Misers Are Too Fair

Steven Landsburg is exactly right:

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. …

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. …

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 you’ll drive down prices by just enough so someone somewhere can have an extra dollar’s worth of coffee with his dinner. (more; HT Adrian Kent)

Why are misers so widely criticized, if their gift is distributed unusually equitably, with little chance to receive praise or gratitude in return? Some might suggest this is caused by economic ignorance, but it seems far more likely that misers are criticized exactly because their gifts are equitable.

Humans have had literally millions of years experience begging from one other. Many primates do it, as do foragers. A supplicant appeals to common feelings that one should help associates in need when one is doing well, in the expectation of getting help later when you are in need, and also of sending good signals about your loyalty and ability.

Associates who hint that you should be less miserly and make more overt gifts are not at all hoping that you will spread your gift equitably across the world. They are instead hoping that you will unequally focus most of your gift on them. By criticizing a miserly associate, you are working to take the gift away from those distant recipients. Ask yourself: are you really more deserving than they? Do you care?

Added 1:30p: Karl Smith says:

The miser is not as generous as the dedicated philanthropist. … [He] is withholding his assessment of the most utility maximizing uses of his money. (HT TGGP)

True, but I’d still guess that the miser does more good than the average rich-nation philanthropist.

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  • david

    Why are we assuming the production possibility curve remains un-altered under relevant transfers, since apparently marginal changes in the real interest rate or price level are significant?

    • Why are we assuming the production possibility curve remains un-altered under relevant transfers, since apparently marginal changes in the real interest rate or price level are significant?

      This is the key issue. What’s assumed is a supply-side version of macroeconomics. From a Keynesian model, the miser is, arguably, the arch-villain. (For an extreme antidote to supply-side thinking, see “Against Thrift: Why Consumer Culture is Good for the Economy, the Environment, and Your Soul” — http://tinyurl.com/753v6tn)

  • orthonormal

    To be fair, you should at least note that hoarding of actual goods (as was the only option before currency) fails to have those positive externalities.

  • Anonymous

    Some might suggest this is caused by economic ignorance, but it seems far more likely that misers are criticized exactly because their gifts are equitable.

    Plausible for close associates, but I actually think there’s a lot of economic ignorance underlying it. I have more of a problem with people whose wealth is generated via violence (most wealth indirectly is) and who think they need at least three cars or yachts to be happy. That binds limited resources. The only good thing about it is that at least cars and yachts don’t suffer.

  • M

    Misers do not seem to be more widely criticized than the wealthy who spend freely on personal consumption; in general, they seem to be socially preferred. Philanthropists, of course, are esteemed more highly still. Both misers and philanthropists, relative to the extravagant, benefit others in times of relatively full factor utilization, although of course the beneficiaries differ, and so there are people who would benefit relatively more from philanthropy than investment. These unfortunates, however, aren’t of the class capable of driving public discourse, especially of the sort that you’re exposed to. So this story seems facially unlikely.

  • Jason

    I thought the point was that Scrooge wasn’t happy. His miserliness seemed to basically manifest his self-denial and people *pitied* him. At the end we learn “[Scrooge’s] own heart laughed and that was quite enough for him.” His generosity at the end is more symbolic because it does not appear to have significant monetary value — a generosity of wealth as a proxy for generosity of heart in the story.

    The story doesn’t really make sense if Scrooge was stingy but happy. We actually laud that kind of existence: the CEO who still drives him/herself to work in their old Ford Taurus, the billionaire who has eggs and toast for breakfast every morning at the local diner.

    There is a side piece that is essentially about profit-sharing with employees that doesn’t have to have anything to do with generosity, but economic incentives.

    • Adam Isom

      Upvoted-if I could-for making a good point that is likely to be ignored for social reasons. The very validity of using “Scrooge” rhetorically is rightly challenged, as is (indirectly) the post itself – as is (indirectly) the support of the post by other commenters.

      Unfortunately, comments like this on Less Wrong, at least, tend to be downvoted – ironic given the community’s supposed rationality, but it just goes to show we’re all social creatures.

  • Psychohistorian

    This analysis also seems to rely on the assumption that the economy is at full employment – or is just incorrect. It’s not easy to piece together from one’s armchair.

    If Scrooge hires a cook and a valet who would otherwise be unemployed, the world seems to be better off (at least if Scrooge is at least indifferent to hiring these employees). His cook now has income. The effect on other cook’s wages may exist, but supply already exceeds demand (and a mostly local market), so it’s at the very least ambiguous as to whether this effect is significant. The cook then uses his salary to buy goods and services, driving up the price of those goods and services. In theory, those rising prices should attract more people to provide those goods and services; that worker who just-barely wasn’t worth hiring now is worth hiring. Unless the economy is already at full employment, or has some significant structural problem in providing housing (which is possible, e.g. rent control / restrictive zoning), it seems we should expect the world to be a net better place.

    If the money sits in his mattress, it may be possible that that makes people today in some sense better off, but it’s unclear it has equivalently positive long-term effects. Particularly if you look at the distribution of wealth – low inflation tends to be good for the already-wealthy.

  • Preferred Anonymous

    Yes, I disagree with this notion as well. The Miserly are certainly entitled to and lauded for any green actions and stoicisms they might portray. But that’s just it, Misers are NOT stoics. Stoics are people who in fact redistribute wealth and live upon a bare minimum. They feel no need to hoard their wealth from the world.

    Which is Scrooge’s sin, not meager living, its greed.

    I’m sorry, you failed your literary/moral analysis class miserably. (No pun intended)

  • Preferred Anonymous

    Actually what’s especially sad about this post is that most 10-year-olds are able to come to a realization of these subtleties, and you have to spill them out to all in your later 40s-50s. I suppose later is better than never…

  • Karl Smith disagrees with Landsburg. Philanthropists use their non-zero knowledge to better target their altruism. He could well have cited Landsburg on giving to more than one charity.

  • GudEnuf

    Misers do not distribute their wealth equally They give more to the rich. If I hide a dollar under the mattress, deflation increases the value of all the other dollars. The more dollars you own, the more you benefit. And if you owe debt, the miser takes wealth from you.

  • Well I don’t see the miser’s shine. MIsers can be neurotic, anti-social and may live in fear that one day they will be poor again. It is most likely a form of mental illness. It is no life for a man or woman. A proper balance with regards to money and taking care of oneself is best methinks.

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  • orthonormal, agreed.
    M, yes the extravagant look worse.
    Preferred, yes the stoics look better.
    Jason and John, I claimed the miser did good, not that he was happy or admirable.
    Pyscho, no it doesn’t require we assume that.
    GudEnuf, I said unusually equitably, not perfectly equitably.
    TGGP, I added to the post.

  • Dave

    It seems that one is getting into some sort of whacky zealotry when you worry about the effect of spending or hoarding a dollar. Perhaps we should next consider the effect of eating a helping of pinto beans on global warming.

  • Hume

    Miserliness is not the focus of people’s ire towards Scrooge. Rather, it is the way he treats those under him and what it is that he values. He treats his employees like they are rats and values money qua money (Aristotle would laugh at him). And perhaps this latter point is why people have a problem with the miser. That which is merely a means has become an end. It’s silly to waste your breath on “the miser” without first realizing the underlying values and worldviews involved.

  • acertainshadeofgreen

    Can somebody explain the basic economics in this post? How does not spending money help others?

    • Matt

      I’m also confused by this. It seems to treat consumption generally as zero-sum and miss the fact that if someone doesn’t spend their money they are depriving others of possible gains from trade. I can see how this might work with natural resources such as coal, but not when the Miser buys a t-shirt or goes to a restuarant.

      • It seems to treat consumption generally as zero-sum and miss the fact that if someone doesn’t spend their money they are depriving others of possible gains from trade.

        “Ideally,” consumption is, trivially, a zero sum game. If some don’t spend their money, prices go down correspondingly. There’s less money to buy up what’s produced, and each dollar is worth more, and those others holding dollars can buy more goods and services with given money. Since they end up buying the same amount—the value of their money rising as the money circulating declines—nobody is (necessarily) deprived of access to the externalities that they’d benefit from were the money spent. In real terms, the same amount gets spend, only differently distributed.

        The problem is that this scenario depends on markets being much more efficient than they are. A decrease in by one person will tend to cause a decrease in amount consumed—for one reason, prices for many goods are sticky.

        What’s strange about the article—and about Hanson’s liking it—is that it leaves aside everything we know about actual markets. When they invoke the “market,” they have some platonic ideal in mind, rather like when some Republican presidential candidate chants the free market mantra. How can economists, of all people, be so blind to the market’s real workings?

        That’s not to say the miser is the real villain. Shouldn’t a person be able to save money without injuring people? But that’s a gripe with the market itself. But maybe without the market, most of our notorious misers would lack the wherewithal to be miserly in the first place.

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  • So when you see one of those bumper stickers that says “Live simply so others can simply live”, you applaud it enthusiastically, right?

  • Karl’s co-blogger Adam piles on.

  • Julia Wise

    Why should equitable distribution of good be the goal? I’d rather give $100 to someone I know needs it than $1 to a hundred random people.
    I’m not sure what “associates” you mean, or why I should care about their intentions. If I give because the Ghost of Christmas Present (or GiveWell) hints that I should, it doesn’t matter to the family that gets those mosquito nets.

  • Wonks Anonymous

    On Twitter today Josh Barro was arguing that “buy American” is (or should be) as offensive as “buy White”. He says its okay to prefer your family/friends over other people, but not strangers who belong to a category like race/nationality. That does seem more normal to me, but I’m not sure under which ethical theory that’s preferable. Maybe some virtue ethics, though I don’t know much about them. The perfectly egalitarian miser seems more in keeping with utilitarian theory than one who prefers friends & family, as most of us will do when buying gifts this Christmas.

  • Michael Wengler

    Looks to me like simple logic mistakes.

    The Miser DOES NOT do good to anyone, any more than the mortgage with the lowest monthly payment is the best deal.

    FOR NOW, the miser does produce without consuming, does lower slightly the current price of items he might have consumed had he not been a miser. But he accumulates money. The amount of money he accumulates is a DIRECT MEASURE of the amount by which he will be able to undo any good he has done. The miser does not forego consumption using his money, he merely postpones it. He will eventually die or otherwise pass his money on to others.

    When they tried to sell me a mortgage comparing only monthly payment, I insisted on seeing how much would be owed in 30 years, even though I might be dead then. Similarly when you try to tell me that a miser is making other people’s money more valuable by not using his to consume or invest, I want to know how much consumption or investment will be done down the road with the money he has mised. Same difference.

  • Scrooge was a character created in a story by Dickens, published just days before Christmas in the early 19th century. Dickens used a miser like Scrooge as an object lesson on a principle life value, particularly poignant at Christmas time: “People and relationships are more valuable than money and material goods. A life spent accumulating wealth at the expense of accumulating relationships and good will is a life poorly lived.” Your defense of the miser flies in the face of the fundamental wisdom behind Dickens’ argument – we live in a society and we all benefit when we share our wealth. We also understand from an economic argument that money circulating has a multiplier effect and lifts the economy so that all benefit, where money hoarded drives the economy downward to the benefit of but a few. We are living out the miser’s argument today with austerity programs in the US and Europe – how’s that working out for us? I’ll stay with Dickens on this Christmas, thank you very much.

    • PGies Chan

      1) we all benefit when we share our wealth

      This is patently false – x/y is always less than x unless y <= x

      2) multiplier effect

      Hahaahaahahaahaahaha *gasp* bwahaahaha

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  • Alex Beh

    Anthropologist here,

    The technical term for the institution Robin inaccurately describes as “begging” is “reciprocal altruism” (RA), which indeed is common in forager societies and among other primates, but more generally is observed throughout kingdom animalia and beyond. I think “inaccurate” because the receiver doesn’t have to do anything (do you really go from relative to relative with your hand out, asking for something on Christmas?), but also because stingy humans often draw resentment by third parties who could not possibly be receivers.

    In fact, reciprocal altruism (RA) is one of the better studied ways to stabilize cooperative behaviors in evolutionary biology and anthropology. They work well in high-payoff, high-variance systems like hunting because individuals who bring home the meat can call in their favors when they bring home nothing. There’s also a mechanism for punishment of Scrooges – you don’t give them things when they are in need. I think Bowles’ Microeconomics goes over the evidence that RA evolves spontaneously in environments where contracts can not be enforced.

    I have great respect for economists, but I don’t understand the need for Robin’s turn from talking about RA to a morality play, where we psychoanalyze supplicants to discover secret hypocrisy; they claim to value selflessness but are in their heart of hearts secretly motivated by selfishness [citation needed].

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