Monday, March 09, 2009

Ebenezer Scrooge: Philanthropist

I'm only a few pages into Steven Landsburg's More Sex is Safer Sex: The Unconventional Wisdom of Economics, but I've found a section that just intrigues the heck out of me ... yet my brain has a hard time wrapping around the concept. It goes like this:

In this whole world, there is nobody more generous than the miser — the man who could deplete the world's resources but chooses not to. The only difference between miserliness and philanthropy is that the philanthropist serves a favored few while the miser spreads his largesse far and wide.

If you build a house but refuse to buy a house, the rest of the world is one house richer. If you earn a dollar but refuse to spend a dollar, the rest of the world is one dollar richer — because you produced a dollar's worth of goods and didn't consume them.

Okay. I confess that I'm completely selfish, as it turns out, and have never thought about "saving" that way. How about you?

Landsburg goes on:

Who exactly gets those goods? That depends on how you save. Put a dollar in the bank and you'll bid down the interest rate by just enough so someone somewhere can afford an extra dollar's worth of vacation or home improvement. Put a dollar in your mattress and (by effectively reducing the money supply) you'll drive down prices by just enough so someone somewhere can have an extra dollar's worth of coffee with his dinner. Scrooge, no doubt a canny investor, lent his money at interest. His less conventional namesake Scrooge McDuck filled a vault with dollar bills to roll around in. No matter. Ebenezer Scrooge lowered interest rates. Scrooge McDuck lowered prices. Each Scrooge enriched his neighbors as much as any Lord Mayor who invited the town in for a Christmas meal.

And finally:

This is a law of arithmetic: If Scrooge eats less, there's more food for someone else.

This is a law of economics: If nobody else wants that extra food, then something — either a price or an interest rate — has to adjust until someone wants it.

So the fact that I have some liquid savings set aside, and am working to pad my cash stash even further, is a benefit to me in lots of ways — not the least of which is the fact that I can sleep at night. Bills and debts (the household sort, anyway) aren't a worry at present.

However, it's nice for society at large, too. Whatever savings I accumulate means I'm that much less of a potential draw on, say, the unemployment-insurance coffers should something yucky happen. Which thus leaves more money for some other (deserving, we hope) recipient.

Ah. Looked at in this light, saving cash is similar to charitable giving. The largesse, as Landsburg puts it, is spread far and wide.

In his January 2008 article "Why the Stimulus Shouldn't Stimulate You," Landsburg elaborated a bit on the "consumption versus saving" idea and the behavior our government ought to be promoting:

If you care about your grandchildren, you should be encouraging everyone else not to consume, but to save.

But much of the stimulus package [the 2008 version] is designed to achieve exactly the opposite: It encourages consumption, not saving. Not that there's anything wrong with consumption; it's what makes life worth living. But my consumption benefits me, while my saving benefits you.

I've already got plenty of incentive to consume. What you should be worrying about is my incentive to save. To say it again: The more I consume, the poorer your grandchildren will be; the resources I use won't be available to build machines that make your grandchildren more productive. It's all well and good to worry about the people who are struggling today, but let's also remember the people who will be struggling in the future. The worst thing we can do for them is to encourage consumption.

There. It's settled, then. Common sense dictates that Congress shall now create and pass laws which will reach deep into the pockets of reckless spenders (selfish nits, they) and extract suitable financial punishment. And, on the flip side, caring savers will be rewarded with tax breaks as far as the eye can see, with as many tax credits as the purse can hold.

Saving shall henceforth be commended as "patriotic" and "selfless," and shall be promoted at all opportunity.

Above-their-means spenders shall be scarlet-lettered and made to live their indebted days in the sole company of corrupt politicians, early-round American Idol dismissals, and other societal miscreants.

See? There's another reason I sleep well at night:

I'm really, really good at dreaming.

[Edit: If you want to read Landsburg's Slate article which appears to largely be the "What I Like About Scrooge" chapter from More Sex is Safer Sex, you can find it here.]

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— Posted by Michael @ 9:50 AM


Very interesting and thought provoking.


Great Post! This is very interesting and everyone one should read this.

** Comments Closed on this Post **

Thoughts on my personal finances, goals, experiences, motivations, and accomplishments (or lack thereof).

My financial life began turning around when I took responsibility for it.
— Dave Ramsey


Start (2005-12): ~$21,900
Currently: $0
[About Our Debt Paydown]


Savings Goal: $15,000
Currently: ~$15,115
[About Our Liquid Savings Goal]