Front Page Titles (by Subject) CHAPTER 37: WASTE AND LUXURY - Economics, vol. 1: Economic Principles
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CHAPTER 37: WASTE AND LUXURY - Frank A. Fetter, Economics, vol. 1: Economic Principles 
Economics, vol. 1: Economic Principles, (New York: The Century Co., 1915).
Part of: Economics, 2 vols.
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WASTE AND LUXURY
§ 1. Accidental destruction of wealth. § 2. Intentional destruction of wealth by the owner. § 3. Intentional destruction of others’ wealth. § 4. Careless waste. § 5. Waste in public outlay. § 6. The fallacy of waste. § 7. Definitions of luxury. § 8. Luxury to give employment. § 9. The fallacy of luxury. § 10. Sudden changes in standards of luxury. § 11. Happiness and the simple life. § 12. The question of justice. § 13. Animal choice. § 14. Choice by primitive men. § 15. Desires and progress. § 16. Function of moderate discontent. § 17. Luxury as an incentive to progress.
§ 1. Accidental destruction of wealth. Before approaching in the next chapter the subject of the dynamic influence of saving and the accumulation of wealth, let us look at the subject in its negative aspects, namely, waste and luxury. By waste is meant the accidental or intentional using and using up of more wealth (and services) than would suffice for the purpose of the use. In waste the potential uses in goods are applied so that they cause less desirable results to the user than they might, or even give no use at all. We are concerned here with the dynamic and social aspect of the case. The question is: What is the dynamic effect of waste as a policy? In which way will it carry the general level of incomes, upward or downward? There is a popular opinion, long held, that waste in itself is a good thing, that it gives employment and benefits the working man.
In a simple society, without exchange, the result of waste is evidently bad for the self-sufficing families. If they destroy their food, they suffer from hunger or gratify appetite less perfectly; if they destroy their clothing, they are cold; if they destroy their house, they have no shelter. Waste makes their economic environment less fitted for their use. In the conditions of our society, where goods are exchanged, the result appears to be different. The need to replace the lost goods makes a demand for special kinds of labor or goods, and this appears “to create” employment for labor. But if a part of the income of the loser must be diverted from other uses to replace the wealth destroyed, those from whom he would have bought suffer an unexpected falling off of their sales. The thought of an immediate benefit to one obscures the corresponding loss to another. The net result is a loss of wealth and gratification to the community as a whole.
There is a real exception where the accidental destruction removes some social difficulty. Such great fires as those in London in 1665 and in Chicago in 1872 result in wonderful improvement to the city as a whole and eventually even to most of the individual owners. When an old city is built almost entirely of wood, each owner may think it to his interest to keep the old buildings. A great fire sweeps them all away and compels the rebuilding of the city on a new and higher standard. But the usual resultant of accidental destruction is loss to the owner, rarely with benefit on the whole to others. It is a use of wealth without a fulfilling of the purpose of production, the gratifying of desires.
§ 2. Intentional destruction of wealth by the owner. Another type of case is the intentional destruction of wealth by the owner, to make trade good. The case in mind is not where the destruction is inevitable without man’s action, and he merely tries to minimize it—such a case as the throwing overboard of a part of the cargo when the ship is in danger of sinking, in the hope thereby of saving the rest, or as the blowing up of buildings to prevent the spread of a fire. The case in mind is the deliberate destruction of wealth that might be kept for use. One labor leader, for example, boasted that when he drank pop he always broke the bottle “to make trade good” by helping the glass industry. The refuting of this fallacy is one of the time-honored tasks in political economy. There is, it is true, an increase in the demand for glass and glassblowers’ labor; but at the same time there is a decrease in the demand for other goods and other kinds of labor. The proverb, old in Shakespeare’s time, runs, “Nothing can come of nothing.” What is spent for one purpose can not be for another; “you can not eat your cake and have it, too.” A given income can be spent in one of many ways, but not in all ways or even in two ways at once. It is a question of this or that, not this and that. At the same moment that the demand for pop-bottles is increased, the demand for other things is decreased. Such a form of benevolence is a futile attempt to provide labor for one man by taking it from another. Moreover, it is an uneconomic, harmful attempt, for the breaking of one bottle to have it replaced by another adds nothing to the sum of enjoyable goods in the world; but the same labor and other agents could and should be used to make some of the many other needed things.
If the advocate of wealth-destruction would be consistent, he should break, not merely the pop-bottle, but the waterpitcher and the table as well; he should make a bonfire at least once daily of his clothing, his house, and its furnishings; he should advise blowing up the steamboat and ripping up the railroad when they have carried a single load of passengers. Thus, when all men were naked and starving, and civilization had sunk to savagery, trade would have been made as “good” as, by the policy of destruction, he could ever hope to make it.
§ 3. Intentional destruction of others’ wealth. Another type of case is the intentional destruction of wealth owned by other persons to benefit trade in general. The acts referred to are not done with criminal motives, but with a view to the public interest. If one sets fire to the property of another, seeking revenge or plunder, he is guilty of the crime of arson. But what shall be said of volunteer firemen that let an old house burn down to provide labor for carpenters and “to make business good”? The duty of firemen is to put out fires, no matter what the building is; but they choose sometimes to be ministers to the social interest as they interpret it. The more spent for carpenters’ work out of any income, the less can be spent for other objects. It is true, however, that if in a small town the money to rebuild is borrowed from a distant loan or insurance company, there is an increase in employment in that town for one season; and that is as far as most men try to carry their economic analysis.
Servants sometimes excuse the breaking of dishes and furniture on the ground that it makes work, and that the employer can afford it. But income is thus diverted from other expenditure, either for productive use or for direct use. In the light of the theory of wages, it would appear that carelessness reduces the servant’s own efficiency, and in the long run the loss, in part at least, comes from the wages of that particular servant. Bastiat’s discussion of the broken window-pane is often and deservedly quoted. He contrasted what was seen with what was unseen. What is seen is a certain immediate benefit that the glass-maker and glazier get; what is not seen is that the power to expend an equal amount for other things is thereby lost by the owner of the house.
§ 4. Careless waste. The destruction of goods of unnecessarily large value to secure a given result is likewise justified as “making trade good.” The blunder that compels the rebuilding of a wall in a rich man’s garden is an occasion for congratulation to those who see in it a happy provision of work for the unemployed. It is easy to forget that the proper use of goods is the final step in production. According as goods are well or poorly used, the production—that is, the real income or gratification they afford—is large or small. Differences in skill in the use of wealth are great. A French cook, we are often told, can make a palatable soup from what goes from the average American kitchen into the swill-pail. Waste in the use of goods is more likely to be found in new countries where wealth comes more easily and necessity does not enforce frugality upon the masses of the people.
The praise of careless waste implies the error noted in the preceding propositions. Waste makes work for a certain class, but not more work (employment and wages) for labor as a whole. It appears to be good only when the interests of a small class of workers or of tradesmen are looked at for the moment; it is bad in the long run alike for workingmen and for all other classes of society. Far more of wisdom lies in the proverb, “A penny saved is worth two earned.” The economic use of wealth as surely adds to wealth (and, ultimately, to the income of society) as any other mode of production.
§ 5. Waste in public outlay. Some government expenditures, as for local post-office buildings, and river and harbor improvements, are sometimes favored, not because their immediate purposes are good, but because they “make work” and “distribute money” throughout the country. This apology for public extravagance in all its forms has an incredible hold on the public mind. It seems even easier to rejoice that the big impersonal thing, the government, fails to get its money’s worth than that one’s neighbor fails to do so. The money for public expenditure comes from taxation, and no matter what the system of taxation, the burden falls upon some one, reducing the incomes at the disposal of the people to expend for objects of their own choice. If the work is not worth doing for itself, the collection of money in small amounts from many tax-payers and its expenditure as a large sum in one locality results in a net loss to society as a whole. Where the result is worth something, but not enough by itself to justify the expenditure, the fallacy of the destruction of wealth is present in a smaller degree. Examples are seen in useless offices, overpaid officials, the extreme use of pensions, and in some public subsidies.
§ 6. The fallacy of waste. Let us restate the ideas that have been touched upon. The fallacy of waste is due to a narrow and incomplete view of the effects resulting from a particular use of wealth. In many cases it is possible that some one person may benefit by another’s mishap or folly in the use of wealth. The complex interrelations of men in society make this inevitable. But, to appreciate the dynamic effects of such action upon society in general, one needs but to go back to the essential thought of wealth and its purposes. As the average efficiency and bounty of the world fall, so fall the income and welfare of men. As it rises, the social and economic levels rise also. Economic wealth has potentially two kinds of uses, direct or indirect: to gratify desire—thus fulfilling its destiny—or to be converted into higher and more efficient agents. That the possibilities of the latter are boundless is overlooked in the fallacies here criticized. A bountiful and efficient world would be the result of abstinence and saving; a barren and used-up world, the result of the fallacy of waste.
§ 7. Definitions of luxury. Closely related to the problem of waste, but still more difficult, is the problem of luxury. It is not possible to define luxury absolutely; it is a relative term. The conception of luxury, however defined, involves always the thought of great consumption of wealth for unessential pleasures. Those opposed to it condemn it in their definition of it, as, for example: “an excessive consumption of wealth,” or “devoting a relatively large amount of wealth to the satisfaction of a relatively superfluous want.” Those who take a more moderate and favorable view say: “It is the enjoyment of forms of wealth not obtainable by the mass of men.” Luxury is not entirely a matter of riches. Many a person of moderate income has relatively superfluous and expensive tastes. One spends more for music than many a millionaire does; another more for books. The difficulty in the definition as well as in the problem of luxury is that it involves a mixture of economic and of ethical questions.
§ 8. Luxury to give employment. Luxury, like waste, is justified by some as giving employment to labor. Typical instances are extravagant dress and elaborate balls where fine and costly flowers, decorations, music, and coaches require the expenditure of a large amount of money. It is said of the Empress Eugénie, wife of Napoleon III, that, in order to help the glove industry of France, she wore a pair of gloves but once; in order to help other French industries, she purchased many silks and laces. It is a very comfortable doctrine to some people that the oftener they change their dress, the greater benefactors to society they are. From time to time a great society “ball” is given in the metropolis, possibly little more elaborate and expensive than many another ball; but if it chances to be a dull time for news the papers all over the land give columns to its discussion. The newspapers at such times usually print many interviews with citizens of varied occupations, and the thought appears over and over that such balls have at least the merit of giving employment to labor, evidently meaning employment additional to the total amount which otherwise would have been possible.
§ 9. The fallacy of luxury. The fallacy of this is essentially the same as that in the argument for waste and destruction. From the fact that these particular tailors, musicians, and florists would have less employment if this ball were not given, it is falsely concluded that, but for this ball, this particular income, or capital, would not be used at all. The average of employment in those special industries which minister to luxury is the result of and is determined by the average level of demand. There are more caterers and florists in a large city than in a crossroads village. It is true that a more than ordinarily gay season gives unusual profits to these enterprises, whereas an abrupt and extreme falling off in demand would cause them large losses and leave many workers lacking employment for that one season. But, if this limited demand became usual, capital and labor would shift to the other industries to which expenditure had shifted. Other modes of expenditure than twenty-five thousand dollar balls are possible, as, for example, twenty-five thousand dollar public libraries. Mr. Carnegie has preferred to take his dissipation in that form. That gives employment also; not less does investment in new houses, in new railroads, and in new factories. More employment of a particular kind of labor is caused in one case than in another, but not more employment of labor as a whole and on the average.
§ 10. Sudden changes in standards of luxury. Luxury may be in various degrees and correspondingly may have various effects upon the state of wealth and income, and upon their movements. It might accompany a general condition of conservative abstinence, where only the clear surplus of income is given to luxury, preserving a static equilibrium. The degree of luxury may, however, change dynamically toward either extreme. First, it might increase so that it exceeded each spender’s clear income, encroached upon capital, and became a policy of prodigality. The result of this must be to stimulate for a time all the trades serving to provide the superfluities, but eventually to leave them without a market for their wares. Thereupon the factors would have to be returned to the use for necessities. The community as a whole would be impoverished as well as the individuals.
Secondly, dynamic change may take the form of the decrease of luxury, expenditure being limited to necessities, and cumulative abstinence being carried to its maximum. The question of the effect of abandoning luxury should this dynamic change occur suddenly, is most difficult. What would happen if everybody at once began to live on the bare necessities of life? If this almost unthinkable change took place, all the factories and agents used for nonessentials would at once lose much of their value. A great industrial crisis would follow, as industry would have to adjust itself abruptly to a greatly altered standard of desires. What would happen, if that standard continued, would vary as human nature varied. There might follow an increase of population, as a result of earlier marriages and larger families; or a great improvement in machinery and other equipment, or an increase of charitable giving, or more probable than all else, a progressive lightening of labor, a use of the surplus resources and energy in study, rest, and recreation. It is well-nigh impossible to suppose that with limited desires for the objective goods of the world there would continue undiminished efforts to produce goods and to save them. That would be miserliness become universal. In actual life changes of standard occur gradually. Economizing in material things by simpler living makes possible not only the increased efficiency of productive agents but the increased enjoyment of immaterial goods, a union of plain living, easy living, and high thinking.
§ 11. Happiness and the simple life. We are concerned here with the economic not with the moral issues involved in luxury, but the line between the two is sometimes hard to draw. Particularly hard is it in answering the question, Does luxury enhance the man’s true psychic income? Does a greater expenditure on oneself give a larger life than a moderate expenditure would give? Surely, it is partly a matter of individual temperament and somewhat a matter of degree. Ostentation has its penalties. Undue striving after effect defeats its own purpose. Happiness results from a harmonious relation between man and the world. Life loaded with too much luggage staggers under the burden. The mere spending of a large income in selfish indulgence absorbs all the energies and interests of some men and women. Not only happiness in the narrow sense, but self-realization, is to such lives impossible. The tired faculties of the Sybarite cease at length to respond to natural pleasures. When the senses are robbed of their fineness, youth grows blasé, mature manhood is ennuied, life is empty. With the growth of incomes grows the strain to reach the self-imposed standards of frivolity. Insanity and suicide are on the increase. The stress of modern life often makes men yearn for the simpler joys. From the days of the Stoics to our own time, philosophers and preachers in times of great material prosperity have risen to praise the simple life, and to declare that happiness dwells not outside of men, that they must seek it within.
Wise consumption depends not alone on physical pleasures, but on the spiritual unity of the uses made of goods. Happiness and character are akin in the qualities of simplicity and unity. Happiness, so far as it depends on wealth, is a harmony of gratifications. Character is a harmony of actions. A successful life is a group of complementary deeds. There can be no harmony, without a central, simple, guiding principle. The wise and moral use of goods and the economic use of them have much in common. The results of the choice of goods are reflected in the health, intelligence, happiness, morality, and progress of society.
The spending of income for display has never been very successfully forbidden by law. The Middle Ages are full of futile sumptuary laws which sprang from the envy the nobles had for the wealthy merchants. The growth of good taste may do what formal law found impossible. In these days even when luxury in some respects in increasing, the use of great wealth takes more social directions. It turns from dress toward education, art, music, and travel; then ceases to be applied merely to self and family, and benefits the community. Nowhere else and never before has this movement gone so far as in America with the gifts of millions annually for education, libraries, art, scientific and medical research, and for social betterment.
§ 12. The question of justice. We leave untouched here the larger moral problem involved in luxury. It concerns the justice of large incomes rather than their spending. Most of the enemies of luxury condemn all expenditure of wealth above a very moderate sum, declaring that it is “unjust” for one man to have much while others are in poverty. This communistic doctrine pervades the teaching of many moral teachers, pagan and Christian. The question of luxury leads back to the question of distribution: Has the man honestly gained his wealth? If so, he may spend it with good judgment or poor, with good taste or bad, but, so long as he does not injure others in the spending of it, there is much vagueness and confusion in the talk of “justice” or “injustice.” Each must in large measure be his own judge of the wisdom of expenditure. If expenditures were regulated by the public, few persons would be within the law. But whatever the goods that are bought, if large incomes are acquired without social service, there may well be talk of injustice.
§ 13. Animal choice. The problems of human life and conduct are never quite simple and there is another side to the question of luxury. Its frankest defenders, while recognizing the fallacy of the make-work argument, and admitting its dangers to the individual, claim that in its general effects it is a great incentive to economic progress. There the argument for luxury has some validity, and to appraise it better, let us recall the function of developing desires in impelling men to greater effort.
Choice among animals depends on the environment; that is to say, all that the creatures below man can do is to take things as they find them. And so the environment shapes and affects the animal. The fish is fitted to live in the water, and suffers and dies if long out of it. The horse and the cow like best the food of the fields. And so each species of animal, in order to survive in the severe struggle for existence, has been forced to fit itself to the conditions in which it lives. After the animal has been thus fitted, its choice is for those things normally to be found in its surroundings. So different animals choose different things, but in most cases it is the environment that determines the choice, and not the choice that shapes the environment. However, migration with the changing seasons, or in search of food, is a most effective method by which the animals, led by their instincts, bring about a change in their environment; and many other methods are employed, such as nest-making and food-storing.
§ 14. Choice by primitive men. In simpler human societies, choices are mostly confined to physical necessities; that is, in the earlier stages of society, man’s choices are very much like those of the animals. Man, like the animals, feels the pangs of hunger and he strives to secure food. He yearns for companionship, for it is only through association and mutual help that men, so weak as compared with many kinds of animals, are able to resist the enemies which beset them. He needs clothing to protect him against the harsher climates of the lands to which he moves. To protect himself against the cold and rain, he needs a shelter—a cave, a wigwam, or a hut. Man is thus impelled to bend his energies to the choice of the things necessary to survival.
In the rudest societies of which there is any record, savages are found with desires developed in many directions beyond those of any animals. Men are not passive victims of circumstances; their desires are not determined solely by their environment, but are drawn to things beyond and outside of the provisions of nature.
§ 15. Desires and progress. As men become more the masters of circumstances, their desires anticipate mere physical needs; they seek a more varied food of finer flavor and more delicately prepared. Dress is not limited by physical comfort, but becomes a means of personal ornament. Men seek and choose the beautiful in sound, in form, in taste, in color, in motion. The rude hut or communal lodge to protect against rain and cold becomes a home. Out of the earlier rude companionship develop the sentiments of friendship and family life. And finally, as the imagination and intellect develop, there grow up the various forms of intellectual pleasures—the love of reading, of study, of travel, and of thought. Desires develop and transform the world.
In recent discussion of the control of the tropics, the too great contentedness of tropical peoples has been brought out prominently. It has been said that if a colony of New England school-teachers and Presbyterian deacons should settle in the tropics, their descendants would, in a single generation, be wearing breech-clouts and going to cock-fights on Sunday. Certain it is that the energy and ambition of the temperate zone are hard to maintain in warmer lands. The negro’s contentedness with hard conditions, so often counted as a virtue, is one of the difficulties in the way of solving the race problem in our South to-day. Booker T. Washington and others who are laboring for the elevation of the American negroes, would try first to make them discontented with the one-room cabins, in which hundreds of thousands of families live. If only the desire for a two- or three-room cabin can be aroused, experience shows that family life and industrial qualities may be improved in many other ways.
§ 16. Function of modern discontent. Not only in America, but in most civilized lands to-day, is seen a rapid growth of desires in the working-classes. The incomes and the standard of living have much of the time been increasing, but not so fast as have the desires of the working-classes. Regret has been expressed by some that the workers of Europe are becoming “declassed.” Increasing wages, it is said, bring not welfare, but unhappiness, to the complaining masses. If discontent with one’s lot goes beyond a moderate degree, if it is more than the desire to better one’s lot by personal efforts, if it becomes an unhappy longing for the impossible, then indeed it may be a misfortune. But a moderate ambition to better the conditions of one’s self, of one’s family, or of society, is the “divine discontent” absolutely indispensable if energy and enterprise are to be called into being.
It is a suggestive fact that civilized man, equipped with all of the inventions and the advantages of science, spends more hours of effort in gaining a livelihood than does the savage with his almost unaided hands. Activity is dependent not on bare physical necessity, but on developed desires. If society is to develop, if progress is to continue, human desire, not of the grosser sort, but ever more refined, must continue to emerge and urge men to action.
§ 17. Luxury as an incentive to progress. It is impossible to know just how important the service of luxury as a pacemaker has been in this progress in the past, tho doubtless it has been great. But what is needed now is a rising standard of taste in the lives of the many, not excessive display or indulgence by the few. But a dead level of conditions seems to be unfavorable to invention, arts, and industry. There must be some motive for emulation, and for ambition to attain finer material means of enjoyment after the bare necessities of life are provided, or no new forms of wealth will be demanded. Necessities, strictly understood, are things absolutely essential to life and health. No hard line can be drawn between necessities and comforts, between comforts and luxuries. The level rises; it is a trite and true saying that the luxuries of one age become the necessities of the next. The rise of the bathtub in the nineteenth century is an epitome of the progress of civilization in that period. The free baths in our cities surpass the hopes of the wealthy of a century ago. The automobile was first the toy of the rich, but is becoming the necessity of daily life. Even the meaner motives of envy may have their social and economic functions. The lower social grades, emulous of the higher standard held before them, labor with greater energy. The successful and capable enterprisers, not content with necessities, continue to give their efforts to production. Even abstinence may be stimulated by the hope of attaining for one’s self and one’s family the imaginary joys of conspicuous display. Doubtless these effects are more or less offset by the temptations to live beyond one’s income, and to seek wealth in devious ways to make luxury possible. Still, luxury in a moderate measure has had, and still has, a part among the forces of dynamic society.