Wednesday, February 07, 2007

Giving Money to a Bum

Many people would like to give money to homeless people on the street, but are hesitant because they are not sure where the money is going or whether the person really needs it. If you could be assured that a panhandler was truly in need and not going to spend the money on drugs or alcohol, many more people would give a few dollars or cents.

Tim Harford (who wrote the article you are reading this week in class) uses this idea to formulate a question: if you could ask 10 bums one common question, and give money to only one of them based on their answer, what would the question be?

One thing to keep in mind is that the bums know what you are doing, and therefore, are tempted to lie.

What would you ask and how would you decide who to give the money to?

Here are some possibilities from the economists who write for Marginal Revolution.


Anonymous said...

I think that basically the bum who deserves the money the most is the one who 1) needs it the most and 2) needs it so much that he is willing to do anything to get it. The person who has the highest willingness to pay (through time and energy) should deserve getting the money. In a capitalist economy, working to earn something (usually of monetary value) is typical. You could ask an extremely subjective question that will most likely result in a lie, but i think that asking a question that will actually demand work to earn it will be the most efficient means of distributing money. This may work...but i dont know...say, "i have ten dollars and i have a lot of housework to do. In order to get this money, you WILL have to work. Any takers?"
I think that demanding physical labor may help narrow down your options.

Anonymous said...

This is a really hard question and I think that even with the chance to ask the bums what they would do the money the fact that they could/probably would be lying almost defeats the purpose. Since they are all thinking with their rational self-interest they would all say whatever they thought would help them get the money. I agree with Alena in saying that something very subjective could just lead to a whole bunch of lies and that demanding work could be a very efficient way of finding out who deserves the money. They only problems I see with this are that 1) you might not want a homeless person coming to your house and 2) all of the bums could take you up on this offer which would make you no better off in deciding who gets the money. Even though this isn't really very economical on my part, I think I would ask them a question like "what would you plan to do with the money" and though they could be lying I would pick the one that had the best answer and seemed most sincere to me. It isn't really systematic and even if a liar gets the money, at least they thought hard to earn it. In the future though since I am so undecided I probably will not be asking questions to bums...

Anonymous said...

I liked the guy in the article's idea about asking each bum the best way to find cheap alcohol and giving money to the one that seemed to have the least experience because most of them probably aren't likely to lie to you if they think you have money to give them because they might think they will be "tipped" for their knowledge or something like that. And I agree with Natalie that the problem with Alena's manual labor idea can be flawed by more than one willing taker (and you might not want them in your house for a long time), and also because just because someone is willing to work for the money doesn't mean that they are not going to buy drugs and alcohol with what they earn.

Anonymous said...

There are some places where the same bum is always sitting when I drive by. I saw one bum with a sign that said "why lie I need a beer" I would know for sure why he was wanting money. I liked the question of "what are you doing here?" It is very true that bums are likely to lie to get money from you. If they respond in a bad way then you know that they truely need the money, but if they are nice then you can tell they want the money for an addiction. I think that most of the bums choose not to work. If I could give money to someone to help them try and find a job, than I would. People do this because the marginal benefit of being a bum outweighs the marginal cost of working. Otherwise the bum would not continue in that line of work.

- Brian Meier

Anonymous said...

Whenever I see a homeless person on the side of the road with a cardboard sign asking for money, I immediately make up my mind that I will not give them money. I automatically assume that they will use it to buy alcohol. Most of the time they probably will. If homeless people want to get money, they should get a job. If they are well enough to "work" on the side of the road begging me for my money that I have earned, they can find a job at McDonalds. The only time that i would consider giving money to a homeless person is if they were standing outside of a restaurant or a store. I would ask them what they wanted to get, I would take them inside, and I would buy them something (depending on what it was and what it would cost). I might even hesitate to do this though. One time, at the Varsity, my dad offered to buy a homeless guy food. We took him inside and bought him food. He took his food, and he left. A little thank you would be nice. If you are lazy and want to take my money, thank me when i give it to you.
Bryan West

Anonymous said...

I somewhat agree with Alena about demanding physical labor. Yes, it would prove who has the highest willingness to pay, but also most bums wouldn't be bums if they were willing to work for money or food. I think the bums with the signs will work for food prove their wants very clearly in stating that they ARE willing to work for what they get. Those who just demand money for nothing seem like they are more likely to go out and buy drugs and alcohol with the money. If they were willing to work for money they could easily find the places where people are picked up every morning for physical labor work.

Anonymous said...

I think saying that bums deserve to be bums because they don't want to work is unfair because minimum wages laws and other government interventions do not give an incentive for businesses to employ cheap labor.

However, I don't think you should give money to a bum who just sits around. You must subject them to tests so that they work for their pay.


- offer to buy their clothes (socks, shoes, jacket, etc) for a low cost so that they suffer pain from coldness

- get them to do a certain number of pushups before you give them money (you can usually infer willingness to pay by looking at how much they sweat)

- give them a free copy of the bible and tell them to read, e.g. the Book of Genesis, and then the next day you ask them some questions about Genesis to ensure they have learned it, and then do the same thing for Exodus, Leviticus, etc until the bum has studied the whole bible.