Beggars as Producers

Neat argument from Justin Ross at The Perfect Substitute

The jeweler is productive because they take this shiny rock out of the ground, polish it up, and sell it to consumers for an amount that covers their time and resources. They are productive because they satisfy a consumer demand, and as any economist will tell you, we do not pass judgment on consumer preferences. When you think of it this way, someone devoting resources to increase their appearance of desperation in order to be given a handout, is no less “productive” than the jeweler. They are simply trying to satisfy the consumer’s demand to reduce neediness. You can think, if you must, of beggars as suppliers of satiable neediness, and charity-givers as consumers of satiating neediness. In which case, every dollar you choose to hand out is not wasteful or even unproductive outcome of some signaling game with unintended consequences, but another example of gains from trade that maximizes the well being of society.

I basically agree, but it depends on whether the relevant argument in the giver’s utility function is ‘giving to the needy’ or ‘not refusing to give to the needy when the needy are before me’. I suspect it’s a little from column A, a little from column B. If the good is simply not refusing (i.e. beggars make us feel guilty so we would prefer to give than ignore, but would prefer to not be confronted at all), begging should be seen as a threat in Nozick’s sense of an offer we would rather not receive. I tend to think charitable giving does produce utility above the hedonic baseline: Justin’s argument is a good, though very counterintuitive, one.  We should note that beggars needn’t really be poor, but merely appear so. 

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One Response

  1. Indeed indeed. I think people get confused about what “productivity” really is.

    I remember my mum asking me why I was an economist and not someone who added to society – my reply was to ask her if she thought teachers added to society (as she is one). She said yes – and I explained that we both provide services, which is still production.

    I suspect it is some sort of inherent mental bias that people have, which implies that they only see production as when people make some physical object.

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