Economics in One Lesson

C
HAPTER
23
The Assault on Saving
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F
rom time immemorial proverbial wisdom has taught the virtues of
saving, and warned against the consequences of prodigality and
waste. This proverbial wisdom has reflected the common ethical as
well as the merely prudential judgments of mankind. But there have
always been squanderers, and there have apparently always been theo-
rists to rationalize their squandering.
The classical economists, refuting the fallacies of their own day,
showed that the saving policy that was in the best interests of the indi-
vidual was also in the best interests of the nation. They showed that
the rational saver, in making provision for his own future, was not
hurting, but helping, the whole community. But today the ancient
virtue of thrift, as well as its defense by the classical economists, is
once more under attack, for allegedly new reasons, while the opposite
doctrine of spending is in fashion.
In order to make the fundamental issue as clear as possible, we
cannot do better, I think, than to start with the classic example used
by Bastiat. Let us imagine two brothers, then, one a spendthrift and
the other a prudent man, each of whom has inherited a sum to yield
him an income of $50,000 a year. We shall disregard the income tax,
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Economics in One Lesson
and the question whether both brothers really ought to work for a liv-
ing, because such questions are irrelevant to our present purpose.
Alvin, then, the first brother, is a lavish spender. He spends not
only by temperament, but on principle. He is a disciple (to go no fur-
ther back) of Rodbertus, who declared in the middle of the nine-
teenth century that capitalists “must expend their income to the last
penny in comforts and luxuries,” for if they “determine to save . . .
goods accumulate, and part of the workmen will have no work.”
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Alvin is always seen at the nightclubs; he tips handsomely; he main-
tains a pretentious establishment, with plenty of servants; he has a
couple of chauffeurs, and doesn’t stint himself in the number of cars
he owns; he keeps a racing stable; he runs a yacht; he travels; he loads
his wife down with diamond bracelets and fur coats; he gives expen-
sive and useless presents to his friends.
To do all this he has to dig into his capital. But what of it? If saving
is a sin, dissaving must be a virtue; and in any case he is simply making
up for the harm being done by the saving of his pinchpenny brother
Benjamin.
It need hardly be said that Alvin is a great favorite with the hat
check girls, the waiters, the restaurateurs, the furriers, the jewelers, the
luxury establishments of all kinds. They regard him as a public bene-
factor. Certainly it is obvious to everyone that he is giving employment
and spreading his money around.
Compared with him brother Benjamin is much less popular. He is
seldom seen at the jewelers, the furriers, or the nightclubs, and he does
not call the headwaiters by their first names. Whereas Alvin spends
not only the full $50,000 income each year but is digging into capital
besides, Benjamin lives much more modestly and spends only about
$25,000. Obviously, think the people who see only what hits them in
the eye, he is providing less than half as much employment as Alvin,
and the other $25,000 is as useless as if it did not exist.
But let us see what Benjamin actually does with this other $25,000.
On the average he gives $5,000 of it to charitable causes, including help
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Karl Rodbertus,