To begin his more specific discussion of particular virtues and vices, Machiavelli first turns to generosity and miserliness. While Machiavelli states that it is "splendid" for a prince to have a reputation for generosity, he argues that a prince who is genuinely generous "will come to grief." This is because for a prince to actually earn a reputation for generosity, he must be "ostentatiously lavish" in order to attract the attention of the people. Any prince who spends so lavishly "will soon squander all his resources" and find himself forced "to impose extortionate taxes" on his people. If a prince places excessive financial burdens on his subjects, then the people will come to hate him and resent his poor judgment. Therefore, a prudent prince will "not mind being called a miser." His "parsimony" will eventually be seen as generosity, since it saves the people from the burden of excessive taxation.
Machiavelli describes the chain of cause and effect that will lead to a generous prince becoming a hated prince. A prince must be miserly in order to avoid burdening his subjects with high taxes, since excessive taxation will cause the people to hate their extravagant ruler. A ruler who burdens his subjects with unnecessary taxes breaks his obligation to protect his people and thus earns their scorn. However, Machiavelli encourages princes to maintain the appearance of generosity while avoiding actual liberality. In time the people will come to regard a prince's miserliness as a form of generosity, since it preserves their own property by protecting the prosperity and effectiveness of the state.
Citing several modern examples, Machiavelli argues that "great things have been accomplished only by those who have been held miserly, and the others have met disaster." Pope Julius II used his reputation for generosity in order to win the papacy; however, after his election "he made no effort to maintain this reputation," opting for miserliness in order to finance the Church's wars. Louis XII, the king of France, has also used his parsimony to finance foreign campaigns without excessively taxing his people. Finally, Ferdinand of Aragon's success similarly rests on his miserliness.
While aspiring rulers may find it useful to maintain a reputation for generosity on the way up, prudent princes must abandon this supposed virtue once they gain power. The princely virtue of miserliness allows rulers to finance wars and defense without altering taxation, which strengthens the state and keeps the people satisfied. Miserliness funds a prince's military, which in turn lays the foundation for his state.
Machiavelli asserts, "Miserliness is one of those vices which sustain his [a prince's] rule." In the name of not robbing his subjects and maintaining the ability to defend his state, a ruler's miserliness is in fact a virtue. Nonetheless, Machiavelli adds a caveat: those who are already princes should avoid generosity, while those who "are on the way to becoming" princes should "certainly" maintain "a reputation for generosity." Machiavelli references Julius Caesar, who established his rule over Rome by cultivating a reputation for generosity.
Typically accepted as a vice, miserliness is in fact a virtue necessary to the preservation of the state. As previously stated, aspiring princes will be aided in their rise by a reputation for generosity, which will initially earn them the people's support. However, an established ruler must eschew generosity in favor penny-pinching, which will support the state's institutions.
Machiavelli adds another qualification to his general rule: a prince should be "frugal" with regards to his own or his people's property, but he should "indulge his generosity to the full" with regards to the property of foreigners or foes. A prince "who campaigns with his armies, who lives by pillaging …. must be open-handed," or else his soldiers will desert him. Referencing Julius Caesar, Cyrus, and Alexander the Great, Machiavelli permits that rulers may "be more liberal with what does not belong to you or your subjects." In fact, rulers who liberally distribute plundered property may actually increase their standing at home. Above all else, a prince must avoid "being despised and hated," and Machiavelli cautions that generosity typically leads to both outcomes.
While a prince must refrain from stealing his subjects' property, he can afford to liberally give away the looted property of conquered foreigners and other opponents. A prince must frugally protect the property of his subjects as if it were his own, although he must be willing to reward loyal soldiers and subjects with property pillaged in war. This particular type of generosity will increase a prince's prestige. However, misguided generosity will result in the people's hatred, which a ruler must avoid at all costs.