Notes From Babel

The Harm That Vain and Silly Fellows Do

with 2 comments

Donald Kochan, my property law professor at Chapman, has this op-ed today in the LA Times.  It raises a question I have been mulling over for some time.

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.”  [Quoting Benjamin Franklin.] Of course, this ancillary impact occurs in varying degrees whenever one spends (rich or poor) and however (wisely or unwisely) they do so.

Assume the endeavor truly was vain and foolish in a very profound way—the economy takes such a turn that few if any can afford to take up stewardship over the fine and richly furnished house.  The value of this property plummets, and it goes either unused, or sold off in pieces for fractions of their original value.  In such an instance, the masons, carpenters, smiths, and tradesmen may have found that the value of their experience in building fine and rich houses and furnishings is less than originally thought, since there are no other “silly fellows” left with the means to build such things.  For all their skill, they are left without work.  The economy, once the supply of fools has dried up, can no longer afford to remunerate the fools’ employ.

Of course, I am talking about the housing bubble, and the harm created when efforts are improvidently directed at endeavors with over-inflated and artificial value, only to later find those efforts were wasted.  This period of wasted, vain economic activity requires laborers to retrain themselves as the economy reorients itself around endeavors with actual value.

So misspent money, I think, can indeed be a serious problem.  But the reason for the misspending is more often misguided government incentives, subsidies, and policies—i.e., the policies responsible for the housing bubble—rather than the hapless “vain and silly Fellows” that Benjamin Franklin talked about.

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Written by Tim Kowal

July 26, 2010 at 8:36 pm

2 Responses

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  1. I think you are oversimplifying the harm caused by the silly fellow’s silly spending:

    “In such an instance, the masons, carpenters, smiths, and tradesmen may have found that the value of their experience in building fine and rich houses and furnishings is less than originally thought”

    I don’t see how the diminished value of the finished product diminishes the value of the work completed by the craftsmen — the craftsman have already extracted their value from the property in the form of their compensation. If the craftsmen have been paid for their work, and have been judicious in their affairs, they should not be directly affected by the homeowner’s folly.

    If a craftsman comes to depend on building houses for people who can’t afford them, then yes, he will suffer, but his suffering is a direct consequence of his own poor decision (to depend on building houses for fools), not the homeowner’s foolishness.

    Yes, as we saw with the housing bubble, widespread foolishness on all fronts will have a net negative effect on the overall market, thus indirectly affecting even the prudent, but the prudent are generally best poised to weather the storm and emerge as leaders as the market improves…

    Misspent money is a serious problem for those who misspend and those who encourage/enable, but in a free market all of this foolishness creates opportunity for the prudent and industrious. Government interference encourages foolishness and punishes prudence, which I’m sure we agree on.

    I guess I just disagree with your notion that misspent money is a problem for any other than the misspenders and their enablers, especially considering that such an assertion implies that something should be done…


    July 27, 2010 at 11:56 am

    • Yes, I was referring to the extrapolated effects of laboring in ultimately valueless endeavors. Fundamentally, it is little different than digging holes just to fill them up again. Rich fools enjoy luxury items that they may be able to enjoy only for a short time until they succumb to their own economic folly. And bureaucrats may enjoy creating make-work programs that have little value other than putting cash into laborers’ pockets. The problem of the “rich fool” is emblematic of the difference between mere economic activity and actual wealth creation. As I said, however, the government dwarfs the effects of “rich fools” on this point.

      Tim Kowal

      July 27, 2010 at 12:07 pm

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