Economists on Ebenezer Scrooge — Compassion, Coercion and Frugality

Greg Mankiw points to four economists‘ interpretations of the old Christmas story of Ebenezer Scrooge. The first one, by Paul Krugman, does not really talk much about Scrooge at all, but is an interesting read for it’s coverage of systematic media manipulation by the Political Right in the US (demonstrated on the issue of an allegedly expanding government workforce under President Obama).

The second, by David Henderson, stays closer to the story, and tries to make an interesting point. The claim is that increasing government welfare is actually the „scroogeish“ thing to do, contrary to what many would think at first, and that it is individual charitable giving that follows the true spirit of Christmas. These two approaches are polarized as coercion vs. compassion. I’m blogging about it because I think it is a recurrent theme in discussions, and maybe one issue where political „left“ and „right“ are truly separated by contradicting perspectives.

The different perspectives stem from different ideas about the original or „natural“ state. The „compassion“ party takes the distribution of wealth as it is as it’s starting point. From there it follows that giving is a charitable act, and that having taken from you without your consent is, well, coercion. On the other hand, the party titled „coercion“ by Henderson could better be called „rights“ approach, in my opinion. Here, the basic idea is that an unequal distribution of wealth is itself result of a coercive system, or of random differences between the talents and heritages (both material and cultural) of different people. Thus, taking from the wealthy is not coercion, but an attempt at remedying a coercive state of affairs. If you are poor and receive money, you are not being treated charitably, you get what is rightfully yours.

I suppose that any sensible position will incorporate something from both perspectives, even though my own would be leaning more towards what I called „rights“ approach. That’s why I’ve always taken some offense when the extremely rich are applauded too loudly for donating money, and I do think that proudly paying taxes is superior to charitable giving. I think it is important that those who receive can do so with a certain sense of entitlement. On the other hand, I understand that compassionate giving probably feels better than feeling you have to give. But maybe that could also be changed: in acknowledging that having a lot is mostly a blessing, and then giving with a feeling of giving something „back“.

The third article (by Steven E. Landsburg) centers around Scrooges frugal lifestyle, and makes the point that refraining from consumption is pretty much a charitable act already. I hope that, coming from a university economics professor, the simple and compelling analysis of what happens if you produce without consuming is true:

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.

The claim becomes harder to follow when you view non-consumption in the form it usually takes nowadays: putting money in the bank with interest. But I think when you assume that money is never taken out of the bank and eventually consumed after being multiplied by interest, the point holds:

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.

I’d like to know more before my final judgement on this, but it is an intriguing thought.

Datum: Samstag, 25. Dezember 2010 21:55
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