

Why Economists are often Cheapskates - cwan
http://online.wsj.com/article_email/SB126238854939012923-lMyQjAxMTIwNjAyMzMwODM4Wj.html

======
michaelkeenan
We often measure charity in dollars donated. Occasionally we measure charity
by percentage of wealth donated[1].

What would happen if we measured charity in terms of lives saved? As PG has
mentioned, things which you measure tend to improve[2]. I would rather improve
charity outcomes than inputs.

Economists sometimes claim that most charities are very inefficient[3]. Maybe
economists give to more efficient charities, so their dismal charity record
might look better when measured in lives saved rather than dollars donated.
(If this seems like a weak apology for the lack of charity of economists, I
agree. It is sad that a disproportionately high fraction of economists give
nothing at all to charity.)

[1] e.g. <http://www.mint.com/blog/trends/charity-who-cares/>

[2] Point 7 of Startups in 13 Sentences:
<http://www.paulgraham.com/13sentences.html>

[3] <http://blog.givewell.net/?p=480> and
<http://www.overcomingbias.com/2009/09/lost-charity.html>

~~~
cwan
There's probably something to that. I do wonder whether for economists look at
something like Walmart and see them doing more social good by making goods
more affordable than XYZ charity (and arguably they do). I think when most of
us think of "social good" we tend to idealize not for profits more than for
profits, but there shouldn't be any reason why profitability doesn't equate to
social good - in fact, arguably it does given that revenues by definition
require that people want a service/product enough to pay for it.

~~~
lionhearted
This reminds me of something I think about quite a bit. Right now I'm in Los
Angeles for just a couple more days before heading off to Taiwan. I've spent a
little under a year here in LA, and - there's _a lot_ of homeless people here.
Good weather plus forgiving vagrancy laws plus charitable people makes Los
Angeles something of a homeless mecca.

I see people giving homeless people a dollar or two all the time. Then I see
the same homeless guy getting an 89 cent taco at Taco Bell, or a $1.60 coffee
at Starbucks. This whole thing seems like a tremendous waste to me.

Consider someone who gives $1 per weekday to homeless persons. That's
$260/year. That buys something like 116 tacos and 81 cups of coffee. Which is
nice.

Except - you know how many tacos a proper homeless shelter can cook with a
$260 donation? You know how much coffee costs in bulk? I know I was making
coffee that averaged me 4 cents/cup for decent stuff in bulk, and it wasn't a
crazy amount of bulk. You can prepare a decent full meal for under 50 cents if
buying rice, beans, lettuce, tortillas, and meat in bulk. That's a full meal
as compared to one small taco.

So y'know, that sucks. It also encourages begging, which is demeaning for the
beggar, and can scare, intimidate, and upset people passing by. It's a bad gig
all the way around.

So how come people give out $1 per day instead of cut a check for $260 to a
shelter? My thought - and it's somewhat cynical - is that people get a "hit of
good feelings" when they give the buck away. Writing a check for $260 once a
year doesn't give that same hit when you make $50,000. It feels very small.
But a dollar every weekday? Oh yeah, that's 260 hits on the "I'm a good
person" pipe.

Now, being an economics-minded individual, I'm not going to explain it like
this to people who patronize panhandlers. Oh no, I'm quite sure it wouldn't
work. Instead, I'm curious to ask - "How could we get people donating to
shelters instead of passing out change?"

Hard question. Maybe - just maybe - when you donate, the charity could give
you slips of paper to print from your computer to give to homeless people
letting them know that food and comfort is nearby. Or maybe we could encourage
people to save up and help a specific homeless person get an inexpensive hotel
room, shave, haircut, shower, and set of clean clothes once every few months
instead of a little petty change every day. Something like that.

It's something I roll over in my mind a fair bit - every time, in fact, that
I'm at the Westwood Taco Bell or Starbucks. It just seems like a tremendous
waste, as I've volunteered at shelters before and know they can get a heck of
a lot better economies of scale and make a heck of a lot more of a difference.
And paying people to beg sucks - begging must be miserable for a person's self
esteem, and has negative effects on people around too. Much better to give
that money to a charity and let a homeless person know where they can get
help.

~~~
Retric
From an economic standpoint begging is just another low paying job. It might
look like they are incapable of working in the real world but there is a
reason it's not wall to wall beggars in high traffic areas. It's fairly
violent and dangerous to keep a high traffic area so I suspect the homeless
person feels much the same as a carnival worker. Smile, play nice, and take
the chump for all he's worth.

------
Tichy
Is it bad to give friends 150$ to hire movers, instead of helping by oneself?
I was actually planning to do the same thing on the next occasion. Since I am
over 30 now, it probably is a lot cheaper too - not only in terms of my hourly
wage, but also if I multiply the odds of getting a lumbago with the costs of
treating it.

I know moving is supposed to be the occasion where true friends are revealed,
but doesn't it make too much sense to simply pay? Also, maybe true friends
wouldn't ask their friends to help moving, if they could afford to hire
movers?

As for charities, I admit I also have problems to donate or "invest fairly":
it seems a "fair price" is probably the market price, to investing fairly
seems alien indeed. At least unless there is more information (I don't want to
support exploitation). As for charities, I am also often not sure how much
good they will really do - I am much more interested in changing the
underlying causes.

------
ryansloan
I have a close friend who studied Economics. He always said he wasn't cheap,
just "opportunity cost aware."

------
houseabsolute
A nice piece of entertainment, but there's a lot of contradictory motivation
behind the actions of these economists. For example, some of them would rather
pay movers to save a few hours of work. Another will drive half an hour out of
his way to save $5. Similarly many of the quirks listed in this article are
just personality quirks which are perhaps associated with wanting to become an
economist, but which are not likely because of it.

This piece is entertainment not meant to inform, which is fine, but we need to
read it that way.

~~~
sokoloff
Saving a few hours of time in exchange for $150 vs saving $5 in exchange for
an hour (round-trip) of your time may be the right choice for the same person.

Moving is strenuous, boring physical labor with a relatively high probability
of being hurt/sore the next day. Driving around for an extra hour may be a
pleasant diversion, time alone to think, relax, listen to music, etc. It's not
apples to apples paying $50 an hour in one case against being paid $5 an hour
in the other case.

------
leelin
I'm guessing as a collective the HN community might be even more frugal than a
grab bag of economists, and it was computer science minds that hacked casinos
for far more by researching card counting. :P

Btw, casinos are getting wise to the trick of placing anti-correlated bets
using match-play coupons. When I was last at Atlantic City, the matchplay
coupon was only good for bets on Red for roulette and Pass for craps, so that
you couldn't pair up with someone betting on Black and Don't Pass.

~~~
tome
The surely you could just bet your own money on black and get 50% of the
leverage?

------
davidmathers
_Economist Robert Gordon, of Northwestern University, says he drives out of
his way to go to a grocery store where prices are cheaper than at the nearby
Whole Foods, even though it takes him an extra half hour to save no more than
$5._

...

 _And the principles that can make economists seem cheap sometimes lead them
to hire help, because they are taught to value their own time._

Hmmm.

------
CapitalistCartr
To mangle Oscar Wilde, economists know the price of everything and the value
of nothing. An exaggeration but not by much.

~~~
cwan
Not sure I agree with that point. I admire those who are able to consistently
separate emotions from decision making - and that's what I think economics
training does for individuals when it comes to money and time. Of course, it
can be taken to extremes and what may seen logical and rational on its face
may not ultimately be viable/optimal especially when you take into account the
emotions and reactions of others.

~~~
chrischen
Correct me if I'm wrong, but I think by "value" he didn't just mean
sentimental value.

Getting a Rolex because you found it for $5 is a value, getting a Fossil
because you found it for $5 is cheap.

------
shrughes
> _One year, Yale University economist Robert Shiller, who'd never gambled in
> his life, found himself at a casino there. He says that was because Wharton
> economist Jeremy Siegel realized that by using coupons offered to
> conventioneers, they could take opposing bets at the craps table with a 35
> out of 36 chance of winning $12.50 each. Over two nights, Mr. Shiller netted
> $87.50._

------
tigerthink
Too bad the article never really answered the question.

