The Political Economy of Duckburg - Instalment 1: Scrooge McDuck and His Money

Yes, I do read Donald Duck, but I am still an adult with fully-functioning mental faculties. The lovable Duck turned eighty earlier this summer, so it is perhaps fitting that he and his relatives and fellow Duckburgers get a few blog posts, of which this is the first instalment. When I read Donald Duck, my favourite author is the late Carl Barks, whose universe, centred at Duckburg with fairly consistent relations among the ducks, is generally considered the best depiction of the amusing ducks (the popular cartoon series DuckTales is largely based upon Carl Barks' stories, though several characters, such as Launchpad McQuack, Fenton Crackshell and Bubba, are specific to the TV show). Barks' stories were my favourites as a child, but I find they work on many different levels, and the detailed boxes contain visual jokes one may not notice until the nth reading.

Thus, I feel myself in a good position to describe the political economy of Duckburg according to Duckman Carl Barks. This first instalment of the series is a blog post about some standard themes of price theory and economic organization, as illustrated primarily by the dealings of one Scrooge McDuck, often characterized as a ruthless monopolist who goes to any length to save a farthing. While he certainly has a penchant for the penny, the following will illustrate the superiority of a more nuanced perspective.

For instance, in 'The Money Champ' (Uncle $crooge 27), we initially follow Scrooge strolling down the street casually chatting and joking with people he passes by. The citizens take the liberty of joking with him ("Wanna borrow a buck, Mr McDuck?") and seem very pleased indeed to see and interact with the world's richest duck. These facts indicate to me that, if Scrooge is a monopolist, he is a Schumpeterian monopolist who reaches his enviable position though skilful entrepreneurship and by offering the people what they want at prices low enough to discourage competitors from entry. Time after time, the comics emphasize that Scrooge reached this position by being "tougher than the toughies and sharper than the sharpies" (e.g., in the Classic 'Only a Poor Old Man', Uncle $crooge Four Color 386), and of course Schumpeter ably argued that monopolists must have these traits or they won't succeed. And their success is for the benefit of society, which can enjoy their innovations.

Indeed, Duckburg turns out to be rather a prosperous society. There is a fairly large upper class, and the small underclass consists, essentially, of Donald Duck, the people of Shacktown (as seen in the Christmas story in Donald Duck Four Color 367), Grandma Duck's farmhand Gus Goose, and Goofy, though the latter is not a figure of the Barksian universe. Virtually everyone else is middle class. Even Donald and Gus lead fairly comfortable lives whose every misfortune is due, respectively, to gross incompetence and pathological lethargy.

Scrooge's love for money is often believed to be a twisted perversion, but given his nephew Donald's general ineptitude, Scrooge is very generous to pay him a few nickels an hour (the exact rate varies in my sources) for sinecures such as making plaintive cries so Scrooge won't have to do it on his own time (e.g., in the wonderful 'Terror of the Beagle Boys, Donald Duck Four Color 356, and in 'All at Sea', Uncle $crooge 31). By my reading, Scrooge sees Donald as someone requiring a bit of tough love, and no-one is better at providing it than Scrooge.

Since Donald Duck is what Tyler Cowen might call a Zero Marginal Product worker, Scrooge's paying him a positive wage is an act of generosity rather than callous exploitation. Indeed, keeping a bin full of money is an even greater, unrecognized, act of generosity, since by taking such copious amounts of cash out of circulation, he raises the purchasing power of the money that remains in circulation by the quantity equation (MV=PT, so when Scrooge halts velocity, money-denominated prices must fall). Such "wastefulness" forces Scrooge to be even more innovative and offer even better products than do his rivals, such as Flintheart Glomgold and John D. Rockerduck.

In conclusion, Scrooge is a widely misunderstood character. An immensely successful Schumpeterian entrepreneur rather than an unscrupulous monopolist who keeps Duckburgers on their knees, his favourite hobby (swimming in his money) requires that he raise the purchasing power of circulating money and on top of that he gives Donald more money than his services are worth. No wonder Scrooge is off to Tralla La (Uncle $crooge 6) when begging letters and charities still won't leave him alone.

Building Façades, Externalities, and Alternative Means of Exchange

Here's a thought: Living in a beautiful building, such as Frank Lloyd-Wright's Robie House, one cannot view the façade of one's house when one is in it (outside the beautiful stained-glass windows of Robie House is the Chicago Booth School of Business - not too bad, I suppose). From indoors, one can only look at neighbouring houses, as was observed once by a friend of my Uncle's. Therefore, your neighbours have a stronger incentive to make your house look nice than do you (maybe your incentive is not weak, but the neighbour's incentive should still be stronger). This is less true for very outgoing types, but even they probably look out the window more often than they look at their own house.

To internalize these externalities as much as possible, one might expect the neighbours with the clearest view to own your façade, as in Harold Demsetz's nice 1967 article on property rights, but then there would also be privacy concerns associated with their constant access to part of where you live, which would only increase the negative externalities involved (noise close to home, etc.). But Demsetz's analysis only says that the arrangement will prevail which best conserves on transaction costs and external effects.

So which arrangement is more successful at conserving transaction costs? The Coasean solution has it that, if neighbours own the façade of your dwelling, you would have to compensate them not to disturb you. If you own your dwelling's façade, your neighbours would compensate you to give it a nice appearance. Both arrangements could be associated with high transaction costs, but the risks of breaching private spheres are surely greater when neighbours come very near where you live. So transaction costs should be lower when the owner of the façade and the owner of the building are the same person.

How low are these transaction costs, though? What does it take for people to be willing to treat personal choice regarding building appearance as a tradeable good? Another way of asking this  is what the transaction costs are for using money in this market. After all, when building appearance and money are used in transactions, the latter might be what is behind the transaction costs. So the currency in this market could be overall treatment by neighbours; smiles and chit-chat, willingness to do favours, etc., rather than money (I have talked about such markets before). So an unkempt house is OK if its occupier is extra nice and expects less from his neighbours; a nice-looking home increases favours received. The means of exchange chosen in a transaction is the one that best conserves upon transaction costs.

This means that transaction costs are sometimes very high indeed if money must be used in the trade, but they are greatly reduced if another means of exchange be used instead. A lot of social situations are more easily manoeuvrable once this insight has been grasped. Maybe something else is the cause of nice-looking building exteriors, but externalities fit this case. In addition, my experience is that buildings have a lot more potential to be unkempt and ugly than they have to be prettier. I frequently find that the few changes I would make if I had ownership of others' façades are mostly down to personal and idiosyncratic preferences. Maybe chit-chat and neighbourliness suffice in this market?

The standard treatment may recommend a commission to impose building codes, or maybe even the introduction of an "ugly" tax. Some communities are planned in very great detail, of course (a memorable episode of the X Files is set in one such community), but normally a building's exterior is chosen by its owner. So the possibility of using means of exchange other than the one approved by the government confounds the standard proposals. If this works, where else might it apply?