Supply, Demand and Playground Economics

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“The economy, stupid,” said James Carville as one of his campaign messages devised for Bill Clinton’s 1992 Presidential Campaign against incumbent George H.W. Bush. It was a simple and effective message to focus on how many Americans cast their vote. The economy was in the midst of a recession, and no one likes when the economy is doing poorly. More recently, we experienced what has been dubbed “The Great Recession.” It lasted from 2008 to 2012, and was one of the most significant economic declines that the United States has experienced since The Great Depression. The Great Recession brought many terms to the forefront as the Federal Reserve and the Federal Government implemented steps to try and stop the economic slide and kick start the economy. Big terms were talked about regularly like quantitative easing, monetary policy, sub-prime mortgages, GDP contraction, etc., but for the average person these terms and their associated impact are as foreign as rocket science.

In Scripture, the economy was also a topic when the Southern Kingdom of Israel was relocated to Babylon as a part of God’s punishment of their unfaithfulness. The Prophet Jeremiah gave the Israelites some economic advice about their time in Babylon. Jeremiah exhorted,

This is what the Lord of Armies, the God of Israel, says to all the exiles I deported from Jerusalem to Babylon: ‘Build houses and live in them. Plant gardens and eat their produce…Pursue the well-being of the city I have deported you to. Pray to the Lord on its behalf, for when it thrives, you will thrive.’ (Jer. 29:4-5,7)

The Israelites were temporarily in a place that was not their home, but the command from God through the Prophet Jeremiah was to participate economically where they found themselves, and to pray that the sovereign God would economically bless this temporary home in which they found themselves.

While this is not our home, we are affected here and now by economics.

As Christians, we are in a place that is not our home. We are citizens of Heaven, but we are here temporarily until the time that Jesus call us home. While we are here we are participants in and impacted by the economy. Many fifty-cent words contribute to economic theories and descriptions of activities that impact the economy. For the average person the best way to understand economics is to view it as a balance between supply and demand.

Picture a child named Supply showing up to play on a seesaw at the playground. Supply struggles to have fun alone on the seesaw, not being able to make it work properly. Soon Supply’s friend Demand shows up to play. When Supply and his friend Demand climb on the seesaw at the same time, they can balance each other and easily use their legs to move up and down in a nice easy pattern again and again and again. Who is this kid Supply? He is the one that is making stuff to buy. Who is this kid Demand? He is the one that has the resources to buy the things the Supply is making. Since they weigh similar amounts, they have the ability on the seesaw to easily work in sync with one other, meaning the economy is humming.

Like all analogies, the picture of Supply and Demand on the seesaw together quickly breaks down, but it should help you understand how Supply and Demand work together to make the economy work. If at any point, either kid, Supply or Demand, stop pushing with their legs, the fun of playing on the seesaw suddenly comes to a halt. If you think back to the Great Recession, one of the contributing factors was the housing industry building too many houses. The housing market, in this example, is the kid named Supply. Supply ended up weighing too much for the kid named Demand to balance him out. Therefore, the housing market came to a screeching halt, which had ripple effects throughout the entire economy. Lots of factors contributed to the Great Recession, but this is one simple example of how the kids, Supply and Demand, stopped playing well together on the seesaw.

What caused Supply and Demand to stop playing well with one another? That is a complicated question to answer, and it is where various economic theories and associated policies diverge. Not only are there divergences in why, there are also divergences in how to coax the kids to start playing well with one another again. Some believe that if you let Supply and Demand alone, the two kids will naturally start to play with one another again, and maybe the best the government can do is to reduce the tax burden to help spur activity. Others believe that the government should be more involved by tweaking not only tax policy, but also by creating government spending and impacting monetary policy through tools like interest rate changes and changes to the money supply.

So as a Christian, while this is not our home, we are affected here and now by economics whether or not we understand the details of how economics works. Whatever causations or correlations arise, it all comes down to those two kids, Supply and Demand, playing well together. However, like the Israelites, we should never forget that we serve a sovereign God who works through His creation including economic forces to bring about His purposes. Whether economic prosperity or economic failure, pray for God’s purpose to be accomplished and ask for His hand of blessings on the economy so that we might thrive here in our temporary home.

Image Credit: Aaron Burden / Unsplash

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Ryan Hutchinson

Ryan Hutchinson is Executive Vice President at Southeastern Baptist Theological Seminary, where he also serves as Adjunctive Instructor of Finance.

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