Saturday, November 12, 2005

Spare anything, Sir?

As my co-hosts are busy (we've got lots of outside orders), allow me to bore you even further. The food for thought this time is whether or not we should keep giving away. Here is a teaser I borrow from Tim Harford:

Dear Economist,

Around South America hundreds of children have held their hands out to me and I’ve ignored many and felt terrible. But my £1 can be worth six of their currency - will I still go to heaven?

Yours sincerely

Natalie Chalk, by e-mail

Dear Natalie,

You would be astonished how difficult it is to give money away properly. Because there are few good jobs in poor countries, the understandable generosity of relatively wealthy visitors risks turning begging into a comparatively attractive profession - which is a self-defeating process.

Imagine that a poor farmer can make £1 a day, and a beggar can make £5 a day. Who would be a farmer? Farmers will leave the fields to beg until five times as many beggars are chasing the same tourists, returns collapse to a £1 a day, and the rest of the farmers continue farming. Similar reasoning applies to where families send their children: to the fields, to school or to the streets? For the same reason, guides and taxi drivers will wait hours or days for the single lucrative tourist. This doesn’t do anyone any good.

It’s true that begging often carries a stigma. Perhaps farmers would rather farm for £1 than beg for £2. Unfortunately, this is no better: your money is still doing nothing more than compensating beggars for the stigma of begging.

This process of “rent-dissipation” is not limited to beggars. For instance, the net benefit of being crushed but getting cheap goodies in the New Year sales should be roughly zero - otherwise more people would be there in the scrum...

Continued on

I remember one day there was this program at a local TV. The host was interviewing a street beggar. Host: "Sir, if you are given one million rupiahs today. What would you do with it? Do you want to use it for investment? How?". Beggar: "I will buy stuff. Investment? Why?". Host: "Then what are you going to do after spending all that mony?". Beggar: "Of course, I will do my job -- begging. It's a good pay, by the way".

1 comment:

  1. ok, i got a question... economics has "taught" us that the purpose of everything is increasing people's welfare (be it an individual, a firm or a country)... is pro-poor policies the same thing as pro-welfare policies? and why people are so keen to do something for the poor? why the poor people??
    if we choose to be pro-market, does this means we do not care for the poor?

    btw, nice cafe... would love to spend my weekends here =D