Chapter LXXVII: Section CCXIX: Effect of Prodigality

Prodigality destroys goods which either were capital or might have become capital. But, at the same time, it either directly or indirectly increases the demand for commodities. Hence, for a time, it raises not only the interest of capital, but the prices of many commodities. Consumers naturally suffer in consequence; many producers make a profit greater than that usual in the country until such time as the equilibrium between supply and demand has been restored by an increase of the supply of the coveted products. But the capital of spendthrifts is wont to be suddenly exhausted; demand suddenly decreases, and producers suffer a crisis. As Benjamin Franklin says, he who buys superfluities will at last have to sell necessities. Thus the extravagance of a court may contribute to the rapid prosperity of a place of princely residence.[219-1] But it should not be forgotten that all the food-sap artificially carried there had to be previously withdrawn from the provinces. The clear loss caused by the destruction of wealth should also be borne in mind.[219-2] [219-3]

[Footnote 219-1: A rapid change of hands by money, as it is
called in every day life. See, _per contra_, _Tucker_,
Sermons, 31, 1774.]

[Footnote 219-2: Only the superficial observer is apt to
notice this apparent prosperity of the capital much more
readily than the decline of the rest of the country, which
covers so much more territory. In like manner, many wars
have had the appearance of promoting industry, for the
reason that some branches grew largely in consequence of the
increased demand of the state; but they grew at the expense
of all others which had to meet the increased taxes. Compare
_Jacob_ in _Lowe_, England nach seinem gegenwartigen
Zustande, 1823, cap. 2, 3; _Nebenius_, Oeffentlicher Credit,
I, Aufl., 419 ff.; _Hermann_, department of the Seine,
amounted, in 1850, to 497,000,000 francs; in the department
of the Bouches du Rhone, to 39,000,000 francs; in 1855, on
the other hand, they were, on account of the war,
887,000,000 francs and 141,000,000. (Journal des Econ.,
Juil., 1857, 32 ff.)]

[Footnote 219-3: The Journal des Economistes for March,
1854, very clearly shows, in opposition to the
state-sophists who recommended extravagant balls, etc. as a
means of advancing industry, and who even advocated the
paying officials higher salaries on this account, and making
greater outlays by them compulsory, that such luxury when it
comes of itself may be a symptom of national wealth, but
that it is a very bad means to produce prosperity
artificially.]