important factors that lead to business success, one of the first things he or she will mention is capital, an economic and financial concept. If you don’t know what capital is or the principles that operate behind the concept, you are much less likely to be successful in your venture, regardless of your passion or calling. Or, suppose you have the goal of purchasing a house. How will you achieve that goal without saving money for a down payment, understanding what interest is and how it is calculated, what insurance is, what property taxes are owed, and on and on? We all need to improve our knowledge of these and other matters so that we can improve our lives and the existence of those around us. Remember the familiar words from Hosea 4:6 – “My people are destroyed for lack of knowledge.”
Second, we’ve been talking about the blessing of the Lord for many years in the Church (both the Body of Christ and in the local church), and Bishop Pitts has been specifically talking about freedom from debt for Cornerstone Church members in 2019. As the saying admonishes, we must strike while the iron is hot!
I believe it’s important to understand foundational concepts and context before getting into the details. To build a house, you need a strong foundation. To begin, I will focus mainly on the basics and then build from there, precept upon precept, relating biblical principles where applicable.
For example, let’s think about the concept of investing. Investing is a principle that, at its essence, involves sacrificing today for an even better tomorrow. One can easily see how this applies to money; instead of buying the big screen TV today, I could sacrifice that immediate desire, invest the money and, with the returns on that investment, purchase an even bigger TV later. However, the principle of investing also could be applied to, say, relationships. Investing in relationships with others could yield financial benefits (as the old saying goes, “It’s not what you know, but who you know.”), but also could provide for a richness and depth to life beyond, and more important than, financial benefits. So, understanding investing from a broad view helps us to properly contextualize and apply it across a variety of levels and scenarios.
What is economics?
At its core, economics is simply the process by which human beings act together to create value. That’s pretty basic, so let’s expand on this.
First, let me make the following argument: Creating value is a component of love. It seems to me that the first principle of love is esteeming another, the one upon whom our love is projected, to be valuable. If the loved one is valuable, then a complementary principle of love would be a desire to create additional “value” for that person. So, for example, I love and value my wife. My desire is for her to be all that God wants her to be and to have all that God wants her to have. Thus, I will work to create and contribute value for her because I am motivated by my love for her.
Consider the commandment to “love your neighbor as yourself,” familiar to many in other words as The Golden Rule. We typically read this as “Love your neighbor like you love yourself.” In other words, “Love your neighbor in the same way that you love yourself.” This is certainly a legitimate and helpful way to think through that phrase. However, let’s imagine that the word as is substituted with the word while. For example, at a meal, we might talk as, or while, we eat. With this new meaning in mind, the commandment is now interpreted as “Love your neighbor while you love yourself.” This brings out a deeper connotation, suggesting that we ought to be taking actions which simultaneously enable loving our neighbor and loving ourselves. The idea is that both you and your neighbor are benefitting from the actions taken.
Imagine that you, your neighbor, and everyone in your neighborhood are acting in this way, loving each other and taking “love” actions that create value for each other. A love action in this scenario is simply providing goods or services to one another in exchange for other goods or services. Think of a very primitive society where there are only two jobs: hunting and farming. The farmers have plenty of potatoes, but they’d enjoy having some meat. The hunters have meat, but would like to have some potatoes. The hunters get together with the farmers and trade meat and potatoes with each other. Value has been created because both the farmers and the hunters are better off than they were before they traded their goods with each other. This is an example of my definition of economics: the process by which human beings act together to create value. Or, in other words, economics is the Golden Rule in operation.
In this sense, I think it’s fair to say that God invented economics. But, am I saying that the economy operates based on love? Well, yes and no. Economics, properly understood in the context of the Golden Rule, ought to be based on love both for our neighbors and ourselves. Of course, we know that not everyone operates according to the law of love. The genius of God in devising this system, however, is that value creation is achieved even if the people involved in the economic activity are not acting out of love.
Let’s say I am having a bad day and am not exhibiting love the way the Lord wants me to. In this mood, I go to the grocery store to buy a loaf of bread. I’m not very pleasant to the store owner or employees. Still, by buying the loaf of bread, value has been created. Both the grocer and I am better off. I wanted the bread more than the money I paid for it and the grocer wanted my money more than the bread. How do I know we are both better off? Because if we weren’t both going to be better off, the bread/money transaction would never have taken place. This ability to freely exchange with one another is the key to understanding why value can be created despite motivations other than love.
Am I saying that Christians shouldn’t give without expecting something in return? No, not at all. I’m simply saying that, as Christians, we should understand the economy and our participation in it as one way for us to put God’s love into action. My argument for this understanding is not meant to exclude any and all other ways one can imagine to love others, including outright giving, but we must realize that giving must be preceded by value creation – otherwise, there is nothing to give.
Economics is about how we live and how we treat each other. It is an integral part of how we build the Kingdom. Love your neighbor, love yourself, and take part in God’s economy!
In the next installment, we’ll build on these fundamental principles behind economics and investing.
About the author
John Reynolds III has been in the financial world for 25 years, developing expertise in auditing, accounting, financial governance, and financial risk management. John is a Certified Public Accountant and a Chartered Financial Analyst charterholder. John, his wife Janell, and their four children are members of Cornerstone Church.