Four Economic Lessons from the Nativity


My exegetic knowledge of the New Testament is not up to academic standards, but I find in Luke 2:1-7 four economic lessons of the Nativity: (1) Leviathan is not a piece of cake; (2) technology matters; (3) institutions matter even more; (4) wealth matters. The readers of this blog, not to speak of my co-bloggers, can no doubt find more lessons.

The Gospel says (Luke 2:1-3, quoted from the King James Bible):

And it came to pass in those days, that there went out a decree from Caesar Augustus, that all the world should be taxed. …
And all went to be taxed, every one into his own city.

I understand “taxed” to mean counted in a census. There is a long-running academic debate over whether it is the Roman emperor or another political authority who ordered the census. But the goal of whatever ruler ruled over Judaea at the time of Christ’s birth was not to know how many loving subjects he had, but how many could be taxed and conscripted. So the term “tax” is, after all, well-chosen. But instead of requesting the taxpayers to travel in order to be counted, today’s Leviathan sends a decennial census form to each household to be completed under penalty of a maximum $5,000 fine. In a free or open society, you may get away without paying the fine, but perhaps not. That Leviathan is everywhere and always burdensome–albeit at different degrees–is the first economic lesson of the Nativity.

The second lesson is that technology matters. It is obviously less costly for Leviathan to mail the census forms than to deal with a Twitter resistance movement from people forced to travel to their hometowns (or to DC). Another aspect of changing technology is a problem that Jesus and Mary met but could now be solved quite easily. Check Luke 2:4-7:

And Joseph also went up from Galilee, out of the city of Nazareth, into Judaea, unto the city of David, which is called Bethlehem …
To be taxed with Mary his espoused wife, being great with child
And so it was, that, while they were there, the days were accomplished that she should be delivered.
And she brought forth her firstborn son, and wrapped him in swaddling clothes, and laid him in a manger; because there was no room for them in the inn.

(At this point, and despite the festive character of the Holidays, I will refrain from emphasizing a bad political pun: Mary wanted to make Judaea great with child.)

Here is the other aspect of changing technology I wanted to mention: Before setting on the trip or while approaching Bethlehem, Joseph could, nowadays, book a motel room or an Airbnb online with a credit card.

Third lesson: economic institutions matter even more than technology. Even without good communications technology, competitive incentives would create enough inn rooms to accommodate virtually all travelers willing to pay. Since, at the time of the Nativity, Christmas had not been invented yet, Joseph would not have had to bid up accommodations prices above the regular price—a process that good economic institutions would have allowed if required. Each time you find an available hotel room when you want it, it is because market prices have been bid up so that hotel owners are incited to keep some vacant rooms (instead of discounting them long in advance).

But did Joseph have the means to pay? (Had he maxed out all his credit cards?) Assume that he was poor and could not have afforded to offer a supplement to the innkeeper or to choose a more expensive motel in order to avoid the stable. This suggests a fourth economic lesson: general prosperity matters, and the analysis must take into account the difference in wealth between Jesus’s time and today (see the chart above, computed from the Maddison Project’s estimates and reproduced from a Regulation article of mine). A carpenter today would have no problem getting a room at the Hilton. In fact, his wife about to deliver would have a cozy place in a hospital Maternity Department. But let’s not forget that prosperity also depends on institutions—and on technological development, which is itself dependent on institutions.

Now, consider this: if, on the night of the Nativity, even assuming a rich and technologically advanced society, a natural catastrophe (say, a hurricane) had happened, if moreover Governor Pontius Pilate had declared a state of emergency, and if price-gouging laws had kicked in, Joseph could not have legally bid up the price of a room at the inn. There were no price-gouging laws (at least no formal ones that we know) in the Roman empire or in Judaea, but two-thirds of American states have them (see my EconLog post on “Emergency and Shortages in Altruistic California”). Back to the first lesson: Leviathan is not a piece of cake.

Merry Christmas!


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