As anecdotal evidence on the matter of how economists view the Bible, I recall how I and some of my fellow graduate students at the University of Wisconsin in the late 1950s scoffed when told that a conservative Catholic priest had invoked the Eighth Commandment (“You shall not steal.”) as an argument against the federal government’s use of progressive income taxation to effect the redistribution of income. Part of our incredulity stemmed from our assumption (not necessarily true) that in the absence of progressive income taxation, the overall tax system (including state and local governments) would become highly regressive; i.e. would burden people more heavily in percentage terms as their income fell. In addition, we thought that whatever the Bible had to say about taxation applied to a different time and had little, if any, relevance to government’s role in the modern world.

To be fair to my profession, since my graduate study days, economists have become far more inclined to question the desirability of taxing income at progressive marginal rates than was the case in the late 1950s. Such taxation necessitates great enforcement cost and imposes a substantial compliance burden upon taxpayers. It can have adverse incentive effects and distorts how people choose to receive their income. By encouraging talented people to choose occupations in which they can advise others about how to comply with the tax laws and reduce their tax liabilities, it wastes human resources since it would be perfectly feasible to collect the same quantity of revenue with a much simpler tax system featuring a relatively low flat rate tax with few loopholes. The vast quantity of non-human resources required to print and distribute tax forms, compilations of tax laws, computerized tax programs, and other income tax literature could also be substantially reduced with such a simplified tax system. Simplification, however, goes against the interests of the politicians who derive power and campaign funds from manipulating the tax laws and depend upon “soak the rich” demagoguery in order to get themselves elected and reelected.

All of these points are well-understood by many economists today. Few economists, however, present arguments against progressive income tax rates that explicitly refer to the Bible. I am sure that some of them know full well that to the extent that the Bible addresses the subject of taxation, it is more compatible with proportional tax rates than progressive ones, and I am also sure that some of them do indeed regard the use of taxation and government spending to effect large-scale transfers of income and wealth through the political process as a violation of the Eighth and Tenth Commandments. To ground arguments about economic policy in Scripture, however, would be to violate the general rules of economic discourse. That is because, like other social scientists, economists employ the analytical approach of methodological naturalism, which excludes divine authority by assumption.

Although the formal study of economics employs methodological naturalism, the study of economic history has suggested to many scholars that it is objectively demonstrable that Christianity contributed enormously to the rise of modern capitalism, the economic system to which the world owes the enormous material progress of the last few centuries. Critics on the left never tire of denouncing capitalism and the inequalities of wealth and income with which it has been associated, but unfortunately for them, they cannot point to a single instance in which an economy has reached a high state of economic development without relying substantially upon market-driven institutional structures; i.e. capitalism. It never ceases to amuse me that much of the criticism of capitalism has come historically—and continues to do so—from the world of academia, whose unprecedented growth and prosperity represents one of the many fruits of capitalistic economic development. A similar paradox can be seen, by the way, in the pathetic politically correct apologies by American politicians to third world countries for the institutional practice of slavery in the past that ignore the fact that the push to end slavery in the nineteenth century received its strongest impetus from the world’s most highly developed centers of capitalism, England and the northeastern part of the United States.

Judging by the record of history, Christianity has managed to accommodate itself to the exercise of sound economic policy, or can it be that our understanding of what constitutes sound economic policy owes a great deal to Christianity? I lean toward the latter view; i.e. I believe that, in general, to the extent that our conduct of economic policy has coincided with a generally sound understanding of the Bible, society has benefited materially as a consequence. I do not assert that the economic policies framed in the countries that led the process of industrialization in the eighteenth and nineteenth centuries were anywhere close to biblical perfection, but I do maintain that they were more in harmony with the New Covenant that came into full effect in AD 70 than the policies that prevailed earlier. The fruits of those policies are evident in such indicators as per capita income, life expectancy at birth, economic opportunity and social mobility, the percentage of the population living in abject poverty, and effective protection of the environment.

Note that I do not include among these indicators greater equality in the distribution of income. This does not mean that I think that the distribution of income has become less equal. In fact, I believe the opposite is the case, though you can get different results depending on when you start and how you measure income. That income can become too unequally distributed for the overall health of a society—and often has—I do not doubt. I also believe, however, that if a society provides broad educational opportunities to its citizens and offers them a high degree of occupational mobility, including the ability to start new businesses; and if it maintains competitive conditions in the business sector, the likelihood that it will become dominated by a relatively small class of people whose members often consume far more than they produce is exceedingly small.

Obviously, however, there are many on both the political left and the political right who would not agree with my contention that the economic policies prevailing in economically successful countries have been, broadly speaking, in harmony with biblical principles. To the contrary, on both the “religious left” and the “religious right” there are many who insist that only by moving economic policy far down the paths that they recommend can the Christian ideal be more closely realized. Because I devoted much of my first article on preterism and economics to dealing with the claims of the religious left, I shall devote most of the remainder of this article to rebutting arguments from those on the religious right who insist that the present structure of the U.S. economy conflicts badly with what is mandated by biblical Christianity.

First, however, there is the question of what I mean by “biblical Christianity.” When I use this term, I have in mind the New Covenant that came into existence in the first century AD. Because the New Covenant replaced a religious system based on Mosaic Law, the question that then emerges is whether or not that Law also applies to the New Covenant. My response is that it does so only in part. The Law applies to the extent that it can be shown to be incorporated into the New Covenant, but it does not apply if it cannot be convincingly shown to be incorporated in the New Covenant. As to what parts of the Law apply and what parts do not, I must bow to the judgment of those numerous preterists whose understanding of the Bible far surpasses my own. This does not mean, however, that I have no opinions on the matter. For example, I have no doubt that the Ten Commandments are included in the New Covenant, but I am just as certain that the parts of Leviticus that pertain to the punishment of criminals and the year of jubilee are not.

Among religious conservatives who can properly be labeled “futurists” there are, of course, many who exhibit a very gloomy view of the world and see things spiraling downward toward the time of the end that will, at last, bring Christ to the rescue. People with such an outlook frequently take a dim view of our current economic situation and tend to find predictions of a coming economic debacle to be highly credible. With considerable justification, I must concede, many of them regard the ever-present threat of further government encroachment into our lives with great alarm. Where I part company with them is that I have far more confidence than they do in our ability to resist government encroachment and in strength of our economic structure. Let us not forget, I like to remind pessimists, that the Great Depression that began in 1929 ended about sixty-five years ago and that nothing remotely like it has occurred since. That does not guarantee immunity from future economic disasters, of course, but it does suggest that something has been learned during the last sixty-five years about how to manage a largely market-oriented economy.

Some of the posts to my last article suggested that I concede far too much authority over the management of our economy to government. I personally wish that government’s role in our economy were a great deal smaller than it is, but I urge my preterist brethren to be economic and political realists. Over forty percent of the American electorate regularly vote for the candidates of a political party whose basic strategy is to assure that as many voters as possible become dependent upon government largesse that they think is paid for by others than themselves; e.g., the “rich,” big corporations, residents of other states, younger workers, white males, etc. Of course, the leaders of that party generally do not couch their strategy in such blatantly obvious terms, but its essence is so obvious that considerable training and effort are required to suppress the recognition of it. Consider the current battle over Social Security. The Democrats have drawn a line in the sand over the privatization issue. Why? Fundamentally, this is because the partial privatization of Social Security would reduce workers’ dependence upon government and turn more of them into owners of significant quantities of financial assets who would become less likely to vote Democratic. This is not how those who oppose partial privatization frame their arguments, but I strongly believe it is how they think.

The forty percent plus percentage of the electorate that regularly votes for increased governmental intrusion into our lives are, for the most part, the products of an educational system that promotes that intrusion in various ways. The educational system’s impact has been strongly reinforcement by the mass media, including the entertainment establishment. Nevertheless, conservative voices are making headway against these formidable institutional obstacles. By working hard to educate the voting public against their dangers, those of us who fear the further expansion of government’s role in the economy can hope that, bit-by-bit, we can succeed in pushing back the forces that favor statism and dependency. I cannot imagine, however, how we are going to win the coming political battles if we insist on an all-or-nothing alteration of the economic landscape that allows our opponents to use the “theocrat” label against us with some appearance of justification. I am no lover of the welfare state, but I see no practical alternative to the strategy of reducing its scope gradually. Incremental successes will grow over time into larger ones. An awareness of this helps explain the tenacity and viciousness of liberal opposition to even modest steps toward reversing the trends that became evident with the advent of the Great Society and Roe vs. Wade.

Spend a little time perusing the abundant rantings of the liberal “blogosphere” and you will see that the terms “theocrat/s” and “theocracy” have become a standard part of the liberal lexicon. Much of the use of such terminology is strictly propagandistic, of course, but there can be no doubt that many liberals actually view the “threat” from the religious right in such terms. Perhaps there is little that those of us on the religious right can do to allay such concerns among the partisans of the left, and we know from experience that many liberals will not hesitate to lie to promote their agenda. I do not believe, however, that it helps our cause when conservative Christians suggest or hint that opposing points of view should be muzzled and the institutions of the state should be explicitly molded to conform to Christian theology.

A serious problem for those Christian conservatives who take a highly libertarian view of the role of government is that they have to find ways around the fact that both Christ and St. Paul made statements that appeared to legitimize the exercise of authority by the pagan rulers of the Roman Empire. Of course, “Give to Caesar what is Caesar’s, and to God what is God’s” (Matt 22:21) leaves open the possibility of encroachment of governmental authority beyond its proper bounds, and one can argue that Paul’s endorsement of the principle of submission to the civil authorities in Romans 13:1-7 conflicts with some of his actions and statements as recorded elsewhere. Clearly, however, both Christ and Paul sought to discourage their followers from participating in futile open rebellion against the Roman authorities and to encourage them to work within the system to the extent that they could do so. If one believes, as I do, that the government of the United States in 2005 is far less oppressive than the government of the Roman Empire in the first century AD, does that not suggest working within the existing institutional framework in dealing with excessive power grabs by government?

Working within the existing institutional framework to effect a gradual reduction in government’s role in our lives does not require that we abandon our guiding principles. One of those principles, I insist, must be the separation of church and state. That principle, I believe, finds explicit support in the New Testament and is clearly supported by the record of history. From the time of Constantine to the present, I maintain, whenever the state has had a special relationship with a particular church, the ability or willingness of that church to promote fidelity to the biblical principles inherent in the New Covenant has suffered. Like the founding fathers, however, we can vigorously uphold the separation of church and state while rejecting the idea of separation of the state from religious influence. The Constitution of the United States does not mandate the construction of a secular civil authority that controls the nation’s system of education and prohibits the posting of the Ten Commandments on courthouse walls.

Over the years, and in some of the recent postings to my articles on planetpreterist.com, I have observed that some conservative critics of economists like to seize upon the supposed defects of our financial system, which they find to be anti-biblical. In doing so, they commonly cite biblical passages warning against borrowing and denouncing the payment of interest. I shudder when I read such comments because they generally come from people whom I believe to be kindred spirits but who are, I fear, quite misguided on this particular matter.

Our financial system undoubtedly has defects, but its broad structural outline reflects many centuries of experience that have taught us, often very painfully, what works and what does not. It is true that our paper money has very little intrinsic value, but that does not mean that we would be significantly better off it we replaced it with gold, silver, or bottles of vitamins. It is also true that banks create money in the form of demand deposits (checking accounts) by getting people, corporations, and governments to go into debt and that banks earn profits by charging interest on the funds that they are allowed to create. Given all this, I can well understand that someone who knows the Bible very well might have some difficulty in reconciling some key features of our financial system with Scripture, particularly if they fail to sharply distinguish the New Covenant from its predecessor

In reconciling the modern financial world with the Bible, one must always keep in mind how enormously different the economy of the ancient world was from what we have today. When the biblical authorities inveighed against interest and indebtedness, for example, they did so primarily in order to protect the economically weak against exploitation by the economically strong. The usury that they complained about was in reference to what we can identify as the biblical equivalent of loan sharking, by which I mean a situation in which a creditor takes advantage of a borrower who lacks an alternative source of funds and imposes a monopoly price for the use of money.

What economists call “interest” consists of four possible components. First, the lender receives compensation for the “time value” of money. What I mean by that is that the lender gives up the use of the money for the time of the loan. Just as “a bird in hand is worth two in the bush,” a dollar in my possession today is worth more than one I expect to get in five years, by which time, I might not even be around. Second, the lender receives compensation for the risks he accepts in lending. These include the risk of not getting paid back and the risk of the loss in the value of money due to inflation. Third, the lender undergoes certain costs. For example, there are the costs of keeping financial records and notifying the borrower about his or her borrowing status; and there may well be a tax cost imposed on the lender. Finally, the lender may be able to receive an extra amount, call it a monopoly return or rent, if he (she or it) is able to collect an above normal interest rate from the borrower. This can occur if the lender has a superior bargaining position over the borrower or is more knowledgeable about market conditions.

According to generally accepted economic theory, competitive financial markets tend to bring about a condition in which those who lend money can expect to receive at least a “normal return” that includes the first three items listed in the last paragraph. Should a person decide to form his/ her own business and invest his/her own funds in it, that person does not realize a true economic profit unless the rate of return on the investment exceeds the normal return, which is really implicit interest. In the same way, when a corporation invests funds it has obtained from its stockholders, at least part of its earnings will be in the form of a normal return; i.e. implicit interest on its own money. When people save part of their income, they rightly expect to be compensated for doing so; i.e. they expect to receive interest. If people put some of their savings into corporate stocks, at least some of the returns that they receive are identifiable from the perspective of economic theory as interest even though they are called “dividends” and “capital gains” and are treated differently from “interest” for tax purposes

The great success of the U.S. economy has been due, in no little part, to the ability of our financial institutions to mobilize funds for lending and investment. Those who save turn their savings over to financial institutions, which, in turn, allocate them to business firms and others who provide adequate collateral and seem to have promising earnings and repayment prospects. In all of this, the existence of interest is fundamental and essential. Eliminate interest and you will bring this system to a halt.

There have been attempts within the past one hundred years to eliminate interest in conformance with, first, the ideology of Marxism in the U.S.S.R. and, second, the supposed requirements of Islamic law. I am not going into details about these efforts in this article, but I insist that they were and are doomed to failure. In certain Islamic countries, there is a phenomenon called “Islamic banking” that is a still ongoing experiment. In its essence, Islamic banking involves “eliminating” much interest by defining the term so that it applies only to explicit contractural interest payments. What are really interest-earning bank loans are then disguised as joint ventures or, in the case of consumer loans, as arrangements in which borrowers pay back to the banks more money than they received without calling the difference “interest.” These arrangements involve certain difficulties that will help to assure that the economies of the countries that adopt Islamic banking will remain backward. At least, however, this experiment should be instructive for Christians who believe that the charging of interest should be prohibited.

I shall close this discussion of interest with the observation that the parable of the talents seems to suggest that the existence of interest payments was not repugnant to Jesus. I particularly enjoy the master’s rebuke of the servant who received one talent to manage and then proceeded to bury it in the ground: “you should have put my money on deposit with the bankers, so that when I returned I would have received it back with interest” (Matt 25:27). Why did Jesus tell this story, I want to know, if He regarded the existence of interest as unjust? What does this story suggest about someone who puts his or her savings in a mattress?