Genesis and the Free Market

My friend and former colleague, economist Charles Van Eaton, reminds me that the historical account of the transaction between Abraham and Ephron in Genesis 23 is a useful ancient example, perhaps even a prototype (not his word), of exchanges in a free market, and that such market exchanges are nearly as old as recorded history itself.

         Free market exchanges require but a handful of crucial, or irreducible, elements: (1) reasonably well-defined property rights, (2) freedom of exchange, (3) basically reliable protection against fraud, and (4) a stable and useful medium of exchange, all of which are present in the Biblical text before us.  Here’s what I mean:

         (1) Even among the ancient Hittites, we find reasonably well-defined property rights.  The Hittites understood both ownership and, in that light, who owned what.  In this case, the field and cave in question belonged to Ephron (v. 7), as everyone knew.  Once the sale had been made, it belonged to Abraham (vv.16-18).

         (2) Freedom of exchange appears here in the unfettered and uncoerced negotiations between Abraham and Ephron (vv. 10ff.).  Both men made offers and counter-offers until they reached a mutually agreeable price.  If, at any time, the negotiations took a turn either of them disliked, or if they could not reach a mutually satisfactory conclusion, bartering would cease.  Either one could have stopped the process at any moment.  But they did not.  They kept at it until they reached a mutually satisfactory price, one agreeable to both.  Abraham liked the price, and so did Ephron.  Thus, when this transaction was complete, both considered themselves better off.  Each considered himself a winner:  Ephron preferred to have the money rather than the land, Abraham the land rather than the money.  In order to close the deal, both had to get what they preferred, and they got it. (Notice this interesting historical point:  As seen from the perspective of the seller, ancient Hittite negotiation proceeded from the bottom price upwards; our negotiation, as seen from that same perspective, proceeds from the highest price downward.)

         (3) Surrounded as they were by the elders of the city, men who sat daily at the city gates, both Abraham and Ephron had many witnesses to their transaction, witnesses who could repeat later what they saw now, witnesses whose testimony would help suppress fraud and double-dealing, witnesses invoked for precisely such purposes by Ephron as a means to allay Abraham’s fears (vv. 11, 12).  We have the same today, in signed and witnessed contracts, in testimony given under oath in court, and in judicial pronouncements backed by law enforcement.

         (4) The two men carried out their negotiations using the local currency, in this case pieces of silver.  The text does not say who minted the coins, but that is of little importance.  Whoever minted them, whether done publicly or privately, the folks themselves validated it by using that currency as the medium of exchange.  It did not have to be silver, of course.  It could have been gold, or copper, or even cattle and sheep (though it is difficult to make change with livestock).  All it needed to be was acceptable to both sides, which normally means that it is convenient, durable, and portable.  We have the same today in the coins and dollars we use, though our government continues to monkey with our currency’s value by printing trillions and trillions more dollars at will, thus lowering the value of each one.