King David's Economic Philosophy

 

נִכְנְסוּ חַכְמֵי יִשְׂרָאֵל אֶצְלוֹ. אָמְרוּ לוֹ: אֲדוֹנֵינוּ הַמֶּלֶךְ, עַמְּךָ יִשְׂרָאֵל צְרִיכִין פַּרְנָסָה. אָמַר לָהֶם: לְכוּ וְהִתְפַּרְנְסוּ זֶה מִזֶּה. אָמְרוּ לוֹ: אֵין הַקּוֹמֶץ מַשְׂבִּיעַ אֶת הָאֲרִי, וְאֵין הַבּוֹר מִתְמַלֵּא מֵחוּלְיָתוֹ. אָמַר לָהֶם: לְכוּ וּפִשְׁטוּ יְדֵיכֶם בִּגְדוּד

 

 

What does this all mean?  What seemed to be the problem? What was king David's proposed solution? What did the sages not like about king David's solution? There seems to be some underlying theme that we are missing.

 

Adam Smith, the most famous economist of the 18th century, or possibly ever, introduced the concept of "The Invisible hand" this means that if the government would be hands off, people's own self-interest would drive them to create goods and services that other people want. Smith believed that all that's needed for an economy to thrive is people working in their own self-interest with no outside intervention and with nobody putting the brakes on economic activity. The people’s motivation to build wealth for themselves would be their biggest incentive to create desired goods and services that others would purchase making the producers wealthy. Smith suggested that competition between businesses would prevent exploitation of consumers by ensuring fair prices and open competition. It would also encourage economic innovation to satisfy consumer demand. In summary, businesses, driven by self-interest, would create optimal goods and services for society and create wealth for the producer who would utilize that accumulated wealth to purchase other goods and services making others wealthy in the process. This cycle would increase infinitely creating a wealthy society. Continued investment and circulation of money keeps the economy growing without any outside intervention.

 

Another also famous economist came along over one hundred years later named John Maynard Keynes.  After seeing a number of recessions and depression, Keynes adopted a different economic philosophy. He believed that the government was needed to support the economy. Both Smith and Keynes understood that to keep an economy thriving a continuous circulation of money was needed, however Keynes believed that there would be periods in an economic cycle where outside stimulus would be needed to drive demand. Creating this outside stimulus is the role of government. Keynes also believed that an accumulation of too much capital in the hands of a few could halt the continuous circulation of capital. Keynes therefore recommended government tax high earners and use the capital collected through those taxes to spur the economy by purchasing goods and services thereby creating demand and ensuring that capital would continue to circulate. This would also ensure that capital would not accumulate and dry up economic activity.

 

 The Israelites came to king David seemingly in a time of an economic downturn and told him "עמך ישראל צריכים פרנסה".  King David responded "לכו והספרנסו זו מזו"  King David's  response was simply to say that the way to  climb out of an economic downturn, as Smith states, is for the people to have faith and confidence in the economy and to continue engaging the economy by doing business and creating more activity. Just continue to produce goods and services and to purchase goods and services. This activity will ultimately fix the recession. One needs no more than faith and confidence and the economy will always sort itself out.  King David was clearly a laissez-faire economic thinker In the Adam Smith mold. The elders that approached king David seemed to be more of a Keynesian persuasion. The elders believed that the economy needed outside/government intervention to climb out of the recession. "אין הבור מתמלא מחוליתו" An economy left to its own devices will lose steam as money accumulates on the sidelines and economic activity and capital circulation will cease.

 

It is important to note that Adam Smith believed in a fair taxation system to provide for essential government services. Ultimately, Smith believed, that taxes should be utilized for government services that provide the most efficient benefit to taxpayers, obviously national defense would be on top of that list. Even a more profitable and beneficial way for the government to spend the collected tax money would be to utilize the tax money on an offensive war that actually would provide a profit to the country by conquering lands with natural resources enlarging the capital pot for all taxpaying citizens.

 

King David soon realized that he couldn't convince the sages to what he considered they're folly for they're Keynesian approach to economics as they continued to insist on government intervention.  At that point king David came up with an ingenious compromise. The king agreed to taxing and spending to conquer other countries and their natural resources.  At least now every dollar spent would increase exponentially and allow for further economic activity with which would continue to increase GDP.