My main research interest has to do with the intersection of literature/film and economics. Rarely do I pay attention for opportunities to explore this dynamic in reality television, but that is just what happened last Thursday night on A&E’s 60 Days In. The show is based on several civilians volunteering to be admitted as prisoners in order to gain inside information for the sheriff and prison administrators. On last week’s episode, an important economic scenario presented itself.
One of the secret plants, Ryan, has been running a store where he trades daily food trays for commissary items (various snacks that are purchased from the outside). He observes another inmate, Justin, who has gone into debt with a fellow prisoner, JoJo. Justin has been borrowing food and is defaulting on his agreement to pay JoJo back. JoJo is now threatening violence upon Justin. As Emerson warned, “A man in debt is a slave.” Ben Franklin repeatedly wrote similar words. Justin, knowing he is running out of options, as he can’t figure out a way to repay and will surely face a brutal beating very soon, decides to ask Ryan for advice.
Ryan has been warned not to get involved with the personal dealings of the real inmates, as it could put him in danger as well. However, Ryan is pretty sharp (and more than a little brash) and decides to offer a few words to Justin anyway. His tip is right out of the free-market economics playbook. He tells Justin to restrict his eating for a few days and give his food to JoJo in an effort to pay back what he owes as quickly as possible. The sooner he can get out of debt, the sooner he can resume a somewhat normal existence in the jail. This will take discipline and sacrifice to basically survive on water and at most one small meal per day, but the ends justify the means. After all, he might be beaten within an inch of his life, so going hungry for a while is well worth it. Ryan has revealed the foundation of capitalism: it’s not spending; it’s saving. The more you save, the more opportunity is created for market efficiency when capital is invested at a later time.
We may be thinking that we have to eat on a regular basis to survive, that, like animals, our instincts rule our behavior. “But,” as Ludwig von Mises writes in Human Action, “it is different with man. Man is not a being who cannot help yielding to the impulse that most urgently asks for satisfaction. Man is a being capable of subduing his instincts, emotions, and impulses; he can rationalize his behavior. He renounces the satisfaction of a burning impulse in order to satisfy other desires. He is not a puppet of his appetites. A man does not...devour every piece of food that entices him....What distinguishes man from beasts is precisely that he adjusts his behavior deliberately. Man is the being that has inhibitions, that can master his impulses and desires, that has power to suppress instinctive desires and impulses” (16).
Humans always make choices. And making tough choices in the short term leads to better circumstances in the long term. “The postponement of consumption makes it possible to direct action toward temporally remoter ends,” Mises writes. “The sacrifice made by restricting consumption in nearer periods of the future is henceforth not only counterbalanced by the expectation of consuming the saved goods in remoter periods; it also opens the way to a more ample supply in the remoter future and to the attainment of goods which could not be procured at all without this sacrifice” (487).
Ryan is right: if you want to get out of debt, serious sacrifices have to be made. Being free from debt, and the punishment that accompanies it, is more valuable than whatever pleasure you may receive by satisfying your immediate desires.
Obtaining loans and going into debt is certainly common out here in the free world, but it’s just as common in America’s jails. Gaining credit from a lender was, throughout history, more of a private affair than it is today. Individual lenders and small banks only lent to those they knew carried minimal risk. They usually knew the person seeking funds, were familiar with their employment, knew their family or background, or at least knew someone who could vouch for them. As Henry Hazlitt writes in Economics in One Lesson, “Each private lender risks his own funds.... When people risk their own funds they are usually careful in their investigations to determine the adequacy of the assets pledged and the business acumen and honesty of the borrower” (42). With massive banks and credit agencies today, that risk increases exponentially because there is a decrease in personal accountability to the lender. If a faceless entity doesn’t know you, you don’t feel much pressure to pay them back. And that’s how we get financial crises like we experienced a few years ago.
It’s interesting how a prison actually handles loans and debt more rationally than we do on the outside. If you knew that the scary guy in the next cell was going to physically harm you if you didn’t promptly repay him what he has loaned you, you would be very careful about your monetary habits. And that is a smart way to stay alive. Yet in the free world, we just assume money will be given to us, and if we can’t pay, we simply sign a foreclosure or declare bankruptcy, and we often go on leading lives of financial recklessness. Sometimes being accountable hurts, but that’s what makes societies function. Strangely, as 60 Days In showed us last week, the most foolish among us—our nation’s criminals—are actually quite astute at regulating financial matters.
The next episode of 60 Days In airs tomorrow night.
One of the secret plants, Ryan, has been running a store where he trades daily food trays for commissary items (various snacks that are purchased from the outside). He observes another inmate, Justin, who has gone into debt with a fellow prisoner, JoJo. Justin has been borrowing food and is defaulting on his agreement to pay JoJo back. JoJo is now threatening violence upon Justin. As Emerson warned, “A man in debt is a slave.” Ben Franklin repeatedly wrote similar words. Justin, knowing he is running out of options, as he can’t figure out a way to repay and will surely face a brutal beating very soon, decides to ask Ryan for advice.
Ryan has been warned not to get involved with the personal dealings of the real inmates, as it could put him in danger as well. However, Ryan is pretty sharp (and more than a little brash) and decides to offer a few words to Justin anyway. His tip is right out of the free-market economics playbook. He tells Justin to restrict his eating for a few days and give his food to JoJo in an effort to pay back what he owes as quickly as possible. The sooner he can get out of debt, the sooner he can resume a somewhat normal existence in the jail. This will take discipline and sacrifice to basically survive on water and at most one small meal per day, but the ends justify the means. After all, he might be beaten within an inch of his life, so going hungry for a while is well worth it. Ryan has revealed the foundation of capitalism: it’s not spending; it’s saving. The more you save, the more opportunity is created for market efficiency when capital is invested at a later time.
We may be thinking that we have to eat on a regular basis to survive, that, like animals, our instincts rule our behavior. “But,” as Ludwig von Mises writes in Human Action, “it is different with man. Man is not a being who cannot help yielding to the impulse that most urgently asks for satisfaction. Man is a being capable of subduing his instincts, emotions, and impulses; he can rationalize his behavior. He renounces the satisfaction of a burning impulse in order to satisfy other desires. He is not a puppet of his appetites. A man does not...devour every piece of food that entices him....What distinguishes man from beasts is precisely that he adjusts his behavior deliberately. Man is the being that has inhibitions, that can master his impulses and desires, that has power to suppress instinctive desires and impulses” (16).
Humans always make choices. And making tough choices in the short term leads to better circumstances in the long term. “The postponement of consumption makes it possible to direct action toward temporally remoter ends,” Mises writes. “The sacrifice made by restricting consumption in nearer periods of the future is henceforth not only counterbalanced by the expectation of consuming the saved goods in remoter periods; it also opens the way to a more ample supply in the remoter future and to the attainment of goods which could not be procured at all without this sacrifice” (487).
Ryan is right: if you want to get out of debt, serious sacrifices have to be made. Being free from debt, and the punishment that accompanies it, is more valuable than whatever pleasure you may receive by satisfying your immediate desires.
Obtaining loans and going into debt is certainly common out here in the free world, but it’s just as common in America’s jails. Gaining credit from a lender was, throughout history, more of a private affair than it is today. Individual lenders and small banks only lent to those they knew carried minimal risk. They usually knew the person seeking funds, were familiar with their employment, knew their family or background, or at least knew someone who could vouch for them. As Henry Hazlitt writes in Economics in One Lesson, “Each private lender risks his own funds.... When people risk their own funds they are usually careful in their investigations to determine the adequacy of the assets pledged and the business acumen and honesty of the borrower” (42). With massive banks and credit agencies today, that risk increases exponentially because there is a decrease in personal accountability to the lender. If a faceless entity doesn’t know you, you don’t feel much pressure to pay them back. And that’s how we get financial crises like we experienced a few years ago.
It’s interesting how a prison actually handles loans and debt more rationally than we do on the outside. If you knew that the scary guy in the next cell was going to physically harm you if you didn’t promptly repay him what he has loaned you, you would be very careful about your monetary habits. And that is a smart way to stay alive. Yet in the free world, we just assume money will be given to us, and if we can’t pay, we simply sign a foreclosure or declare bankruptcy, and we often go on leading lives of financial recklessness. Sometimes being accountable hurts, but that’s what makes societies function. Strangely, as 60 Days In showed us last week, the most foolish among us—our nation’s criminals—are actually quite astute at regulating financial matters.
The next episode of 60 Days In airs tomorrow night.