We Are Timebound

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).[1] 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). Kana argues that time is God’s resource and we are stewards of time.[2]

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 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 life time 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.

We Are Social

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.

We Are Heterogeneous

People are created with a wide variety of skills, needs and desires. In the Bible, we see this in God’s creation in his endowment of 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.

We Act as Agents

People were created to act on others’ behalf, to be stewards or agents. Prime examples are that God mandates us to steward his creation and steward his grace (1 Peter 4:10). We also see that God called Joseph 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 for acting as he would want us to (Matthew 25:14-30).

Finance depends on 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.

We Make Promises

God is a God of promises and covenants. The biblical narrative is a story of God’s promises kept. Humans are created in his image, and thus we have biblical accounts of humans 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. Humans are created to be able to make and keep promises to each other.

Every financial instrument is a promise between two or more parties, and would not be possible if promises were not part of God’s creation. A mortgage loan is a promise to pay a certain amount each month. A share of stock is a promise for a portion of future dividends and a right to elect board members. In modern finance some of our promises tend to get quite complicated and detailed so it has become common practice to write them down. However, these written contracts simply reflect our created ability to make and keep promises. This ability is so central to finance that the Bible teaches us to not overpromise in our finances (Proverbs 22:26-27). 

We Are Not Omniscient

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 endeavor depends 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 must 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.

We Create Resources for a Future That We Do Not Know

God created risk, in that 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. 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.[1] Consistent with this, Buchanan and Vanberg (1991) argue that the markets are best understood as a creative process, as opposed to a discovery process or allocative process.[2] 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.[3] 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.

We Are Risk Takers

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 took “risks by making a distinct creation and a free humanity to rule it.”[1] God created us so we feel risk, but we know God will provide.[2] However we also have much biblical teaching to be prudent in our risk taking.[3] Gregersen defines risk as the sum of natural events, social events and the meaning these hold for a person.[4] Gregersen quotes 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.”[5]

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 a risk understood and managed is consistent with God’s creation design.

Conclusion to the Foundations of Finance Are Created by God

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.