Saturday, December 25, 2010

Scrooge, Krugman, and Christmas

Krugman calls people who don't support the welfare state Scrooge.

David Henderson and Troy Camplin point out that Krugman has misstated the message of the Christmas Carol. Scrooge does support the welfare state - the state workhouses. What he refuses to do is support the poor with additional private charity. Then David Henderson says: "So here's my modest suggestion. Next time you hear someone advocating a coercively financed government program to help those in need, call him a "Scrooge." I guarantee that you'll catch him off guard. Moreover, he'll likely ask why you called him that. Then you can tell him the truth about Ebenezer Scrooge and A Christmas Carol."

And in the process, turns a good point into a point that's just as erroneous as Krugman's initial point.

What differentiated Scrooge from the donation seekers who knocked on his door was not his support for the welfare state. The good guys that we all like supported the welfare state and Scrooge supported the welfare state. That wasn't the difference between them. The difference between them was that Scrooge rejected the idea of private charity - a truly Scroogy stance. I have no idea why Henderson wants to attribute that to those who support public safety nets for the poor.

I should note, that the donation-seekers appeal to Scrooge by noting the troublesome inequality in England. Scrooge is unconcerned about it - it's not an issue for him, and he's concerned that attempts to alleviate will induce idleness. Scrooge's support for the welfare state may not make it to the Cato blog, but that lack of concern for inequality certainly would!!!

And what of those people who don't even like the welfare state??? Well we have no good analogy to draw for them. After all, Dickens never conceived of such a character. Even his meanest antagonist-turned-protagonist supported the welfare state (as Henderson so ably points out), along with the private charity seekers.

Merry Christmas everyone! And remember that economic calculation only gets us so far in this world. Be generous when you have the opportunity and means to. All year, of course, but this time of year when "when Want is keenly felt, and Abundance rejoices" (as Dickens writes) especially.


  1. Isn't this a case of economists reading too much into it? I thought the story of Scrooge was a moral story? It's better to care about others, rather than only about yourself.

  2. Krugman was obviously being humourous.

    And so was Dickens. It is still not understood that none of Dickens' works were entirely serious, and one would understand that if one read Great Expectations - Miss Havisham was not a commentary on British society, she was commentary on Miss Havisham. She was a strange, amusing caricature of herself. Dickens' stories are full of characters strange purely on their own merit, and they are not social commentary.

    Some people think Victorian times represented contempt for children, solely because they think Dickens was social commentary. People loved their children deeply the century before the last, as any private letters from those times would show, and even the poorest loved children enough to have more of them. It is our era that abandons love for children, with parents occupied with mobile phones and leaving kids in daycare centers.

    This notion of a "stingy" 19th century has to stop - it has no basis in reality.

  3. I was a terrible student when it came to literature - often I wouldn't finish books, and Dickens was no exception. But the introduction of Miss Havisham is still one of my all time favorite pieces of literature - a really, really great character.

  4. I am quite close to you, Daniel, in that I am perhaps an average-at-best person when it comes to literature, who also doesn't finish books, and who also tries to raise his standards. I start from Lovecraft, and from there I try to reach to Hans Heinz Ewers and Edgar Allen Poe and all the others who inspired him (I check the endnotes to his stories). Same with music.

    Out of curiosity, you say, "the troublesome inequality in England". What exactly do you consider to be the bad kind of inequality, when do you think it is a problem that needs to be solved somehow, and why should it be solved, if at all? Is it a problem by itself or a symptom? (Speaking from a purely non-economic POV, I mean.) I like to cleverly chide friends by saying that Italy is more "unequal" on the GINI coefficient than India, so I ask them if they think Italy should be more like India.

  5. That sounds like an extented question for another time - I do think inequality can be a good thing. Inequality is a price signal. I like to think of it in terms of Bernoulli's law and flight - if you don't have an inequality in pressure you're not going to get lift.

    But circumstances of birth and luck, combined with a "full employment by accident" economy does create a lot of inequality that is entirely unnecessary. There's also a point where we have lifted ourselves above the brute beasts we used to be - scratching out a living for ourselves from the Earth in pre-industrial times - and so we can probably even afford some inefficient egalitarianism for its own sake.

    But no, inequality isn't all bad. That doesn't mean its something to ignore either, though.

  6. Two thoughts

    #1 I really dislike 90% of Henderson's posts. He posts, for the most part, the generic internet libertarian arguments in his blog posts, like one against behavioral economics, that you hear over and over again, respite the arguments not being particularly strong. I guess this Scrooge one is new, but as you have shown, his point isn't valid. I feel this way about most of his posts.

    #2 I'm not necessarily sure reducing all that inequality would be all that bad. For instance, it would act as an improvement for the capital markets. Right now if you are born into a rich family, you have a significantly easier time getting capital for whatever reason. Aid to the poor, especially through grants could lower inequality and increase economic activity by counteracting a market friction.

    Another example I can think of is how welfare states lead to greater entrepreneurship, as the welfare state reduces the risk of such. Anyone who thinks entrepreneurship should be encouraged and has spillover benefits should support a welfare state!

  7. Ben, if the welfare state produces more entrepreneurship, why do we see entrepreneurs in just about any society, be it or be it not one with an extensive welfare state? You find entrepreneurs in deep Uganda and Somalia, you find them in Russia during Soviet collapse and crisis, you find them in United States, you find them in Finland, and so on.

    Why does France, with its backup support for unemployed, not produce nearly as many entrepreneurs per capita as, say, Dubai or Qatar where you get jailed for not paying your debts or bills? That's two extremes of risk levels. Let's remember that Woolworth was an illiterate beggar with far less support than people on welfare today.

    I bet Scrooge would have refused private charity even further if he knew of Woolworth and Henry Ford!

  8. I've always gotten the impression (or in other words, I'm talking out of my ass) that the main reason countries like France have low levels of entrepreneurship is because of "red tape" that makes it difficult to start a business.

  9. One could argue that high unemployment in France, by lowering incomes, lowers entrepreneurship. Remember, I was arguing that ceterius paribus, welfare states should see more entrepreneurship, as it lowers risks. I can't seem to find the study I wanted, supposedly there was some study (by the OECD) were the U.S. was 35th out of 36th in self employment. I'll post here if I find it. I guess you could argue that small businesses might not be good, as they would make markets less flexible, much like how economist have theorized that home ownership raises NAIRU.

    Also finding people who are self employed in countries doesn't falsify my hypothesis, I said self employment should be increased by welfare states, not that it only exists due to welfare states. If I gave that impression, it was a poorly articulated thought. My bad.


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