Old Testament macroeconomics

The Sydney Morning Herald recently ran a column from its Economics Editor, Ross Gittens, about the virtues of the economic system stipulated by the Old Testament. The article was largely based on a (rather old) Cambridge Paper, The Divine Economy, by Paul Mills.

The thesis can be summarised as follows. The economic system in the Old Testament Israelite society has the following features:

  • Almost completely free markets
  • Codified property rights
  • Limited government
  • Low, flat rate taxation
  • Restrictions on land transfer (reversion to original owner’s family every 50 years)
  • Restrictions on lending (prohibition of interest, cancellation every 7 years)

Mills concluded:

Hence the biblical model had a strong underlying current of concern for the poor. Yet its approach to the distribution of wealth and income was radically different from the familiar approach of redistributive taxes and welfare benefits. … Its aim was to ensure that everyone, even the poorest, was able to gain access at some time in his or her life to the means of production (in this case, land); that no-one was in debt or debt bondage for more than seven years; that the primary responsibility for care of the poor was the extended family and local community; and that no-one could entrench their wealth through simply lending money at interest without risk.

Are there any benefits in adopting aspects of this system to the current economic system?

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