I’ll probably blog very little over the next ten days or so, in recognition of the fact that most of you won’t be reading. (On the other hand, if, say, the New York Times publishes something sufficiently egregious, I might not be able to restrain myself. Meanwhile, for your holiday pleasure, here’s the Christmas column I published in Slate in 2004:
Here’s what I like about Ebenezer Scrooge: His meager lodgings were dark because darkness is cheap, and barely heated because coal is not free. His dinner was gruel, which he prepared himself. Scrooge paid no man to wait on him.
Scrooge has been called ungenerous. I say that’s a bum rap. What could be more generous than keeping your lamps unlit and your plate unfilled, leaving more fuel for others to burn and more food for others to eat? Who is a more benevolent neighbor than the man who employs no servants, freeing them to wait on someone else?
Oh, it might be slightly more complicated than that. Maybe when Scrooge demands less coal for his fire, less coal ends up being mined. But that’s fine, too. Instead of digging coal for Scrooge, some would-be miner is now free to perform some other service for himself or someone else.
Dickens tells us that the Lord Mayor, in the stronghold of the mighty Mansion House, gave orders to his 50 cooks and butlers to keep Christmas as a Lord Mayor’s household should—presumably for a houseful of guests who lavishly praised his generosity. The bricks, mortar, and labor that built the Mansion House might otherwise have built housing for hundreds; Scrooge, by living in three sparse rooms, deprived no man of a home. By employing no cooks or butlers, he ensured that cooks and butlers were available to some other household where guests reveled in ignorance of their debt to Ebenezer Scrooge.
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 largess far and wide.
If you build a house and refuse to buy a house, the rest of the world is one house richer. If you earn a dollar and 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.
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.
Saving is philanthropy, and—because this is both the Christmas season and the season of tax reform—it’s worth mentioning that the tax system should recognize as much. If there’s a tax deduction for charitable giving, there should be a tax deduction for saving. What you earn and don’t spend is your contribution to the world, and it’s equally a contribution whether you give it away or squirrel it away.
Of course, there’s always the threat that some meddling ghosts will come along and convince you to deplete your savings, at which point it makes sense (insofar as the taxation of income ever makes sense) to start taxing you. Which is exactly what individual retirement accounts are all about: They shield your earnings from taxation for as long as you save (that is, for as long as you let others enjoy the fruits of your labor), but no longer.
Great artists are sometimes unaware of the deepest meanings in their own creations. Though Dickens might not have recognized it, the primary moral of A Christmas Carol is that there should be no limit on IRA contributions. This is quite independent of all the other reasons why the tax system should encourage saving (e.g., the salutary effects on economic growth).
If Christmas is the season of selflessness, then surely one of the great symbols of Christmas should be Ebenezer Scrooge—the old Scrooge, not the reformed one. It’s taxes, not misers, that need reforming.
Humbug.
Merry Christmas to all.
This is just like your book, Armchair Economist; there is enough food for thought here to last, literally, months. Every sentence can be examined, and followed, and used to test assumptions and arguments for enough time to fill a semester in an econ. class.
Merry Christmas!
Doesn’t the miser her more those who can already afford to spend more? After all, if the value of a dollar spent goes up, those who spend $100 benefit much more than those who spend a mere $1.
And in a world of Scrooges we would all live in miserable hovels – or more likely in rude shelters in the woods. Scrooge represents the ultimate failure of demand – Not surprising that you, Steve, can’t grasp this.
But presumably in a world full of Scrooges, we would all like living in miserable hovels – just as the original Scrooge does. Being misers, we wouldn’t want to waste our money on a fancy house.
EricK: The point is not that *you* should be a Scrooge; it’s that you should hope that your neighbors are.
Steve, I was responding to Ted’s post that in a world full of Scrooges we would all be living in hovels (and presumably that would be a problem).
As an aside, I think it was this Slate column that first interested me in things economic. So thank you very much for that!
EricK: Yes, the response should have been directed at Ted, not you.
Thanks for the kind words!
And when he told Bob Cratchit that he could not put more coal on the fire, Scrooge was doing his part to reduce carbon emissions.
A modern day Scrooge is not somebody who doesn’t spend. It’s somebody who spends a lot on financial services. Scrooges paid for all those Connecticut mansions owned by hedge fund managers.
I’d post this on my facebook page, except that I already did so a couple years ago. It’s such a great article!
Dickens was inspired to create Scrooge by an epitaph he (mis)read in an Edinburg churchyard – the grave of one Ebenezer Lennox Scroggie:
here.
”
There, as revealed by his diaries, he saw a memorial slab which read: “Ebenezer Lennox Scroggie – meal man”. The description referred to his main trade as a corn merchant. However, the author mistakenly translated it as “mean man”.
Though he was shocked by the description, it gave him food for thought and two years later, art imitated life – or so the author believed.
When A Christmas Carol , one of Dickens’ finest works, was published in 1843, it featured Ebenezer Scrooge, a “mean man” erroneously based on Ebenezer Scroggie.
Dickens always believed his creation was rooted in truth. Later, he wrote that while Scots had a reputation for frugality, they were not mean. It must have “shrivelled” Scroggie’s soul, said Dickens, to carry “such a terrible thing to eternity”.”
Doubtless are the “mean men” here will be disappointed to here that the real Ebenezer was quite a different fellow, given to partying and rambunctious behavior.
“In life, Scroggie was apparently a rambunctious, generous and licentious man who gave wild parties, impregnated the odd serving wench and once wonderfully interrupted the General Assembly of the Church of Scotland by grabbing the buttocks of a hapless countess.
“
Penultimate paragraph should read: Doubtless all the “mean men” here will be disappointed to hear…
Are these savings amassed in fiat money and then set on fire? If so then sure, the deflationary effect is a form of philanthropy toward the other holders of that money. If savings are merely amassed ready to spend at some later date, then they are solely philanthropy toward whichever heir eventually spends them.
“Are these savings amassed in fiat money and then set on fire?”
An environmentally-friendly way to destroy money is to make a “gift” to the Treasury:
http://www.treasurydirect.gov/govt/reports/pd/gift/gift.htm
It’s just like paying taxes only voluntary. You can see how much has been collected year by year. Over $3 million in fiscal 2011. Somehow I doubt that this will become a popular mode of philanthropy.
Here is my criticism of Steve’s (delightful) analysis.
…. but if all my neighbours were Scrooges, who would employ me or buy my goods and services?
The ledger of Scrooge, pre-conversion:
1. Scrooge is wealthy and reputed to be an “excellent man of business,” suggesting that he’s productive. (What exactly does Scrooge produce? Not specified. His business involves “cash-boxes, keys, padlocks, ledgers, deeds, and heavy purses.” Scrooge maintains a “counting house,” and “banker’s book,” and retained clerk to copy letters.) In particular, Scrooge states that he invested 100% of his time on his business, which “occupies [him] constantly,” leaving him no time to learn about the plight of the poor. (Scrooge does find time to read “all the newspapers,” however.)
2. While producing much, as Landsburg notes, Scrooge does not appear to consume much. Scrooge lives simply. Admittedly, Scrooge’s house is rather elaborate, with a wide staircase and ornate fireplace, but Scrooge appears to have inherited it from Marley, and Scrooge rented out many of its rooms as offices.
3. However, the story suggests that Scrooge is being wasteful by squandering his life – “life’s opportunities misued.” It seems to me that Scrooge failed to invest in maintaining the social networks that are associated with a prolonged productive life. But more importantly, Scrooge failed to engage directly in promoting the welfare of those around him. The Spirits of Christmas Past and Present emphasize the role that direct, interpersonal actions play in enhancing people’s utility – acts that might command no market value, but create experiences that give life meaning. Marley acknowledges that work contributes to the public welfare, but concludes that “The dealings of my trade were but a drop of water in the comprehensive ocean of my business!”
4. Landsburg suggests that people who produce and save (in effect, lend) are better philanthropists than those who produce and give. Scrooge is clearly in the former category. (Note that Scrooge does not express opposition to aiding the poor, but professes that he already contributes — via taxes? — to the maintenance of institutions that feed and house the poor: prisons, Union workhouses, “the Treadmill and the Poor Laws.” I believe that prisons housed both criminals and people who failed to pay debts.) Whether you embrace Landsburg’s analysis might depend upon your faith in the efficiency of markets to promote the welfare of the poor, especially in the London of the early 1800s. As an initial matter, we’d have to conclude that Scrooge’s miserliness would have achieved a better outcome than saving Tiny Tim’s life.
5. Scrooge clearly produces negative externalities in that he produces bad feelings in everyone he encounters. People flee his presence on public streets. This quality strikes people as especially pernicious at Christmastime, when people expect greater goodwill from even passing strangers, and when Scrooge seems especially cross. How you score this aspect of Scrooge will depend upon your outlook: We don’t like negative externalities, but generally tolerate some externalities in the interest of maintaining personal autonomy.
6. In the final analysis, how productive was the unreformed Scrooge? He produced. But the burden of the story was that he produced less than he could have; he had the power to enrich himself and those around him beyond his current practices, but didn’t realize it. The purpose of the Spirits was to free Scrooge from his Galbrathian-induced demand (i.e., demand induced by false belief) for his then-current lifestyle. After the end of his hauntings, Scrooge freely chooses a different lifestyle.
Arguably, the larger econ lesson in A Christmas Carol is to challenge the idea that people always know what is best for themselves. Ultimately people need to make their own choices, but sometimes those choices need to be informed by an intervention – even an unwelcome one.