People are dying so that you can read this blog. Your internet access fees could more than double the income of a $400-a-year Ghanaian laborer. People are starving to death, and there you sit, with resources enough to save them (and with reputable charities standing by to effect the transfers), padding your own already luxuriant lifestyle. That’s a choice you made. It’s a choice almost everyone in the First World makes. It might or might not be a horrific choice, but it’s one for which we easily forgive each other.
(Do you already give money to Ghanaian laborers? I applaud you and I wish others would do the same. But it doesn’t change the fact that other Ghanaian laborers are dying so you can have your Internet.)
Someday you might find yourself strolling through a desert with a bottle of water and stumble on a man dying of thirst. I bet you’ll offer him some water, and I bet you’d think much less of anyone who didn’t. But there is, as far as I can see, no important moral difference between surfing the web while Africans starve and strolling through the desert while men die in front of you.
I said there’s no moral difference, which is not the same as saying there’s no difference at all. We evolved to be callous towards those who are distant (or invisible) and kind toward those who are close. (Robin Hanson posts frequently and insightfully on the contrast between how we treat the near and the far.) It’s pretty clear why there might be an evolutionary advantage to behaving that way. If you’ve got a reputation for helping your friends and ignoring strangers, then more people will want to be your friends. So it pays to favor the close and the visible. Our emotions are wired that way, and there’s probably not much we can do to change it. Attempts to change human nature do not have a good historical success rate.
But. But. The principles that guide our individual choices are not always the principles that should guide our policy choices. When it comes to spending public funds, we instinctively continue to favor the visible, even though we might all have preferred to be born into a world where the invisible count equally.
Imagine a miner trapped in a mine. It will cost thirty million dollars to get him out. With that thirty million, we could build a guardrail that will save three lives. We’ve seen the miner’s face on the news; we’ve seen his family; we know his name. All of our instincts — the same instincts that let us ignore those Ghanaian laborers — tell us to save the man we know and ignore the three we don’t know. Those, I think, are bad instincts. Anyone with amnesia — anyone, that is, who is forced to take an unbiased view of the situation — would want us to save three lives rather than one. (Because each of us, in a state of amnesia, has triple the chance of being saved by a guard rail.)
It’s no use saying we should both build the guardrail and save the miner; that only raises the question of whether we ought to build two guardrails instead of one.
It’s also no use pretending, as some economists would, that you can dodge this issue by inventing jargon. Those economists love to talk about the distinction between “identified lives” and “statistical lives”. But naming something does not change its nature. Inventing a phrase is not the same thing as having an insight. All these phrases do is restate the issues we’ve already visited. (In Chapter 22 of The Big Questions, there’s a much longer passage detailing all the ways in which the distinction between identified and statistical lives is incoherent.)
(The miners currently trapped in Chile are, most thankfully, not a good example of miners who ought to be abandoned. As far as I can estimate, the cost of getting them out is quite entirely reasonable and well within the bounds that an amnesiac would approve.)
If this sounds all wrong to you, keep in mind that people die all the time just so we can live slightly more luxurious lifestyles. It’s not just the guy in Ghana. We have the option of spending more than we do to make the world a safer place. The world lacks guardrails not just so we can spend money rescuing miners; it lacks guardrails so you and I can drink better wine. It would be easy to save more lives if we were willing to reduce the quality of life — but we’ve chosen not to do that. We’d rather face a higher risk of death so we can afford to live a little better.
We’ve made the decision to kill people (in Ghana and on winding mountain roads) so you can have faster Internet service. Given that, how can it be grisly to kill one person (e.g. that trapped miner) so we can actually save more lives (e.g. with a guardrail)? (I’m sure that Alex Tabarrok has made the same point often and brilliantly.)
All of which brings me to why I wrote this post. Last week we had a discussion about the efficiency criterion. A few days ago, I followed up by applying the criterion to the hardest of cases — Bill Gates walking through the desert and refusing water to a dying man. (This is of course fiction; I expect Bill is one of the least likely people on the planet to behave this way.) The point of that post (which I hope did not get lost in all the verbiage) is that this is one of the rare cases in which the efficiency criterion doesn’t work very well, owing to the big discrepancy between Willingness to Pay and Willingness to Accept.
But today’s point is a different one: Even if the efficiency criterion did unambiguously recommend that Bill keep his water (which in fact it does not), that’s not actually so horrible by the standards we apply to ourselves every day. The only difference is that we kill the distant, whereas in this scenario, Bill kills the nearby. That might quite reasonably make us want to stay out of Bill’s way, and tell ourselves we want nothing to do with him. But at the level of policy, where we really ought to care about everyone, it’s just not signficantly more horrible than what we accept all the time.
As I said, the efficiency criterion doesn’t really apply to Bill in the desert. But it does tell us to abandon the miner. We instinctively recoil from that recommendation, which is exactly why we need the efficiency criterion. Our strongest instincts are not always our best instincts. I like the efficiency criterion because it insists that we face the hard choices.
Another difference between the dying man in the desert scenario and that of the Ghanaian labourer is that in the former I am the only one who can save the man. If we, as humans, are morally obligated to save him, then my share of that moral duty in this particular instance is 100%. In the latter case, there are billions of other people who can also help, and hundreds of millions who could more easily afford to help than I. My share of the moral duty is tiny.
Future generations everywhere may be better off because the First World has Internet access now. Shouldn’t you take that possibility into account in your moral calculus? My first exposure to this argument was as a proposed justification for the existence of an aristocracy: the idea that a peasant population had to be forced into subsistence (or worse) so that feudal lords could have leisure time and be able to make capital investments. An ugly idea!
By the way, my wife and I make a monthly contribution to a child in Africa, and the charitable organization involved makes every effort to personalize the child, first by earmarking our donation for an individual and second by sending pictures and letters from her. In other words, converting her from far to near.
What you are right about: We lie to ourselves about our true preferences. We prefer marginal improvements in our own lifestyles to other people’s lives, but don’t like to admit this.
What you are wrong about: That policy per “the efficiency criterion” would be somehow different than what’s observed. Your morality/policy examples all stress that maximizing social welfare may entail tradeoffs that seem unpleasant, but nevertheless social welfare SHOULD be maximized. Well, if the world is in fact full of maximizing agents, than social welfare IS maximized subject to all actually-existing constraints. If it’s not, then someone is leaving money on the table; someone is acting stupidly, and if people are fundamentally stupid, then it’s impossible to know how to maximize social welfare.
I’m sorry to keep making this point, but you have an interesting blog and you keep posting on economic efficiency, a topic I think most economists don’t really understand. I’ll just stress that I think Staten and Umbeck’s embarrassingly simple take down of welfare economics might be the most important piece on efficiency that you haven’t read:
Economic Inefficiency: A Failure of Economists
Michael Staten and John Umbeck
The Journal of Economic Education
Vol. 20, No. 1 (Winter, 1989), pp. 57-72
I broadly agree with you, but the guardrail MAY be a bad example. The point is that you assume a perfectly consequentalist view of the world. Yet there is no evidence that humans take that view, and of course it cannot be proved that we should.
Guardrails save lives that the victims could have saved themselves by driving slower – they are paternalistic. Mankind takes circumstances and rights, as well as consequences, into account when deciding what is the moral course of action, and economists routinely fail to recognise this. I think you could make your point better if you chose two scenarios of similar moral standing. (Of course its possible to argue the miner is undeserving too, but I’m simply saying that you have to control for confounding moral circumstances).
Which brings up the question: when to use the efficiency criterion? My understanding of Rawl’s first principle of “Justice as Fairness” is, that basic rights and liberties are not to be traded off against other social goods like economic efficiency.
This is a question I’m pondering myself now. I live in Christchurch, which just suffered a fairly significant earthquake (with no direct deaths, however). Many other students have volunteered to help with cleanup. I haven’t, for I’ve reasoned that if I want to be charitable, I’d be much more effective by donating money to help people in the Third World. My family doesn’t like this view. I should help my “own people”. I’ve tried to point out how this view also supports racism, but to little success.
Your fallacy here is to equate morality with a utilitarian calculus. Reject utilitarianism and the paradox goes away.
We can conclude that utilitarianism is rejected as a moral basis, by the revealed preferences of just about everybody.
People really care about *causality* (and about personal relationships). It’s more important to save the miners because we know they are in deadly peril now, wheras the people who fall to their deaths for absence of a guardrail could be more careful – they have themselves to blame, the miners don’t.
I should also point out that utilitarian calculus is provably inadequate as a moral basis. All forms of utilitarian calculus are subject to the “Utility Monster” problem – i.e. whatever maximisation rule you use, there is (at least) one “utility monster” who, under that calculus, would be entitled to all the resources in the world.
So if you take the Rawlsian view that one should maximise the wellbeing of the worst off, the utility monster would be the worst off person, and his wellbeing would be improved infinitesimally by any addition of resources – but not enought for him to stop being the worst off. So under that rule he is entitled to all the resources in the world.
Under the more view more commonly used by economists, that the aggregate utility should be maximised, the monster is someone who gains more utility from each addition of resources than anyone else. So he is entitled to get happier and happier, while everyone else works in drudgery, simply because of his greater capacity to enjoy.
Basically utilitarianism doesn’t work in theory – a point Prof Landsburg made in his last post on the subject.
But does it work in practice? As the good Professor said yesterday, it seems to work reasonably when the stakes are low.
While that may seem theoretical, the practical problems are much worse. If we consider that misfortune confers a right to the resources of others, that’s a reason for people to suffer misfortune on purpose (“workers comp” as seen in a dozen made-for-TV movies about abusive fathers), or at any rate not avoid them so avidly. “The Armchair Economist” has a good take on this, as does “Law and Economics”.
It’s not clear that there is any strictly rules-based moral theory which avoids all such problems.
Perhaps the miner could have been partially to blame in this case. But I don’t think that was the point Steve was trying to make. You could replace funding for handrails with funding for an unpreventable cancer.
@Henry, point taken, but people also care about what is in front of them. We have a good idea whether we can save the miner, we don’t know even who will get the cancer – it could even be me.
The point is that our morality just doesn’t work off simple rules, and as stated above, it CAN’T work off simple rules even in theory.
We are not morally consistent creatures. In The Big Questions you mention a scenario where a train is speeding towards 6 people trapped on the line. You can flick a switch to swap the train onto a line with 1 person trapped. Most people asked say they would flick the switch, reasoning that 1 death is better than 6 deaths. However, what if the only method of stopping the train is to push a fat man (a stranger) standing next to you on a bridge onto the line to stop the train? People say they would be reluctant to push the man off the bridge, even though the situation is apparently the same as the original scenario: 6 lives vs 1 life.
That example is individual action, but what of policy? As you say, we have a innate preference for some actions, and innate disgust at some things. This guides our morality in ways that are less than “efficient” in an economic sense. For example, would it be efficient to have as policy A an “organ donor lottery”? All healthy people are entered, and if your name comes up, you get harvested to save several other lives. Organs taken from healthy, alive people are much better than those taken from already dead people, and you can get all recipients arranged to accept the organs straight away. This is avoiding the “large stakes” issue of difference between WTP and WTA because each person has only a small chance of being chosen, and also a small (but larger) chance of needing a donor. I can see there are other ways to solve the problem that are perhaps even more efficient (and some enforcement costs), but if the only options were status quo or polcy A, should we implement it?
Whatever we decide, it can do no harm to asses the gains and losses of policies, if we can do so. Society is then in a better position to decide. A similar situation to the trapped miners is people kidnapped by terrorists. The Govt. has a clear policy defined in advance that demands will not be met. This makes it easier to gain public acceptance, even if the now named individual gets killed. Perhaps we should take more of these descisions before emotive events happen, and inform everyone about them. We could tell miners “if you get trapped and is costs more than $x, we will leave you there.” Politicians could be more honest. They could announce that a small number of train crashes are acceptable, and measures that cost over $x billion will not be taken for marginal improvements in safety. Similarly air travel. I personally would welcome more of this, but I have a feeling the media would crucify any politician making the attempt.
If you draw your utility curve as a trade-off between internet and Ghanaian lives, then you might come to one conclusion. But this utility curve absolutely does not reflect reality. In reality, if we’re speaking in 2 dimensions then the real trade-off is internet access versus all other goods. The individual pays for a certain level of internet access not at the expense of a human being, but at the expense of all other things the individual can actually buy. Part of the reason the individual selects the internet access is because the internet access affects the individual’s life, along with his/her family and friends. It meets a need more immediate than the needs of a stranger. This isn’t about “statistical lives” versus “identified lives,” it’s about the logical fact that people would rather provide for their own families than provide for someone else’s.
I made the point a few days ago, a lot of these problems are just philosophy/ethics disguised as economics. We make them look like economic choices, but we aren’t thinking clearly. We are designing our models based on our value judgments, proving our implied values, and then saying, “See? I knew I was right!” But we can all do this, any time. All I have to do is draw up a utility curve that reflects the fact that my having access to high speed internet is the very phenomenon that allows me to donate money to Ghana more quickly, efficiently and often. See? I just proved that I saved more Ghanaian workers with internet access than I did by contributing to them directly.
This isn’t really even about philosophy vs. economics, it’s about the scientific method. It is far too common in economics to leave out what we wish to ignore or to include any particular concept we want to highlight. It becomes circular reasoning. We prove it because we chose to design the model that way. It makes for interesting thought experiments, but it does not advance economics.
Just my two cents.
Ben: I did not propose any sort of utilitarian calculus. I endorsed thinking about efficiency.
Henry: “Many other students have volunteered to help with cleanup. I haven’t, for I’ve reasoned that if I want to be charitable, I’d be much more effective by donating money to help people in the Third World”
I admire your lack of colloquialism, but unless you actually *do* donate money to a charity to help people in the Third World, you’re actually just saying “I’m not helping because I don’t want to be charitable”. It would certainly be *more* altruistic to donate money to help the clean-up in Christchurch than to, say, order an extra-large pizza from Domino’s.
This seems like similar reasoning to those who don’t give any money to charity and then spend hours justifying their decision by arguing that existing charities are inefficient. Well, maybe, but surely they don’t actually have a negative impact on the people they aim to help?
http://www.givewell.org/
@Prof Landsburg:
I know you don’t endorse efficiency as a complete moral theory. I didn’t mean to imply that!
Efficiency as a utilitarian criterion *has* been promoted by others though – notably Posner for a period.
I was just pointing out that it doesn’t work as a complete system in theory or practice, however useful it is as an *addition* to our moral thinking.
So it is worth exercising caution over the results. Which I think is what this post is about – so we may actually be agreeing?
Best regards,
Ben
The example of the trapped miner is puzzling. Are we really spending $30 million to rescue a trapped miner? Or are we spending $30 million to make good on our social commitment to rescue any and all miners who are ever trapped? In the latter case, shouldn’t the benefit/cost analysis include the value of this insurance to all other miners? Cheaper mining frees up resources which may be used for, among other things, saving lives.
Windypundit:
Or are we spending $30 million to make good on our social commitment to rescue any and all miners who are ever trapped? In the latter case, shouldn’t the benefit/cost analysis include the value of this insurance to all other miners?
Yes, absolutely. But if we can spend that same $30 million to save three lives elsewhere, that’s tantamount to giving everyone three times as much insurance for the same price. So the benefit/cost analysis tells you to spend the money elsewhere.
Unless miners value the insurance more than drivers?
Rapscallion, sidestepping the fact that your definition of efficiency is not the same as the one in the efficiency criterion, you appear to be implying that the constraints on maximizing welfare are constant and cannot be changed by human actions. In your world of maximizers, you seem to be overestimating their omniscience (access to information) and underestimating their capacity for being educated.
Just as someone can invent or market a better mousetrap or a fusion reactor and increase the efficiency and welfare of a society by providing your maximizers with information previously unavailable to them, someone else could invent a new way of reasoning or a better way of marketing an old way of reasoning that can lead people to question and restructure their thought processes to make different decisions and increase welfare. Indeed, by writing this blog, Landsburg is eating away at those constraints you keep referring to (or at least slowing the generation of new ones).
Closer and more visible means better information. If I offer up my water to the man in the desert, I know what trade off I have made, If I send money to some impersonal organization for an alleged need in a faraway place, I really have no idea what happens–just hope. I think people are being neither hypocritical nor inconsistent.
And a close-by guardrail is not a good example either, because a guardrail is a public good and there is an obvious free rider problem.
Ben: I don’t understand your utility monster. If we make the worst off person better off infinitessimally, then he remains the worst off. But will he not eventually become equal to the next worse off, at which point we must help both equally? This will continue until everybody is equal. The same with the aggregate utility.
I am all for expressing arguments in terms of the efficeincy criterion. We may well then decide to follow another course, perhaps because we believe that there are some rights that cannot be usurped by efficiency, as Stephan pointed out.
Having thought about it some more I can see some other problems. In order to properly conduct the efficiency exercise, we must outline All of the possible policies. In this way only can we be sure we implement the best. I think in isolation, any efficient policy is possible, since the willingness to pay is constrained by the ability to pay. But if we have more than one policy, then spending on one reduces the willingness to pay for the other, as we now have less money. Taken to its extreme, we would need to spend all our resources just assesing the efficiency of different policies. So we are limited to a select few policies to choose between. Some policies will be “easy” to measure the efficiency: rescuing a trapped miner, say. Some will be much more difficult. How do we decide whether to spend a large amount of money with a fairly certain, but small, gain, or on a policy with a chance of a huge gain, but also the chance of a loss? So it is a hopeless task to use the efficiency criteria to decide what we should do. Where it is much more useful (to my mind) is deciding what NOT to do. We cannot asses all possible policies, but we can asses individual policies against some accepted criterion.
There are huge uncertainties in calculating the gains and losses. We must acknowledge this. We can use efficiency to reject the worst of the alternatives. If we make the most optimistic, realistic assumptions about a policy, is it then efficient? If not, then we would need a very good reason to implement it. If it has a chance of efficiency, stick it in the ring to compete with the others. We can use the efficiency estimates together with the uncertainty estimates (error bars) to assist in the competition.
Thomas,
I am in fact using the same definition. For example, in the Bill Gates example, social welfare is maximized when Bill gets to keep the water ($10,000>$100). Social welfare is maximized when utility maximizing individuals are free to make Pareto-improving trades, hence all models of rational utility maximizers maximize social welfare. This results is intuitive: when everyone is doing the best they can, everyone is doing the best they can.
Yes, when things (like information or costs) change, behaviors change and equilibrium changes, but that doesn’t mean people aren’t doing the best they can given their resources, which is my claim. I’m simply pointing out the logical necessity that inefficiency can never be observed.
As I elaborated on in prior comments in other posts, if you want to include economists doing efficiency analysis in the model itself—i.e. say that economist’s are agents with the principal being the entire society—you get into pretty thorny, unexplored territory. For instance, all rejected policy recommendations would have to necessarily be wrong because they were not adopted. Besides, most economists who do efficiency analyses don’t claim anything so elaborate; they usually claim what is logically impossible: that some current policy is in the relevant sense inefficient.
Neil – that looks like exactly the argument I was talking about in my previous comment:
“If I send money to some impersonal organization for an alleged need in a faraway place, I really have no idea what happens–just hope”
I’m afraid you can’t get out of it that easily. Given that there are some people in the world somewhere who could probably benefit a lot more from the money you have than you do, why not do some research and find out? http://www.givewell.org/
John Faben–“why not do some research and find out?”
Because gathering and verifying information is costly. Givewell.org may provide me with useful information, but even then there is a trust problem. Why should I believe their information? The information I gather from seeing a man dying of thirst in the desert is both costless and undeniable.
There are so many other reasons why this example proves nothing, I don’t know where to start.
With the man dying in the desert, I am able to achieve a big impact (saving his life) at a low cost to me (sharing my water.) With large numbers of people dying abroad, I have no way of knowing I can save someone’s life at a reasonable cost to me (giving up my internet.) If someone could guarantee me–look here, I can save this Ghanian’s life for the price of your internet, I might do it, after asking someone richer than I why don’t they do it.
Rapscallion:
For example, in the Bill Gates example, social welfare is maximized when Bill gets to keep the water ($10,000>$100).
In this example, social welfare is maximized no matter who keeps the water.
Even if there is a great deal of inefficiency and uncertainty, the gains to the poorest of the poor are so massive they would still
One way around it is to deny that charity provides long run benefits. For instance, if you believe that overpopulation is a big problem, or that helping poor people will encourage them to have more children who would wish they’d never been born.
Ben: Efficiency is not a utilitarian criterion. It *is* a consequentialist criterion, but that’s not the same thing at all.
In particular, you’ll note that efficiency is defined in a way that does not even assume the existence of utility functions, let alone making use of them.
“With the man dying in the desert, I am able to achieve a big impact (saving his life) at a low cost to me (sharing my water.) With large numbers of people dying abroad, I have no way of knowing I can save someone’s life at a reasonable cost to me (giving up my internet.)”
What you’re saying here is something completely uncontroversial, and I think it would probably help for you to quantify your reasoning. You can save the man in the desert with high probability at low cost – good. You can save the Ghanaian farmer with slightly lower probability at slightly higher cost – not quite as good. But what you’re saying is not that you can’t compare the two situations, merely that when you do compare them, you find that you get more bang for your buck in the desert than in Ghana. I don’t really think anyone is disputing this.
By all means give water to people who are dying of thirst in front of you *before* you give money to charities that help Ghanaian farmers, but once there are no more people dying of thirst right in front of you, you’re not absolved of responsibility to the farmers.
You need to ask yourself the question “how much am I willing to spend per expected-stranger-life?”*. It’s quite possible that the answer comes out at somewhere between 1 bottle of water and (say) $2000 (which, if I recall correctly, is Givewell’s estimate of “cost per death averted”) . If so, fine, but simply saying “I don’t know if I can save Ghanaian farmers or not” really does prove nothing.
*ok, so you probably have to ask a slightly more complicated question like “when does the marginal cost of an expected-stranger-life become so high that I’d rather buy pizza?” but I don’t really know enough economic jargon to word it correctly, so this will do.
Rapscallion, I and most likely everyone else here agree that when everyone is doing the best they can, everyone is doing the best they can. No one suspects that theoretically superior outcomes are going to occur in the real world just because they exist on paper.
However, should you move to a new town that is holding a town meeting the next day to decide whether or not to rescue a miner, your actions could potentially be a deciding factor in the course of action taken. You may be uniquely suited to break through some of the constraints that have restricted outcomes in the past. For all you know, no one in town has ever suggested that more people can be saved by building a guardrail. Stranger things have happened – people have lived their lives in terror believing they risk causing a huge flood every time they bathe if the water level exceeds the metal drain control thingy in their tub…
There are other types of considerations that can go into this decision.
1.) Is my action going to encourage more people to need water in the desert or farmers to need aid in Ghana?
2.) Is it going to prevent others from taking action that might be more decisive in eradicating the problem in the future?
I seem to be able to answer these types of questions better the closer I am to a particular situation. Also, I am usually not motivated to act if I can’t answer these questions.
This is not to rule out the “known” versus “unknown” victim theory. I’m just saying that concrete, “known” situations offer more information.
In the fable “The Boy Who Cried Wolf”, the townspeople were willing to entertain a chance of death for that “known” boy after they had gained more experience about his cries. There was a moral to that story wasn’t there?
@Prof Landsburg:
In short: It seems to me that “knowledge is local/love doesn’t scale” is a better guide to personal action than “maximise this global function”, whereas for government action it is the other way around. God forbid the government try to love me.
I appreciate you aren’t promoting efficiency as a complete moral theory and I hope I didn’t imply that. You are, I think, promoting it as a good way of testing moral assumptions, particularly in impersonal interactions such as government decisions. I agree with that.
That’s very different from promoting it as a guide to personal action.
“Yes, absolutely. But if we can spend that same $30 million to save three lives elsewhere, that’s tantamount to giving everyone three times as much insurance for the same price.”
But we’ve no *duty* to give insurance to anyone else.
If you owe me £1000, then you come to me one day and say “it’s OK, I gave £500 to help starving Ghanans”, I am not going to be impressed. You will still owe me a grand.
Alternatively, the fact that you repay me a grand doesn’t make you a hypocite because you didn’t give it to starving Ghanans, even if you think they need it more. It is my grand, and for me to decide if I want Ghanans to have it.
Didn’t you say in one of your earlier works that duties arise from agreements voluntarily entered into? Ref. rapscallion at 2:35 am, doesn’t that imply that performing one’s duty is likely to be efficient?
–
The mining company rescues the trapped miners because they owe that to them – how much it costs is irrelevant – they spend money until they are all either out, or dead, or they run out of money. That’s the (implicit) promise they go to work on every day (like the US Marines). And that’s the difference between a utilitarian (sorry consequentialist) calculus and a duty.
I think the key to your paradox is the broken window. The “seen” is act utility, the “unseen” is rule utility.
Each in turn, your first rule is, roughly “give all your surplus earnings to the poor until no person on earth earns under-substinence.”
Your second rule is, roughly, “help desperate people you come across.”
If we trace out the implications of these 2 rules, the first gives a perhaps 95% marginal tax rate, which would likely impoverish the world. The second rule gives peace in the neighborhood, which is a good thing.
At that point, we can discuss the efficiency of the rule (e.g. people can move away from desperate neighbors, so impact on incentives is reduced, etc etc). But we have definitively moved from a supposed paradox back into the comfy zone of (rule) efficiency.
I understand the need for an abstract noun like “efficiency” and an adjective like “efficient” for the concept, but when I learnt it we called it “Pareto optimal”. I still rather like that. “Optimal” infuriates the soft-minded. (What part of optimal do you not understand?)
I don’t know. I think you’ve got this backwards.
We’re horrified that people would refuse to save a drowning child but we’re alright with refusing to spend $10 for someone else to save the child. Therefore we should stop complaining when we have our gov. refuse to pay to save the child?
But I think most people think it goes like: we SHOULD be horrified at our own behavior when we refuse to spend the $10 to save the child. And thus it’s ok to complain when the governent doesn’t too.
“People are dying so that you can read this blog.”
And people are also living.
I can’t let this go.
First, on efficiency, I think Steve is wrong that efficiency fails when WTP is not equal to WTA. In the case of the man dying of thirst, his WTA is high when he owns the bottle of water. If he does not own the bottle of water, his WTP is limited by his net worth. It is efficient for the man to keep (and drink) the water when he already owns it, and it is efficient for Bill to keep the water (and let the man die) when Bill owns it. What is an efficient allocation changes when the distribution of factor ownership changes. For example, even if WTP=WTA, a redistribution of factor ownership between vegetarians and carnivores would change the allocation of resources between veggies and meat.
On morality, Steve says that if Bill denies the dying man the water, he is a jerk. Right. He goes on to assert that we are jerks because we similarly spend money of frills like the internet while people die of need in Africa. Wrong, again. As I stated earlier, there are informational problems. Lets ignore those. More importantly, there is a free rider problem not present in the example. It may well be efficient for moral people to help dying people in Africa, but we don’t do it, not because we are jerks, but because charity is a public good (non-rival, non-excludable) which introduces the free rider problem. This fact is not present in Steve’s one-on-one example.
I do not think free riding makes one a jerk like Bill in Steve’s example. If it costs $1000 to save an African life and 20 of us have a WTP of $100 (note–we are moral because we have a positive WTP to save a stranger’s life), then it is efficient to save that life but the life doesn’t get saved because of market failure, not because we are jerks.
“But there is, as far as I can see, no important moral difference between surfing the web while Africans starve and strolling through the desert while men die in front of you.”
I can disagree with this. Everything I spend money on I do so with the purpose of maintaining and enhancing my present and future productivity and minimizing my present and future costs. The internet I’m entertaining myself with now is the same one I earn a living with 8-12 hours a day.
If I made the choice to give my broadband subscription money to Ghana I could only do so once. By paying that $50/mo I make enough money to give far more than $50/mo to worthy charities. In fact, I cannot think of anything that I spend money on that does not yield a net benefit to both myself and a third-party who is otherwise unable to sustain him/herself.
You’re right, if I send a portion of my earnings to Ghana then I do so at the expense of what I could send to Rwanda. If I give a dollar to the poor fellow selling oranges on the side of the highway I do so at the expense of what I could send to Ghana or Rwanda. That’s just scarcity vs. the world-is-tough-all-over.
But it seems like you are saying that I could be confining myself to the 300 calories/day of rice and wheat gruel common in impoverished nations and the money I spend on oranges instead could be send to those poor folks. Because I do not, there is the implication that I value my luxury over the well-being of others. I refute this absolutely.
Confining my lifestyle to that of a developing nation’s would confine my health, productivity, lifespan as well; leading to a confined total in the help I do send to worthy charities. I could live like a Rwandan and succumb to undernourishment in 10-15 years and give 30% of my income (total of $660,000 assuming 5% interest rates on endowments held by charities I give to)or I can live like an American another 50 years and give 5-8% of my income($1.1 million).
The argument could also be made that every dollar spent providing medicine to sick kids in Africa shows that we value them more than the millions of American children who go to bed every night without healthcare. That every mosquito net I buy shows that I care more about someone in a malaria-nation more than I care about the struggling family who would benefit from my patronage of the great state of Disney World.