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Although some capitalists and defenders of free markets believe that Ebenezer Scrooge has much to teach us about good economics, I have long found him to be less than inspiring in this respect.

Scrooge, for example, demonstrates a lamentably bad understanding of the subjective nature of value, nor does he understand the concept of psychic profits. He perpetuates the nonsensical myth of the "homo economicus" in which human beings are (wrongly) assumed to be always in pursuit of maximizing money profits. In Scrooge's mind, nothing has value unless it can be calculated on a ledger. He denounces his nephew Fred for enjoying the company of friends and family on Christmas, sarcastically telling Fred "Much good [Christmas] has ever done you!” Scrooge further concludes that anyone who derives pleasure from the experience of Christmas — something which, of course, cannot be calculated on paper — is a fool.

Scrooge vs. His Nephew

From what we can glean from Dickens's text, it appears in Scrooge's mind, those who spend and consume are his moral and intellectual inferiors, quite incapable of good planning or astute observation.

In his extended condemnation of Christmas, expressed to his nephew, Scrooge rages:

What’s Christmas time to you but a time for paying bills without money; a time for finding yourself a year older, but not an hour richer; a time for balancing your books and having every item in ’em through a round dozen of months presented dead against you? If I could work my will,” said Scrooge indignantly, “every idiot who goes about with ‘Merry Christmas’ on his lips, should be boiled with his own pudding, and buried with a stake of holly through his heart. He should!”

These judgments by Scrooge, however, are apparently based on fantasy. At no point do we see any evidence that Fred is incapable of paying his bills or or managing whatever debts he might have. On the contrary, everything we know from the text suggests that Fred enjoys a comfortable middle-class lifestyle. Fred, for example, has servants, he provides for a wife, and he has the means of entertaining friends at his home.

For Scrooge, this is all so much imprudent extravagance. Fred, it appears, might only gain his uncle's good favor if Fred were to ditch all his friends, his wife, and his servants in favor of living a live of austerity like Scrooge.

Moreover, we find that Scrooge can offer few examples of people for whom Christmas is primarily about "paying bills without money." Defaulting on debt is no doubt a reality for many people, but this fact hardly "proves" that Christmas is nothing more than a time for "wasting" money. In other words, it's unclear why he thinks imprudent spending by some, justifies an overall condemnation of spending in general.

Scrooge is free to take this position for philosophical reasons, of course. He puritanical moralism is his own business. But let's not pretend that his views are necessarily the result of sound economic analysis.

Saving Good, Consumption Bad?

In economics, saving is not "good" and spending is not "bad." There is not moral vice or righteousness attached to either act.

Certainly, production is a good thing. Saving and investment are the most critical factors in economic growth. This is because saving and capital accumulation are key factors in increasing worker productivity. It's the savings that are are used to create the tools, machines, computers, and vehicles that allow workers to produce more in less time. More productive workers are then able to buy more things, enjoy more leisure, and generally lead more comfortable lives.

This does not mean, however, that consumption has no purpose, or that consumption is a morally problematic activity.

Indeed, the purpose of production is consumption, and the value of the factors of production are determined by how consumers value the retail products and services they ultimately consume.

Scrooge Needs Consumers

Although he fails to realize it, consumers are important to Scrooge personally. The text does not say so explicitly, but Scrooge has long been assumed to be a moneylender in his daily business. Whether or not he engages in wholesale or retail lending, it is the consumers — the people for whom Scrooge shows such boundless contempt — who provide him with a living. The money Scrooge lends is ultimately used to purchase consumer goods directly, or it is used by businesses to provide consumer goods or services to shoppers.

Without these consumers, Scrooge would be begging for a living, as his business activities would have no value in the marketplace. And if everyone lived like Scrooge does, he'd have few customers.

Moreover, Scrooge appears to be unaware that the people who consume his goods and services must themselves be producers — either as laborers or entrepreneurs — in order to have money to spend on his services.

Are some of these people unable to pay their bills? That is likely. This fact, however, hardly justifies Scrooge's raving about every person who decides to buy a slightly larger family meal for Christmas, rather than save every single penny.

Where Did Scrooge Get His Ideas?

In his book An Austrian Perspective on the History of Economic Thought, Murray Rothbard examines the idea that saving and labor are morally superior to consumption — what Bob Cratchit would call "making merry."

As a case study, Rothbard points to differences in emphasis between some Catholic groups and some Calvinist groups in how they viewed saving and spending in the sixteenth century.

Rothbard writes:

A Calvinist emphasis on postponement of earthly gratification led to a particular stress on saving. Labor or "industry" and thrift, almost for their own sake, or rather for God's sake, were emphasized in Calvinism much more than in the other segments of Christianity. ... [A] rather grim emphasis on work and on saving began to be stressed in Calvinist culture. This de-emphasis on leisure of course fitted with the iconoclasm that reached its height in Calvinism — the condemnation of the enjoyment of the senses as a means of expressing religious devotion. One of the expressions of this conflict came over religious holidays, which Catholic countries enjoyed in abundance. To the Puritans, this was idolatry; even Christmas was not supposed to be an occasion for sensate enjoyment. (emphasis added.)

The popularity of these ideas in some parts of the world led many to assign a moral value to saving, which in turn often led to economic theories in which saving was necessarily superior to spending in nearly all circumstances.

The Catholic scholastics, on the other hand, took a more benign view of spending:

The focus, then, both in Catholic countries and in Scholastic thought, became very different from that of Calvinism. The Scholastic focus was on consumption, the consumer, as the goal of labor and production. Labor was not so much a good in itself as a means toward consumption on the market. The Aristotelian balance, or golden mean, was considered a requisite of the good life, a life leading to happiness in keeping with the nature of man. And that balanced life emphasized the joys of consumption, as well as of leisure, in addition to the importance of productive effort.

In Rothbard's view, these theories then filtered their way down into various views about society in general:

Particularly influential was the early-17th-century Cambridge University academic, the Rev. William Perkins, who did much to translate Calvinist theology into English practice. Perkins denounced four groups of men who had "no particular calling to walk in": beggars and vagabonds; monks and friars; gentlemen who "spend their days in eating and drinking"; and servants, who allegedly spent their time waiting. All these were dangerous because unsettled and undisciplined.

Rothbard's point is not that all Catholics and all Calvinists hold these respective views. There is no doubt significant debate within each group, both historically and today.

What Rothbard does well demonstrate, however, is that these strains of thought have, at certain times and places, been influential, and have colored the thinking of many.

While pre-conversion Scrooge appears to be decidedly un-religious in Dickens's text, it is nevertheless easy to see how Scrooge (or people on whom Dickens may have modeled the character) could have been influenced by the lopsidedly pro-work views labeled by Rothbard here as "Calvinist," while Fred appears to take the more Aristotelian view.

What Scrooge fails to realize is that production is not the end of economic activity. Consumption is. And saving is merely deferred consumption. The fact that not everyone wants to live a life of dour self-denial appears to trouble Scrooge greatly — even though he personally benefits from the consumption of others. Scrooge fails to understand that Fred was right, and that feasting with friends and family brings benefits that can't be calculated on paper, and which will never show up in any statistics about national income or economic growth: