Economic Efficiency, the Role of Law, and the Old Testament

Abstract

Laws and rules, spiritual and temporal, implicit and explicit, are public goods. They set out the expected standards of behaviour in a society. Since laws and rules are public goods, and not private goods, they tend to be under-supplied by individuals in the marketplace. They are therefore usually supplied and enforced by a group, or by some governor(s) of a group, and will reflect the values of that group. The Mosaic laws were supplied by God to the tribes of Israel and subsequently adopted in whole or in part by many Western countries as the basis for their values. These values became embedded in the legal systems of those countries and affected the institutions and practices that facilitated the development of the market economies associated with those countries. Economics developed from inductive and deductive observations of these early market economies, and led to the formulation of the economic model and to the development of the modern concept of economic efficiency. Since economic efficiency presupposes the laws, rules, institutions and practices that were in place when the observations were made, it is possible to hypothesise that there is a logical link between the Biblical Mosaic laws and economic efficiency. This paper sets out to identify and explain the ‘basic’ economic model and an amplified model that we call the ‘extended’ economic model. It analyses the rules and laws that are implicit in these models, and then compares the Mosaic laws with those implied by the models. The paper concludes that there is evidence of a considerable congruence between the two sets of laws.