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Ben's wealth wisdom

On July 26, 1784, Benjamin Franklin considered whether society was in need of a "remedy for luxury" in a letter to his trusted adviser, Benjamin Vaughn. In it, Franklin methodically argued against such a need.

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The current clamor for the regulation of wealth makes Franklin's thoughts relevant. Consider President Barack Obama's now infamous off-script muttering that "I do think at a certain point you've made enough money." Many have argued that this statement is emblematic of larger antiwealth, antiluxury tendencies in the administration's agenda.

Liberals are not the only ones who engage in antiluxury politics. All sides invoke the term "luxury" with a loaded meaning of "inappropriate," "excessive" or "wrong." Take as examples recent criticism from conservatives about Obama's vacations, Massachusetts Sen. John Kerry's yacht or criticism from varying political perspectives on the sailing trip BP's chief executive took during the Gulf of Mexico oil spill. Luxury is a demonizing four-letter word.

Franklin's letter provides a partial retort to such sentiments. The wealthy infuse capital and invest, create jobs and in other ways make disproportionately positive contributions to the economy and society. Franklin reminds us of the reasons wealth, even luxuriant wealth, is good and why its regulation is dangerous.

He wrote: "I have not indeed yet thought of a Remedy for Luxury. I am not sure that in a great State it is capable of a Remedy. Nor that the Evil is in itself always so great as it is represented."

Franklin, of course, is known for his counsel on frugality, but only as a self-imposed virtue, not by the force of the state. The luxurist may be unwise, but that need not mean his wealth needs regulating.

Franklin posed the question of whether government should intervene to thwart this thing called luxury: "Suppose we include in the Definition of Luxury all unnecessary Expense, and then let us consider whether Laws to prevent such Expense are possible to be executed in a great Country; and whether if they could be executed, our People generally would be happier or even richer." He answers in the negative, concluding that, as to the hazards of unabated luxury, "Laws cannot prevent this, and perhaps it is not always an Evil to the Publick."

In part, Franklin believed that there was little cause for concern because "upon the whole the Quantity of Industry and Prudence among Mankind exceeds the Quantity of Idleness and Folly."

Legal intervention against wealth accumulation, Franklin further proclaimed, destroys incentives: "Is not the Hope of one day being able to purchase and enjoy Luxuries a great Spur to Labour and Industry? May not Luxury therefore produce more than it consumes, if without such a Spur People would be, as they are naturally enough inclined to be, lazy and indolent?"

Furthermore, if a man foolishly spends his fortune, he will bring about his own demise. Law need not teach him a lesson. In Franklin's words, some of those "fond of showing their Wealth, will be extravagant and ruin themselves." The evolutionary powers of self-interest and survival create a self-regulative effect on luxurious spending.

Finally, Franklin reminded his friend that we must not forget that spending on luxuries means someone else gets paid: "A Shilling spent idly by a Fool, may be picked up by a Wiser Person who knows better what to do with it. It is therefore not lost."

The luxurist may be destructive to himself, but in the process he is constructive in the lives of many who are employed in the enterprise of creating those "unnecessary" things: "A vain silly Fellow builds a fine House, furnishes it richly, lives in it expensively, and in a few Years ruins himself, but the Masons, Carpenters, Smiths and other honest Tradesmen have been by his Employ assisted in maintaining and raising their Families, the Farmer has been paid for his Labour and encouraged, and the Estate is now in better Hands." Of course, this ancillary impact occurs in varying degrees whenever one spends (rich or poor) and however (wisely or unwisely) they do so.

Because all of these positive contributions exist even from luxuriant behaviors, Franklin concludes that, "we may hope the Luxury of a few … will not be the Ruin of America." Obama, and others, should heed these wise words and abandon the belief that wealth itself is a national illness for which we should seek a governmental remedy.

Ben's wealth wisdom 07/30/10 [Last modified: Friday, July 30, 2010 6:15pm]

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