Monday, August 2, 2010

Is spending a lot of money immoral?


As everyone in the world seems to know, Chelsea Clinton got married this past weekend. And, as everyone also seems to know, the estimated cost of her wedding was 3 million dollars. That’s a lot of money, and the media (both new and old) are challenging the morality of spending that much on a party, however important it might be to the bride, groom, and family. Just think, Philosopher Michael LaBossiere asks us to consider, how much good that money could do for those who need it.

This is a standard argument against extravagant spending. Some things are just too expensive. It rests on the notion of opportunity cost – those sacrifices one makes by doing one thing instead of doing something else. So, the opportunity costs of spending 3 million dollars on a wedding might be one million textbooks that never get purchased, or hundreds of thousands of malaria inoculations that never get distributed, or what have you, whatever the Clintons would have chosen if they hadn't chosen the wedding. Of course, everything has an opportunity cost, not just money. The time I spend writing this blog has an opportunity cost because I could be working on an academic book, or jogging, or hanging out with my daughter, or feeding the poor at a soup kitchen. And hanging out with my daughter has an opportunity cost – writing this blog, for example, or jogging, or feeding the poor, or searching for enlightenment. Anytime you do one thing as opposed to another, or anytime you spend money on one thing or another, the opportunity cost is the other thing you could/would have done or bought if you hadn't chosen what you chose. Most of the time, we think that the cost is worth the price – this blog is important enough to me to sacrifice an hour of Adina-time every few days, but it might not be if, God forbid, she had terminal cancer or something. LaBossiere is therefore suggesting that the opportunity cost is simply too high to justify spending 3 million dollars on a wedding; many people seem to agree.

The problem with this argument, however, is that it assumes money has an absolute value – that three million dollars is three million dollars period, and that every person’s three million dollars is the same. Especially in the Clinton’s case, this just doesn’t seem to be the case. Hilary Clinton’s net worth is estimated to be 34.9 million; Bill is estimated to be worth 200 million. Consider, for example, what Money Magazine tells us:

Although she takes in $165,200 a year as a senator, these days Bill is breadwinner-in-chief. His presidential pension is $201,000 a year, and he grabbed a $12 million advance for his 2001 memoir, "My Life." (Her "Living History" won an advance of $8 million and $7 million in royalties.)

But it's been Bill's great gift for gab that has really feathered the Clintons' nest. He earned an astounding $41 million speaking to groups and corporations in the first six years since he left office. Standard fee: $150,000. The fact that he may be married to the next President can only burnish his star power.

So, it seems to me that the question isn’t whether 3 million dollars is too much, but rather, whether someone’s only child’s wedding is worth 1.2% of his or her net worth, and that’s ignoring future earnings. Asked this way, the amount seems negligible to say the least. When my wife and I were married, our wedding cost about 12% of our combined annual salaries. (Debt from student loans kept our net worth in the negative, but there’s no point getting into that.) So, unless money has an absolute value – again, three million dollars is just three million dollars, no matter who spends it – then Kim and I are much more immoral than Bill and Hilary.

One might argue that no one should be as rich as the Clintons, or that they don’t spend enough on charity. Perhaps, but again, those are different discussions. Instead, the question is whether, given how rich they actually are, and given how much money they will continue to make, whether it is immoral for them to spend so much money on this particular wedding.

It’s easy to blame the rich, but it’s even easier to forget that most everyone reading this blog counts as rich. In terms of U.S. dollars, the average person in Zimbabwe makes ten cents a year. Folks in the Republic of Congo earn (on average) $334 per year; in Liberia they earn $379. (There’s a list of the ten poorest countries and their per capita income here .) Outside of Africa, Afghanis make an average of $800 per year, and according to many sources, Haitians make $2 per day or $730 per year. So, you know what’s really immoral by LaBossiere’s standard? My Netflix membership. In one year, I could feed 2176.8 Zimbabweans for the amount that I spend to not watch the DVDs I have piled up on my television for three months at a time. I could feed a Congolese person for almost a year. I could save lives, real people, with real need, and even if the aid organizations were imperfect, I could still have substantial impact. Thus, if opportunity cost, based on absolute value, is the standard by which we are to judge whether someone is spending too much money on something, I have a lot to answer for. And so does, I expect, LaBossiere. So do you.

Peter Singer agrees, incidentally, and he argues that if it costs $30,000 for an American family to live, then any penny more than that ought to be donated to the poor. That too is a conversation for another time, but it seems to be the logical consequence of Labossiere’s position.

I intend to take a different tack. What saves us from being horrible immoral people? The answer is hinted at by a misunderstanding that LaBossiere waves away. He writes, “Then again, perhaps this is an excellent example of trickle down economics: the fabulously wealthy Clintons spend $3 million on a wedding and this trickles down money to those involved, such as the waiters who will be working there and the folks making the cake. Also, people who are out of work and poor can enjoy watching news of the event on the TV in the local coffee shop, thus lifting their spirits.”

First of all, what he describes isn’t trickle-down economics. Trickle-down economics is a tax-theory that argues that the wealthy should pay fewer taxes because the wealthier they are, the more money they spend, and that this spending has a disproportionally positive impact on the economy. What Labossiere waves away, instead, is basic capitalist theory, that is, that the more goods purchased, in general, the more labor there is, and when there is more labor, there is a higher standard of living for everyone. Adam Smith called this increase in standard of living "universal opulence." Sure, trickle-down economics is a variation of this, but so is every other market-based economic theory. I will let Adam Smith explain the point further, since he does it better than anyone else, but before I do, let me warn you that this is a REALLY REALLY long quote, and I’m including it all to counter Labossiere’s caricature that the Clinton wedding helps out a few select people materially and a few more psychologically. Certainly, if the wedding helped out a handful of people only, it would be hard to justify. But Smith’s point is that something like this does not just help out a few people, it helps out lots and lots and lots and lots.

You don’t have to read the whole thing if you don’t want. Read the first few sentences and then skip ahead to my text, if you prefer, but if you want to really understand the power of Smith’s argument, you should take the time to get the picture Smith is drawing. Anywhere, here is Smith’s description of all of those who benefit from the purchase of a simple coat. It's from The Wealth of Nations:

    Observe the accommodation of the most common artificer or day-labourer in a civilized and thriving country, and you will perceive that the number of people of whose industry a part, though but a small part, has been employed in procuring him this accommodation, exceeds all computation. The woollen coat, for example, which covers the day-labourer, as coarse and rough as it may appear, is the produce of the joint labour of a great multitude of workmen. The shepherd, the sorter of the wool, the wool-comber or carder, the dyer, the scribbler, the spinner, the weaver, the fuller, the dresser, with many others, must all join their different arts in order to complete even this homely production. How many merchants and carriers, besides, must have been employed in transporting the materials from some of those workmen to others who often live in a very distant part of the country! how much commerce and navigation in particular, how many ship-builders, sailors, sail-makers, rope-makers, must have been employed in order to bring together the different drugs made use of by the dyer, which often come from the remotest corners of the world! What a variety of labour too is necessary in order to produce the tools of the meanest of those workmen! To say nothing of such complicated machines as the ship of the sailor, the mill of the fuller, or even the loom of the weaver, let us consider only what a variety of labour is requisite in order to form that very simple machine, the shears with which the shepherd clips the wool. The miner, the builder of the furnace for smelting the ore, the feller of the timber, the burner of the charcoal to be made use of in the smelting-house, the brick-maker, the brick-layer, the workmen who attend the furnace, the mill-wright, the forger, the smith, must all of them join their different arts in order to produce them. Were we to examine, in the same manner, all the different parts of his dress and household furniture, the coarse linen shirt which he wears next his skin, the shoes which cover his feet, the bed which he lies on, and all the different parts which compose it, the kitchen-grate at which he prepares his victuals, the coals which he makes use of for that purpose, dug from the bowels of the earth, and brought to him perhaps by a long sea and a long land carriage, all the other utensils of his kitchen, all the furniture of his table, the knives and forks, the earthen or pewter plates upon which he serves up and divides his victuals, the different hands employed in preparing his bread and his beer, the glass window which lets in the heat and the light, and keeps out the wind and the rain, with all the knowledge and art requisite for preparing that beautiful and happy invention, without which these northern parts of the world could scarce have afforded a very comfortable habitation, together with the tools of all the different workmen employed in producing those different conveniencies; if we examine, I say, all these things, and consider what a variety of labour is employed about each of them, we shall be sensible that without the assistance and co-operation of many thousands, the very meanest person in a civilized country could not be provided, even according to what we very falsely imagine, the easy and simple manner in which he is commonly accommodated. Compared, indeed, with the more extravagant luxury of the great, his accommodation must no doubt appear extremely simple and easy; and yet it may be true, perhaps, that the accommodation of an European prince does not always so much exceed that of an industrious and frugal peasant, as the accommodation of the latter exceeds that of many an African king, the absolute master of the lives and liberties of ten thousand naked savages.

There is a lot that follows from Smith’s quote, including, obviously, an implicit argument for globalization. Also, there is some language in the last sentence that rubs us moderns the wrong way – eighteenth century norms allowed people to speak of Africans as “naked savages;” we certainly don’t do that. However, we can talk about whether Smith was a racist or not another time. (He wasn’t.) Instead, Smith’s point about African tribes at the end is that the income differential in a free-market society is never as large as the income differential in a tribal society in which no one owns anything but those in charge. Is that less true these days with Bill Gates around? I don’t know. But if we take away the handful of multi-billionaire exceptions, it seems to be the case.

Smith's writing is, of course, an argument for free-market theory, and the reason why I bring it up is to show that Labossiere’s attack on the Clinton wedding is, in essence, an attack on capitalism in general. Now, it's okay if you want to attack capitalism. I just don't like the idea of someone sneaking the critique under the door without acknowledging it.

(Incidentally, if you are interested in these debates, I'm teaching a graduate seminar on philosophy of economics, including the morality of markets and globalization in the Fall. Come join us. There are still spaces available.)

Smith's point is that consumption helps the general population; the Clinton wedding does too. However, my point, or rather, the philosophical question before us now, is whether or not we can measure the value of something by an absolute standard or whether we should consider it in the context in which the value is determined. Everything I have written suggests that value is contextual, whereas Labossiere seems to argue otherwise. What do you think? Does the Clinton fortune mitigate the amount they spent on Chelsea’s wedding or is it simply too much? If it is too much, then what standard are you using to decide? Where does absolute value come from, and if we rely on it, why aren’t you just as immoral as the Clintons or me?

UPDATE: As always, when I walk away from the blog I realize ten things I wanted to say. So, I'm back to add one clarification. My point is not that spending is always good. I am not arguing for rampant materialism or conspicuous consumption. (Smith doesn't either.) Instead, I am asking about the standards we use to determine whether spending money on something specific is moral or not. Are the criteria derived from context or from the absolute value of the money? Obviously, I suggest the former, but this doesn't mean that some purchases still can't turn out to be immoral.

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8 comments:

  1. Thursday evenings from 6 - 8:30. I just compiled the reading list. It's goooooooood.

    ReplyDelete
  2. BTW, the seminar is listed under Arts & Sciences, since its interdisciplinary. A&S 599.

    ReplyDelete
  3. Trickle down has been confuted as an economy management model by Hoover and Doobya. Even were idealistic meritocratic capitalism in play, instead of networking among the privileged to maintain privilege which often correlates with predatory corporations seeking short term gain at the expense of the economy over time, resource availabilities and space (e.g. fishing profits versus stocks - one does not even have to mention oil drilling rigs).

    As for the Clintons and the paltry $3M they spent on networking to improve Billy's income from speaking gigs, if he gets 20 more gigs or raises his price ten percent, he has netted a profit. Besides, they are only political expediency politicians, not statesman quality and about as important and as rich as the third most successful comedian in 13th C Venice, or perhaps Johnny Carson.

    Should morality in expenditures be less concerned with privileged vulgars' marketing expenses than with expenditures on 'defense of national interest' (usually in defense of predatory corporations) when the US is falling behind in education and infrastructure and homo sapiens industrialis is terminally descending into a Malthusian mire?

    Just askin'.

    ReplyDelete
  4. Hillary Clinton texts a $10 donation to Pakistan flood relief
    By Christina Wilkie - 08/04/10 06:15 PM ET

    http://thehill.com/capital-living/in-the-know/112733-hillary-clinton-texts-a-10-donation-to-pakistan-flood-relief



    http://bit.ly/bu8gml

    ReplyDelete
  5. Dear Anonymous et al.
    Yes. Let’s assume that’s all she’ll give. And, for that matter, if she’s giving more, she should broadcast it to the world, else she won’t be wearing here charitableness on her sleeve as is, apparently, expected by some in this country. . .

    OR here’s an idea. . .let’s 'assume' that the whole concept is to kick off a campaign to raise $10/PER PERSON--- (03 August 2010 U.S. Launches New Text Donation Campaign for Pakistan—from America.gov)
    “The State Department and U.S. Embassy Islamabad announced a new mobile phone donation campaign that asks mobile phone users to text “SWAT” to 50555. Each text donates $10 to the U.N. High Commissioner for Refugees (UNHCR), whose emergency response teams are delivering supplies in Balochistan and Kyber Pakhtunkhwa provinces.”

    In this case, it would seem she’s succeeding in “leading by example”. For this campaign, for the message the public (the ones without an agenda,that is) needs to hear, texting $10 is what’s to be done. Simple as that.

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  6. Good comment. It is a State Department effort http://tinyurl.com/2v6f4kc

    with the UN Refugee Agency
    http://tinyurl.com/36xntp4

    and all you can do is donate $10.

    After reading this:

    "Carefully Consider Making A Text Donation - So
    long as you do your homework, texting your
    donation can be a safe way to give. . . .But
    texting donations do have a downside. For one,
    donors may not take the time to research the
    charity. Also, processing text donations can
    be expensive for charities and it can take as
    much as three months for charities to receive
    your donation. Please visit our blog about the
    Haiti earthquake and text donations for a
    longer explanation."

    From http://www.charitynavigator.org/index.cfm?bay=content.view&cpid=1042

    I dug a little deeper and found some curious stuff:

    The UNHCR page notes that payments are processed by RBS WorldPay, RBS as in Royal Bank of Scotland, a distressed bank since the collapse.

    RBS WorldPay was recently bought by Advent International and Bain Capital (40% each so they can claim 'minority ownership').

    RBS WorldPay on the sale:
    http://tinyurl.com/3y4o6e6

    Advent: http://tinyurl.com/36mkojs
    Bain: http://tinyurl.com/3xd9fa8

    Bain was founded by Mitt Romney and others. http://tinyurl.com/yl6ylm

    Personally, I don't like Mitt Romney. Call it is my hangup. After consulting with the Charity Navigator Blog (http://tinyurl.com/29lkr92) I printed a form and sent a check to the US Fund For UNICEF. http://tinyurl.com/2bwyu68

    Charity Navigator seems to like this one so maybe Pakistanis in need will get most of the money and maybe promptly. Sending a check cuts out processing fees and delays.

    Hillary's donation is legitimate and all she could do to set an example and get good press.

    Simple as that.

    ReplyDelete
  7. Update,

    UNICEF recommends...

    __________________________________________________
    Jay,
    go to unicefusa.org
    best
    Patrick
    Patrick McCormick
    Emergencies Communication Officer
    Media Section
    UNICEF New York
    Tel: 1 212 326 7426
    cell: 1 917 582 7546
    http://www.unicef.org/media




    To: pmccormick@unicef.org
    Date: 08/12/2010 03:47 AM
    Subject: Pakistan relief

    How does UNICEF suggest individual Americans aid (donate) to relief efforts?

    ReplyDelete