Arnold Kling

In Praise of Temperance

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Deirdre McCloskey writes that economists no longer view underconsumption as a threat to full employment.


Nothing would befall the market economy in the long run, says the modern economist, if we tempered our desires to a thrifty style of life--one old Volvo and a little house with a vegetable garden and a moderate amount of tofu and jug wine from the co-op. ... if you focus on an irrelevant mental experiment, namely, that tomorrow, suddenly, without warning, we would all begin to follow Jesus in what we buy. Such a sudden conversion would no doubt be a shock to sales of SUVs at Ford and Toyota. But, the economist observes, people in a Christian Economy would at length find other employment, or choose more leisure...

All this is good news for ethical people. We don't need to accept avaricious behavior on account of some wider social prudence it is supposed to serve, allegedly keeping us employed. "Keeping us employed." Have you ever in your private, homely activities, doing the laundry or planting the garden, seen the main problem as finding jobs at which to be employed? Isn't the main problem the opposite one, a scarcity of hours in which to bake the bread, or fix the car, or play with the kids, or nurture friendships, or sing praises unto the Lord? If you agree, then you grasp the great economic principle that, as Adam Smith put it, "What is prudence in the conduct of every private family can scarce be folly in that of a great kingdom." And you will grasp why it is not economic prudence to "keep us all at work" by spending on luxuries.


I confess to a lack of familiarity with McCloskey's religious references, but see also Economics vs. Populism, which is chapter 7 in this bible.

For Discussion. Is the theory that we need to consume to "keep the economy going" related to what Bryan Caplan would call make-work bias?


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CATEGORIES: Economic Philosophy



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The author at JML's Observations in a related article titled In Praise of Temperance writes:
    Is rampant consumerism is essential to sustain economic growth? Is the social benefit worth the personal cost? "What Would Jesus Spend?" delves into both the economics and morality of temperance, arguing that greed is not good. The endless call to cons... [Tracked on October 12, 2004 1:17 PM]
COMMENTS (5 to date)
Brad Hutchings writes:

This is a strawman bias. Actually, this is a "I have no sense of humor" bias. My grandfather, a man with a very refined sense of humor, would always joke (and yes, it was a joke) that he had to "keep the economy going" when he bought nice things for my grandmother. In fact, outside of news reporting on consumers running up debt, variations of that joke are the only context I've ever heard it in that wasn't lamenting what a bunch of idiots we all are for wanting earthly goods. If this silly theory had any merit, don't you think Republicans would be out buying tons of stuff with the goal of getting W re-elected? How stupid is that? Very.

Seriously, this is the kind of nonsense that makes me proud to be an ag-care-stic. In fact, tomorrow I will redouble my efforts to keep the economy going just to spite this paragon of anti-fun. Egads.

Kieran writes:

Jesus's life teaches thriftiness. But most people abondon Jesus's
teaching in economics in favour of greed is good.

Three arguments:
1) If we shopped like Jesus, and consummed simply the economy would
not fall because capitalism has proven not to be too efficient.
example: if we tempered our desires to a thrifty style of life--one
old Volvo and a little house with a vegetable garden and a moderate
amount of tofu and jug wine from the co-op, we know that we can be
very efficient at producing these simple things and still have a great
economy.

2) If we loved like Jesus the economy would not fall, because we must
also practice balancing virtues of prudence, justice, and temperance.

example:One owes love to a family first. Property with the virtue of
justice protects the beloved family. Work, depending on temperance and
prudence, is desirable to create and acquire the property. So is
prudence in managing it.

3) Greed as a force to keep us working and sustaining the economy is
not necessary.
Example: we are working less in a lifetime now than at any time in
history, due to education and retirement, and the economy is at is
strongest.

melvin writes:

Yes, the argument that consumers should increase spending simply to keep the economy going can be seen as a form of the make-work bias. The fear that "automation" will hurt the economy by taking away jobs is similar to the fear that "thrift" or "simple living" will hurt the economy by taking away sales. In both cases, the fear would cause people to make choices based on a short-sighted desire to maintain the status quo, whereas a larger, more "economically literate" view realizes that, at best, such choices are a brake on prosperity.

I would argue that, unless you're stuffing your dollars in a mattress, "thrift" is itself just another form of consumption. The person who decides to buy fewer steaks and to save more by, say, investing in mutual stock funds, is choosing one form of consumption over another, just as if he chose to buy sneakers instead of steaks. His "saving" is the purchase (consumption) of stock (a piece of an enterprise). Both "saving" and buying steaks or sneakers are forms of trade in which, via money, one person's surplus is traded for another's, with both being happier than they were before. (Specifically, in this example, the managers and current owners of the enterprises whose stock makes up the mutual fund want to trade a portion of control over the enterprises for the collective dollars of the mutual fund's investors, while those investors want to trade a portion of their dollars for a chance in sharing in enterprises that will prosper.)

Lawrance George Lux writes:

Is the theory that we need to consume to "keep the economy going" related to what Bryan Caplan would call make-work bias?

Yes it is, and it is what causes the delima for Economists. Every one of Us knows the value of doubling the average Product life of current Products--savings of Resource, Energy, Capital, and reduction of Pollution. We also know about the overwhelming need to provide a Living Income for Households. The two goals are inconsistent as all Economists know. All discussion in this area revolves around the proper mix of Conservation and economic performance. Few, most especially Economists, will be permanently satisfied with any mix ratio.

I have often contemplated a reduction to a 24-hour Workweek. We have sufficient trained labor Worldwide, and with alternate methods of Profits distribution, sufficient Business profits for provision of a Living Wage. The reduced scale of Production could be accomodated by design of long-life Products. Another method could be policies to again withdraw women from the outer World labor force. The main impediments to such plans would be the greed factor, and the energy of young men, who preoccupy themselves with performing great labors. Such a Utopian world does hold many advantages, though, and some thought should be given to a practical economic framework. lgl

Kevin Carson writes:

What would or not befall the "market economy" if consumption were reduced has little bearing on what would happen to our state capitalist economy.

As Joseph Stromberg has argued, the state capitalism of the past century or so has subsidized overaccumulation and centralization to the point that overbuilt industry simply cannot dispose of its full product in a free market. The only way for industry to keep unit costs down by operating at full capacity is by disposing of its surplus product through statist means--either the forcible acquisition of monopoly control over foreign markets, or government absorption of the surplus at home.

Stromberg. "The Role of State Monopoly Capitalism in the American Empire" Journal of Libertarian Studies Volume 15, no. 3 (Summer 2001)

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