Editor’s Note: Although it is traditional to discuss Dickens’ classic, A Christmas Carol, only around Christmas, people’s understanding of that classic affects their thinking all through the year. For that reason, I have decided to run this article in May.

“Market behavior really is motivated largely by the same desire that transformed Scrooge on Christmas morning.”

Having read Charles Dickens’ A Christmas Carol several times, I have concluded that Ebenezer Scrooge was a moral man, both before and after his Christmas Eve encounters with the ghost of his former business partner, Jacob Marley, and the three ghosts of Christmas. Yet readers of A Christmas Carol invariably despise the first Scrooge and admire the second. Why? My explanation begins by considering two moralities. The first morality has, for most people, little emotional appeal and is consistent with behavior that violates the universally admired second morality.

The first Scrooge satisfied only the requirements of the first morality, which I call mundane morality, while the second Scrooge enthusiastically embraced the second morality, which I call magnanimous morality. Economists who want to make a moral case for free markets need to take both moralities into account.1

Magnanimous Morality Trumps Mundane Morality

Dickens introduces Scrooge as “[a] squeezing, wrenching, grasping, scraping, clutching, covetous old sinner! Hard and sharp as flint from which no steel had ever struck out generous fire; secret and self-contained, and solitary as an oyster.” Clearly not the type who lights up your life, but there is nothing in Dickens’ description to suggest that Scrooge was not a moral man. Indeed, from what we learn about Scrooge’s business success, his business behavior satisfies all the conditions of mundane morality.

Briefly stated, mundane morality requires abiding by accepted rules of behavior that are generally beneficial, such as being honest, keeping your promises, honoring your contractual obligations, and not intentionally violating the legitimate rights of others. Adam Smith’s term for mundane morality was “mere justice.” Smith wrote:

Mere justice is, upon most occasions, but a negative virtue, and only hinders us from hurting our neighbor. The man who barely abstains from violating either the person, or the estate, or the reputation of his neighbours, has surely little positive merit. He fulfills, however, all the rules of what is peculiarly called justice, and does everything which his equals can with propriety force him to do, or which they can punish him for not doing. We may often fulfill all the rules of justice by sitting still and doing nothing.2

As Smith indicates, the person who satisfies only the requirements of mundane morality does not deserve a ticker-tape parade, but we should acknowledge that many people violate those requirements at the expense of the rest of us. Dickens’ story suggests that Scrooge satisfied those requirements.

It is clear that Scrooge was a successful businessman, but, by itself, this is not enough to earn him credit for mundane morality. He could have achieved his success by cheating his customers or by using government to grab subsidies and protections against competition that allowed him to succeed at the expense of others instead of in service to others. But Dickens, whether intentionally or not, leaves little doubt about Scrooge’s mundane morality as a businessman. There is no indication that he spent time lobbying politicians for special privileges. When he wasn’t working in his counting house,3 or having “his melancholy dinner in his usual melancholy tavern[,]” he found it beguiling to spend the evening at home with his ledgers and figures. Scrooge had been in business in the same location for many years (his long-time business partner, Marley, had been dead for seven years), so he must have developed a reputation for honest dealings based on providing customers a service they valued more than he charged them. Such honesty and customer service are consistent with Scrooge’s being rich, which the reader is reminded of frequently. Indeed, famous businessman P.T. Barnum’s discovery was not that “There’s a sucker born every minute”—he never said it—but that “no man can be dishonest without soon being found out and when his lack of principle is discovered, nearly every avenue to success is closed against him forever.4

Yet Scrooge is universally despised despite his mundane morality. Why? Because, when thinking about morality, people invariably think of magnanimous morality. As opposed to mundane morality, magnanimous morality is very much a positive and proactive morality, and one that has enormous emotional appeal. Briefly stated, it requires helping others intentionally, providing the help at a personal sacrifice, and, ideally, providing it to identifiable individuals or groups. This emotional appeal was hard-wired into us during most of human history, when our ancestors lived in small bands of 50 to 100 hunters and gatherers. Under these circumstances, individuals were more likely to survive if they benefited from the magnanimous help of others and were willing to reciprocate by helping others. Through an evolutionary process, humans developed a genetic predisposition toward intentionally helping—even at some sacrifice—those in our group, along with emotional responses that encouraged this morality in ourselves and made us appreciate it in others.

It is difficult to imagine anyone, much less a successful businessperson, lacking in magnanimous morality to the degree that the first Scrooge was. But if Dickens had wanted readers to respond negatively to Scrooge, and there is no doubt that he did, he could hardly have done better that to strip him of all evidence of magnanimous morality. The lack of magnanimous morality causes most readers to view Scrooge with repugnance.

The Mundane Morality of Scrooge

It is easy for economists to present the first Scrooge in a favorable way. This is not because they are personally indifferent to magnanimous morality—most of them are not. It is because of economists’ professional attachment to the importance of mundane morality to human progress, especially as it applies to markets: In the first Scrooge, they see a great example of how markets motivate even those who care little for others to behave as if they do care. Indeed, economists can argue—and some have—that the first Scrooge actually did more for others than the second Scrooge did.

For example, Michael Levin5 argues that by using the money he earned to make new loans to responsible borrowers, and by aggressively going after those who were late in repaying his loans, Scrooge was able to increase the amount he lent and the productive opportunities and higher-paying jobs his loans made possible. Dickens never mentions the parents who were better able to provide for their children because of Scrooge’s mundane morality, but these parents loved their children as much as Mr. and Mrs. Cratchit loved theirs, and some of their children probably needed medical care as much as, or more than, Tiny Tim, the Cratchit’s crippled son.

The implicit question in Levin’s argument is: Would Scrooge really have done more good by paying Bob Cratchit more than his opportunity cost rather than using the money to increase his loans? One can plausibly answer “no.”

Furthermore, the first Scrooge was clearly a first-rate miser who did not finance a lavish lifestyle for himself. Instead, he used his profits to expand his loans. His melancholy dinners taken in his melancholy tavern couldn’t have cost much; his lodging was poorly lit and heated; he didn’t go to or give parties; and there is no mention of any trips or vacations he had taken or hobbies he pursued. Scrooge spent very little of the profits he made from benefiting others. And the wealth he produced, and did not consume, was left over for others to consume. In Scrooge’s case, the money he didn’t spend was money he lent to others, increasing productive investment and expanding the wealth that would have benefited others. Even if he had buried much of his profits in the ground, he would still have benefited others by very slightly lowering the general price level and increasing the consumption of others by making their money more valuable. Either way, Scrooge helped others more by being a miser than if he had been a philanthropist and given away the money he didn’t spend on himself.6

When it comes to helping others, philanthropists face difficulties that misers do not. Those who hope to receive some of a philanthropist’s wealth incur costs trying to convince him or her that they are worthy recipients, and many who incur those costs will receive nothing. The philanthropist incurs costs in deciding which applicant will be successful—evaluating their proposals and then following up on how well the successful ones made use of their gifts. The result is that some of the value of the gifts is dissipated in the process of transferring them from the philanthropist to the recipients. Furthermore, how much recipients receive and what they do with their gifts is often determined less by their preferences than by the preferences of the philanthropist. Even when the philanthropist makes unrestricted monetary gifts, most of that money goes to nonprofit organizations that lack information on the value of the money in alternative uses; this is the kind of information that private firms receive in the form of market prices and profits.

For more on the invisible hand, see the EconTalk podcast Otteson on Adam Smith.

So, why do people not heap praise on Scrooge for all the benefits he provides through his market activity? One reason is that those benefits are spread so thin, and provided so indirectly, that they are not easily noticed. Another reason is that no matter how much Scrooge’s market activity helped others, people see Scrooge as not intending to help anyone when responding to market incentives. Instead, they see him, and others like him, as concerned only with their own interests, with any help they provide being unintended and going primarily to promote some vague public interest, not to particular people, like Bob Cratchit and Tiny Tim.7 So economists’ efforts to defend Scrooge by pointing to the benefits he provided through his mundane morality will not likely improve his image or convince those hostile to markets to be less so.

A convincing case for the morality of markets cannot ignore the economic efficiency generated by mundane morality and Adam Smith’s “invisible hand.” But in A Christmas Carol, Dickens played with our emotions to make a point that Joseph Schumpeter made more succinctly, though far less dramatically, 99 years later when he stated that “the stock exchange is a poor substitute for the Holy Grail.”8

The Two Moralities of a Good Life

The emotional impact of A Christmas Carol contains an important lesson for economists. Once they take it seriously, they will be in a better position to make a convincing moral case for markets even to those who see A Christmas Carol as a moral condemnation of markets. Most economists already know the lesson contained in A Christmas Carol that I have in mind: that few people would find life very satisfying in the absence of magnanimous morality, no matter how efficient the economy. Economists tend to forget this, however, when teaching how markets work.

For more on these topics, see The Lesson of Ebenezer Scrooge and The Essence of Scrooge, by David R. Henderson on EconLog.

A Christmas Carol is a story of how Scrooge improved his life by embracing magnanimous morality. Scrooge went to bed on Christmas Eve a stingy and doleful man and woke up Christmas morning a generous and exuberant one. He suddenly experienced what he had missed for most of his life—the happiness that comes from loving family and friends and being loved in return. Dickens ends the story just after the Cratchits get their Christmas turkey, Bob Cratchit gets his raise, Scrooge shows up at his nephew’s Christmas party and, we are told, Scrooge becomes a second father to Tiny Tim and remains a good and happy man, never to be visited by spirits again. But other than a comment that Scrooge becomes “as good a master [employer]… as the good old city knew[,]” there is no indication of his continued mundane morality or business success. This is not surprising since it is easy to appreciate the importance of magnanimous morality to a good life while completely ignoring the importance of mundane morality. And this is especially true of those who are skeptical of the morality of markets.

Most economists understand the importance of magnanimous morality to a good life. However, they approach their teaching by trying to get their students to appreciate the mundane morality of the market in the absence of magnanimous morality. As a result, they face much the same difficulty as when they try to get people to appreciate the first Scrooge. Economists could go a long way toward eliminating this difficulty by recognizing that those whose mundane morality helps them succeed in the marketplace are motivated largely by magnanimous morality—the desire to take care of their families and help their friends, neighbors and close associates, and being willing to make sacrifices to do so. Both moralities are necessary for a life of achievement, of purpose, and of the joy that comes from being able to do more for those we care about and who care for us.

Market behavior really is motivated largely by the same desire that transformed Scrooge on Christmas morning—the desire to help those who mean the most to us—and that motivation, when directed by the mundane morality of markets, results in our also serving the interests of multitudes of people we will never know. By emphasizing that a good economy, like a good life, is best achieved by the mundane morality of markets coupled with recognition of the motivational importance of magnanimous morality, economists would make a case for the morality of markets that has some of the same emotional appeal as does the transformation of Scrooge in A Christmas Carol.


I made the distinction between these two moralities in an earlier article. See Dwight R. Lee, “The Political Economy of Morality: Political Pretense versus Market Performance.” December 6, 2010.

See page 82 of Adam Smith, ([1759] 1982), The Theory of Moral Sentiments. Indianapolis: Liberty Fund. Paragraph II.II.9, online at the Library of Economics and Liberty.

The term “counting house” indicates that Scrooge was in the business of handling financial transactions for his clients, such as collecting and making payments for them.

See Michael Levin, “Scrooge Defended.” Mises Institute (December 14, 1998).

Steven E. Landsburg, “What I like about Scrooge,”Slate ( December 9, 2004).

Many readers will recognize that this complaint against Scrooge comes from the observation that he is helping others through Adam Smith’s “invisible hand” of the market, which depends on mundane morality but violates every requirement of magnanimous morality. See page 456 of Adam Smith, ([1776] 1981) An Inquiry into the Nature and Causes of the Wealth of Nations, Indianapolis: Liberty Fund. Paragraph IV.2.9, online at the Library of Economics and Liberty.

Joseph Schumpeter, Capitalism, Socialism and Democracy (New York: Harper and Row) ([1942] 1950: 137).


*Dwight R. Lee is the William J. O’Neil Professor of Global Markets and Freedom at the Cox School of Business, Southern Methodist University in Dallas, Texas.

For more articles by Dwight R. Lee, see the Archive.