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Economics

William Cavanaugh, Trade, and Scarcity

William Cavanaugh is a contemporary theologian everyone should read.  In his book “Being Consumed:  Economics and Christian Desire,” Cavanaugh brings his scholarship on Augustine’s treatment of “desire” into the contemporary economic sphere.[1]   As with Luther, however, I have to take issue with some of the ways in which Cavanaugh characterizes “the market.”  He relies heavily on Milton Friedman for the concept that “[a] market is free if people can satisfy their wants without harming others, even if there are utterly incommensurable ideas about what people ought to desire.”[2]  I think there is some confusion here between Friedman’s general views on market economies in relation to macro-economic factors and basic principles of microeconomics.  From a microeconomic perspective, it is also true that a “free” market responses to consumer preferences, but the measure of a truly free, efficient, competitive market is that the price of goods sold equals the producer’s marginal cost.  A lower price eventually would put the producer out of business, and a higher price would allow the produce to obtain a surplus above a competitive level.  The reason it is generally a bad idea for governments to set quotas or prices on consumer goods is that government quotas or price regulation interferes with the market efficiency that leads to what Luther had in mind:  the price is what the market price on both the producer and consumer side will bear, no more and no less.

I think Cavanaugh also is somewhat mistaken in one of his central arguments:  that “[t]he very basis of the market, trade – giving up something to get something else – assumes scarcity.”[3]  Much here depends on what we mean by “scarcity.”

Scarcity can mean that if I possess something necessary for survival, you cannot simultaneously possess an adequate supply of the same kind of thing, and therefore we cannot both survive.  If there are 100 total units of food available, and I possess 75 units, you can possess only 25 units.  Whatever food I possess takes away from your food.  If we both need 75 units of food to survive, one or both of us must starve.

Scarcity also can mean that there are not enough goods to satisfy everyone’s desires — which is not the same as everyone’s needs.  Perhaps there are 150 units of total food available, and we each need only 75 units to survive.  I am a glutton, however, and I desire 125 units.  If I can fulfill my desire, you will starve.  But if some portion of my desire goes unfulfilled, we can both survive.

I think what Cavanaugh wants to suggest is that scarcity in this latter sense often produces scarcity in the former sense because human desire is often so twisted.  Tonight I will go to a restaurant, and I will eat far more than I need to survive.  Meanwhile, not far from where I live there are cities with food deserts, where young children cannot obtain enough quality food to grow healthy, while in yet other places people are starving to death.  But it is not necessarily the case that the food I will eat tonight takes food out of the pockets of those other people.  In the first sense of scarcity, far more than enough total food is produced in the world for me to enjoy a nice meal at a restaurant and for everyone else at least to eat well enough to live in decent health.

Moreover, it could be possible for trade to supply what people need. Indeed, trade could provide a mechanism for disciplining excessive desire. Perhaps I have a 10 acre field, and I can grow enough wheat for my family’s needs, plus a surplus, but I cannot at the same time raise sheep.  I have a surplus of wheat, but a deficit of wool.  Perhaps I am a glutton and I would like to eat all the wheat myself, but meanwhile I am freezing to death because I lack clothing.  At the same time, perhaps you have a 10 acre field that supports sheep, but not wheat.  You have a surplus of wool, but a deficit of wheat.  Perhaps you are a clothes hound and you would like to hoard all the wool for yourself, but at the same time you are starving.  In this context, it is possible for us to engage in a market exchange that allows us both to obtain adequate bread and adequate clothing, even though that requires some compromise of each of our desires.  Cavanaugh does not seem to imagine a world in which this sort of market exchange could be part of a just society, but this is precisely the kind of exchange a truly free market is supposed to foster.  Even though in economic terms there is “scarcity” here, it seems to me that there is also a kind of “abundance,” of the very sort God had in mind when he gave humanity dominion over creation while at the same time giving us responsibility to work the Garden.

Of course, Cavanaugh is not fundamentally wrong about misplaced desire and its distributional consequences.  More than enough food is produced globally to feed everyone, with plenty left over for nice restaurant meals, but poverty and inequality prevent at least a billion people from obtaining enough to eat.  There are many causes of this poverty and inequality, including corruption and the failure of the rule of law, but some of it is caused by those of us in the developed world who desire certain kinds of goods and lifestyles that are supported by unjust laws and policies, including exploitative labor conditions in much of the developing world, unbalanced intellectual property rules, lack of access to capital, the legacy of slavery and colonialism, and so-on.  My point here is just that “trade” is not in itself the problem, but rather “trade” is part of our created stewardship.

[1] William T. Cavanaugh, Being Consumed:  Economics and Christian Desire (Grand Rapids:  Eerdmans 2008).

[2] Ibid., Kindle Loc. 107.

[3] Ibid., Kindle Loc. 936.