How should I think about paying for excellence? Is it worth buying the nice shirt or nice building or nice piece of art, or should I buy a cheap one and give the extra money to the poor?
My answer embodies why people hate economists: it depends. It also illustrates why Harry Truman asked for a one-handed economist: on the one hand, our intuition says we should make sure others have adequate food, clothing, and shelter. On the other hand, it’s not that simple economically or ethically.
Our church is going through a series on Ecclesiastes, and we read in Ecclesiastes 3:1, “For everything there is a season, and a time for every matter under heaven.” Just as there is a time to be born and a time to die, there is a time to buy and a time to give. Here are a few reasons why.
Paying for Quality Can Be Good Stewardship
In the long run, buying a few good shirts might mean less time and money spent replacing shirts that wear out quickly. Food offers another good example: paying more for good food might mean lower medical bills, a longer life, and more capacity to do good. If you’re a heart surgeon who might be called into the operating room at a moment’s notice, “good stewardship” might mean having a car you know you can rely on that doesn’t leave you with a sore back on the drive to the hospital.
Just as there is a time to be born and a time to die, there is a time to buy and a time to give.
Quality goods can also be passed on to others when you’re done with them. For example, if you purchase a quality car that your family outgrows, you can donate it to someone who needs a reliable vehicle. The same is true for clothes your children grow out of, books you’ve finished reading, or furniture that doesn’t fit in your new home. When you sell or give away your gently used quality items, others can continue to use them.
Paying for Quality Can Be Bad Stewardship
But are you paying for quality just to cultivate and indulge your vanity? Are you sitting in first class because you like knowing you’re fancier and better than everyone who isn’t? Are you indulging because you think you deserve something as a reward for your stressful or busy life? Are you pampering yourself in the name of self-care? Pride is one of the seven deadly sins, and the economist Thorstein Veblen criticized “conspicuous consumption” of status symbols.
On the other hand (see why people hate economists?), there’s such a thing as conspicuous abstention. As I type this, I’m wearing a tie from a thrift store. Is this healthy and virtuous frugality? Not if I’m conspicuously pointing out my thrift-store tie so I can have a reason to be smug.
Helping the Poor Is Complicated
Want to know something really depressing? It’s hard to give money away in a way that helps the people who receive the money. The economist Yoram Barzel explained this in an underappreciated article in the 1970s: even if there isn’t a monetary price, people still “pay” for things by searching and waiting. For example, a low-income parent might receive free diapers and kids’ clothes at a local church, but she still needs to figure out when the church is open, how to get there, and where to store the items in her tiny apartment once she returns home. There wasn’t a monetary price on the items, but they still cost her something.
“Free” stuff, in other words, can be expensive if people pay for it with their time. Note the argument here isn’t that people don’t deserve charity, should pull themselves up by their bootstraps, or “will just drink it away.” It’s that our effort to “help” might not.
Our effort to ‘help’ might not.
Jesus said, “But when you give to the needy, do not let your left hand know what your right hand is doing, so that your giving may be in secret. And your Father who sees in secret will reward you” (Matt. 6:3–4). So it isn’t just good for the giver because only God sees it. It’s also good for the potential recipients because it doesn’t mess up their incentives.
Of course, different settings are going to call for different actions. Buying an expensive dining room set is a way to provide the dignity of work to someone who needs a job. It provides assistance without asking anyone to spend time applying or competing for your handouts. On the other hand, if you come across someone in the park who has been beaten unconscious, it’s not the time to ask if helping them will mess up their incentives. It’s time to call 911, stay with the victim, maybe cancel a meeting you’re supposed to attend, and help however you can.
More Production Is the Answer to Poverty
In our book Leave Me Alone and I’ll Make You Rich: How the Bourgeois Deal Enriched the World, Deirdre McCloskey and I explained that we have largely eradicated poverty by embracing economic liberty and social dignity for entrepreneurs and innovators. The raw number of people in extreme poverty has fallen by over a billion people since the late 1980s–early 1990s, even though the world’s population has grown by about two billion people.
That hasn’t happened because of redistribution (through government or charity) but because societies have embraced innovation. Emphasis on inequality within high-income countries obscures the genuinely remarkable story: the sharp decline in extreme poverty and the emergence of a global middle class.
With this in view, buying that Chanel handbag might be an effective way you can help the poor. By purchasing well-made goods, you are contributing to an economy that creates stable jobs for people who need them most.
Outrageous Generosity Varies
I don’t think generosity is optional, but I don’t know exactly what it looks like for everyone. You know your situation better than I do, and it would be folly and presumption for me to think I know exactly how you should employ your capital.
I’m reminded of Jesus’s response to Peter after giving Peter some instructions (John 21). I like how the KJV translates Peter’s question about another disciple: “Lord, and what shall this man do?” Jesus’s response is as beautiful as it is profound: “If I will that he tarry till I come, what is that to thee? Follow thou me.”
Instead of pointing at other disciples and asking what they should be doing, we should watch our steps. Fortunately, the Lord is there for us, and he speaks to us. Through prayer, reading the Word, and close fellowship, we can start to see which steps to take.