"For Love of Neighbor" is a new documentary film offering a hopeful vision for Christian engagement in politics. Click here to learn more.

Is It Possible to Waste Money?

It is easy to criticize luxurious lifestyles. Who really needs a private jet? Does a $2,000 bottle of wine really taste any better than a decent $15 bottle? The website Bornrich.com features a list of the “most expensive things” that most people will find both amusing and disturbing.

When it comes to luxury, we are all guilty in some way or another—it is a relative term. Poverty in America is still fairly luxurious by global standards. The 18th century philosopher David Hume noted the difficulty in drawing a moral line between vicious and virtuous luxury. “I have, indeed, heard of a monk abroad,” he wrote, “who, because the windows of his cell opened upon a noble prospect, made a covenant with his eyes never to turn that way.” His essay on the subject is worth a read.

All philosophizing aside, we know excessive luxury when we see it, and it grates on our moral sensibilities. Perhaps we recognize that a person focused so intently on his or her own pleasures has a crippled soul, and is feeding the beast rather than fighting it. More likely, we simply cannot stand to think of all that money going to such wasteful things, when they could be going to any number of greater causes.

But this idea of “wasteful” spending is an interesting one, since it appears that it is nearly impossible to actually waste money, with the exception of outright destroying it.

[pq]Humans do not consume resources; they create and exchange them.[/pq]

As it pertains to the financial goals of a particular individual, money can certainly be exhausted on things that are inconsistent with those goals, and is therefore wasteful in a sense. But if a person is wealthy enough to drop over a thousand bucks on socks, for instance, it is not a likely threat to their financial future.

The issue of concern for critics is the argument that such expenses effectively use up resources that could be used to help the poor, improve animal shelters, support research, and an endless variety of other projects to make the world better. In this view, society has a top 1 percent or so that holds or “consumes” most of the wealth, while everyone else has to struggle with the remaining scraps. That is indeed a great moral dilemma. Except it is an illusion.

Humans do not consume resources; they create and exchange them.

When I purchase goods at the grocery store, the money I spend gets distributed in hundreds of places. A portion goes to the cashier, and another goes to the bagger. A little goes to the person collecting the carts in the parking lot, to the woman making bread in the bakery, and to the man restocking the shelf. A tiny fraction goes to people who build and maintain the facilities and machines.

If you are fortunate enough to be one of the nine people on earth to purchase a Lamborghini Veneno Roadster this year, you would not be simply handing over $4.5 million to the CEO of Lamborghini. That money goes into the pockets of thousands of people around the world who develop materials, build parts, design concepts, create marketing strategies and many other functions that are necessary for bringing those cars to market.

It is true that some things, such as food, are consumed, but to acquire food there has to be an exchange of labor (the farmer) or money (the customer). To get money, the customer must first engage in labor, so ultimately everything must begin with the creation of resources through work before consumption can occur. It is not that specific resources are not consumed per se, but that the full stock of resources must grow, not decrease, along with consumption. One might argue that the only commonly wasted resource is simply the human time and talent that goes unused and therefore fails to contribute to the stock. This is one reason why work is not only necessary, but moral.

Irrespective of the apparent absurdity of an expense, every exchange is an opportunity for all those involved to advance their lives. Furthermore, many of those who benefit are low-wage workers, whether in a grocery store or auto factory. How then could we view an expense as wasteful?

Perhaps the question is less about how much someone spends or how unnecessary it is, and more about whether the thing purchased is wasteful in terms of having morally destructive characteristics. Is it wasteful to spend money on prostitution or narcotics because they can destroy lives? Is it wasteful to pay someone to be unemployed, since it discourages work? In the context of my previous point about creating resources versus consuming them, it would seem that these kinds of expenses result in a less productive, and a less physically, spiritually and emotionally healthy society?

The problem now shifts to the economics of investment and return. We might ask the question a new way: does waste occur when resources are spent on something that results in a decrease of value? Again, we are not speaking here of personal finances, but their collective outcomes. In a particular way, the answer is yes.

Politicians often prescribe government projects to provide jobs and stimulate the economy. Most free market economists argue these projects are wasteful, as they take money out of the more efficient private sector. To illustrate, imagine an extreme example: government hires a million people to dig ditches and fill them back up again. While it would suddenly add a million jobs to the economy, it wouldn’t actually be growing the economy. The money itself is simply transferred, but time and talent are wasted as a result. Only in such a case are resources consumed without creation.

Perhaps we can view the problem in terms of missed opportunity. No expense is entirely wasteful, as there are so many people who benefit by any exchange of resources. But the choice to follow one path instead of another can be costly in a different way—after a period of time, resources that may have been available under one set of circumstances simply are not available in the chosen set. The economic term is “opportunity cost.” What technologies and solutions do we lack today because resources were redirected via government mandate decades ago? How are burdensome taxes and regulations today affecting the wealth and opportunity of future generations?

While excessive consumption and needless luxuries may be a problem for a particular individual, the collective benefits of all personal spending are clear. In the fight against poverty, hunger, illiteracy and disease, the wealthy are on the side of progress, even if they don’t know it. If we want to see human well-being continue to improve, we must simply allow the economy to grow, which means enabling markets to operate efficiently. The free market can build schoolhouses, introduce medical innovations, and provide jobs much more effectively than any government program. Aside from destroying it, it seems that the only way to waste money is to stand in its way.