Academic journal article Journal of Markets & Morality

Common Grace and the Competitive Market System

Academic journal article Journal of Markets & Morality

Common Grace and the Competitive Market System

Article excerpt

This article reviews the biblical doctrine of common grace and evaluates the consistency of competitive free markets with that doctrine. Common grace helps explain much of the good found in a fallen world, while also providing an explanation for why fallen men do not act worse than they do. Competition is seen as a form of God's common grace because it provides the institutional incentives to constrain market participants from predation and exploitation, while encouraging social cooperation and mutually beneficial exchange.

How can it be that institutions that serve the common welfare and are
extremely significant for its development come into being ithout a
common will directed towards establishing them? (1)
                                                     --Carl Menger

How shall we solve the problem of the bad which the Bible ascribes to
unregenerate men and those "excellent" deeds performed by these same
unregenerate and pagan men? And we cannot say of these excellent deeds
that they are splendid vices. We cannot call them the products of sin.
Sin will not produce such good results. (2)
                                                     --H. Henry Meeter

Introduction

In The Fatal Conceit, F. A. Hayek defends free markets against the errors of socialism by lauding the free market's evolutionary process, which leads to an extended order. For Hayek, the leap of extending the gains from trade beyond narrow social groupings (such as the family or tribe) to those we do not know--and may not even like--requires submission to abstract rules, conventions, and evolved morality. (3) Hayek argues that the evolutionary process of trial and error has resulted in a system of morality that includes knowledge and wisdom "incomparably more complex than what any individual mind can command," and requires "many differing individuals to absorb... it." (4) Following Adam Smith, Hayek argues that with an extended order, "unintended consequences are paramount: a distribution of resources is effected by an impersonal process in which individuals, acting for their own ends, literally do not and cannot know what will be the net result of their interactions." (5) If individuals cannot see the effects of their specific actions, it is impossible to apply a moral calculus to their actions; we are left to follow abstract rules and conventions. But is there stronger support for the morality of competitive markets?

In Hayek's classic "Competition as a Discovery Procedure," he argued that the way economists commonly think of competition fundamentally misunderstands its essential function. Rather than the textbook definition of perfect competition--where markets assume given knowledge and optimally allocate resources--competition serves to discover hitherto unknown and unavailable knowledge (tastes and preferences, best production technique, relative scarcities, and so on). (6) For Hayek, the market is a process--a process of knowledge discovery. Yet competition serves broader purposes than simply as an economic system to allocate scarce resources--the competitive market system can also be shown to be an institution of God's common grace. In this article, I will argue that competition as exemplified in free markets is consistent with the Christian doctrine of common grace: first by reviewing that doctrine, then, following Berkhof's taxonomy, by describing how markets manifest common grace. (7)

Common Grace

The eyes of all look to You,
And You give them their food in due time.
You open Your hand
And satisfy the desire of every living thing.
                           --Psalm 145:15-16

A major stumbling block for many in deciding whether to embrace a belief in God is the problem of evil in the world. Why would a supposedly loving God allow bad things to happen to so-called good people? Yet theologians often question the opposite problem: Why do good things happen to bad (fallen) people? …

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