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Thread: weekend commentary - 'Defending the Miser'

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    Banned Melonie's Avatar
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    Default weekend commentary - 'Defending the Miser'

    (snip)"The miser has never recovered from Charles Dickens's attack on him in A Christmas Carol. Although the miser had been sternly criticized before Dickens, the depiction of Ebenezer Scrooge has become definitive and has passed into the folklore of our time. Indeed, the attitude pervades even in freshman economics textbooks. There the miser is roundly condemned and blamed for unemployment, changes in the business cycle, and economic depressions and recessions.

    In the famous – or rather infamous – "paradox of savings," young students of economics are taught that, although saving may be sensible for an individual or a family, it may be folly for the economy as a whole. The prevalent Keynesian doctrine holds that the more saving in an economy, the less spending for consumption, and the less spending, the fewer jobs.

    It is time that an end be put to all these misconceptions. Many and various benefits are derived from saving. Ever since the first caveman saved seed corn for future planting, the human race has owed a debt of gratitude to the hoarders, misers, and savers. It is to those people who refused to use up at once their entire store of wealth and chose rather to save it for a needy time that we owe the capital equipment that enables us to aspire to a civilized standard of living.

    It is true, of course, that such people became richer than their fellows, and perhaps thereby earned their enmity. Perhaps the whole process of saving and accumulating was cast into disrepute along with the saver. But the enmity is not deserved. For the wages earned by the masses are intimately dependent upon the rate at which the saver can accumulate money.

    There are, for example, many reasons contributing to the fact that the American worker earns more than, say, his Bolivian counterpart. The American worker's education, health, and motivation play important roles. But a major contribution to the wage differential is the greater amount of capital stored up by American employers than by Bolivians. And this is not an exceptional case. The saver has been instrumental throughout history in lifting the pack above the level of the savage."(snip)

    (snip)"Consider a simplistic but not wholly inaccurate model in which all the dollars in the economy are bid against all its goods and services. Thus the fewer the dollars, the greater the purchasing power of each. Since hoarding can be defined as reducing the amount of money in circulation, and other things equal, less money means lower prices, it can readily be seen that hoarding leads to lower prices.

    There is no harm in lowering the level of prices. Quite the contrary: one of the great benefits is that all other people, the nonmisers, benefit from cheaper goods and services.

    Nor will lower prices cause depressions. Indeed, the course of the prices of some of our most successful machinery has followed a strong downward curve. When cars, televisions, and computers were first produced, they were priced far beyond the reach of the average consumer. But technical efficiency succeeded in lowering prices until they were within the reach of the mass of consumers. Needless to say, neither a depression nor recession was caused by these falling prices. In fact, the only businessmen who suffer in the face of such a trend are those who follow the Keynesian analysis and do not lower their prices in the face of falling demand.(snip)

    (snip)But far from causing an ever-widening depression, as the Keynesians contend, such businessmen only succeed in driving themselves into bankruptcy. For the rest, business continues as satisfactorily as before, but with a lower price level. The cause of depressions, therefore, exists elsewhere.1

    There is likewise no substance in the objection to hoarding on the ground that it is disruptive, and continually forces the economy to adjust. Even if true, it would not constitute an indictment of hoarding, for the free market is preeminently an institution of adjustment and reconciliation of divergent and ever-changing tastes. To criticize hoarding on this ground, one would also have to criticize changing clothing styles as well, for they continually call on the market for "fine tuning" adjustment.

    Hoarding is not even a very disruptive process because for every miser stuffing money into his mattress, there are numerous misers' heirs ferreting it out. This has always been the case, and it is not likely to change drastically.

    Claims that the miser's hoard of cash is sterile because it does not draw interest as it would if it were banked are also without merit. Could the money held by individuals in their wallets be characterized as sterile since it does not draw interest either? If people voluntarily forbear to earn interest on their money and instead hold it in cash balances, the money may appear useless from our point of view, but it undoubtedly is not useless from theirs.

    The miser may want his money not for later spending, not to bridge the gap between expenditures and payments, but rather for the pure joy of holding cash balances. How can the economist, educated in the utility maximization tradition, characterize joy as sterile? Art lovers who hoard rare paintings and sculpture are not characterized as engaging in a sterile enterprise. People who own dogs and cats, solely for the purpose of enjoyment and not investment, are not described as engaging in sterile activity. Tastes differ among people, and what is sterile for one person may be far from sterile for another.

    The miser's hoarding of large cash balances can only be considered heroic. We benefit from lowered price levels, which result from it. The money that we have and are willing to spend becomes more valuable, enabling the purchaser to buy more with the same amount of money. Far from being harmful to society, the miser is a benefactor, increasing our buying power each time he engages in hoarding."(snip)

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  2. #2
    JRdancer
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    Default Re: weekend commentary - 'Defending the Miser'

    I prefer to be generous to others and enjoy life within limits so that I'm still taking care of myself and my future. I'd never hold up a miserly extreme as a hero. Those who are generous to others in need and do charitable things are my heroes because I find that much harder to do. (Our tendency is to keep what's ours or spend it on ourselves.)

    Some of our financial gurus may be penny pinchers, but they're not necessarily miserly. Money is their obsession, their life, so that makes sense. It's what makes them happy. The main thing is not to be a slave to what you buy or to your credit cards but to be free of debt and store savings for the future. But to be miserly? Those people may brag away, but I think they die with more than a few regrets.

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    Banned Melonie's Avatar
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    Default Re: weekend commentary - 'Defending the Miser'

    at the risk of overreaching, it seemed clear that author Walter Block's miser was referring to the 'virtues' of saving ... and of investing in capital equipment that increases productivity. This is not the same as the financial industry / individuals investing in usury ( i.e. loaning money at interest) or speculations ( i.e. futures and derivatives ) which do not increase productivity but merely extract a profit against someone else's loss.

    As to being 'generous to others', on the surface this would appear to be an admirable trait. However, upon deeper analysis, liberal generosity can be shown to cause NON-admirable traits to become dominant among the recipients of said generosity. This is even more the case when said generosity is enforced by the gov't forcibly extracting 'contributions' from the most productive citizens and transferring those 'contributions' to a gov't approved group of recipients.

    In simplest terms, being entitled to 'generosity' has arguably now rendered moot the old adage of 'give the man a fish and he eats today, but teach a man to fish and he eats forever'. When regular 'generosity' can be expected, that man is much better off not expending his own personal effort toward fishing because gov't enforced 'generosity' will make sure that he is given fish caught via someone else's effort. And if that man is foolish enough to go fishing anyhow, the gov't will simply stop the transfer of other people's fish leaving him no better off for his effort ( or worse off given that he would now have to pay for bait and tackle out of his own pocket in order to end up with the same number of fish).


    Our tendency is to keep what's ours or spend it on ourselves
    Arguably this tendency is a direct reaction to the gov't forcibly extracting ever higher levels of 'contributions' from the most productive citizens ! Historically speaking, prior to the institution of LBJ's 'Great Society' programs some 50 years ago, and prior to the resulting tax increases, there were a whole lot more voluntary charitable activities. Unfortunately ( from the viewpoint of many ), where voluntary charity is involved, those making the 'contributions' were able to choose the intended pool of recipients or place some conditions upon receipt of charitable benefits ( from soup kitchen prayers over meals to being a legal local resident ).

    Today, given 20-30-40% combined federal and state tax rates and given some 50% of federal and state budgets going towards social welfare programs in one form or another, every income tax paying citizen is already 'contributing' 10-15-20% of their income toward generosity and charity. These income tax paying citizens do not have a 'say' in how and where their generous but involuntary 'contributions' are redistributed ! But is their charitable contribution any less valuable because it is involuntary - as compared to the tax-deductible 'voluntary' contribution of a ( mostly ) non income tax paying tax sheltered millionaire ?

    ~
    Last edited by Melonie; 05-30-2010 at 05:50 PM.

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