Why Economists are often Cheapskates | Hacker News Reader

Why Economists are often Cheapskates

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19 pointscwan16 comments

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

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.

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.

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.

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.

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

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.

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.

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.

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

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.

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

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.

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.

> 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.

Too bad the article never really answered the question.

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