At least two bloggers ( 1 and 2) have cheerfully cited Steve Landsburg’s article in praise of misers. Although it is refreshing anytime someone takes such an unconventional and pro-capitalist position, I’m afraid that I must be a Scrooge with the kudos.
Landsburg’s main point–at least, the point to which he devotes the opening of his article, and which the skeptical reader will first see and consider–is that Scrooge is a good guy because he refrains from consuming heating oil, labor power, etc. But by the same token, we should write articles in praise of squirrels, rocks, and limericks. (I.e. these things do not reduce the PPF for “everyone else” either.)
Later in the article Landsburg elaborates and says that, when someone earns a dollar but refrains from spending it, everyone else is a dollar richer. Yes, in a static Kaldor-Hicks framework, I guess this is true–and perhaps worth a Slate article. (I don’t mean this sarcastically; I’m acknowledging that you can’t deal with every possible subtlety in such a piece.)
But the division of labor is beneficial even if everybody consumes “what he earns.” For example, if one person alone can catch 10 rabbits per day, while two people together can catch 30 rabbits per day, even if each person consumes 15 rabbits per day, they both benefit from cooperation and the other person’s existence. One couldn’t point to one such man and say, “Because he consumes exactly what he produces–15 rabbits per day–he’s not helping anyone else in society by his actions.”
Finally, I’m also a little uncomfortable with Lansburg classifying saving as a form of philanthropy. For example, if I save up for a decade and then spend my accumulated capital, Landsburg would have to explain this as follows: In the first ten years, I was being generous to the rest of the world. Then in the tenth year, I took back everything (i.e. I was an “Indian giver” to use the non P.C. phrase).
Is that really how we should analyze this? Or would it be better to say that I had selfishly spent my earnings on future consumption rather than present consumption, and that philanthropy had nothing to do with it?
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But isn’t it the case that the key issue here is the form in which savings occur?
Shuffling gold coins out of circulation and into the mattress would be difficult to see as any benefit to the economy or as any sort of philanthropy.
But shuffling gold coins into commerce via savings which provide the basis for capital accumulation can hardly be objected to — can it?
Saving money by lending it out at interest is both miserly and a tremendous benefit to the economy. How could we see it otherwise?
So the Scrooge question comes down to — where/how does he save? In the mattress or as a proper miser by lending for interest?
cheers,
Shirley Knott
I agree with your criticisms. The author does take sort of a “zero sum” approach, though I believe only for illustrative purposes.
I would argue the following, in terms of benefit.
The philanthropist who gives his money to pro-capitalist causes does the greatest amount of good.
The philanthropist who gives his money to anti-capitalist causes does the greatest amount of harm.
The rich person who spends his money on things for personal consumption also does good: all sides to the transactions benefitted ex ante.
The rich person who misers his money also does good, allowing everyone else to purchase more for their dollar.
Of course, these are all my subjective valuations. However, I’d argue that we could also bring the ethics of freedom into it, to condemn any philanthropist giving his money to anti-capitalist causes: this consitutes supporting the initiation of aggression.
Btw, I do think squirrels are worthy of praise. An unbelievable number of people live paycheck to paycheck, but even a squirrel knows that it has to save in the summer (when there is plenty) to survive in the winter (when there is little).
David,
I would be *fascinated* to hear a decent description of the meaningful differences between “gives … to” and “lends … for interest … to” along with a reasoned argument why the former is better than the latter.
And I still wonder at the economic difference between the miser who ‘misers’ his riches by hoarding them in his mattress and the miser who ‘misers’ his riches by storing them in an interest-bearing account (or stocks or bonds or…).
I do genuinely get the sense that we tend to be insufficiently precise and careful when discussing other people’s choices and their impact on ‘the economy’. Few things fail faster than the Austrian’s commitment to subjective value…
regards,
Shirley Knott
Gives to means that you aren’t requesting your principal back, or any interest. A loan can be either interest-bearing or interest-free. I don’t see what more explanation is needeed.
Investing your money somewhere — either in stocks, bonds, gold, or lending banks — means that you are directing it to some sector of the economy. Putting it under your bed is equivalent to retracting it from the economy (at least for a time). The latter creates a temporary deflation in the effective monetary supply.
I’m not retreating from subjective value. I’m asserting my objective value: the person who gives his money to anti-capitalist causes is acting poorly, in my estimation. Objectively, I can use the libertarian non-aggression axiom to state that they’re acting criminally (little different than if I paid X to murder Y). Think about what happens when a rich person gives their money one of these nutjob environmentalist organizations: they’re giving money to support the violation of property rights.
David, I think we are largely, if not entirely, in agreement. And, btw, my remarks about a tendency of Austrians to retreat from subjective value was not directed specifically at you.
But your response does point out that the situation I describe as a retreat may in fact be one of unannounced, and thus generally unnoticed, context switching. As I took it, the discussion at hand was regarding whether misers were _economically_ good, bad, or indifferent. Your response indicates that you were making a non-economic evaluation, which is all well and good — when known.
I agree that the person who supports anti-capitalist ends is behaving immorally.
I remain convinced that there are two situations to consider when viewing the miser — the economic and the moral. The interesting question from the economic point of view has to do with whether the economic impact of removing money from the effective monetary supply is equivalent to, or of greater economic value, or of lesser economic value than being ‘miserly’ by saving and investing in lieu of consuming.
I believe an Austrian analysis would have to conclude that the person who is a miser, in the sense of maximal savings/minimal consumption, is of tremendous value to the overall economy. (Of course, this does leave aside all questions of where that money comes from, ie, how it was earned in the first place — inheritance, personal production by the miser, or ??)
regards,
Shirley Knott
David,
You say “Putting it under your bed is equivalent to retracting it from the economy (at least for a time). The latter creates a temporary deflation in the effective monetary supply.”.
Be careful here. A single miser is not likely to have much effect on the money supply. Certainly nothing that would be noticed by the general populous. More importantly we should be talking about a class of people. Assuming misers are randomly distributed as to age and all try to take their money with them to the grave they will on average have no effect on the money supply.
I think it is proper to be talking about the effect of multiple misers because we are also talking about groups of people with regard to the consequences. From the point of view of society at large misers as a class are beneficial. They cannot actually take it with them and therefore someones going to get it.
From the perspective of certain individuals however an individual misers actions certainly are less than desireable. The offspring of a miser certainly will perceive with a different eye the resulting depravation required to amass a pile of coins. Of course it is all subjective, what was more important, the pile of coin or the weeks vacation with the family in the Caymans.
I reenforce my point by pointing out that one need not be rich to be a miser, nor vice versa. Plenty of the very rich have been know to have spent or given to charity substantial portions of their wealth on a yearly basis. That’s what mansions are all about.
Ms. Knott,
I think you may have misunderstood my post. I didn’t mean to deny that misers are good; I just didn’t think Landsburg’s reasons were valid.
People who invest and earn interest are being compensated (in a sense) for this; would you say that working for a salary is a form of philanthropy, and should be tax deductible?
Also, suppose that I refrain from current consumption, and use the $$ to buy forward contracts on future commodities. This is economically equivalent (assuming long-run equilibrium) to the case where I refrain from present consumption and then, in the future, spend the accumulated principal on those same goods. The former case clearly isn’t philanthropy.
(1.) Isn’t there a point to be made for reduced consumption, as Landsburg does, as beneficial to the rest of society even more so than were the benefits of free exchange to be consumed, and doesn’t this point show also that we should praise the leftist in his attacks on excessive consumption, such as of oil? While it’s true that if a resource is priced at cost, its consumption does no harm, isn’t it also true that resources are often mispriced due to distortions of the market, and that therefore, we ought to praise not only those who increase the supply but those who maintain the supply (by decreasing consumption)?
(2.) Why can’t we blame the miser? Isn’t there /something/ wrong with a person who is so far removed from the misfortunes of /this/ world here and now that he would leave resources available only to the world of tomorrow?
(3.) Wrt “In Defense of Scrooge”, which is related to this thread, doesn’t Michael Levin assume a free market in labor where such is in fact attenuated? Whereas, while it’s true that on the free market, labor gets paid its marginal revenue product, in reality there exists a cartel of employers against the unemployed because of minimum wage laws and perhaps also criminalization and ostracism of so-called vices like drug use?
Secondly, is it not true that in the market for artificial bank credit, there exists some additional opportunity for credit to be lent to the Cratchits of the world–additional: beyond what would exist on the market–and that it is rather going not necessarily to the best-credited customers but to the ones favored by the distortions created by this particular statist intervention? Shouldn’t this mitigate the unadulterated praise due to the lender–somehow?
And with respect to the purported lack of miserliness on the part of Scrooge with reference made to the tax dollars taken from him already, does this condition ever not obtain, to the point that if sufficient as an excuse against charity, it would condone the behavior of all the ‘bad Samaritans’ (so to speak) at all times? Isn’t support for statist institutions like forced labor (a) self-serving, in driving down the price of labor, and (b) pretty miserable?
I need to learn more economics, I admit. And I wish I had a forum for asking questions like these without fear either of bothering someone or of being ignored by all.
Adios.
Mr. Bundren,
Let me just address part of your first question: “Isn’t there a point to be made for reduced consumption, as Landsburg does, as beneficial to the rest of society even more so than were the benefits of free exchange to be consumed…?”
Yes, I think this is largely true. E.g. if I burn my paycheck every week without cashing it, then I’m obviously making a gift to my employer. But even if I do cash it and then burn the dollar bills, then I’m making a gift to holders of dollar-denominated assets.
But what I was getting at is that this isn’t true of all forms of saving (where saving is defined as “refraining from potential present consumption”). So long as you retain the ability to consume in the future (which the miser does!), then it’s not a gift. Specifically, if I refrain from consuming, say, $100 now and choose to let that grow at interest to $10,000 in the future, unless I burn it own my deathbed, then it’s not a gift to anybody.
Of course, if I never spend a cent and pass on everything to an heir, it’s a gift to him or her. But the gift occurs at the moment of my death, not during my lifetime of investment. Yes, I’m refraining from possible consumption all those decades, but the freed up resources must be devoted to the eventual production of whatever it is that my heir consumes.
Mr. Bundren,
One last clarification: If you’re asking me, do I think it helps society more when a person (a) consumes his weekly paycheck all the time or (b) saves 50% of his income and invests it, of course I think (b) is correct.
But the reason for this isn’t really captured by Landsburg’s analysis (if memory serves). It’s not because the person who saves thereby frees up resources for everyone else, but rather that the person who saves (and invests) redirects resources into more roundabout production processes, i.e. resources that otherwise would have gone into making TV sets now go into making tractors.
And the reason this helps others is that, with more capital goods, the marginal product of everyone’s labor is higher, and hence their real wages are higher.
If I recall correctly, Landsburg didn’t even mention capital accumulation. He said that the reason Ebenezer was good is that he lowered interest rates, just like Scrooge McDuck is good for lowering prices.
Mr. Murphy,
Thanks for the clarification. I agree with what you say: The benefit of saving comes from deepening of the capital structure, or else as a redistributed benefit to another,whether directly (by gift) or indirectly (by general deflation of the security in question).
On second thought, it’s difficult to say just what my real problem was that presented itself to prompt me to write. It has something to do with a faint discomfort with articles being so widely acclaimed and circulated which seem somehow, if not superficially even, against the spirit of charity, despite claims to the contrary and in that much of the analysis is unimpeachable. The example which comes presently to mind is of the dismissal of the significance of the passages in which Scrooge–in the article by Mr. Levin–dismisses his obligation to patronage by reference to the acts the state performs in that name.
Yet, it is this attitude which cuts to the heart of why Scrooge has the reputation he has, and why attempts to rehabilitate him must fail, and I believe, even backfire against the movememnt which they attempt to strengthen. It–the attitude that reads as being behind many of these kind of pieces–may be bold and funny and substantially true, but I believe it ‘s counterproductive and, at bottom, false.
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