“Parable of talents” and spending free money
View(s):If you receive a few millions of dollars free, what would you choose to do? Some of you might decide to distribute it among the poor, thinking that it is the best thing to do with free money. Some of you might dig a hole in the ground and hide it. There might be some others, I believe a very few, who may think of investing it to create more wealth.
File picture of worried CIFL depositors at a meeting to discuss the fate of the crisis-hit company which has mismanaged depositor's funds.
If you belong to the first group, you might want to show your generosity and compassion towards the poor; your decision might be politically correct, but at the end of the day you would have achieved nothing either for you or even for the poor. Besides, all that money that you got free would have got evaporated too.
If you belong to the second group that hid the money in a hole or somewhere else as if there was nothing happened, no one will have any benefit. You might live the rest of your life as poor as you were before you got money, although you have the ability to change it; at the end everybody would have lost it, unless someone else discovered it by accident.
If you belong to the third group of people, who are very few I guess, you know that investment multiplies your money and creates wealth, not just one time but a flow of wealth; and that flow of wealth brings about sustainable benefits not just for you but also for others, including the poor.
Parable of talents
One day, a wealthy master who had to go on a long journey, called his three faithful servants and gave them “free money” in the units of measurement called “talents” at that time: He gave five talents to the first servant, two talents to the second and, one talent to the third and, went on his journey.
After several days he returned and called his three servants to settle the accounts: The first servant had invested what he got and had doubled the five talents. The master was very pleased with him, and decided to give him more responsibilities. The second servant had also done the same and, doubled the two talents he got from the master. The master was pleased with him too, and decided to give him more.
The third servant had hidden the one talent he got digging a hole in the ground; he got it back and returned it to the master. Although he seemed to be “faithful” enough to protect his master’s money, the master considered him “wicked”. He was angry with the servant and said that “if you had saved it in a bank, I would have got it at least with an interest for it”. He got the talent back and gave it also to the first servant.
Economics of the parable
1. Ability, not equality
The first economic lesson that we can extract from this parable is related to the notion of “equality” that is loaded with so much politics today. The master did not distribute his free money equally among the three servants; he distributed it according to each one’s ability and capacity.
It is worthwhile exploring whether “equal distribution” makes people better off than they were before. Besides, I have seen more “inequality” in societies where “equality” is promoted as an economic and political ideology than in other societies where it didn’t receive much emphasis.
2. Wealth creation
The second economic lesson is about the value of investment. The first two servants were wise enough to make an investment from the free money that they received. It is noteworthy that, however, the first servant’s ability to handle money was greater than that of the second.
For this reason, the first servant got five talents, while the second one got two talents. Even the one talent grabbed from the third servant was given to the first servant, and not to the second servant. Had he received more, he would have failed, as the parable implicitly reveals. However, they both succeeded according to their abilities.
3. Prosperity is a process
The third lesson is about the process. As the first two servants succeeded in small things, they got more responsibilities to do big things. The progress is a process and, not a “jump from poverty to prosperity.”
That is why, even after receiving free money, the third person was unable to make any change to himself or to anyone else. Probably, it would have been better for him to have not received anything free!
4. More will attract more
Finally, a shocking lesson from the parable is that “the one who had more will have even more while the one who had little will lose even that little he got”. The first servant got the highest amount of talents because he was the best according to the “ability”; the parable shows that he got even more responsibilities.
The third servant who got the least, did not make any progress and, finally he lost even the little money he possessed. This is why, some people and even some nations should not have money or resources more than they can handle. Perhaps, it is better for them to remain poor.
There is no free lunch
By the way, in economics “there is no free lunch” although in politics some may seem to think so. The master gave free money to the three servants, but that money was actually not free. The master had earned it; therefore, the free money that they got was absolutely not “free.”
Probably, what you got “free” must be the money paid by the people of the country as taxes. In a country where people anticipate and leaders encourage so much from the government to the people, there is a tendency to believe that it is free money flowing out from the Treasury. But it is not; it is the money that people willingly or grudgingly give to the government as taxes so that there should be a cautious approach in spending someone else’s money rather than someone’s own money.
Even if you win a lottery, it is not free money. Millions of many people have spent their own money (hopefully with disappointment) for the lottery prize you won. Even for you, it comes with a responsibility. Whether you progress or not is determined by you. This is why we do not hear much about the people who thrived with “free money” they got.
Nation’s ability to handle free resources
Nations don’t thrive with what they have got. If it was the case, we will have no explanations as to why some nations blessed with so much resources continue to remain poor. Africa is the world’s richest region with mineral resources, but many African nations continued to remain poor. The inverse is also true: You may find some nations in Asia that have got little resources but have flourished.
Donald Snodgrass, an economist who wrote much about Sri Lanka’s development history, made an interesting discovery as far back as in the 1950s and the 1960s and noted down in his book titled “Ceylon: an Export Economy in Transition (1966)”: Whenever there were economic upturns (due to favourable world market conditions), both private and government spending rose; yet this spending was irreversible, when the economic cycle changed into downturns.
What a profound discovery on the Sri Lankan economy about half a century ago! Its validity remains equally applicable for today’s affairs as well.
(The writer is a Professor of Economics at the Colombo University. He can be reached at sirimal@econ.cmb.ac).