It was God’s choice to make us in a particular way that enables finance.
This is not to say that God created particular institutions or systems of finance, but that people are created in ways that give finance a role in God’s purposes. This concept is critical for theology. If God did not create the foundations of finance, then finance is a purely human invention that might not have any role in God’s intentions for humanity. If however God did create the foundations of finance, then surely he did that for a purpose, and that purpose must align with his revealed will. We will explore eight foundations of finance to see whether they really do spring from God’s creation.
God created a world with time and where human time is limited. By God’s creation, we have days, seasons, generations and lifetimes (Genesis 1, Psalm 104). Further we need to be aware of time and will be held accountable for our time (Psalm 90:12, Ecclesiastes 3,Proverbs 6:6-11, Proverbs 20:4). Time is God’s resource and we are stewards of time.
Allocating resources among people across different time periods is the underpinning of finance. Financial resources are needed for a few days because of production or shipping time, or a few months due to seasonal business, or for a half year due to a growing season, or for several years for new product development and launch, or for decades to build a factory or buy a house, or for most of a lifetime for retirement savings. In a world where people’s needs, opportunities, and available resources vary over time, finance is the primary means of matching resources to needs across time.
Human beings are created to be social and to live in community, and we have a desire to be with other people. As God put it, “It is not good that the man should be alone” (Genesis 2:18). Moreover, we are created in God’s image (Genesis 1:26-27; 2 Corinthians 3:8), and the Holy Trinity existing in perfect unity is a model of community for us (Galatians 4:1-7). As a form of resource sharing among people, finance is inherently a social activity. By creating us as social beings, God laid the foundation for the exchange of resources, of which finance is a crucial form.
“Heterogeneous” means “varied.” People are created with a wide variety of skills, needs and desires. In the Bible, we see how God endows people with a wide variety of skills to build the tabernacle (Exodus 35:30-36:5) and to rebuild Jerusalem upon the return of the remnant from the Babylonian captivity (Ezra 7:6-7; Nehemiah 1, 2). Paul emphasizes that we are each gifted differently (1 Corinthians 12:12-31).
In addition, since we were not all born at the same time, human society has a rich variety of ages and life stages. Some people are young and not yet able to provide their own food and shelter, others are just beginning to be able to do so, others are in their prime productive years and have resources in excess of their current needs, and still others are older and need help in supporting themselves, or need to draw on resources accumulated during their earlier years.
This heterogeneity is a foundation of financial markets because at any given time some people will have excess resources while others will have need or opportunity to use resources beyond what they currently possess. For example, some of us will want to borrow money to pursue a business opportunity or build infrastructure to fulfill some unmet need in society. Others will be savers at some periods of their lives and will be able to lend to meet that borrowing need.
People were created to act on others’ behalf, to be stewards or agents. We are mandated by God to steward his creation and steward his grace (1 Peter 4:10). Joseph was called by God to act as a steward for both Potiphar and Pharaoh (Genesis 39:2-6; 41:41-44). Jesus’ parable of the talents illustrates that we are his stewards, and will be held accountable as such (Matthew 25:14-30).
Finance prominently features people acting as agents or stewards on behalf of others. Executives act as agents for the shareholders of a corporation. Mutual fund managers act on behalf of investors to decide which stocks or bonds in which to invest. Lawyers apply their expertise to serve their clients’ interests in financial transactions. An entire branch of finance literature is devoted to better understanding the many agency relationships in finance. Finance can exist because God created people with an ability to act on behalf of others.
God is a God of promises and covenants. The biblical narrative is a story of God’s promises kept. People are created in his image, and thus we have biblical accounts of people making promises to each other. The story of Ruth hinges on promises between people of different nationalities, for example (Ruth 1:16 -18). Paul references human promises in Galatians 3:15. People are created to be able to make and keep promises to each other.
Humanity does not know everything, and individually each of us knows only a tiny fraction of what can be known. God created each of us with our own unique mind which takes in, processes and remembers things differently from anyone else. Human endeavors depend on each of us using our individual knowledge for mutual benefit, rather than on each of us learning everything needed for success.
Limited knowledge and asymmetric information are mediated by financial markets. This means that when a loan is entered into, the borrower has more information about his or her ability to repay than does the lender. It means that when we buy a stock it is possible that the seller knows something about the stock that we do not. This asymmetry will impact our willingness to participate in financial markets and will impact financial prices. Finance is built on two obligations that turn asymmetric information from a hindrance into an opportunity. First, we use promises to convey our certainty about information we possess that other parties do not. My promise to repay the mortgage, under penalty of losing the house, gives you the confidence to deposit money in the bank that funds the mortgage, even though you do not know my likely future earnings. Secondly, we prohibit falsifying information in financial transactions. If your investment documents tell me that there is a $3 billion market for products like yours, this information should be accurate. Because of this, we can make use of information provided by others, even if we do not have personal knowledge of its accuracy.
God created risk. We do not know what the future holds (Ecclesiastes 8:7). But God created us with an ability to influence future events, in particular with the ability to create new things that come to fruition in the future. Kent Miller outlines three conceptions of risk, the third being “opportunity creation” wherein human imagination and creativity make the future indeterminate because we might—or might not— be able to bring into existence what was not there before. Consistent with this, James Buchanan and Victor Vanberg argue that markets are best understood as a creative process, as opposed to a discovery process or allocative process. By God’s design the future is not deterministic, but an unfolding process impacted by human choice.
This risk has a profound impact on financial decisions. Most financial instruments and the pricing of those instruments reflect this uncertainty. Loans get turned down due to uncertainty, or are priced higher to compensate for the percentage expected to fail. Stock prices rise and fall due to uncertainty. Debt contracts have reporting and collateral provisions because of uncertainty. Financial markets are greatly complicated by uncertainty, but also have a greater potential benefit to society due to the ability of risk to be managed and re-allocated via finance.
God created us to be able to take risk and provides biblical support for taking risks (Genesis 1:28-30; 2:15; Matthew 25:14-30; Luke 19:11-27; John 12:24). We are created in the image of a risk-taking God, who as Samuel Gregg and Gordon Preece say took “risks by making a distinct creation and a free humanity to rule it.” God created us, so we feel risk, but we know God will provide.
However, we also have much biblical teaching to be prudent in our risk taking. Niels Henrik Gregersen defines risk as the sum of natural events, social events and the meaning these hold for a person. Gregersen quotes Niklas Luhmann who argues that trust is a risk-willing position, creating a virtuous cycle between trust and risk. Gregersen argues that the Bible teaches “the world is created by a benevolent God in such a manner that invites a risk-taking attitude and rewards it in the long term.”
Human attitudes toward risks are crucial in finance. People are willing to take some risk but not too much, and the amount varies by individual and circumstance. This ability to take risk along with an aversion to taking risk unnecessarily is part of God’s creation design. God in his wisdom created us with an innate ability to balance the risks and rewards, and we see this reflected in financial prices. With this awareness we can recognize that risk understood and managed is consistent with God’s creation design.
These eight aspects of creation—especially of the creation of human beings—form the foundation of finance. Finance bridges the gaps that would otherwise prevent people from making use of spare resources to grow and increase human productivity and from sharing resources socially for mutual benefit. In other words, finance turns the conditions of human existence into opportunities to bring glory to God, to serve as stewards of creation, and to care for each other with justice and love.