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Summary and Review of in Cheap We Trust: The Story of a Misunderstood American Virtue by Lauren Weber

Published by David C. Wyld Southeastern Louisiana University, April 26, 2010

This summary and review of the book, In Cheap We Trust: The Story of a Misunderstood American Virtue, was prepared by Lauren Milliner while a student in the College of Business at Southeastern Louisiana University.

Cover via Amazon

Executive Summary

The first half of In Cheap We Trust details the nation’s history of saving versus spending, beginning with America’s first colonists and ending with today’s society of consumers. The second half of Weber’s book ties America’s current economic problems into its effects on the environment, giving specific examples of what some people are doing to make a difference. The last chapter of the book investigates the psychology of being cheap.

The 10 Concrete Things Practicing Managers Should Take from this Book

Are your employees charging non-business related expenses on the company card?

Have a fire-and-brimstone preacher condemn them for their materialistic ways.

Trying to run a cost-efficient business?

Hang a scary portrait of Benjamin Franklin in the break-room.

Just because a potential hire is Jewish or Asian does not necessarily mean they will be excellent company accountants or financiers.

There’s just a high probability they’ll be excellent company accountants or financiers.

Employees still not watching costs closely enough?

Tell them there’s a war going on.

Consider going back to a traditional pension.

Nobody wants to work until the day they die.

Trying to encourage employees to keep their own personal savings?

Start a system that allows employees to have a fraction of their paychecks directly deposited into savings.

A cost-conscious business is often an eco-conscious business.

Unless you’re cutting corners in the wrong places.

Find a perfectly edible half-eaten tuna sandwich in the break room trash?

That’s just plain wasteful. Dive right in and get it.

If a potential employee admits to being cheap, there’s a chance they’re also highly organized and driven.

They might even be difficult, obstinate, and anal-retentive.

In this country, there is always at least one thing that will motivate any employee to do their job.

Whether they spend or save, Americans love money.

Full Summary of In Cheap We Trust

Ch. 1: “The Crowd Approved the Doctrine, and Immediately Practiced the Contrary”

Lauren Weber opens her first chapter with the story of how Benjamin Franklin came to write his 1758 edition of Poor Richard’s Almanack. In its preface, she notices one particular parable: a crowd of shoppers are waiting to get into a market when “Father Abraham” approaches them to give them useful advice. He asks them to pay attention to their “outgoes” as well as their incomes by saving money for the future. His final bit of advice is that everyone heed his advice, at which point “the crowd approved the doctrine, and immediately practiced the contrary, for the venue opened, and they began to buy extravagantly.” The preface, also known as The Way to Wealth, became tremendously popular in America because everyone believed it was good, practical advice. Weber adds that Father Abraham’s best advice may have been the part about acting on it. The next portion of the chapter details the first Americans’ battles with spending. Puritanism, led by John Calvin, held deeply rooted values of modesty and frugality, which often conflicted with the Puritans’ temptation to prosper in the New World. In fact, Calvin’s followers found it almost impossible not to prosper, accumulating wealth that they were not allowed to enjoy. While preachers like Cotton Mather “bemoaned the turn to materialism”, many were growing tired of humble living and self-denial. Even the Quakers found these same virtues difficult to uphold in America. The last bit of the chapter is dedicated to the life of Benjamin Franklin, son of a candle-maker and one of seventeen children. Ben Franklin began his printing career apprenticing for his uncle’s paper, sometimes publishing some of his own writings under a different name. Soon he was running his own printing firm in Philadelphia, producing his own almanacs and newspapers. Franklin also developed an avid interest in science and civic affairs. Once he retired, living well off of his income, “he distinguished himself as a philosopher, statesman, and diplomat.” Throughout his life, Benjamin Franklin had always been concerned with America’s growing international trade economy, fearing that American spending on European products would steer savings away from investments at home and ultimately put their freedom at risk. Franklin felt that the development of an American middle-class would be what separated America from tyrannical European monarchies because it would mean fewer households in the extreme upper and lower classes. Unfortunately, though many Americans liked Franklin, they enjoyed international trade because it meant cheaper, higher-quality products. Franklin finally found the opportunity to bring Americans back to frugality when King George and the British Parliament passed the Townshend Duties, which taxed a lot of their exports. Americans responded with boycotts, and newspapers urged everyone to save their money by making their own products. To Franklin’s relief, this led to a period of American frugality: all of the much-loved European luxuries were given up. But Franklin hadn’t yet learned that Americans were never meant to be under-consumers, for as soon as the Revolutionary years ended, they began spending again. Benjamin Franklin died at age 84 in 1790.

Ch. 2: A Nation of Savers

The Guiness Book of Records credits Hetty Green with being the “World’s Greatest Miser” because she lived her life well below her means. She became interested in finance as a child, opening her own savings account when she was just eight years old. Green achieved millionaire status by multiplying her inheritance through “steel-willed dealings in railroads, real estate, and finance”. Thomas Eddy, another important figured highlighted in this chapter, was a wealthy New York insurance broker who tried to reform America’s lower classes by opening the Bank for Savings in the City of New York, one of the very first savings banks in the country. Eddy believed that his bank would not only teach the poor to save but also offer “long-lasting moral improvement”. Banks like Eddy’s were well-intentioned, but they may have been incorrectly based on the assumption that poverty was caused by a lack of personal responsibility, as opposed to a capitalist market. While poverty emerged as a growing problem in post-revolution America, many held that same conservative theory that people were just “idle and ill of spirit”. The poor simply needed to be taught how to be thrifty. By 1820, there were ten savings banks with $1.1 million in funds. By 1899, there were just under a thousand in the country, with over $2 billion. Thanks to the completion of the Erie Canal in 1825, America then entered a “market revolution” that gave people all over the country access to the international economy. Consumers now had choices. Companies merged, big factories replaced small businesses, employment went up, and incomes grew. This era marked the beginning of the ideology that America was a place of opportunity and upward mobility. Americans still felt that frugality led to success, but they were no longer satisfied with mere “happiness and independence” as Franklin had been. They wanted to get rich. Due to this recent turn toward extreme materialism, the “transcendentalists” Ralph Waldo Emerson and Henry David Thoreau wrote about self-discipline and simple living. They believed that if one led a more simple life, he or she would have more time and energy to devote to intellectual exertion and public service. The transcendentalists directed their writings toward the upper-classes, encouraging them to question their own spending. Still, most Americans only admired the transcendentalist philosophy; they didn’t actually act on it. Booker T. Washington became a guiding light for the freed slaves after the Civil War. He knew they would only be prosperous if they put their money in savings. As the principal of the Tuskegee Normal and Industrial Institute in Alabama, Washington taught his students that hard work, frugality, and honesty would lead to their prosperity. The post-Civil War American economy was booming, but the creation of a “leisure class” and consumption-driven society had not killed thrift as a virtue yet. John Henry Thiry, a Belgian immigrant and New York City book dealer, first noticed the severity of American materialism in his sons, who he felt were growing up to be pleasure-seeking spenders. Thiry believed that American children were no longer being educated on how to save their money, and so he began the Thiry System, a school savings bank movement in which children were taught how to save and deposit their spare change into a bank account. Thiry believed that his system would not only teach them about savings, but hopefully save them from the “moral dangers” and corruptions of society. Simon William Strauss held a similar belief that he could help cure the country by encouraging savings. Strauss began the American Society for Thrift in 1914.

Ch. 3: “What Use Can a Woman Have for Arithmetic?”

Whether they were pioneers, farmwives, or homesteaders, eighteenth and nineteenth century American women worked hard to produce everything for their families. Once these families started moving into cities, they joined the working class, increasing their incomes and their standards of living. At this point women didn’t have to make everything themselves; they could now buy some of it. So in a sense, women went from producing the nation’s products to consuming them. But many wondered if women were equipped to make financial decisions and handle the household’s money. Samuel Smiles, author of Thrift, said “Some may say, ‘What use can a woman have for arithmetic?’ But when men marry, they soon find this out.” Because urban women did not know how to spend, some rural women who grew up with thrift wrote housekeeping manuals and cookbooks to help guide women in their new lives as consumers. Lydia Maria Child, an abolitionist and writer, wrote the The American Frugal Housewife, a best-selling cookbook meant for those “not ashamed of economy.” Child’s book offered housewives all kinds of tips and tricks for saving money. Alongside these recipes and suggestions, Child also inserted some of her own negative feelings toward spending beyond one’s means. A critic of Child, Sarah Josepha Hale also promoted thrift, but more as a virtue than as a necessity. The Good Housekeeper was similar to Child’s, but it was instead aimed more toward middle and upper class women. Catherine Beecher and Harriet Beecher Stowe, sisters and both famous authors, co-wrote The American Woman’s Home, another home instruction manual. Their writing focused more on regaining the woman’s self-respect, since the industrial revolution had brought on a general attitude that women were no longer as useful as they once were. The Beechers presented housework as a “domestic science” that required some of the same skills (like efficiency and organization) that men used in their places of work. Catherine Beecher continued this work by opening the Hartford Female Seminary in Connecticut, a place where girls could be formally educated on cooking, cleaning, and on what later became the field of home economics. The emergence of “Home Ec” as a field led to the belief that science could solve anything. Theories like Frederick Taylor’s “scientific management” and inventions like the assembly line were soon developed. By the late nineteenth and early twentieth century, women handled the household money more than ever, finding that mass production had truly made buying less expensive than producing. A growing advertising industry recognized that women ran the family budget, and so they stepped in to bring women and companies’ products together. As retailers made their goods more and more accessible, buying decisions became more difficult. It was then that home economics altered into the study of making informed purchases and training women to be educated consumers.

Ch. 4: Cheap Jews and Thrifty Chinese

Of the many ethnic and national groups that have been labeled thrifty, cheap, or money-obsessed, the Jews and Chinese remain the most stereotyped. Psychologists have said that stereotypes like these usually stem from the insecurity and fear of those creating them. It is possible that this is what happened because one can easily see how these stereotypes have been strengthened by fear. When the Jews first started immigrating to America after 1825, Americans welcomed their good understanding of money and commercial skills. But it wasn’t too long before their “shrewdness” became a bad thing. Native-born Americans were threatened by the Jews ability to handle money, fearing that their success would result in the loss of their own property and job opportunities. Americans felt that Jews were “money-grubbers”, often depicted in racist dime novels as overtly poor but secretly rich. This prejudice showed that Americans were genuinely afraid of the Jews having too much control in the economy. By about 1877, many of the 250,000 German Jews that lived in America had succeeded in founding or expanding a business. As it became more obvious that this success resulted from honest hard work, Americans began labeling them as “vulgar and ostentatious” social-climbers that were trying to invade on high-society American culture. It seemed like the Jews couldn’t win: they were miserly, but then they were ostentatious. “These elements couldn’t quite be reconciled; instead, they remained muddled together.” The Chinese posed a similar threat. During the Gold Rush, many of the Chinese immigrated to California with the intention of making a fortune and returning home. When some of the Chinese decided to settle in America instead, businesses more than tolerated them because they would work for very few wages. But when the economy hit a downturn in 1857, the Chinese were to blame. Americans accused the Chinese of taking their jobs because they required such a low standard of living and worked for nothing. They were also accused of bringing crime and disease into the country. Many Americans worried that their altogether different culture would “undermine American traditions” and basically kill the American dream. Much to their relief, Congress finally passed the Chinese Exclusion Act of 1882, excluding only Chinese laborers. Soon after the Act was passed, the “Jews of the East” who had already settled in America went from being known as cheap laborers to shrewd businessmen. They had gone from poor and degraded to shrewd and opportunistic, which were again contradictory stereotypes. Today these stereotypes still exist, probably because the Jews and Chinese have established themselves as the most successful ethnic groups in the country. However, the motive behind their “cheapness” was never any different from other Americans. They too wanted more than just freedom and independence: they wanted to get rich. And like other Americans, they have swung from frugality to extravagance and back.

Ch. 5: “Use It Up, Wear It Out, Make It Do, or Do Without”

Before the United States officially entered World War I on April 6, 1917, Frank Vanderlip was made chairman of the War Savings Committee. Vanderlip called on all Americans to start saving, offering war bonds, thrift stamps, and savings certificates as a way to raise money for war supplies and keep Americans from using up the raw materials needed to make those supplies. George Creel, head of the Committee for Public Information, attempted to persuade every American to buy these bonds through his illustrated advertisements and Four Minute Men. Teachers were asked to get their students involved, and National Thrift Week was created to teach children how to use their savings accounts. Herbert Hoover, the country’s wartime director, had the Food Administration begin Wheatless Mondays and Meatless Tuesdays. American housewives were asked to sign pledge cards, promising to carry out the Food Administration’s “war against waste” in their households. The National War Garden Commission promoted growing backyard vegetable gardens to save money on food. Vanderlip hoped that all of his campaigning would fund the war and bring about a new tradition of frugality. But many began to worry about the post-war economy, fearing that a sudden drop in demand for army supplies and a country of thriftier consumers would lead to a recession. Fortunately, it never took much to convince Americans to spend, and they spent. As the country moved into the Roaring Twenties, the increased production capacity of the war years released a wide variety of innovations and consumer goods that completely changed everyday life for Americans, giving them more free time than ever before. “Movies, jazz clubs, country drives, and vacations to Miami rose up to fill the leisure time made possible by labor-saving inventions.” And savings deposits and thrift were steadily declining in popularity. Everyone became more optimistic about their personal finances, businesses, and the overall economy. Consumers wanted to invest in the stock market and spend their profits on guilty pleasures. Unfortunately, good economic times could not and did not last forever. On October 24th 1929, the stock market plunged. By the following month, the industrials index had been cut in half. The unemployment rate went up to 25%. Consumer spending came to a halt. Businesses were unable to pay their bank loans, and 40% of the nation’s banks collapsed. Americans were suddenly forced to return to lives of self-denial. In hindsight, many realized that a lack of economic policies may have been the primary problem. Until then, economists had believed that recessions were “natural and self-correcting.” John Maynard Keynes, a British polymath, believed that “demand was the engine of growth.” Keynes claimed that consumer spending was the only way companies would continue to hire workers and increase production. This was taking a completely different view from what economists had thought before: that only savings made business investment possible. The idea that saving was actually bad for the economy was deemed the “paradox of thrift”, the paradox of course being that thrift was a private virtue but a public vice. In 1932, Americans elected the Democrat Franklin Delano Roosevelt. Under his presidency, Roosevelt passed the New Deal, which created government programs designed to employ Americans. But Keynes’ economic theory and FDR’s New Deal is not what finally lifted the country out of the Great Depression. After the Japanese bombed Pearl Harbor and America finally joined World War II, employment quickly shot up with production demand. Americans had money to spend and were eager to spend it. Roosevelt knew that the only way he could get Americans to save for the war was by mandatory rationing, so he created the War Production Board to limit access to certain resources. Posters and pamphlets all over the country read “Use it up, wear it out, make it do, or do without.” War bonds were used once again. Both economists and Keynes agreed that during wartime, consumers needed to save and let government spending pick up the slack. When many Americans followed suit and saved for the war, leaders and economists again worried that all the saving would cause another post-war depression. But Americans had changed: consumption had replaced thrift as a virtue, and spending was officially equated with patriotism.

Ch. 6: Lively Golf Balls and Two-Ford Freedom: The Postwar Years

The expected recession never came after World War II. Equipped with a whole new value system, Americans were spending more than ever. By 1947, the savings rate had dropped from 26% to 4%. “Consumptive” and “productive” spending were no longer differentiated; economists held that it no longer mattered because both increased GDP. Particularly during the Cold War, Americans were urged to spend because it was not only good for the economy, but also the patriotic thing to do. Consumerism had come to mean democracy which had come to mean capitalism. Americans were expected to consume to express their anti-communist, capitalist freedoms. Spending was also viewed as a way to increase psychological well-being. Psychologists promoted spending as creative, expressive, and even therapeutic, asserting that Americans should not let their old Puritan morality keep them from indulging in a good life. Leaders were happy that Americans were giving in to the consumer society, and they wanted it to continue. Without any intervention, it did continue: soldiers returning from the War had come home to start a family and a new life. The “baby boom” led to a demand in new homes and furniture, with suburbs quickly sprouting up and once-isolated housewives using shopping as a way to socialize. “Two-Ford Freedom”, an early 1950’s television ad, recommended a second vehicle as a way for women to get out while their husbands were at work. All of this prosperity gave rise to a middle-class, which in turn developed into the need for a “mass market”. The market could no longer be divided simply into a “class market” and a “lower market”; members of the mass market demanded products that were functional, affordable, and stylish. Wide-spread use of the word “obsolete” became a good way to keep consumers spending by replacing the products they already owned. Functional obsolescence is a good thing because it indicates that products are constantly improving. But a more controversial obsolescence that occurred mid-century was when corporations began intentionally making products with shorter lives just to keep Americans spending. Some engineers denied ever having done this while others rationalized that it was good for the economy. This era also brought on the introduction of the bank credit card. American Express and Bank of America knew that Americans would be more likely to spend with plastic than with cash. These credit cards also permitted consumers to pay off purchases over time, providing the illusion that one didn’t need money to spend money. While the nation of spendthrifts continued to grow, there remained a disappearing but small population of “penny-pinchers” who thought that credits cards and debt were bad ideas. Instead of being admired, these careful spenders were often ridiculed and represented as comic figures in pop culture. By 1960, household debt had climbed to $61.2 billion. National Thrift Week ended in 1966. People who lived cheaply didn’t talk about it because it was no longer an American ideal. It was not until the election of Jimmy Carter that Americans were reprimanded for their over-consumption and excessive ways. Carter’s speeches didn’t inspire Americans as much as they insulted them. Naturally, Ronald Reagan quickly replaced Jimmy Carter in the next election. Reagan shared with Americans the view that their country was special, and that they should continue to expand by not denying themselves the rewards of a strong economy. Even up to 9/11, leaders like Rudy Giuliani and President Bush have continued to support this ideal, inviting people to fight terrorism by spending. Weber concludes that this attitude is likely what led to the housing and credit “bubbles” of the early 2000’s.

Ch. 7: Spendthrift Nation

Americans may finally have to admit that savings matter. National debt has hit $11.4 trillion and is constantly growing. The country’s credit cards have run up $3.7 trillion. The “housing bubble” burst in 2007. Investment banks have fallen or had to accept bail-out money. Unemployment was up to 9.4% in May of last year. Finance experts say that people should keep three to six months of savings in case of an emergency, but most households are nowhere near this. The Department of Commerce stated that in 2008, for every $100 earned, approximately $1.70 was saved. Looking at the NIPA and FFA rates over the last few decades, it’s clear that Americans are saving less and actually going into the negatives with an increasing amount of debt. In 2007, American debt hit 141% of collective annual income. A study conducted by the Consumer Federation of America revealed that 75% of Americans with incomes below $25,000 have no savings. The Federal Reserve’s Survey of Consumer Finances revealed that 27% of debtors are using 40% or more of their income to pay off loans. Without any savings, it is said that baby boomers and younger generations will be completely unprepared for retirement. Employers are now using defined contribution plans instead of the traditional pension plans. With the baby boomer generation retiring, Social Security will not have enough revenue coming in to support future generations of retirees. Government estimates predict that by 2017, Social Security will start paying out more than it takes in, and by 2041, the entire Social Security Trust Fund will be gone. At that point, the government will have to reduce benefits or raise taxes. Without retirement savings, many will have to work until they die. To make matters worse, medical costs are rising. So why aren’t Americans saving? For one, it was too easy to get credit before the banking freeze. Deregulation allowed banks to make risky loans and borrow from everyone. This pumped more money into the financial system, decreasing interest rates and increasing incentives to borrow. No one puts money in a savings account when it’s drawing virtually no interest. Another reason Americans may not be saving is because they don’t fully understand compound interest. And yet another good reason given is that it’s just plain hard to save when rising costs are “outpacing” real wages. But even so, people are continuing to spend on non-necessities. Why? Weber believes people often spend as a result of peer pressure from friends and neighbors. Americans spend to “keep up with the Jones.’” Though the economy’s failures are in large part due to irresponsible consumers, it’s easy to see any country falling into the same trap that the United States has fallen into: there are just too many opportunities and money is too accessible. Americans need to take personal responsibility, but the government also needs to take action. Finally, one may ask what happened to the paradox of thrift. Will saving really help the economy? Economists today have an integrated theory of saving and spending: consumer spending will prevent recessions from getting too bad, but saving ultimately drives the economy. Both supply and demand are key. The main thing consumers need to stop doing is responding only as economic events occur. Economists say that using a re-active approach of spending less in hard times and spending more in times of expansion only “amplifies the business cycle” and leads to worse recessions.

Ch. 8: Eco-Cheap

In Weber’s opinion, “some of the best reasons to consume less have nothing to do with financial security”. Consuming less may be the only way to stop all of the environmental harm humans have inflicted on the planet. In 1992, the United Nations officially stated that what’s happening to the global environment is a direct result of consumption and production in the more industrialized countries. Still, people continue to think that the planet’s resources are infinite. The catalogs that come through every consumer’s mail costs the Earth 14 million trees per year. One cubicle worker throws out a hundred to two-hundred pounds of paper per year. In fact, Americans consume 30% of the world’s paper when they’re only 5% of the global population. Research shows that Americans are the least likely to use public transportation and the most likely to drive alone in a car. America currently uses 25% of the world’s oil and 27% of its aluminum. All of this consumption burns fossil fuels and releases greenhouses gases that contribute to global warming. In addition to the current environmental problems, other countries such as China, India, and Brazil are steadily developing into countries just like America. Once these countries reach the same level of economic demand as Americans, some say that obtaining those extra resources will require cloning about four other planets just like Earth. Obviously, that’s not even plausible. But there are some who are becoming more eco-conscious. Organic foods, low-electricity appliances, and energy-efficient architecture are growing in popularity. In the green market, marketers are now taking advantage of the green fad as a way to sell their products. As Weber states, the greenest thing one can do is to not buy their green products at all, because the less one buys, the fewer resources consumed. Lauren Weber has deemed an environmentally and economically secure environment an “eco-cheap” economy. In the ideal “eco-cheap” economy, consumption is reduced and resources or products are re-used. People respect the value of objects by not wasting. In today’s culture, Americans love disposability and their local garbage men for immediately taking their waste “out of sight and out of mind”. According to the Environmental Protection Agency, in 2007 residential Americans produced 254 million tons of trash in one year. About 137 million tons of that garbage is brought to a landfill. To give one an idea of how massive these landfills are, the old Fresh Kills landfill on Staten Island can be seen from the moon and is larger in volume than the Great Wall of China. All of the organic waste in landfills like these produces methane, another contributor to global warming. Another thing consumers may not realize is that demand alone generates waste. Even if a product hasn’t yet been consumed, it’s already produced massive amounts of industrial waste in the production process. For every single bag of trash one resident generates, about 70 bags of waste went into extracting and producing those goods that are getting thrown away. One way that consumers can be more “green” is by participating in the secondary market, which includes all second-hand commerce like thrift stores, Ebay, and garage sales. Second-hand commerce allows products to be re-used and both residential and industrial waste to be reduced. Weber is also of the opinion that governments should take action. Some states have instituted “pay-as-you-throw” garbage disposal programs. An ecological economist even suggested that corporations be taxed based on resource use and pollution instead of payroll and profits. In general, as Wendell Berry said, Americans ought to be more materialistic. If Americans were truly materialistic, they would value their things more and be less likely to throw them away.

Ch. 9: Living Cheap in the Age of Mass Consumption

The United States may primarily be a spendthrift nation, but that doesn’t mean there aren’t some people living low-cost lives. Some are now forced to live cheaply due to the current economic conditions. Others are more aware of the destruction that consumption wreaks on the environment. And then there are some people that simply question today’s culture. These people don’t equate spending with happiness. While some of these people are privately cheap, others have come together in groups, all choosing to live below their means. Examples of these private cheapskates and group leaders include Shawn Rosenmoss, Adam Weismann, and Helena Shoe. After Shawn Rosenmoss watched Katrina destroy her childhood home, concluding that the increase in hurricanes was in some way connected to the growing environmental issues, she joined a friend in starting up the Compact. The Compact consisted of a group of San Franciscans, who, in the fall of 2005, decided to stop buying for an entire year. The group prohibited themselves from spending on any new goods that used raw materials and thus produced waste. They could spend on food, medicine, safety-related items, second-hand items, and on services. The members of the Compact were already “low-cost, low-impact” livers, and the Compact was not initially about saving money so much as it was about saving the environment, but taking part in the experiment did lead to questions of “Do I need this? Can I wait? Can I improvise? Can I borrow?” According to Rosenmoss, the experiment also led to a more meaningful life, in which she began spending more time with her family and community. Weber conjectures that in today’s society, spenders are probably more lonely and depressed because they live alone in big homes surrounded by all of their things. “Mall culture” says that shopping will lift those consumers out of their depression (and it never really does). The Compact has rejected this culture of instant gratification and given Rosenmoss a higher quality of life. Adam Weismann, the informal leader of Freegan.info and the New York City freegan movement, promotes doing away with the “money economy”, choosing not to participate in the capitalist market in which one works to earn cash to satisfy basic needs. Freegans like Weismann practice low-cost living by dumpster-diving for wasted food, squatting in unoccupied buildings, biking instead of driving, bartering at Really Really Free Markets, growing urban gardens, and sharing certain skills. Weber actually met Weismann on one of his “trash tours”. On a “trash tour”, a group of freegans go around the city, digging through the trash bags of supermarkets and restaurants to salvage edible food. The Department of Agriculture found that in addition to households, these businesses throw out at least 150 billion pounds of food every year, all while food prices rise and millions go hungry. Being freegan like Adam means “to live resourcefully and cheaply”, because it’s ethical and also because it’s required (they don’t work). An example Weber gives of a “sole operator” is Helena Shoe. Helena was a San Franciscan software analyst who found herself constantly depressed and sick. After taking a 3-month long tour around Europe, she decided she wanted to move to New Orleans, among other low-cost people. So she dropped her nice salary and became a ticket-taker at a New Orleans movie theater, living off of old popcorn at night, riding a bike, and residing in the Ninth Ward with a friend for low rent. She did there what economists call “household production”: she spent her time laboring for herself rather than for others to make money. This led to greater autonomy for Shoe, and again, a much higher quality of life.

Ch. 10: Cheapskate Psychology

The author noticed that consumer researchers have always studied why people buy, but they haven’t looked into why people don’t buy. She attributes this lack of research to a lack of data. Unlike spenders, who have receipts, cheap people don’t leave evidence of their cheapness behind. However, there has been evidence to prove that as much as one fourth of the general population are “tightwads”. Surveys have also been distributed to samples of people to measure the percentage of tightwads to spendthrifts. Still, there’s not much research on why some people are cheap. Sigmund Freud published the essay “Character and Anal Eroticism”, which theorized that children go through three stages of psychosexual development: oral, anal, and genital. Freud said that during potty training in the anal phase, children develop a fascination with holding and releasing their bowels because it basically gives them control over their parents. Some don’t fully emerge from this phase and grow up to have an “anal personality”, which generally includes traits like orderliness, cheapness, and obstinacy. Anal people express their need to control by being cheap and controlling their money. Freud’s psychosexual theories have since been discredited, but he did prove that unconscious things in the brain have an impact on human behavior. And there are people with “anal” personalities that share that same package of traits. Someone who has this personality to an extreme is today diagnosed as having obsessive compulsive personality disorder. The main question: where is the line between stringiness and mental illness? It’s common for a frugal person to have a somewhat catastrophic view of the world and save money “just in case”; the extreme side of it would probably fall under “hoarding”. Behavioral economists at Carnegie Mellon and MIT have been studying a theory called the “pain of paying” for over ten years. In the past, economists have thought people spend in terms of immediate pleasure versus delayed pleasure. These behavioral economists believe that some consumers feel acute pain when they spend, meaning the choice is actually between immediate pleasure and immediate pain of paying. These negative emotions act as consequences and a way to self-control spending habits. Clearly, spendthrifts need more of this and cheapskates experience too much of this. Putting all negatives aside, being cheap definitely has its upsides. Studies have shown that people with OCPD in moderation are often more successful. A study conducted at Stanford University in the sixties tested how young instant gratifiers grow up. A group of 4-year olds were given one marshmallow each and told that if they waited twenty minutes before they ate it, they would receive a second marshmallow. Psychologists followed these kids up through their adolescence, finding that those who had saved their marshmallows were “better adjusted and more dependable.” Delayed gratification proved to be an early predictor of future success. Weber adds that there are advantages to being cheap. Producing and fixing things for oneself gives a greater sense of resourcefulness and self-sufficiency. Buying less helps one need less. People who don’t consume much may not have a terribly high standard of living, but they often have a higher quality of life. Most cheapskates don’t care to impress others with their status objects; they are independent and nonconformist. And finally, the law of diminishing returns applies here: the more stuff one buys, the less pleasure one derives from it. If a pleasure-seeking culture keeps indulging and spending, people will no longer appreciate the simple things. Weber poses one final question: Can people learn to be frugal or is it a trait that’s developed at a young age, as Freud said? As it turns out, frugality is coming back into style and a lot of writers are saying that living cheap is completely learnable, and they’re giving tips on how to do it.

Interview with the Author

Reviews

Carolyn See from The Washington Post writes “Two lessons steam up from this terrific book about the history of thrift (and spending) in our great country. First, Americans possess a phenomenal capacity to endure scoldings about our fiscal behavior. Second, from the beginning, many Americans have nursed a seething contempt for the poor.” Jim Lardner, coauthor of Up to Our Eyeballs: How Shady Lenders and Failed Economic Policies are Drowning Americans in Debt says “Consumers have been researched to death. It’s about time the tightwads among us got the same kind of loving attention. In Cheap We Trust is immensely readable and highly illuminating-the perfect guide to the oncoming era of like-it-or-not thrift.” Both See and Lardner have a positive take on the book. The Washington Post mostly appreciates Lauren Weber’s spot-on opinions about American consumers. Lardner, on the other hand, appreciates the book’s readability. Megan McArdle from The New York Times writes “I’m probably not the natural audience for Lauren Weber’s new book, In Cheap We Trust. The book is a combination of personal memoir, social history, and political manifesto for extreme frugality. Don’t get me wrong: I like to save money. But I also like to spend it. Weber, on the other hand, is fervently…well, cheap.” Though McArdle acknowledges the book as “engaging” and Lauren Weber’s personal stories to be her favorite part, she disagrees with some of Weber’s opinions: “Overspending can, of course, be disastrous. But how healthy is it to agonize over every tiny purchase? Walking half an hour to save $1.50 on an ATM fee means you put a ludicrously low value on your time.”

References:

See, Carolyn. “‘Cheap’s’ Virtue: Time Well Spent”. The Washington Post. April 17, 2010

McArdle, Megan. “Penny Pincher”. The New York Times. April 17, 2010

Lardner, Jim. “Editorial Reviews”. Amazon.com. April 17, 2010

Personal Insights

I think Lauren Weber’s a brilliant author and probably a great person. One reason I think In Cheap We Trust is good writing is because it was so well-researched. She has a twenty-page list of relevant, quality sources that draw from different fields of study (American history, politics, economics, environmental science, psychology) to support her ideas. She even throws some of her own personal experiences in the mix. She seems to truly believe in “low-cost, low-impact living” and she knows the only way she can get readers to believe in it too is to make sure she includes a lot of recent, relevant facts. I love history, so I thoroughly enjoyed reading about Benjamin Franklin and the Revolutionary Era. And even though I’m no tree-hugger, I thought her chapter on consumerism’s impact on the environment was really an eye-opener. She even made the combination of economics and politics interesting for me in “Spendthrift Nation”. As someone who knew very little about the current state of the economy and needed a simplified but solid update, I can honestly say that I feel up-to-speed. The reason I think Lauren Weber is probably a pretty decent person is because I didn’t come out of reading In Cheap We Trust feeling brainwashed. I came out of reading this book feeling educated. It’s easy for anyone to get preachy when they start discussing topics like the economy, politics, the environment, and generally what people should be doing instead of what they’re doing (in this case, saving). She never gets preachy, condescending, or sarcastic. Overall, Lauren Weber seems to be less concerned with creating a good impression of herself and more concerned with the topic she is writing about.

I also think her message is a very significant one in today’s conditions. In fact, I’m not sure it’s ever been more significant. American society has never been more obsessed with spending and immediately having. We’re so desperate for instant gratification that we’re willing to risk our futures by wiping out our savings and amassing piles of debt. Because the country itself is literally in a “pile of debt” as we speak, anyone who picks up the book and just skims it will relate to its message. Hopefully, he or she will maybe consider applying it to their own life.

If I were Lauren Weber, I probably would have taken my research into “Cheapskate Psychology” a little further, mostly because psychology intrigues me, but also because I don’t feel like some of the questions concerning the psychology of thrift that she asked herself and her readers were completely answered. Secondly, as much as I love reading about history, I’m not sure I’d enjoy researching and writing about it. If I were the author, I wouldn’t have spent more than half the book on eighteenth and nineteenth century America (even though it is “the story of a misunderstood American virtue”). I just didn’t care to hear as much about “The Nation of Savers” as I did about today’s “Spendthrift Nation”. But more than anything, if I were Lauren Weber, I would not have made “Eco-Cheap” the shortest chapter. I feel like it’s one of the most important chapters in the book and it got the least attention, or it didn’t get any attention at all until the very end.

In Cheap We Trust made me realize that for the most part, Americans have rarely ever chosen to live cheaply. They were only thrifty when they absolutely had to be. This book also made me understand that “cheap” people are not necessarily interested in saving money alone. Some may under-consume to prevent further environmental damage. Some may question the idea that spending and having makes one happy. And some cheap people may take a combination of all of these positions and feel that excess and waste is just plain wrong. Finally, In Cheap We Trust made me think more seriously than I have in the past about the economy, savings, and what my future holds.

I’ll apply what I’ve learned in this book in my career by not living from paycheck to paycheck. No matter how much money I make, there will always be “extra” leftover for emergencies. And if I ever manage people or sign others’ paychecks, I’ll remember that though money buys a lot, it doesn’t always buy happiness. As I said in the “10 Concrete Things”, money is always an excellent motivator, but it’s only the least an employer can do.

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To contact the author of this book summary and review, please email Lauren.Milliner@selu.edu.

David C. Wyld (dwyld@selu.edu) is the Robert Maurin Professor of Management at Southeastern Louisiana University in Hammond, Louisiana. He is a management consultant, researcher/writer, and executive educator. His blog, Wyld About Business, can be viewed at http://wyld-business.blogspot.com/.

Cover via Amazon