Dimensions in Economics:
Prism of Economic and Moral Principles
Dr. Judd W. Patton
“What a science [like
economics] does, or should do, is simply to allow the average man…to
command the heights of genius. The basic tools are the simple principles…
Without them, he is a jibbering idiot, who makes only noise under an
illusion of speech.”1 – James Buchanan, 1986 Nobel
laureate in economics.
Dr. Buchanan has “hit the nail on the head.”
Economic knowledge with its simple yet profound principles should
propel economists and non-economists alike to eye-opening vision and insight
into humankind’s economic problems. It
is crystal clear that hasn’t happened. Witness numerous jokes ridiculing
economists and their forecasting follies.2
Indeed, the 20th century “explosion” of economic
research, aided by the marvels of computer technology, has, paradoxically,
still not provided definitive solutions to basic contemporary economic
problems, namely: inflation, unemployment, business cycles, stock market
crashes, budget and trade deficits, and financial crises.
Why? Could there be a knowledge gap – a missing dimension in
contemporary economic analysis? Could
there be a prism, so to speak, that individuals can look through to discover
the real causes and solutions to humankind’s seemingly intractable
Yes! The author and a
small minority of individuals and economists respectfully submit that there
is indeed a blind spot in modern-day economic analysis, and there is
such a prism.
Contemporary economic science has discovered principles that are
relative to time and place, continually open to refinement or refutation.
These principles, however, have not led to any heights of genius.
Our economic problems remain. Candidly, the foundational premises of
secular economists simply make it impossible for them to grasp the existence
of universal, timeless economic and moral principles. But we humbly suggest that these simple principles,
these missing dimensions, do provide the insight to resolve our
economic difficulties. Step
inside this worldview and determine for yourself if you do not agree that it
allows the average man to command the heights of genius.
Two Basic Worldviews
In the 1960s physicist Thomas S. Kuhn brilliantly demonstrated that
each and every science rests on generally unquestioned premises that
condition the nature of human thinking and scientific investigation.3 Dr. Kuhn called this body of foundational premises a
The essence of
Kuhn’s insight is that there are no such things as brute facts -
facts apart from a definite paradigm. What
is a fact and what is a non-fact, or what is a cause or
what is an effect, depends on the specific paradigm.
Today there are many economic schools of thought, each with their own
unique paradigm or worldview. By
analogy, each tradition has its own eyeglasses with very different
prescriptions to view the economic world.
The result? There is no
agreement on facts, or on cause and effect
relationships. What, for
instance, caused the October 1987 stock market crash?
Ask five different economists, and you will get six different
answers! It’s virtually the
same for any economic topic.
The real philosophical question is: which economic paradigm can best
account or give meaning to economic phenomena?
Consider the worldview based on revealed knowledge, the Bible, as the
paradigm for economic analysis.
In the book of Genesis, the Creator God reveals that there are only
two primary world-views, one symbolized by the tree of life (God’s
revealed paradigm) and the other by the tree of the knowledge of good and
evil (man’s paradigm). Simple
observation today makes clear that the latter tree, when applied to
economics, contains many branches or traditions, but the trunk of the tree
is humanism, man and his reasoning as the sole source of knowledge.
As most people know, Adam and Eve disbelieved and disobeyed God. They
ate from the tree of the knowledge of good and evil. In doing so they took
to themselves, and for all mankind after them, the discovery of knowledge
apart from God. They ignored
God’s instruction, “The fear of the Lord is the beginning of
knowledge” (Proverb 1:7). As
a result mankind has created his own economic systems and generated his own
diverse schools of thought that seem right to him (Proverbs 14:12).
Thus, there are only two kinds of economics: Biblical economics
and man’s economics. Again,
the latter is fractured into numerous traditions.
By excluding moral or ethical principles from their paradigms, and by
conducting science by means of the trial and error scientific method,
man’s economics cannot see or discover inexorable economic
relationships as revealed within the Biblical paradigm.
The Bible does not directly expound the principles of physics,
chemistry, or even that of economics. However,
it does provide the essential framework for the acquisition of economic
knowledge and understanding that is necessary for man’s stewardship of the
earth (Genesis 1:28).
Three of the most significant paradigmatic premises for Biblical
Economics are: (1) The Word of God is the foundation for all knowledge; (2)
Man is a purposeful being endowed with volition and free choice; and (3) The
Creator God has set in motion inexorable spiritual laws that govern human
relationships to cause and produce all good (Deuteronomy 30:15-20).
From these premises and other scriptures, it can be seen that there
is indeed a relationship between God’s spiritual laws, the Ten
Commandments, and the economy (Psalms 1:1-3, Job 36:11).
The relationship is plain: obedience to the Ten Commandments leads to
or causes individual and national prosperity.
These laws, if followed, produce attitudes and a way of life that
cause harmony, social cooperation in the division of labor, and an
environment for capital accumulation. On
the other hand, a society rife with rebellious children, murder, adultery
and fornication, stealing, lying and coveting will find it difficult to form
long-lasting productive relationships in a division of labor. The
institutions and environment necessary for wealth creation will be poor and
Economic difficulties, then, are ultimately spiritual in nature.
This is vital, essential knowledge in understanding the root causes
of 21st century economic problems.
Nevertheless, it is not sufficient knowledge.
Wise stewards, whether economists, government leaders, or average
men and women, need knowledge of economic cause and effect.
For example, would abolishing private property be an appropriate
means to a more productive, efficient economy? Would protective tariffs or
quotas be proper means to reduce a nation’s unemployment rate?
Would higher minimum wage legislation raise income for laborers?
Would increasing the quantity of money be a proper means for Federal
Reserve policy to lower interest rates and thereby stimulate economic
Obviously knowledge of the Ten Commandments does not directly answer
these and most other economic questions - questions a wise economist should
be able to answer. These are
questions of economic cause and effect.
How can they be discovered?
The answer, in brief, is through logical deduction starting from the
premise that mankind acts purposefully.
The Bible provides numerous examples that make plain the
inappropriateness of empiricism or the scientific method when dealing with
purposeful beings. Specifically,
the method for discovering economic principles is to start with the premise
that man acts purposefully, then by the rules of logic deduce that B is
true; if B then C; if C then D and so on.
No experimentation or hypothesis is needed to confirm these
principles (B, C, D). They are universal principles, true for all people at all
Interestingly, a tradition of economics outside the fashionable
mainstream has built their analysis on this premise of purposeful human
action. These economists have grasped the missing dimension
of inexorable economic laws and lucidly expounded them.
We refer our readers to the works of Ludwig von Mises, Hans Sennholz,
Murray Rothbard, Henry Hazlitt, Gary North and others available from the
Foundation for Economic Education (e-mail: firstname.lastname@example.org).
Let’s notice a few of these important laws of cause and effect,
laws that command the heights of genius.
Law of Comparative Advantage
Harmony and balance
between producers and consumers is only attainable through market-clearing
prices that reflect the actual supply of and demand for a particular product
Supply creates demand; or better yet:
Saleable production creates its own Demand.
Law of Comparative Advantage
Income or production
is maximized when individuals and nation specialize
producing goods and services in which they have a cost
advantage, that is, in which
they are more efficient or profitable than other
4. Law of Employment
There is always work to be done but individuals must accept wages or
salaries, including fringe benefits, which correspond to the market worth of
their service to be employable.
5. Law of the Quantity of Money
There is no economic benefit to be gained by increasing the quantity
of money. Prices and costs
adjust to the available supply, namely:
more money, higher prices; less money, lower prices.
6. Law of Time Preference
Mankind prefers a present good or satisfaction to the same good or
satisfaction in the future. That is, time is valuable; it commands a price
7. Gresham’s Law
money drives “good” money out of circulation.
A better definition is: Money artificially overvalued by government
will drive out of circulation artificially undervalued money. (Remember our
silver coins that disappeared in the early 1960s?)
To achieve economic prosperity and success, these laws must be
learned and followed. Otherwise,
our leaders will be frustrated in their attempts to find solutions to
contemporary economic problems.
For example, from these laws we know that persistent shortages and
surpluses are the consequences of legal price ceilings and legal price
supports, failing to obey the Law of Supply and Demand. Price
inflation and business cycles are the consequence of ignoring the Law of the
Quantity of Money. Unemployment
is a consequence of minimum wage laws that violate the Law of Employment.
Lower standards of living can be a consequence of protective tariffs
and barriers – failure to get in step with the Law of Comparative
Advantage. Government deficit
spending to create demand and thereby restore unemployment is
counterproductive; it contradicts Say’s Law. Loss of American silver
coinage in 1964 was the consequence of ignoring Gresham’s Law.
Clearly, it is knowledge of economic law that makes it possible for
man to understand how to achieve a prosperous, dynamic, and progressing
economy free from inflation, chronic unemployment, and boom and bust cycles. Surely it is exciting, essential knowledge.
Modern day economic analysis has a knowledge gap – a gap consisting
of two missing dimensions. There
exist immutable moral and economic laws even though unseen and unattainable
through man’s paradigms. These
laws are the basic tools for resolving contemporary economic
James Buchanan is right. Without
these simple principles one only makes noise under the illusion of
Buchanan, What Should Economists Do? (Indianapolis: Liberty Press,
example, a major accomplishment of economic forecasters has been to make
like a science!
S. Kuhn, The Structure of Scientific Revolutions, (Chicago:
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