There are numerous indications in Scripture that God intended for people to work together and help one another. After placing man in the garden, and charging him with the task of working it and keeping it, God said, “It is not good that man should be alone; I will make him a helper fit for him” (Gen. 2:18). God did not intend for people to function as isolated individuals cut off from human interaction. Man is benefited by working together with someone who will help him in his work. This truth is later affirmed in Ecclesiastes 4:9, “Two are better than one, because they have a good reward for their toil.” Much of the New Testament addresses the importance of Christians working together (John 13:33-34; 1 Cor. 1:10-12; 12:12-27; Rom. 12:4-5; Eph. 4:1-6, 11-16; Heb. 10:24-25; 1 John 1:7; 2:9-11).
God designed people to function best through interaction with others. But not all forms of interaction are good. Rather than helping Adam, Eve led him to take the forbidden fruit. One generation later, Cain murdered his brother Able. As mankind failed to work together in mutually beneficial ways, God gave Israel laws to govern their actions.
As the apostle Paul later observed, these laws can be summed up in the commandment to love one another.
Owe no one anything, except to love each other, for the one who loves has fulfilled the law. For the commandments, “You shall not commit adultery, You shall not murder, You shall not steal, You shall not covet”, and any other commandment, are summed up in this word, “You shall love your neighbor as yourself.” Love does no wrong to a neighbor, therefore love is the fulfilling of the law.Romans 13:8-10; cf. Mt. 22:37-40
When people interact with one another in love, they do not take what belongs others and they do not threaten violence towards others. Rather than forcing their will on others, they seek to peacefully cooperate with one another.
Two Categories of Exchange
As we consider the economics of the interpersonal exchange of goods from a Christian perspective, we start by recognizing that all exchange of goods can fall into one of two categories: forbidden exchange and voluntary exchange.
Forbidden exchange is taking goods for yourself that God has not permitted you to have, that is, taking something that belongs to someone else. If a store has apples, and I want the apples, I could simply take the apples for myself. This of course would be stealing, which is wrong. I could purchase the apples, using counterfeit money. This would be fraud, which is wrong. If the store owner resists, I could choose to carry a weapon into the store and take the apples by force. This would be a threat of murder, which is wrong. Behind all of these actions are attitudes of covetousness and greed, which are wrong. Forbidden exchange is unloving because it harms others.
The other kind of exchange is voluntary. If I want the apples, I could simply choose to buy them. If I don’t have enough money to buy them, I could offer an alternative form of payment. For instance, I might offer to help bag groceries in exchange for the apples. It might even be that the store owner recognizes that I am hungry, and so he voluntarily chooses to give me the apples for free as an act of grace and kindness. In each of these examples, the exchange of the apples is voluntarily agreed upon by both parties.
In either case, I end up with the apples I desire. But unlike forbidden exchange, voluntary exchange benefits both parties involved, and fosters feelings of goodwill, love, and unity.
Voluntary Trade is Always Mutually Beneficial
Many profound and important economic principles can be logically established by reflecting on very simple illustrations. Suppose two boys packed sandwiches for lunch. Opie has a peanut butter and jelly, but prefers ham and cheese. Leon has a ham and cheese, but prefers peanut butter and jelly.
In this situation, we can easily see that both Opie and Leon would be better off by trading sandwiches. Opie could give Leon the peanut butter and jelly in exchange for the ham and cheese. As a result, both boys would enjoy a sandwich they value more than the one they packed.
From this example, a wise economic thinker can observe an important truth. For voluntary exchange to occur, each party must value the end result of the exchange more highly than their original state. If Opie and Leon both preferred their own sandwich over the other’s, they would have no desire to trade.
Similarly, if Opie and Leon both preferred peanut butter and jelly over ham and cheese, no trade would take place. In this situation, Leon would happily trade his ham and cheese for Opie’s peanut butter and jelly, but Opie would not agree to the trade, since he values his own peanut butter and jelly over Leon’s ham and cheese. For voluntary exchange to occur, both parties must view the exchange as an act that will lead to a more preferable situation.
The important implication of this observation is this: voluntary exchange is always expected to be mutually beneficial. Both parties must believe they will benefit from the exchange or they would not agree to the exchange.
If Opie and Leon agree to trade sandwiches, who is better off? As long as they have both voluntarily agreed to the exchange, they are both better off. If either boy believed he would be worse off from the trade, no sandwich exchange would have occurred.
Voluntary Exchange Creates Wealth
As long as the trade was voluntary, both boys were able to obtain something they value more. We could call this increased value their “profit” (see part 4). Observe that both boys have profited by increasing the value of their lunch, yet without adding a single item of food to the table. The number of sandwiches are the same. The same ingredients are used. And yet, because of the trade, both boys are better off. One boy does not benefit at the expense of another. How can it be that both benefit without adding food to the table? Because both boys value the sandwiches differently.
This illustrates another important principle. Voluntary exchange has the ability to create wealth even with a fixed number of resources. We must not imagine the distribution of wealth as a zero-sum game, where one person gets a bigger slice of a pie only at the expense of leaving the other person with a smaller slice. This is false because wealth is not a fixed sum, but can be increased by voluntary trade. As long as trade is voluntary, there are no “winners” and “losers”, “exploited” and “exploiter”, or “oppressed” and “oppressor.” This is only true, however, when both parties benefit from the trade. Both parties benefit only when it is a trade they would both voluntarily agree to.
It should be noted that the judgments about the benefit of exchange are made before the trade takes place. One or both parties could certainly be in error. Leon may trade for Opie’s peanut butter and jelly, only to later discover that Opie used crunchy peanut butter, and Leon only likes smooth peanut butter. In this situation, Leon was not unjustly taken advantage of by Opie. He was not bullied into trading sandwiches. Leon simply made an error, and suffered a loss of value as a result of the mistake.
As noted in part 4 of this series, losses are important. As a result of the mistake, Leon will learn that he does not in fact prefer Opie’s peanut butter and jelly. Next time Leon sees a friend with a peanut butter and jelly sandwich, before he agrees to a trade he will know to first ask “does your mom use crunchy or smooth peanut butter?” As a result of the loss, Leon will become a wiser entrepreneur.
The Fallacy of “Price Gouging”
Sometimes people have a hard time believing that all voluntary trade is mutually beneficial. For instance, during times of extreme shortages, prices can rapidly increase. It is not uncommon for gas prices to almost double after natural disasters. When gas prices increase, it is common to hear gas stations accused of “price gouging.”
Of course a gas station owner may choose to keep their prices low as an act of kindness. In this case, the gas station owner may willingly choose to suffer financial loss so that they will enjoy the profit of knowing they have helped their customers during a time of need. As long as the decision to keep prices low is voluntary, both parties benefit as a result of the exchange.
But suppose the gas station owner chooses to increase prices. In such a situation, is the owner of the gas station profiting at the expense of those who buy the expensive gas? One might be tempted to think so. But before assuming that the gas station owner is acting unjustly or unloving towards their customers, we must think clearly about the nature of the exchange.
We have observed that for a voluntary exchange to occur, both parties must think that the trade will be mutually beneficial. If gas stations are in fact able to sell their gas at double the price, this must mean that there are buyers who think the gas is more valuable to them than the money they exchange for it. Otherwise, they would simply decide not to purchase the gas. At a minimum we must conclude that the gas station owner is not harming their customers since their customers think they are better off as a result of the exchange. The choice to increase prices may not be as selfless as the gas station owner who decided to keep prices artificially low, but it certainly cannot be described as oppression or exploitation.
On the other hand, if the local government were to force the gas stations to sell their gas at a cheaper price, this could be described as oppression or exploitation, since the exchange of gas would benefit the buyers at the expense of the gas station owners. It can also be noted that reducing the profits of the gas providers would only serve to prolong the shortage by removing the incentive for increased gas production (see part 4).
Oppression and exploitation are only features of forbidden exchange, where dishonestly, theft, and violence enable one party to benefit at another’s expense. As long as exchange is voluntary, no one party will benefit at another’s expense. On the contrary, overall wealth will increase as both parties are able to improve their overall satisfaction.