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Some Wisdom From Benjamin Franklin

October 19, 2010

There’s always a good article or two to be found on the Arts & Letters Daily website.   This article is entitled Benjamin Franklin on American Happiness:  A wise advisor for troubled times.

For the acquisitive and free Americans, says Tocqueville, life is too short to get ahold of all the possessions and comforts that are possible to be had. And one’s station in life, whatever it is, always is bested, however marginally, by another’s. As death hurries us along, and as we become more equal, the remaining inequalities, small as they might be, grate far more than the massive inequalities unnoticed in aristocratic societies. The two things the American wants most and in principle can have—prosperity and equality—always recede, just out of reach.

According to the philosophers of the pursuit of happiness, Thomas Hobbes and John Locke, this situation is no American accident; it’s the human condition properly understood. Nature condemns us to shop until we drop. According to Hobbes, there is no “repose of a mind satisfied” and “felicity is a continual progress of the desire from one object to another, the attaining of the former, being still but the way to the latter.” Human beings are inclined to a perpetual, restless desire for power after power that ends only with death. Locke is no cheerier. He tells us that human desire always looks beyond present enjoyments to an absent good, and the minute we find ourselves contented by something, a new “uneasiness” disturbs us and “we are set afresh on work in the pursuit of happiness.” By this argument, the pursuit of happiness means that happiness as such is the Holy Grail.

It’s hard to deny that American life is always in flux: for immigrant and blue-blood and Wall Street maven alike, fortunes rise and fall; and in our present economic troubles, we’re told paradoxically to spend our way out of our inability to spend. From the time of Montesquieu, analysts of commercial republicanism and capitalism have worried that material acquisition requires bourgeois virtues, such as thrift and self-reliance, which the affluence they produce then undermines. It’s no accident that the American counterculture’s first anthem, Jack Kerouac’s On the Road, was written in the business-obsessed and super-bourgeois 1950s. We’re thus in a happiness double bind: our pursuit of happiness first makes us unhappy, as Tocqueville suggests, and then makes us poor because it makes us corrupt, which then makes us even more unhappy.

The idea that we can spend our way out of our inability to spend certainly is a strange one, indeed.  Keynesian economics is difficult to understand, especially the paradox of thrift.  I think the most damning evidence against it comes from Japan.  They undertook several major stimulus programs since the 1980s, and all it has left them with is a mountain of debt and a continually depressed economy.  Their central bank cut interest rates, inflating an asset bubble during the late 80s which took them over a decade to deflate — their infamous Lost Decade.

As much as I wish the government could paper over economic problems, it looks like savings and hard-earned capital has to be the source of our investments, not cheap printed money.  Keynes may have thought himself pretty clever when he denied Benjamin Franklin’s conventional wisdom of, “A penny saved is a penny earned”, but when I look at the numbers, I think Franklin was right.  It’s rather ironic to see our society go out and gorge in a credit-induced boom, and then when the bills come due, tell themselves that the fix to the problem is to spend some more. Over-consumption has led to the collapse of many nations throughout history and I see no reason to think ourselves an exception.

After watching Greenspan inflate our housing bubble during the Clinton years, the similarity to Japan isn’t pretty.  My views on the capitalist business cycle come from Friedrich Hayek.  In his Prices and Production (1931) and The Pure Theory of Capital (1941), he explained the origin of the business cycle in terms of central bank credit expansion and its transmission over time in terms of capital misallocation caused by artificially low interest rates.  He built his theory on top of the work of Austrian economist Ludwig von Mises.

The past instability of the market economy is the consequence of the exclusion of the most important regulator of the market mechanism, money, from itself being regulated by the market process.

– Friedrich Hayek, Nobel laureate economist

In his essay The Use of Knowledge in Society, he argued that a monopolistic governmental agency like a central bank can neither possess the relevant information which should govern supply of money, nor have the ability to use it correctly.

Austrian economists are interesting in that they view money as a commodity, not merely as a numeric medium of exchange.  I think they’re correct when it comes to what money actually is.  When you view money as a commodity, you come to an economic picture similar to Ben Franklin.  You find several gaping holes in John Maynard Keynes thinking.

One of my favorite Hayek quotes is the following,

“To act on the belief that we possess the knowledge and the power which enable us to shape the processes of society entirely to our liking, knowledge which in fact we do not possess, is likely to make us do much harm.”

– Friedrich Hayek

In his books The Blind Watchmaker, and Climbing Mount Improbable, Richard Dawkins shows that species evolve from the bottom up, completely unplanned.  I think the world economy is developing the same way.  I wish we were smart enough to plan the economy, but we’re not.   The economy is surrounded by a thick fog, and we can barely see two feet in front of us.  Beyond our immediate lives, and the lives of a few people close to us, all the economic details going on in the world are beyond us.  There’s too much and it’s too complicated.

That’s not to say I like the free-market.  I think it’s cruel and terrible, but I haven’t found anything better.   I find myself all over the place when it comes to economic perspectives.  I see the rapacious corporations, and I become sympathetic to socialist type ideologies.  Then I read the history of the Soviet Union and communism doesn’t look all that great.

Overall, I just get frustrated and throw my hands up in the air thinking, “I have no idea.  This problem is way too complicated.”  On one hand we have the cogs of economic fate, the invisible hand taking us who knows where, and on the other hand, corruption and people who are too stupid to properly plan such complexity.

Frustrated, I decide to study quantum mechanics for the rest of the night and my head falls to my desk in dismay.  Not only is the economy beyond my understanding, so is the atoms from which everything is made.

Hobbes and Locke felt mankind would never be satisfied, caught in a endless cycle in perpetual want.   Benjamin Franklin didn’t see life that way.  He actually had admiration for the American Indians, whose lives were a lot more simplistic.

… Franklin didn’t buy the shop-till-we-drop ideas of Hobbes and Locke. In a 1753 letter (to Peter Collinson) on the topic of support for the poor, Franklin argued that human beings are by nature prone to desire “a life of ease, of freedom from care and labour.” This proneness can work in two directions: toward work and acquisitiveness to provide for such an easy life, as in civilized societies, or toward extreme simplicity and a wandering and careless life, as one sees among the American Indians.

The Indians, said Franklin, are “not deficient in natural understanding” and see clearly the advantages of the arts and sciences among the whites. But they refuse to give up their indolent ways. In fact, when whites are raised among the Indians and subsequently get ransomed, they soon become disgusted with civilized life and escape back into the woods. Civilization and hard work are not the spontaneous products of our ever-acquisitive natures; they result rather from accidents that force people to live together in quarters so close that subsistence can’t be had without hard labor. For a smart and lucky person in civilized society, the wise thing to do is to work hard and then retire as early as possible (which is exactly what Franklin did).

Evidence points toward Franklin’s conclusions.   Many economic studies indicate the validity of the backward bending labor supply curve.  As wages increase, the average worker desires less working hours, not more.  Once a certain minimal quality of life is reached (which for most isn’t all that much), indolence is generally preferred.

People aren’t out for all they can get.  Most people just want a small degree of comfort and time to spend with their family.

But as wise as Franklin was, he didn’t really live the life he preached in his books.

Franklin was, in fact, an American for all seasons. On the one hand, we read in the pages of Poor Richard’s Almanac and elsewhere homilies about sobriety, thrift, hard work, self-reliance, the way to wealth, the virtues of marriage, and especially (as for Tocqueville later on) the importance of tolerant religion and divine reward and punishment. If men are so bad with religion, he once said, imagine what they would be like without it. The famous Autobiography is a tale of self-redemption and self-mastery. There we learn that, from reading the Enlightenment philosophers, Franklin became a free-thinking libertine, even a nihilist, until he realized the practical and moral danger he was in, cleaned up his act, put himself to thrift and incessant work, and then dedicated his life to public service and easy-going, do-good piety.

On the other hand, the bourgeois and pious Ben Franklin is hard to square with much of what he wrote throughout his life, especially about morality, the family, and religion. The bourgeois, believing Franklin is a fiction, and more than a few people who knew him, including John Adams, thought so…

Ben Franklin probably was very similar to how he’s portrayed in the film John Adams.

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