In my view, the moral problem at the root of socialism is actually not envy, as many libertarians contend. I grew up among socialists, and they were, by far, motivated by honorable concerns: a sense of injustice, grief for the poor, compassion.

(I’m not talking here about political activists, some of whom do, in fact, have much baser motives).

The principal flaw in the socialist world view, as I see it, is a too great concern with appearances and an inability to see cause and effect in any complex way. It’s not the ‘materialism’ of dialectical materialism I object to. It’s the lack of ‘mind’ in the materialism. The reasoning is limited, superficial, and inaccurate. It lacks sufficient particularity, as Michael Oakeshott argued in “Rationalism in Politics” (1962).

And as Oakeshott argued there, that can be a problem in Hayek, as well.

Libertarian theorist, Frederic Bastiat, makes much the same point in his acute analysis of the superiority of the miser over the spendthrift, an analysis that would be iconoclastic from the point of view of traditional religious morality, where the miser’s avarice would usually be condemned and the spendthrift’s generosity praised:

“Aristus spends upon himself and his household 20,000 francs a year. If that is not sufficient to content him, he does not deserve to be called a wise man. He is touched by the miseries which oppress the poorer classes; he thinks he is bound in conscience to afford them some relief, and therefore he devotes 10,000 francs to acts of benevolence. Amongst the merchants, the manufacturers, and the agriculturists, he has friends who are suffering under temporary difficulties; he makes himself acquainted with their situation, that he may assist them with prudence and efficiency, and to this work he devotes 10,000 francs more. Then he does not forget that he has daughters to portion, and sons for whose prospects it is his duty to provide, and therefore he considers it a duty to lay by and put out to interest 10,000 francs every year.

The following is a list of his expenses: –

1st, Personal expenses......... 20,000 fr.
2nd, Benevolent objects........ 10,000
3rd, Offices of friendship..... 10,000
4th, Saving.................... 10,000

Let us examine each of these items, and we shall see that not a single farthing escapes the national labour.

1st. Personal expenses. – These, as far as work-people and tradesmen are concerned, have precisely the same effect as an equal sum spent by Mondor. This is self-evident, therefore we shall say no more about it.

2nd. Benevolent objects. – The 10,000 francs devoted to this purpose benefit trade in an equal degree; they reach the butcher, the baker, the tailor, and the carpenter. The only thing is, that the bread, the meat, and the clothing are not used by Aristus, but by those whom he has made his substitutes. Now, this simple substitution of one consumer for another, in no way effects trade in general. It is all one, whether Aristus spends a crown, or desires some unfortunate person to spend it instead.

3rd. Offices of friendship. – The friend to whom Aristus lends or gives 10,000 francs, does not receive them to bury them; that would be against the hypothesis. He uses them to pay for goods, or to discharge debts. In the first case, trade is encouraged. Will any one pretend to say that it gains more by Mondor’s purchase of a thorough-bred horse for 10,000 francs, than by the purchase of 10,000 francs’ worth of stuffs by Aristus or his friend? For, if this sum serves to pay a debt, a third person appears, viz. the creditor, who will certainly employ them upon something in his trade, his household, or his farm. He forms another medium between Aristus and the workmen. The names only are changed, the expense remains, and also the encouragement to trade.

4th. Saving. – There remains now the 10,000 francs saved; and it is here, as regards the encouragement to the arts, to trade, labour, and the workmen, that Mondor appears far superior to Aristus, although, in a moral point of view, Aristus shows himself, in some degree, superior to Mondor.

I can never look at these apparent contradictions between the great laws of nature, without a feeling of physical uneasiness which amounts to suffering. Were mankind reduced to the necessity of choosing between two parties, one of whom injures his interest, and the other his conscience, we should have nothing to hope from the future. Happily, this is not the case; and to see Aristus regain his economical superiority, as well as his moral superiority, it is sufficient to understand this consoling maxim, which is no less true from having a paradoxical appearance, “To save, is to spend.”

What is Aristus’s object in saving 10,000 francs? Is it to bury them in his garden? No, certainly; he intends to increase his capital and his income; consequently, this money, instead of being employed upon his own personal gratification, is used for buying land, a house, &c., or it is placed in the hands of a merchant or a banker. Follow the progress of this money in any one of these cases, and you will be convinced, that through the medium of vendors or lenders, it is encouraging labour quite as certainly as if Aristus, following the example of his brother, had exchanged it for furniture, jewels, and horses.

For when Aristus buys lands or rents for 10,000 francs, he is determined by the consideration that he does not want to spend this money. This is why you complain of him.

But, at the same time, the man who sells the land or the rent, is determined by the consideration that he does want to spend the 10,000 francs in some way; so that the money is spent in any case, either by Aristus, or by others in his stead.

With respect to the working class, to the encouragement of labour, there is only one difference between the conduct of Aristus and that of Mondor. Mondor spends the money himself and therefore the effect is seen. Aristus, spending it partly through intermediate parties, and at a distance, the effect is not seen. But, in fact, those who know how to attribute effects to their proper causes, will perceive, that what is not seen is as certain as what is seen. This is proved by the fact, that in both cases the money circulates, and does not lie in the iron chest of the wise mall, any more than it does in that of the spendthrift. It is, therefore, false to say that economy does actual harm to trade; as described above, it is equally beneficial with luxury.

But how far superior is it, if, instead of confining our thoughts to the present moment, we let them embrace a longer period!

Ten years pass away. What is become of Mondor and his fortune, and his great popularity? Mondor is ruined. Instead of spending 60,000 francs every year in the social body, he is, perhaps, a burden to it. In any case, he is no longer the delight of shopkeepers; he is no longer the patron of the arts and of trade; he is no longer of any use to the workmen, nor are his successors, whom he has brought to want.

At the end of the same ten years, Aristus not only continues to throw his income into circulation, but he adds an increasing sum from year to year to his expenses. He enlarges the national capital, that is, the fund which supplies wages, and as it is upon the extent of this fund that the demand for hands depends, he assists in progressively increasing the remuneration of the working class; and if he dies, he leaves children whom he has taught to succeed him in this work of progress and civilization.

In a moral point of view, the superiority of frugality over luxury is indisputable. It is consoling to think that it is so in political economy, to every one who, not confining his views to the immediate effects of phenomena, knows how to extend his investigations to their final effects.”