{"id":3202,"date":"2017-06-14T19:51:58","date_gmt":"2017-06-14T19:51:58","guid":{"rendered":"http:\/\/davidopderbeck.com\/tgdarkly\/?p=3202"},"modified":"2017-06-14T19:51:58","modified_gmt":"2017-06-14T19:51:58","slug":"martin-luther-on-economics","status":"publish","type":"post","link":"https:\/\/davidopderbeck.com\/tgdarkly\/2017\/06\/14\/martin-luther-on-economics\/","title":{"rendered":"Martin Luther on Economics"},"content":{"rendered":"

\"\" Martin Luther fascinates me, not least because he is such a bundle of contradictions. \u00a0This is true as much in his economic thinking as anywhere else. \u00a0In his sermon \u201cOn Trading and Usury<\/a>,\u201d\u00a0Luther argues that it is sinful for merchants to sell their goods for the highest possible profit.\u00a0[1]<\/a>\u00a0 Here, he says, \u201coccasion is given for avarice, and every window and door to hell is opened.\u201d[2]<\/a>\u00a0 Luther says the ideal civil law would involve a government agency that would set a fair price, but he thinks \u201cwe Germans have too many other things to do; we are too busy drinking and dancing to provide for rules and regulations of this sort.\u201d[3]<\/a>\u00a0 Since government regulation of this kind is not feasible, he suggests that \u201cthe next best thing is to let goods be valued at the price for which they are bought and sold in the common market, or in the land generally.\u201d[4]<\/a>\u00a0 He also suggests that crafts people should price their goods based on the amount of labor they put into creating them, at a rate comparable to a day laborer in some other occupation.[5]<\/a><\/p>\n

Luther\u2019s argument here is interesting because, to anyone with a sense of how economics works, it seems incoherent.\u00a0 The \u201chighest possible profit\u201d for any commodity is simply the price the market will bear, which is one of Luther\u2019s suggestion for a fair<\/em> price.\u00a0 It may be that Luther is writing against the backdrop of an economy that is not really a free market because of the influence of trade guilds and general lack of consumer information.\u00a0 Perhaps candle makers in Wittenberg could charge much higher prices than candle makers in M\u00fcnster because the markets were so localized.\u00a0 Or, perhaps the furniture maker\u2019s guild artificially inflated prices because of its monopoly on the trade.\u00a0 In any event, in modern regulatory economics, that kind of problem is addressed through antitrust law, not through government price-setting.<\/p>\n

Luther\u2019s alternate suggestion of setting a price equal to the value of labor in another occupation \u2013 in addition to being inconsistent with looking to an ordinary competitive market price \u2013 makes no sense unless the other occupation involves comparable skill, training, precision, and so-on.\u00a0 Even then, the monetary \u201cvalue\u201d of a unit of labor is not something that can be established ex ante<\/em> without reference to the market for whatever commodity the labor produces.\u00a0 What Luther seems to have in mind here is luxuries versus necessities.\u00a0 He might have a point on this score.\u00a0 Modern microeconomics recognizes that demand for luxury goods (sometimes called \u201cVeblen\u201d goods after the economist who first described this effect in detail) is highly price inelastic \u2013 that is, the quantity demanded does not vary significantly as price is raised.[6]<\/a>\u00a0 This is why a mid-range Mercedes costs $25,000 or so more than a comparable quality Toyota.<\/p>\n

[1]<\/a> Martin Luther, \u201cTrade and Usury,\u201d in William C. Placher, ed. Callings:\u00a0 Twenty Centuries of Christian Wisdom on Vocation<\/em><\/a> (Grand Rapids:\u00a0 Eerdmans 2005).<\/p>\n

[2]<\/a> Ibid.<\/em>, Kindle Loc. 3091.<\/p>\n

[3]<\/a> Ibid.<\/em>, Kindle Loc. 3113.<\/p>\n

[4]<\/a> Ibid.<\/em><\/p>\n

[5]<\/a> Ibid.<\/em><\/p>\n

[6]<\/a> For a description of this and other price elasticity effects, see David W. Opderbeck, Patents, Essential Medicines, and the Innovation Game, <\/em>58 Vanderbilt Law Review 501 (2005).<\/p>\n","protected":false},"excerpt":{"rendered":"

Martin Luther fascinates me, not least because he is such a bundle of contradictions. \u00a0This is true as much in his economic thinking as anywhere else. \u00a0In his sermon \u201cOn Trading and Usury,\u201d\u00a0Luther argues that it is sinful for merchants to sell their goods for the highest possible profit.\u00a0[1]\u00a0 Here, he says, \u201coccasion is given […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2},"jetpack_post_was_ever_published":false},"categories":[86,87],"tags":[],"class_list":["post-3202","post","type-post","status-publish","format-standard","hentry","category-economics","category-luther"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/p824rZ-PE","jetpack-related-posts":[],"_links":{"self":[{"href":"https:\/\/davidopderbeck.com\/tgdarkly\/wp-json\/wp\/v2\/posts\/3202","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/davidopderbeck.com\/tgdarkly\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/davidopderbeck.com\/tgdarkly\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/davidopderbeck.com\/tgdarkly\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/davidopderbeck.com\/tgdarkly\/wp-json\/wp\/v2\/comments?post=3202"}],"version-history":[{"count":1,"href":"https:\/\/davidopderbeck.com\/tgdarkly\/wp-json\/wp\/v2\/posts\/3202\/revisions"}],"predecessor-version":[{"id":3204,"href":"https:\/\/davidopderbeck.com\/tgdarkly\/wp-json\/wp\/v2\/posts\/3202\/revisions\/3204"}],"wp:attachment":[{"href":"https:\/\/davidopderbeck.com\/tgdarkly\/wp-json\/wp\/v2\/media?parent=3202"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/davidopderbeck.com\/tgdarkly\/wp-json\/wp\/v2\/categories?post=3202"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/davidopderbeck.com\/tgdarkly\/wp-json\/wp\/v2\/tags?post=3202"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}