EFFECT OF PRODIGALITY.
Prodigality destroys goods which either were capital or might have become capital. But, at the same time, it either directly or indirectly increases the demand for commodities. Hence, for a time, it raises not only the interest of capital, but the prices of many commodities. Consumers naturally suffer in consequence; many producers make a profit greater than that usual in the country until such time as the equilibrium between supply and demand has been restored by an increase of the supply of the coveted products. But the capital of spendthrifts is wont to be suddenly exhausted; demand suddenly decreases, and producers suffer a crisis. As Benjamin Franklin says, he who buys superfluities will at last have to sell necessities. Thus the extravagance of a court may contribute to the rapid prosperity of a place of princely residence.[219-1] But it should not be forgotten that all the food-sap artificially carried there had to be previously withdrawn from the provinces. The clear loss caused by the destruction of wealth should also be borne in mind.[219-2] ] [219-3]
[219-1] A rapid change of hands by money, as it is called in every day life. See, per contra, Tucker, Sermons, 31, 1774.
[219-2] Only the superficial observer is apt to notice this apparent prosperity of the capital much more readily than the decline of the rest of the country, which covers so much more territory. In like manner, many wars have had the appearance of promoting industry, for the reason that some branches grew largely in consequence of the increased demand of the state; but they grew at the expense of all others which had to meet the increased taxes. Compare Jacob in Lowe, England nach seinem gegenwartigen Zustande, 1823, cap. 2, 3; Nebenius, Oeffentlicher Credit, I, Aufl., 419 ff.; Hermann, department[TN 46] of the Seine, amounted, in 1850, to 497,000,000 francs; in the department of the Bouches du Rhone, to 39,000,000 francs; in 1855, on the other hand, they were, on account of the war, 887,000,000 francs and 141,000,000. (Journal des Econ., Juil., 1857, 32 ff.)
[219-3] The Journal des Economistes for March, 1854, very clearly shows, in opposition to the state-sophists who recommended extravagant balls, etc. as a means of advancing industry, and who even advocated the paying officials higher salaries on this account, and making greater outlays by them compulsory, that such luxury when it comes of itself may be a symptom of national wealth, but that it is a very bad means to produce prosperity artificially.
WHEN SAVING IS INJURIOUS.
The act of saving, if the consumption omitted was a productive one, is detrimental to the common good; because now a real want of the national economy remains unsatisfied.[220-1] The effecting of savings by curtailing unproductive consumption may embarrass those who had calculated on its continuance. But its utility or damage to the whole national economy will depend on the application or employment of what is saved. Here two different cases are possible.
A. It is stored up and remains idle. If this happens to a sum of money, the number of instruments of exchange in commerce is diminished. Hence, in consequence, there may be either a general fall in the price of commodities, or some commodities may remain unsold; that is, according to § 217, a commercial crisis of greater or smaller extent.[220-2] If it be objects of immediate consumption that are stored up and lie idle, articles of food or clothing, for instance, the price of such commodities is wont to be raised by the new and unusual demand for them, precisely as it is lowered afterwards when the stores are suddenly opened and thrown upon the market.[220-3]