Scrooge and Economics 101

An economist writing in Slate prefers the unreformed Scrooge. His reasoning is that, by consuming as little as possible, Scrooge left more for everyone else.

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.

A few years ago the BBC and PBS did a reality show called 1900 House. A 21st century family was to live as people did 100 years earlier. They also employed a maid but ended up firing her because the mother in the family couldn't bear to have domestic help. She justified it as "setting her free to do something else." The woman who was employed as the maid was livid. No one asked her if she wanted to be freed. In Victorian England, a significant portion of the population did domestic work. Had everyone followed Scrooge's example, there would have been wide-spread starvation as the market for domestic labor suddenly collapsed. You would think that an economist would understand this.

While Dickens did not understand modern economic theory, he seems to have a better grasp of some aspects than Slate's expert.

Scrooge was a miser. Presumably he simply horded his money. Economically, that is the worst thing that he could do with it. Money that is horded is wasted. It is not helping anyone. It would be different had Scrooge done something with the money. If he had invested it, it would be helping both him and the people he invested in. If he simply spent it, it would have gone for goods and services that people needed to sell for their livelihoods. By just sitting, it did none of these things.

What if everyone followed Scrooge's example now? It's not very hard to find out. Just compare the economy in December and January. In December, people are buying things that they do not need and spending money that they don't have to. In January they cut back, both because the holidays are over and because they are still paying the bills.

So which month do you think keeps the economy going - December or January? Unless you are selling fitness equipment, January represents the worst month of the year. If all months were like January the country would be in serious economic trouble.

So why doesn't an economist understand this?