Christian Ethics - Lesson 8

Economics | ET501-08

From this lesson, you will gain insight into the evangelical civil war that took place over 20 years ago. You will learn about the early stages of this civil war, which were recorded by Clark Penick, who helped instigate the movement known as the Evangelical left. You will also understand the harmful effects of left-wing evangelicalism on the church and the poor. The lesson will show you how many evangelicals on the left became enamored with their own self-virtue in what they thought was a crusade to help the poor, and began to preach that anyone to the right of them economically and politically had a defective Christian faith.

Ronald Nash
Christian Ethics
Lesson 8
Watching Now
Economics | ET501-08

Social Ethics

Part 3

III. Economics

A. Evangelical Civil War

1. The evangelical left

2. The message of the evangelical left

3. How will the church help the poor?

4. The historical record

B. Why study economics?

1. Helpful in understanding human behavior

2. Necessary for Christian leadership

C. Definition of Economics

1. Scarcity

a. Limited money, food, natural resources

b. Limited time

c. Choices made because of scarcity

d. Choices reflect values

2. A way of thinking

a. The importance of incentives

i. Application to welfare and poverty

ii. Consequences of the welfare system

b. Everything has a price

c. Long-range consequences

D. Subjective Economic Value

1. Objective theory

a. Adam Smith

b. Karl Marx

c. Value is inherent in the object.

2. Subjective theory

a. Value is imputed by the subject.

b. Opportunity cost

c. Marginal utility

3. Consequences of subjective theory

a. An unpredictable economic future

b. Socialism becomes impossible as an economic system.

  • Gain insights into philosophical ethics and Christian responses, and the Christian role in society regarding the state, justice, economics, and education.
  • In this lesson, Dr. Nash introduces you to the concept of hedonism, which is an example of a consequentialist ethic. He reviews non-hedonistic consequentialist philosophies, psychological hedonism, and ethical hedonism.
  • This lesson introduces you to the theory of deontological ethics and Emmanuel Conte. You will learn that the deontological ethic judges morality by examining the nature of actions and the will of agents rather than goals achieved.
  • In this lesson you will learn about the system of ethics that focuses on virtue and introduces the Four Cardinal Virtues, which are temperance, wisdom, justice, and courage, and emphasizes the importance of being the right kind of person who possesses the traits of character, and C.S. Lewis's book "Christianity" provides an informative treatment of the Four Cardinal Virtues and the Three Theological Virtues.
  • You will gain insight into C.S. Lewis's views on Christian ethics and the morality analogy he presents, where morality is like a fleet of ships that must fulfill three conditions to succeed: every ship must run properly, the relations between ships must be proper and orderly, and the fleet must head to the right destination.
  • You will learn about the importance of distinguishing between society and the state. Society is a voluntary organization of people, while the state is the group of people who claim a monopoly on the use of coercive force within a geographic boundary. By understanding this difference, you can prevent the government from interfering with your voluntary associations.
  • You will gain an understanding of how the professor's theory of the state in Social Justice in the Christian Church aligns with the New Testament. He explains that the state is a God-ordained institution to check against sin, and he is a moderate anti-statist who recognizes the need for government but also the inherent evil in any concentration of human power. The New Testament recognizes constraints upon governmental power, and Revelation 13 is an example of how the state can symbolize anti-Christian government. The lesson also discusses the concept of justice and how it is often invoked without a clear understanding, suggesting that Christians should study ancient Greece for a better comprehension of the term.
  • In this lesson, you will gain insight into the evangelical civil war that happened 20 years ago, learn about its early stages recorded by Clark Penick, understand the harmful effects of left-wing evangelicalism, and see how many evangelicals on the left became enamored with their own self-virtue in what they thought was a crusade to help the poor.
  • By studying this lesson, you will gain insight into the major differences between capitalism, socialism, and interventionism. You will learn that interventionism is often responsible for economic crises that are attributed to capitalism. You will also learn about the overlapping and continuum nature of economic systems and the gray area where an economic system may be viewed as socialism or interventionism.
  • This lesson discusses the decline of old liberation theology and how some of its proponents are now advocating for capitalism and democracy as being what the poor of the third world need, and presents shocking quotations from individuals characterized as evangelical, such as Jose Marquez Bonino, who promotes Marxism and praises tyrants like Castro and Mao Tse tung, as well as material about the three major kinds of Marxism that have existed in the world.
  • This lesson will provide you with a comprehensive understanding of interventionism and its role in the Great Depression, including the fact that blaming capitalism for the depression is based on four myths, and that interventionism actually deepens recessions by disguising the information produced by a market economy.
  • Through this lesson, you will gain an understanding of the crisis facing American education, as highlighted by Alan Blum's book The Closing of the American Heart and the author's complementary book. The focus is on the importance of values, standards, and morality in education, and the need to reopen the American heart to reopen the American mind. The lesson introduces the three kinds of illiteracy currently affecting Americans at every level of the educational process, with a particular emphasis on functional illiteracy, which refers to the inability to read, write, or use numbers well enough to get along in society.
  • In this lesson, you will learn about the incompetency of public school teachers in America, caused by academically weak students being attracted to the profession, lack of content courses in their college curriculum, unimpressive and radical left-winged professional educationists, and the National Education Association being an enemy of America's young people, with four essential steps to improve education, including getting a clear focus on the educational role of the family, increasing local control of education, changing the curriculum to prepare students for life after school, and changing teacher education programs.
  • Gain knowledge of the difference between the biblical ethic and other philosophical systems. Though it may seem simple, it is an underlying system that can lead to complex issues. The divinely revealed scriptures are the starting point for moral reflection, but not a ready-made answer. Some New Testament commandments are archaic or obsolete, and many modern moral problems are not discussed in the Bible.
  • You will gain insight into the pro-life stance and be equipped to inform others. Christians need not be timid about talking about these issues.
  • This lesson explores the arguments and counterarguments surrounding abortion, arguing for caution and conservatism in ending any life, emphasizing the need to balance the right of the mother with the rights of the infant, and briefly touching on the issue of rape and how it complicates the matter.
  • As you go through the lesson, you will learn about infanticide and euthanasia, and how the disrespect for unborn human life has led to an increase in cases of infanticide, along with some suggestions for what Christians should do in the case of children born with life-threatening handicaps.
  • In this lesson, you will explore the five major passages of Scripture related to homosexuality, including different interpretations of the story of Sodom and Gomorrah, and concludes that the Bible clearly condemns homosexual activity.
  • This lesson explores the topic of capital punishment in the context of Christian beliefs, arguing for consistency and emphasizing the need to view Old Testament laws in the context of specific situations that are no longer applicable.
  • This lesson discusses the three approaches to war and peace and distinguishes between principled pacifists and hypocritical, unprincipled pacifists, who are members of the political left and denounce American military actions but support violent revolutionary organizations.
  • You will gain an understanding of the growing issue of divorce and remarriage within the church, the responsibilities of Christian leaders in addressing it, and the need for Christians to think through what the Scripture teaches on these matters and formulate principles that will guide their thinking and conduct.
  • This lesson provides insight into how responsible Christians can make ethical decisions about birth control, considering the importance of intention, distinguishing between ethically acceptable and unacceptable forms of birth control, and emphasizing the importance of wise and careful means in achieving family planning goals.

Theoretical and theological basis for Christians  living an ethical life.

Dr. Ronald Nash

Christian Ethics



Lesson Transcript


It is said that when Albert Einstein got to heaven, he was told that his mansion was not quite ready yet and that he would have to spend a few a few weeks rooming with three other people. So Einstein went into this apartment that he was to share with three other people, and the first man greeted Einstein, put out his hand and said, I'm glad to meet you, I'm so-and-so, and I have an IQ of 180. And Einstein smiled and said, Wonderful. We can talk about the theory of relativity. The next man, somewhat humbled, put out his hand and said, I'm so-and-so and I only have an IQ of 120. Then Einstein smiled and said, Wonderful. We can talk about quantum mechanics. And then the third man stuck out his hand and somewhat sheepishly said, I only have an IQ of 80. Then Einstein said, That's all right. Tell me what's going to happen to interest rates in the next ten years. All right. I'll let you think about how that might have relevance for the study of economics. And if you're not tuned in to this bit of evangelical civil war, you won't understand why I get a little heated up. But you must understand that a little over 20 years ago, a group of people in the evangelical movement declared war on everybody else. And anybody who dared to disagree with them about the issues that we've been discussing the last week and somewhat the week before, and this week, the account. Lest you think I'm making this up, the account of the early stages of that civil war had been recorded by Clark Penick, who was a leader of the Opposition back in the early seventies, and Clark Tunick was one of two or three people who helped instigate the movement known as the Evangelical left. The place where you can find Penix account of this is in a chapter. He contributed to a book that I edited called Liberation Theology. It's on reserve for this course. Penick tells how that he helped begin The post-American, which was a the journal that preceded what is today called Sojourners, how he and Jim Wallis helped to set out to recruit and indoctrinate and entice every evangelical they could into a marxist or leftist orientation. Tenet goes on to report that he himself became so fanatical in his obsession with the left that he actually became a marxist for a few years after he had left Trinity and moved to Canada. However much Clark Pennock frustrates those of us who are his friends, we have to at least admire the man's candor and honesty, because Penick continued to read and he continued to think about political and social issues even while he was way on the left. And gradually he became he began to realize that the left wing evangelicalism he was touting was not only unjustifiable on theoretical grounds, it was also harmful to the church and harmful to the poor, and that, in fact, many of the many evangelicals on the left became became enamored of their own self virtue in what they thought was a crusade to help the poor. These people and I include here Jim Wallis and Tony Campolo and Ron Sider and dozens of other people who are now firmly entrenched in many evangelical seminaries and colleges. These people began to preach 20 years ago that if you were anywhere to the right of them economically and politically, there was something sadly defective about your Christian faith. You could not possibly be a good Christian and vote for Ronald Reagan. These people argue you could not possibly be a good Christian and support capitalism. So this business of mixing evangelical theology and politics and economics was not something that I started, but I think it would be hard to miss that. I'm one of a small group of people who's Bennett who who have who've been out. After these people to try and set the record straight. You don't enhance your virtue or your spirituality or your reputation as an intellectual, as an intellectual by moving towards the left, politically or socially or economically, but wholly apart from the bad social theory and the bad economics that these people are propagandized with is the bad effect that this bad social theory has upon the poor. Once again, I submit to you that Christians have an obligation, a duty, to help the poor. The question is what means will we adopt in our desire to help the poor? What economic system will we set forth as as one that will help the poor? What social theory? What political theory will we advance? And I want to submit to you that we do not help the poor. The record is clear. We now have the evidence from 25 years of Great Society social welfare programs that these programs not only do not work, but make the conditions of the poor worse, and you get the documentation for that in one of the later chapters of the Poverty and Wealth book. Don't think it's limited to us. This battle is going on within the Roman Catholic Church. The Roman Catholic bishops issued a letter on the American economy a few years ago that was absolute disaster. I mention it in the first chapter of the Poverty and Wealth book. This battle is going on within also the confines of the American academic scene as well. So you simply are not going to be very well equipped to lead other Christians to think about the social dimensions of the gospel. Unless you have an alternative, a reasoned and intelligent alternative to the left wing nonsense that is too often smuggled in to the content of the gospel these days. Now, a couple of other reasons why this economic stuff is important. I will very quickly give you a definition of economics that will show you that when economics is understood correctly, it is perhaps the basic science that studies human behavior. Economics has to do with much more than simply the making and the exchanging of money and material goods. I hope that I will be giving you some clues that will help you become a more astute observer of other people. What makes other people pick? What makes you tick? Why do people make the choices that they make? And what inferences, what reasoned inferences can we draw from our observation of the choices that people make? Economics deals with much more than money and the exchange of material goods. And then, of course, the other reason why I believe it's worth our time to focus on this stuff is this People are going to look to you for leadership in all kinds of matters. And I just don't think any educated Christian is qualified to provide the kinds of leadership that we expect in social issues unless he is economically literate. Economics is often a difficult and obscure and a boring subject, which may explain why so few people, even people who've taken economics courses in college, still understand it. I will try to, in what I see the rest of today and parts of next week, I'll try to indicate why the position I represent really is a Copernican revolution. Now I realize when I talk about a Copernican revolution, I am implying that people who don't recognize this revolution are as out of date, theoretically, as the people who advanced the earth centered model of the solar system. The geocentric theory of the solar system. If you know your history of astronomy, you know that well into the 14th 15th century, it was still common. It was still possible to find large numbers of people who still. Advocated the old Ptolemaic picture of the solar system. And of course, it was Copernicus, the Polish astronomer, who tried to get scientists to recognize that it was not the Earth that was the center of the solar system. It was the sun. And there was that battle that went on. Well, it is true that most Christians who think about economics are thinking about economics in a way that has now been outmoded. It has been outmoded for several generations. But the news of this new paradigm, the news of this new picture of economics has yet to reach home. And that is one reason why people like Ron Sider and Tony Campolo and Jim Wallis and the rest of the evangelical left are so confused they don't understand the Copernican revolution that has occurred in economics. They're still judging what they call capitalism in terms of an outmoded theory, and we'll try to correct that in in the time that is ahead of us. Now, let's begin with a definition of economics. What is economics? Economics is the study of human choices, of human choices with respect to scarce scarcity. I just want to make this as compact as possible. Now, there are two key ideas in this definition idea. Number one is the notion of scarcity. Economics deals with scarcity. No human being can have everything he wants. If there is anything that reason people will learn about life is that there is no such thing as a free lunch. You can't have your lunch and eat it. You can't have your cake and eat it too. Life confronts us every waking moment with scarcity. Scarcity of money. But it goes far beyond that. But let's just consider the scarcity of money. If you and I had all of the money that we could possibly spend, what our lives, would our choices be different? Well, I suppose mine would be. I might live in a different house. I might drive a different car. All kinds of changes are possible. If we had more money. But you see, it isn't money alone that confronts us with scarcity. There's a scarcity of food. There's a scarcity of natural resources. And there is the most important scarcity of all, I suppose the scarcity of time. Many people fail to recognize that economics is as concerned with the scarcity of time in our lives as it is with the scarcity of money and other resources. Let me give you an example. The other day, a couple of weeks ago, I wanted to buy a couple of baseball tickets for a spring training game done in Baseball City. And I'm kind of fastidious when I hate to sit in the bleachers. I like this guy, like a box seat so I can yell at the umpire and yell at George Brett. And, you know, especially when no one knows me. I like to make a fool of myself at athletic events. All right. So I faced a little problem. How can I get the best tickets? Well, I had several choices. I could get in my car and I could drive to the stadium at Baseball City. I could stand in a long line and I could say, What are the best tickets you got? All right. That would that on that where on those grounds, the two tickets would cost me a bucks apiece. Box seats, a baseball city who wants to get in his car and drive all the way to baseball city stand in line for an hour. You know, that's that's 3 hours time. So my other choice was to call ticket Trump. I saved all of that mileage. I saved all of that time. But it cost me all right. I had to pay a premium. I had to pay tickets on their commission. I had to pay a mailing and postage, and it was a rip off. Probably added six, seven, $8 to the cost of the tickets, but it was worth it to me that eight bucks, whatever I paid Ticket Tran is a premium. Saved me driving 80 miles, saved 3 hours of time, saved a lot of inconvenience. So it was worth it. So as we go through life, we make tradeoffs. We make tradeoffs with time. We make trade offs with money. So life is scarce. And in the face of this scarcity, human beings make choices. Those choices always reflect the individual personal scale of values. Whenever a human being acts, acts that action always reflects the most important value for that person at that moment. When I dialed up Ticket Tran and I said, Give me two box seats to the Royals game with the Cincinnati Reds. I was making a choice. The time I was saving was more important to me than the extra money that I was spending to get those tickets by mail. When I decide whether I'm going to eat at McDonald's or eat at a sit down restaurant, that action the final choice that I make, reflects the value that ranks highest to me at that moment. I might say to myself, I don't have the money to eat out tonight. I want to save that money and maybe eat out at a better restaurant or I don't have the time. Today I was a little late, so I had to grab a Diet Coke and a McLean burger. But I you know, it was a tradeoff again. I don't like McDonald's, but I had no time. I had to get here because of my faithful students who wanted to compliment me on the objectivity of my. Textbook. Now, listen to me. Whenever you make a choice, become reflective about the other things that you're choosing among and recognize how the choices you make reflect the value that ranks highest in your personal scale of values at that moment. And if you do that, you'll achieve a better understanding of what makes you tick and what makes other people tick. Okay. Now, the other thing I want to say from chapter one concerns the material at the end of chapter one. It is best to think of economics not as this is page 18 and your book. It is best to think of economics not as a series of doctrines or formulae or whatever. It is best to think of economics as a way of thinking, the economic way of thinking. Long before I began to pay attention to economics. I observed certain colleagues of mine back at Western Kentucky State University whose reasoning ability impressed me greatly. I often found a correlation between being a good economist and being and having an astute insight into human affairs and human problems. And one day it hit me that what qualified those especially good economists as good thinkers was the fact that they had been trained in the economic way of thinking. It was not their mastery of supply and demand. It was not their mastery of certain economic formula formulae that made them so astute in this matter. It was the fact that they had learned some common sense lessons about economics, which are also common sense lessons about life. Now let's identify some of the major elements of what your textbook calls the economic way of thinking. And notice that this is really just plain common sense. The catch is that in the hands of bad economists, they avoid, they ignore, and they reject these principles of the economic way of thinking. Principle number one, The importance of incentives. Now it's shocking that anybody would overlook this. But good economists approach any problem by recognizing that it makes a difference what incentives you give people. Now, this applies to America's welfare programs. This applies to our efforts to fight poverty in America. What did our welfare programs do during their first 20 years or so? Well, I'll give you some of the consequences. It led to a massive increase in illegitimate births. It led to a massive increase in one parent households. It led to female dominated homes full of large numbers of children who had no idea who their fathers were. All right. Now, some people some people have looked at the people in question, the people who came to exhibit these characteristics and say there must be something wrong with that race or there must be something wrong with those people. Not at all. What we need to realize is that the old liberal welfare programs gave people incentives to change the way they used to live. Before the Great Society programs, there was little assistance available to the poor. There was little incentive for people to go on unemployment. There was little incentive for people to just mass produce babies out of wedlock in the old days. If a daughter came home from high school and a daughter in a poor family and said to her mother, I'm pregnant and we're not going to get married, the mother would beat that shit up, right? She fell under the noose. Why? Because there was no money to feed that new child. There was no incentive to keep bringing illegitimate children in the world into the old system of welfare. What we needed to realize was that out of a desire to help the poor and needy, out of a desire to be compassionate, we sent the wrong kinds of signals to people. And those signals said, if you continue to produce babies out of wedlock, your monthly stipend from the folks from the beneficent federal government will increase. All right. And if if if there's a man around the house, your finance, your your monthly stipend will decrease. So we gave them all kinds of incentives, which now have been entrenched in the kinds of habits that Aristotle talked about, habits that may well condemn millions of poor Americans to a substandard life for generations to come because of the bad incentives we gave the poor. The shortsighted thinking of the people who developed the legislation. Well, let's quickly keep moving. A second principle of the economic way of thinking is the recognition that everything has a price. You see, this is one of the major weaknesses with socialism in songs. Under socialism, it looks as if all kinds of things are free. All right. Take health care, for example. Somebody wants me to expound on health care sometime in the next month. The great problem with a socialistic approach to medicine is that if people begin to think it's free and of course it isn't free. Somewhere along the line you're going to pay a price for what you get. In the case of the British system, what it means is long lines waiting to see the few number, the small number of people who who want to be doctors under that kind of system. I'll tell you about a rumor that was circulating Moscow when I was there last May. The highest paid person in the entire city of Moscow is a woman physician who moonlights as a prostitute. Her income as a physician under the under the Soviet socialist system was next to nothing. But by selling her body nights, she made enough money to to qualify as the richest person in Moscow. Everything has a price. If you think you're going to get free medical care, you or somebody else is going to pay for it monetarily through increased tax. Is everybody is going to pay forward through a lower quality of medical service. Everybody is going to pay for it through longer waits in a doctor's office. I'm talking about getting at the end of a line of 40 people. You calculate your time costs in that kind of system. A long wait for elective surgery. Everything has a cost. There is nothing that's free and there is no advantage to an economic system that disguises the costs. Let's skip to the last point under this heading the one on page 20. It's it is the importance of long range consequences. I want to tell you about a book that some people have called The Best Economics Text Ever Written. I don't know if that's true, but certainly it has been an enormously influential book. Perhaps one reason it's so good is because the author of this book never went to college. Some of the best books have been written by people who didn't go to college. The author's name is Henry Hazlitt. The title of his book is Economics in One Lesson Economics and One Lesson. What Henry Hazlitt does is tell you the basic principle of all sound economic thinking, and then the rest of the book is simply an elaboration, a set of examples. Henry Hazlitt says If you want to know whether a contemplated action is sound economically or bad economically, ask this one question What will be the long range consequences of this policy if it is adopted? What will be the long range consequences of this policy if it is adopted? Oh, I'll tell you. If you come out of this chorus with just one thing ringing in your ears, it wouldn't hurt for that to be the idea. Now, how does a typical American politician think when contemplating some action? You got it. What will be the short range consequences of this action? That is what's going to happen until the next election. See, they're only worried about the interval of time between today and the next time they stand judgment with the electorate. Let's consider one or two examples of programs promoted by American politicians on the grounds that they will help the needy in America. And let's see what the long range consequences will be. Let's try as our first example. Minimum wage legislation. Oh, boy. Do the bleeding hearts be at the moon when people start talking about this. All right. Now, why do we need minimum wage legislation? Here is the liberal answer. See, we needed in order to help the people who are struggling at the bottom of the economic ladder. They have no skills. They can't make enough money. And so what we're going to do is get the federal government to force employers to pay them more and not only pay them more in real wages, but also, of course, there will be a corresponding increase in the Social Security tax and all of the other fees that employers have to pay. Now, let's see which of you or how many of you can see not the short range consequences of minimum wage legislation, but a long range consequence. What is it? What will it be? Layoffs. Unemployment. Small business. Small businesses failing. Now, what you're all saying is this that when the government intervenes and be in the business process of people, employers hiring unskilled workers, the long range consequence of governmental intervention is to make fewer jobs available to poor and unskilled workers. In other words, it's the very opposite consequence that the liberal politician talks about. He wants to enhance the life of people at the bottom of the economic ladder, but he's only going to make it worse. Think some time about the number of jobs that may have existed when you were young or when your parents were young that no longer exist. I can think of many. Now, you may think this is trivial, all right? Because these were menial jobs. These were low paying jobs. But the fact is that these kinds of work were the first kinds of employment that were available to teenage men. 40, 50 years ago, it enabled teenage men who were unskilled to get their first job, get them trained and employable skills so they could then go on from that first job to a second better job and a third still better job. Movie Usher. You know, when I was a kid, we used to go to the movies and some nice person with a flashlight would take us down to our seat, bowling alleys, had human pins, etc.. How many of you ever seen a human being? You can tell you got to be over 50. All right. Some of us, either over 50 or from Canada, one or the other, a real live human being operating an elevator. How many of you have seen that? Well, again, some of you older people see, forgive me, I want to be alive. Human being, operating an elevator. That man, a guy or a girl with take home pay and all the rest. All right. What happened to jobs like that? The well-meaning government priced those jobs out of existence. Remember the first economic way of thinking? Incentives matter When the government. When the government increases the minimum wage, it creates this incentives for employers to keep as many unskilled workers on the payroll. Disincentives and so many businesses, people who ran bowling alleys or large office buildings or movie theaters said, I can no longer afford to keep hiring people to do this. I'm going to add technology, a machine to run the up the elevator, a machine to set the bowling pins, or we'll just get rid of the ushers completely. This is what government does. Well, you can get other examples from reading. From reading that material. Always ask yourself what will be the long range consequences of this action? I want to focus on one of the major elements of what I call the Copernican Revolution in economics, and I'm going to write a sentence on the board that may shock some of you. Good. I hope it does it. All right, here it is. All economic value is sub chapter. Now, let me tell you about a couple. In order to understand this, let me tell you about a couple of economists. You may have heard of them who disagreed with this idea, who in fact, never even gave any thought to this idea. All right. Their view was that all economic value is objective. Now, let me give you a couple of names here. If you've heard these names, raise your hands. All right. Let's see how literate you are. Adam Smith, Reagan, you've all heard of Adam Smith. He wrote The Wealth of Nations published in one year, by the way. Hey, man, 1776. One can never forget that. It's often called the father of capitalism. Adam Smith That comes as a shock, you mean? Adam Smith. Adam Smith was uninformed about a rather important issue in economics. You bet. As I'll show you in a moment. Now I'm ready to give you the other name, Karl Marx. Oh, just say for the fun of it. Get that on to get that on tape. Isn't that fashion? Think if you were ever a contestant on Jeopardy. These two enemies, the father of capitalism and the father of communism, both believed that economic value was objective. Now, what did they mean by that? They meant that economic value of something is inherent in the object. It is inseparable from the object. Let me give you an example from Karl Marx. Marx said, What is the economic value of a pair of shoes? Answer. It is the social and socially necessary labor necessary to produce those shoes. All right. So let us suppose in Marx's scheme that I'm going buy a store in some mall somewhere that that has for sale a pair of shoes and the costs of making that pair of shoes, that is the labor of the poor people who made those shoes, let's say, is $20. All right. That would be very high today. That would be very that would be enormously high in Marx's day. Now, Marx would say, get this, because the socially necessary labor that was mandatory to create those shoes was $20. The value of those shoes can never drop below $20. Now, it doesn't take a Ph.D. in economics to see the folly of that line of reasoning or anybody. Maybe what it takes is a few months in business. All right. To figure out the folly of that. Any businessman would tell you that if he stuck with a piece of merchandise that he can't sell at a profit, that he can't sell for his own cost, he better get whatever he can get for it, even if he has to give it away for next to nothing, because that merchandise is only taking up space in his window where he could have something else that might be selling more quickly. The value of that pair of shoes has nothing to do with how much it costs to make those shoes. The value of those shoes at any given moment is what any given person is willing to pay for them. And if someone's willing to pay $30 for them at this moment, they'll go for $30. If somebody is only willing to pay $10 for those shoes, they're not going to sell until the seller lowers them to their price. Economic value is imputed by the agent himself. Economic value is subjective. Now, before I pursue that idea any further, let me eliminate a possible objection here that I get from Christians who hear this for the first time. They say, Ah ha. I've always suspected Nash of heresy. All right. I've had my eye on Nash for a long time, and now it comes out. He's a subjective. He's a relativist. Hmm. In economics, I am. All right. I'm sorry, but economics is only one part of life. I can be a subjectivist in economics and be an objectivist when it comes to morality. And you've already heard me defend the objectivity and the transcendence of moral standards. The reason why economic value is subjective is because it depends upon what's going on inside the subject. It depends upon what he knows. It depends upon his tastes. It depends upon his values at the moment. Now there are two other ideas that are part and parcel of this business about economics subject to subjectivity. In fact, these are three different ways of looking at the same basic idea. So I'm writing on the board here under the word subjective economic value. I'm writing the word opportunity cost, and I'm also writing the term marginal utility. These are simply different ways of looking at the same thing. The business about opportunity cost goes this way. Let's take two people. Let's take a person A and person B and let us see two. Let us let us inquire into this matter with regard to these two people. Given your situation, your interests, your values, and what is accessible to you, financially feasible to you at this moment in your life? Of all the things that you could do the rest of today rank them in the order of highest importance. Okay. Well, somebody might say Mr. A mind say, man, if I were free to do whatever I want to do today, I think I'd go play a round of golf. Mr. B doesn't care about golf. All right. Mr. B is a conscientious seminary student, and he says, I would spend my time in the library. All right. Because I'm concerned about grades, graduation, future. All right. Now, what is the second ranked choice for Mr. A? The golf is going to cost him 25 bucks. His second choice could be a dinner at Olive Garden. Okay. Obviously, this guy is something of a hedonist, but that's all right there. There are. One can be a Christian hedonist. All right, now, Student B here. So he thinks about all of that money. His first choice is to spend time in the library. His second choice is to take some of that money and buy food for disadvantaged children, you know, help the poor. Now, notice that whatever Mr. A does with his time and his money and his resources will reflect the value that ranks highest for him at that time and in that place. Notice I said at that time, tomorrow, tomorrow, Mr. A might rank something else higher. His girlfriend might be coming to town or there might be a musical extravaganza somewhere today. What will you do with your time and your resources? Now, here's what the opportunity cost of playing a round of golf is for. Mr. A The opportunity cost for anything is the second highest ranked alternative in your scale of values. I repeat that the opportunity cost for whatever you choose is the second highest ranked alternative in your personal scale of values. So for Mr. A, the opportunity cost of playing 18 holes of golf is giving up a dinner, perhaps with his sweetheart at the Olive Garden. The opportunity cost of spending an afternoon in the library for Mr. B might be spending that same time helping the poor in some way. I haven't set these examples up and so there is no such thing as a free lunch. Whenever you make a choice, you give up something else, and that's something else that you give up is your opportunity cost for the choice that you have made. Now, because the opportunity cost is different and subjective. The cost, the cost that any choice involves for you is subjective. When you start totaling up what it costs you to make an economic choice, don't just think about the money it costs. You think about the opportunities it cost you, and then you will get a better handle on the true cost. You see, it's just not the fact that you're blowing 25 bucks to play a round of golf. It's the other things you could do with that $25. And with that time that is your true cost and it's subjective. Now, marginal utility in a nutshell, marginal utility boils down to this. First of all, the word utility is simply a fancy word that entered economics that has to do with the value that something has for a given person at a given time. Remember I told you that whatever choices you make in life, whenever you act, that is, you make a reasoned choice. You are demonstrating what is most valuable to you at that moment. Something has utility if it has value for you, if it's a good if, it's the sort of thing you're considering choosing. In this world of scarce resources. Now, what does the word marginal mean? Simply this. The way to tell the true value of something is to see what people are willing to exchange for a one additional unit and what they are willing to give up for one less unit of something. The word margin refers to any change at the limits. Any change at the limits. Let me give you an example. And this is way from the book. Years ago, when I was immature, actually about six months ago, I used to sometimes be overcome in certain shopping malls by a passion for a certain kind of pretzel. Hot sand pretzel. I guess it was all right. Such that it used to be the case that people could predict that if any time I visit a new mall, I walk around to see if there's a hot sand pretzel place there. All right. Remember I said I was immature, kind of worldly. Okay. Now, suppose I go to up. I go up to a hot Sam pretzel place, and I say, give me a pretzel with all of that sodium and give me to go with it. Something very nourishing. Give me a Coke. So in those as you know, those things are very filling. In fact, the combination of the pretzel and the Coke usually has people belching for the next hour, hour and a half. All right. So I finish my pretzel and my coke for which I pay $2, and then I ask myself, do I want another pretzel and Coke? Notice the situation is different. When I paid two blocks for the first pretzel and the first coke, I hadn't had one. I was hungry. I was lusting after a pretzel. All right. Having a pretzel at that moment ranked at the highest of my scale. About. Doesn't it say something despicable about my scale of values? All right, well, you do the same thing, All right? At any given moment, we can do crazy, stupid, foolish thing. Now, I ask myself, do I want a second pretzel and a second Coke? Notice I'm looking at the costs for an additional unit, and I say to myself, No, I'm satiated. I want to pay two bucks for another pretzel and another Coke. But you see, the merchant is watching me. He knows me. So he walks out to my table and he says, You know, we're having a special today for seminary professors with a certain weakness for pretzels. He says, you've already bought your first pretzel. You can today only you can have a second pretzel and a Coke for $0.99. Notice the marginal utility, the value that the second pretzel in Coke had for me has declined because I've already had one of them. So I'm not willing to part with $2. But the smart businessman comes along and he offers it to me for half price, $0.99. That's a tough bargain to pass up. All right. So I have the second pretzel in the second Coke. And I ask myself, do I want a third one? What would it take for that merchant to have me to get me to eat still? He'd have to give it to me free of charge. Or he'd have to say to me, I'll pay you a dollar. The marginal utility changes as we get more. Or has we have less. Now, of course, some people would say that that may work with pretzels MASH, but it doesn't work with money. The marginal utility of money never fluctuates. Oh, yeah. Try this as an example. Suppose you're financially destitute as I was when I was a student. I had a family to support. I had to make a living. All right? I made my living as a hospital orderly. There are more pleasant ways to earn a living than as a hospital orderly. All right. Now, suppose I work. Suppose I need $100 a week to pay the rent and buy groceries, support my family. And suppose I get that 100 bucks, and I may do all kinds of menial jobs to get that money. But suppose I've got it. Suppose I've got a little more than what I need. And then somebody comes up to me and says, Well, would you clean latrines for eight more hours a day for another 100 bucks? The fact that I've got the first 200 bucks makes me less willing to engage in certain kinds of activities for additional money. The marginal utility of money changes in the same way that the marginal utility of anything changes. You may not think that the more money people have, the less money they they need. But you watch what they will do for a few extra bucks and you'll quickly see that the marginal utility of money does change. The more we have of something, the less we have of something affects the what we are willing to give up, what we are willing to pay to get additional units of things. All right. Now, what is the concept? Suppose for the sake of argument. Suppose you've not yet read your brilliant textbook and you're not yet convinced. What are the consequences that follow? If economic value is subjective. And hang on to your seat. The first consequence is that the economic future is totally unpredictable. Economics is unpredictable if economic value is subjective. Why? Because we can never know from day to day, from hour to hour what the personal preferences of people are going to be in the future. Be careful of any economist who presumes to make predictions about the future. He's a phony or he hasn't heard about the Copernican revolution in economics. Consequence number two Socialism becomes absolutely impossible as an economic system. Say, Hey, wait a minute, What? How did that happen? A minute ago you were talking about opportunity cost and subjective economic value, and all of a sudden you're banging socialism over the head. How did that. Where's the connection? Simply, this socialism is an economic system in which a small group of elitist planners issue commands that result in certain goods being produced and certain goods, certain other goods not being produced and distributed and supplied. You see, under socialism, a small group of people is foolish enough to think that they can have so much knowledge about the desires. The launch of people as to make commands issue command and control an economy from the top down. If there is any lesson that the Left in America should have learned from the collapse of communism, it is the utter, total inability of economic planners to plan. Under socialism, there simply is not sufficient information for the socialist planners to know what edicts to issue. I met a man who was the first Soviet economist to escape from the Soviet Union. This was a couple of years ago. He said that under, oh, under one of the Soviet leaders prior to Gorbachev, this this leader called one of the Russian bureaucrats into his office. And he said, Comrade, I and this is true stories that I have good news and I have bad news. What's the good news? We have made you. We have put you in charge of a new committee to produce vegetables. The very idea of establishing a committee to produce vegetables. So the comrade said, Thank you for the compliment and the promotion. What's the bad news? You have until October to produce them. But just a man. Put yourself in the next guy. Shoes. All right. And under a statist system, somebody makes you the commander in charge of producing carrots and broccoli and other vegetables. What are you going to do to fulfill the edict of here of your command? What are you going to do? You're going to go. You're going to send soldiers out in the fields with guns and tell people to plant carrots and broccoli. Do you have any what are the incentives and disincentives of that? Huh? People have a bayonet in their back and they're supposed to grow plant carrots. Well, I know what I do. I go out after dark and I dig up the seed. That's what I do. Those dirty guys are going to put a bayonet in my back. The way you produce vegetables is to give free people an incentive to produce those vegetables. A command economy will not do it. That's why there is. That's why there are such shortages in the Soviet Union, although many of those shortages are actually caused by important products being hidden away in fat in in warehouses until the prices rise high enough so they produce the stuff, but there's no incentive to sell them knowing that market prices in the Soviet Union are going to rise even more in the future. Will you pay attention to this? Because I'm going to be saying more about the possibility of socialism in the future. The failure of socialism in the communist countries of the world was not an accident. It was predictable based upon the nature of socialism and its lack of access to the information that socialist planners must have if they are to be successful. Nobody can have that information because all economic choices are based on subjective preference. Therefore, socialism will necessarily fail wherever it is tried.