If there is one mantra you are sure to get widespread agreement upon from all economists, it is this: Trade is good. But before we get into why, it is helpful to understand the key economic principles underneath this common refrain.
First, economists believe that people are rational. This term can mean a lot of different things, but here, I simply define it as a person who is “goal seeking.” That is, a person who acts on purpose.
Second, we live in a world of scarcity. Scarcity, defined and described on the first page on nearly every economics textbook, is the problem of having infinite desires in a world of finite resources. Or, in more general terms, scarcity could be summarized by simply saying “there isn’t enough to go around.”
Third, and finally, if rational people find themselves in a world of scarcity, then they will prioritize their decisions. Because resources are limited, and people act on purpose, decisions will reflect the course of action that is best, or produces the most benefit (what economists call utility) given one’s resources.
Trade and Utility
What does trade have to do with utility? Consider an exercise I like to share in my entry-level economic classes. Once everyone is seated, I provide each student with a random snack (1 per student). The snacks range from healthy (fruit, whole-grain chips, dried vegetables) to unhealthy (candy bars, 12oz. soda, gummy worms). On a scale of 1-10, each student is asked to rate their level of satisfaction with the snack they received (utility or “utils”). As I write their snack score on the board, I ask them to share their rationale. Some might say, “I gave it a ‘4’ because raisins make me sick,” or “I gave this sugar packet a ‘7’ because I like my coffee sweet.”
After this, the scores are summed to arrive upon a total utility score. As one might imagine, randomly distributing the various snacks to students without considering which snack they actually desire creates an inefficient, or suboptimal, arrangement. Some may like their snacks; others may not. So, after summing the scores, I ask: “What can be done to increase this score?” It only takes moments before someone inevitably blurts out the obvious: “Let us trade!”
Therefore, I create a second round of snack distribution. However, this time, each student is allowed to trade with one another for a specified period of time (usually 2 minutes). Students can keep their snack, or opt to exchange in mutually beneficial ways so as to increase their satisfaction number.
After trading, I calculate the new score and take the percentage difference between the new score and the old (after doing this exercise numerous times, I have found that the percentage increase is consistently in the 50% to 60% range). The conclusion follows: “So, by simply allowing you to exchange for mere minutes, I was able to increase our classroom satisfaction by over 50%!”
Marketplace and Value
This is a very simple exercise, but it demonstrates an important principle in free-market economics: Trade allows for mutually beneficial exchange. A person would not enter in an exchange with someone else if they did not believe they would benefit from the transaction. So, when exchange occurs, new value is created. If people are acting rationally in the exchange, they are made better off. Whether it is trading gummy worms in a classroom, or trading wheat, tires, or cotton across an international market—trade creates value that did not exist prior to the exchange.
Naturally, for people of faith, the creation of value should appeal to us. An open marketplace affords individuals the opportunity to partner with one another through the exchange of products and services. In addition to creating additional benefit, it recognizes that others can be a source of value and fulfillment in a given social setting.
This does not mean that free trade is a “Christian slogan” as Theologian David Atkinson has warned. Moreover, conditions allowing for exchange relationships alone are not sufficient to bring about the Kingdom ends described in Scripture. However, it is important to recognize that free trade—properly positioned—creates new benefits through mutually beneficial interactions. Moreover, our creative action and productive work as humans created in God’s image allows us to harness certain exchange and trade arrangements in a redemptive manner. John Wesley, for example, recognized the power of faithfully harnessing economic forces in order to achieve socially desirable outcomes.
Of Wesley’s perspective on economic activity, the production of money, and its rightful stewardship, Chris Armstrong writes:
Wesley was not averse to promoting economic work in the secular world as a means to promote human thriving. He taught his people that when well handled by Christians, money could become food for the hungry, drink for the thirsty, clothing for the naked, rest for the traveler, support for the widow and the orphan, defense for the oppressed, health for the sick, even life for the dying.
So, trade is good. And when it comes to creating the conditions necessary to allow others to thrive, it is very good. Moreover, a free market allows for productivity, specialization, and open trade to occur. This naturally allows for innovation and growth, market outcomes that people of faith can reasonably support.