#115 Who Made the Market?

the christian economist dave arnott

Who Made the Market?

Whole Foods founder John Mackey said recently, “Capitalism is the greatest thing humanity’s ever done.”  Who gets credit for this marvelous invention?  Who made the market? 


Whole Foods founder John Mackey said recently, “Capitalism is the greatest thing humanity’s ever done.”  That’s worth repeating and thinking about it for a moment, Capitalism is the greatest thing humanity’s ever done.”  My first response is, “Christ coming to earth was greater, but humans didn’t do that.  

The capitalist market is where people vote.  It’s really the most democratic of systems.  As the Christian Economist, I would suggest that the market is where we love our neighbor as we love ourselves.  In my little book Economics and the Christian Worldview, I make the statement, “If you love your neighbor you will supply him products and services he demands.  If you love yourself, you will make a profit while doing so.”  

In class this week, I tried to simplify the market.  It’s not easy to do.  But, very briefly: Demand changes because of price, and quantity demanded changes with SPITE.  That’s an acronym for substitutes, population, income, taste, and expectations.  Supply changes because of price, and quantity demanded changes because of SITE, which stands for the number of suppliers, input cost, technology, and expectations.  There are 11 things moving all at the same time.  Now you know why the idea of ceteris paribus is so important.  Because, if I said that demand would go down, because of a price increase, you would argue about any of the other ten.  Ceteris paribus is a Latin term that means, “All else being equal.”  So, when prices increase – all else being equal – demand goes down.  Think about those 11 effects, all moving at the same time.  Who can set prices in such a dynamic environment?   Fed Chairman Jerome Powell can’t do it.  Treasury Secretary Janet Yellen can’t do it.  President Biden can’t.  No one can!  

Humility really is at the heart of Christianity and Economics.  The first two steps in Alcoholics Anonymous are: Step 1 – We admitted we were powerless over our addiction – that our lives had become unmanageable

Step 2 – Came to believe that a Power greater than ourselves could restore us to sanity

The four spiritual laws require humility because we believe we have to admit that God is greater than we are. The first is: God loves me.  The second is: I am sinful and separated from God.  

Humility is a critical lesson to learn in Economics as well.  As I’m recording this, in February of 2022, the Federal Reserve Bank is promising to decrease bond-buying and increase the interest rate next month.  They’re probably too late.  I cover some of that humility in podcast #21 titled Economic Humanism, and #41 In the Fed we Trust.    

The Benevolent Social Planner

I often draw a simple happy face and replace the two “eyes” with the letters “I.”  And, I explain that there could never be a benevolent social planner because that person would need perfect vision through two “I’s”:  Information and Intent.  You should wonder how any supplier sets prices with 11 dynamic effects changing at the same time.  They can’t  No one can.  It’s impossible to predict where all 11 of those are going to land at the end of the day.  My class at Dallas Baptist University starts at 8:00 central time, so the stock market opens at 8:30.  Sometimes I will ask the students, “Do you think the stock market has gone up or down in the last 15 minutes?  They don’t know.  No one knows.  There are three explanations for what moves prices, and the three suppliers of the answers happen to have different worldviews. 

First: Adam Smith

Yes, that guy.  He said products and services get distributed via the invisible hand.  He was mostly a diest.  He said that goods get distributed via the “invisible hand” of the market.  Since the transactions of the market transcended human limitations, Smith said they were an expression of God’s benevolent and providential governance of human society, since it created a more harmonious order than we would otherwise expect.  That’s a pretty important point, and maybe that’s why he’s considered the father of economics.  When fallen people enter the market, we should expect mayhem.  Each person seeking their own best interest should be a free-for-all tag-team mess.  But it’s not.  Markets are orderly.  People respect one another.  They show grace and care for each other.  Why?  How can two people seeking their own self-interest, provide for the interests of all?

When markets are lightly regulated, they produce order.  You buy gas without even seeing an attendant.  You buy products from Amazon without a second thought about whether the product will arrive on time, at the prescribed price, and the promised quality.  Something more than human behavior is at work here, because that answer, the invisible hand, is not a very satisfying answer, because it’s invisible.  Let’s see if we can FIND that hand. 


Second: F. A. Hayek

Our second answer comes from an atheist, F A Hayek, yes, that guy.  He said the market conducts transactions via spontaneous order.  So the question is “who spontaened it?”  In philosophical terms, this is called “first cause,” but I’m not a very good philosopher.  But the idea that order springs from chaos need some investigation.  Can order come out of dis-order, without some push from an external source?

One of the laws of thermodynamics says the world is slowing down and becoming more disordered.  That’s how nature works.  It tends toward disorder, not order.  Order can’t emerge on its own. 

While attending a very good presentation on FA Hayek at the Acton Institute a couple of years ago, I asked the presenter if Hayek’s idea of spontaneous order was an example of intelligent design.  Maybe I gave her a title for her next presentation, and I wish I had the time and intellectual ability to marry those two ideas.  You see, intelligent design essentially says that life on earth is so complex, that it must have been designed by a supernatural entity.  The book by that title was authored by Bill Dembski, and there is a think tank in Seattle called The Discovery Institute where they do work on this subject.  One of the founders is George Gilder, who wrote a classic book of Christian Economics that I often quote, titled, Wealth and Poverty.  

Here’s how Intelligent Design works: When you see a sophisticated outcome, you assume there was an intelligent designer.  You clicked on your keyboard today and I started talking.  The computer you clicked on was intelligently designed.  The internet that delivers the message was intelligently designed.  Maybe even the words I’m saying are intelligently designed, but I admit to being a professor, so sometimes I “Profess” and get off the topic.  So, I will return to my subject, Who Made the Market?


Third: Jay Richards

I’ve read about 35 books on Christian Economics.  It’s my personal opinion that Money, Greed & God is the best.  And the best line from that best book is this, “Markets are a stunning example of God’s providence over a fallen world.  It is just what we might expect of a God who, even in a fallen world, can still work all things together for good.”

Oh, by the way, Jay Richards is a senior fellow at the Discovery Institute.  Quoting from his book again, “For the market to work right, people need private property.”  In the Bible, the right to have private property is an assumption.  In our book Biblical Economic Policy, Sergiy Saydometov and I say that the Old Testament command “don’t steal,” assumes private property.  This property is exchanged in markets.  Quoting Jay Richards, again, So a market doesn’t just distribute goods and services. It’s a highly sensitive network for gathering and disseminating information that would otherwise elude us. It leads to specific prices for the goods and services of interest.”   

We hear a lot about the brutish, competitive nature of capitalism, about winners and losers, the survival of the fittest, and the income inequality it produces.  You may have even read a book on the topic.  But how was that book written, printed, distributed, and sold to you?  You see, we hear many criticisms of free markets, but far too little about the miracles of free cooperation and interdependence that free markets have made possible.  About the free market that delivered that book to you, yes, the one that criticized the very market that delivered the book to you.  Is that market perfect?  Of course not!  In any system where fallen humans engage with each other, there will be imperfections.  But free markets are so much better than the alternative, which in this podcast I’ve described as a benevolent social planner, and other times I have referred to it as Socialism.  



In a recent podcast titled The Great Reset, I make the point that the folks at the World Economic Forum don’t like markets because it takes the power out of their hands.  Fallen people who seek power are really at the heart of just about all economic maneuvers.  The Great Reset by the World Economic Forum is just the latest.  Just this week, in Senate hearings, to get confirmed as the supervisor of banks at the Fed, Sarah Raskin contradicted many clear statements she has made in the past, about discriminating against fossil fuel companies.  She thinks she knows what is best, and so she’s choosing winners and losers, although she denied it in her testimony this week.  Power: That’s what our fallen nature tells us to seek, and people seek it in economic terms, just like they do in every other facet of life. 

Recently, I’ve been reading a book titled On Business and Economics, the writings of Abraham Kuyper.  Maybe that’s why it seems like markets are God’s common grace that falls equally on believers and non-believers.  It even falls on those who criticize the market.    

So Whole Foods founder John Mackey was partly correct, when he said, “Capitalism is the greatest thing humanity’s ever done.”  But it wasn’t done by humanity.  It was done by the providence of God.