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Which bum should get the money?
Tim Harford, writing in Saturday's FT, allows us, as benevolent utilitarians, to ask ten bums one common question, and upon hearing their answers we give a donation to one of them.
I am never one to believe that cheap talk has zero value, if so why would I write (or you read) a blog? So what questions might be asked? The bums know the game, so of course they are tempted to lie. Alex, Tim and I pondered this one over lunch.
1. Alex's idea: ask each bum "who deserves the money the most?" If they have repeated dealings with each other, the folk theorem might kick in and the group will nominate the wealth-maximizing recipient and institute side payments. This may or may not maximize group utility as well.
2. Ask each bum "what are you doing here?", with a provocative tone of voice. Give the money to the bum with the rudest, least polite answer. He is least likely to get funds from elsewhere, plus the polite bum is probably a drug addict or otherwise totally dysfunctional.
3. Take advantage of the human proclivity to boast about knowledge. Ask each bum what is the best way to find or to drink cheap alcohol, and give the money to the bum who shows the least expertise. This was also an Alex idea.
4. Find the single question best correlated with the results of an IQ test. Give the money to the stupidest bum, who is likely to be unlucky more than self-destructive.
Alternatively, say you had to tax one of ten rich men, and had one question to ask the group to determine who should pay the tax. What should the question be, and why is this a harder problem?
Your thoughts on either problem?
Posted by Tyler Cowen on February 4, 2007 at 07:53 AM in Economics | Permalink
Comments
Bum Bum Bum Bums John Lee Hookers the King of the Boogie
Posted by: Donny at Feb 4, 2007 8:20:28 AM
Ask the rich person: suppose you were thirsty and you wanted a drink of water. How much would you pay for one, if you knew the alternative was to to get a free glass in an hour? And then tax the person who was willing to pay the most, since that person cares least about money.
The poor person question seems impossible to me. The rich person question just involves knowing a little bit about varieties in utility curves and a little bit about human thrist.
Posted by: Mike J. at Feb 4, 2007 8:42:09 AM
As so often with libertarian thinking, both scenarios assume away a big problem in order to focus on a smaller problem.
They assume that (a) one or more bums wouldn't get together and just "redistribute" your money for you, and that (b) one or more rich men will pay whatever tax you demand. If you were a bum or a rich person, would there be anything wrong with that?
Posted by: tom s. at Feb 4, 2007 9:14:43 AM
Mike J.,
Wouldn't you have to model in metabolic rates of the person to adjust for different capabilities and needs? One might naturally be more in need of water than someone else and therefore places a higher value on having water available now. You would then tax a naturally disadvantaged person, not the fairest thing you can do, eh?
I would suggest something like: "According to you, which are the biggest problems humanity faces in this century and what are you doing to mitigate them?" Give that the persons answers truthfully, you could see who is priotizing what and how much he is doing about it relative to his income. You could then tax the person that is least benevolent relative to his income, or the one that has a completley bogus vision of the world.
David
Posted by: David at Feb 4, 2007 9:21:14 AM
If you really want a single answer for #4 you could probably do a lot worse than "how much money did your parents make?"
Posted by: Matt at Feb 4, 2007 9:30:33 AM
I think you missed the point of Hartford's column. The correct question to ask the bums is "I have some work that needs to be done, which of you would like a job?"
Posted by: Jeremy Bettis at Feb 4, 2007 9:31:58 AM
Keep in mind whatever you ask them, they might lie in response, hoping to get the money...you might get some truth by a question which appeals to their pride...
Posted by: Tyler Cowen at Feb 4, 2007 9:36:05 AM
Which is why #3 is most likely to illicit the highest probability of a honest answer, and is therefore the question that should be put forth. Plus, I'd just be curious to hear their responses...
Posted by: Shaun M at Feb 4, 2007 9:46:36 AM
David,
No. As a rule of thumb, pretty much everybody gets thirsty in the same way, to the same degree.
Posted by: Mike J. at Feb 4, 2007 9:57:43 AM
How would one know which answer reveals the least expertise with regard to drinking/finding alcohol? ;)
Posted by: Andy at Feb 4, 2007 12:03:02 PM
Overreacting to your throwaway remark about cheap talk having value, note that there are at least two useful types of information that we can communicate directly: things which are hard to verify, and things which are easy to verify but hard to notice. This distinction is important in computer search algorithms, especially for NP problems, but I don't know any term for it in nontechnical English, so I will just give examples.
If a professional Chess player tells me that such-and-such opening variation is better, I probably have to trust him. But if he tells me the solution to a difficult checkmate-in-6-moves problem, I can probably check it myself, even if I think he's a pathological liar: it might take me a little time to check, but much less time than it would take me to find the answer for myself.
For easy-to-check information, cheapness of talk doesn't much matter. Some stuff on blogs *is* cheap talk: are you truly not convinced that a highly regulated society boosts income inequality? That sounds plausible, but how can I *know*, short of mugging you, dragging you into a time capsule, and waiting until advanced mind-reading electrode technology is developed? But other stuff is easy to check, and stands on its own regardless of whether I trust you. E.g., you pointed out that it's natural to expect inequality to rise with education and longevity, so that it's flaky for an analysis to ignore these terms while using correlation of other terms to infer causality. Like Julian Sanchez, I hadn't noticed that for myself, but once you point it out, it doesn't depend on whether I trust you.
Posted by: William Newman at Feb 4, 2007 12:51:22 PM
Alex proposal (#1) would never work, at least through the folk theorem. The folk theorem needs there to be a positive probability of cooperation (even if only epsilon) all the way into infinity (otherwise backwards idnuction makes cooperation imposible).
I could see human beings in general holding delusional beliefs (about their own mortality) that make this possible, but I cannot imagine most bums having discount functions that assign any value to, say, 10 years in the future. Some sort of reputational mechanism might quick in which does allow for sustained cooperation but this is different than the folk theorem.
here is my proposal; a seccond price sealed bid auction using time discounts as the payment; each bum gets (ideally privatly but i dont think this matters much) asked what is the longest they would be williing to whait for $1. They will get the dollar if and only if they are the most patient (ie said the point furthest away in the future), and they will get it a day after the seccond most patient bum was willing to whait for it.
Posted by: econgeek at Feb 4, 2007 2:13:35 PM
I think Matt has the right answer to the wrong question. We should tax the rich person whose parents made the most money, since that rich person is more likely to be lucky than successful.
It's back to income vs. wealth on MR...
Posted by: dave at Feb 4, 2007 2:25:25 PM
For short effective IQ-test ask them to repeat a number series backwards.
The professors seem to try to focus on who is most unlucky and least responsible for their situation. I would try to find the bum that is:
* Most likely to use the money to improve their lives.
* least likely to lie (actually needs the money).
* Least harmful to passer byes (reciprocity).
When it comes to the most rude bum that is a horrible criteria. Rude threatening beggars impose massive costs on everyone else, especially women and the elderly. Why on earth do you want to reward them?
Posted by: Tino at Feb 4, 2007 3:05:37 PM
tom s.---I think "institute side payments" is Tyler's/Alex's way of saying "redistribute your money for you."
Posted by: lee at Feb 4, 2007 5:16:07 PM
I would ask the rich (must it necessarily be men?) this: With whom would you most like to have sex? A prude who is above the question singles himself out for the tax; he has revealed a strong preference for reputation over money. Someone who says “my wife” gets a break: If he is truthful, family obligations make him a poor candidate and, moreover, he is probably charitable; if he is lying, he must be desperate to avoid the tax. For intermediate responses, I would try to tease out an implicit discount rate (“Britney Spears” = high; “high school sweetheart I never went all-the-way with” = low). Tax the rich man with the highest discount rate; he is the worst steward of capital.
For the beggars: What is your favorite joke? This is likely to elicit informative responses. One might reward vulgarity (like Alex’s boorish vagrant) or even something positive like wit (more deserving?). Inability to recite a coherent joke (or repeating one said by another bum) would signal low intellect and manifest need. In any case, as long as I am not easily offended, I should receive some utility from the exchange.
In general, I disagree with Harford’s take – the question maps too closely to a typical interview situation. Cheap talk during interviews is informative and carries weight in hiring decisions.
Posted by: blink at Feb 4, 2007 7:12:02 PM
If all of them are in fact impoverished (making them "bums"), does it really matter which one gets the donation? Is there really going to be that much of a gain for the world giving the donation to the worthiest versus the least worthy bum?
Posted by: Trieu Truong at Feb 4, 2007 8:19:49 PM
Regarding the travel-in-the-age-of-crackberry paradox: Mobile telecoms alleviate the cost of travelling. Formerly, actual travel time (going to the airport, being at the airport, being on the plane, arrival, etc.) cost a lot in productivity time. Now with notebook computers and smart phones, managers and executives (not to mention programmers and IT administrators) can be productive while in tranist. Business travellers now travel more because it costs less to do so.
Posted by: Trieu Truong at Feb 4, 2007 8:27:09 PM
Poor or rich, the question is the same:
Q: "What is the best thing to ask yourself, about everything you do, everyday?"
Closest to the following answer gets the money (or avoids the tax) since they would do the most with the gift.
A: "What can I do right now to get closer to my goals without moving backwards?"
Posted by: topher at Feb 4, 2007 8:36:40 PM
Econgeek, wouldn't saying "infinity" (or "200 years") be a dominating strategy in your proposed game, leading to very uninteresting equilibria? And even if you got an honest answer, wouldn't you be giving the bread to the bum who needed it the least?
Posted by: Phoebe at Feb 4, 2007 10:29:47 PM
Having the ten of them tell jokes seems like a combination of Harford's answer and a way to partially insure that they have a personality that you find pleasing. The best (or most pleasant) joke teller probably is a more successful beggar, so if you wishes you can then take the approach of #2. It should be noted that the approach of #2 is suboptimal when you assume that there will be repeat encounters with the bums.
Posted by: agent00yak at Feb 4, 2007 11:33:31 PM
Deciding which rich person to tax solely on the basis of their response to a question is difficult for approximately the same reason it's hard to hold a race where the winner is the person who finishes last. Incompetence is much easier to fake than competence.
Posted by: Dan Leavitt at Feb 4, 2007 11:54:30 PM
The third solution for bums seems weird for two reasons - if anything, you should give the money to the one with greatest expertise.
First is that if they are spending this money on booze anyway, you want the one most proficient in getting cheap booze to get the money. Otherwise, most of your money goes to intermediaries selling expensive booze, a weird subsidy target.
The second reason is that cheap alcohol and crack are the most efficient means to utility maximization - this is why they are so dangerous. Yes, this recommnedation sounds stupid but so is the "utility maximization" approach when we are talking about doing something for other people.
Posted by: mic at Feb 5, 2007 5:32:57 AM
I would give it to Rex Grossman.
Posted by: T at Feb 5, 2007 8:43:34 AM
as each to tell you a joke.
the one with the best joke wins.
is there anything more important than a sense of humor,
than maintaining the ability to laugh and make others laugh?
Posted by: glenn at Feb 5, 2007 10:33:00 AM
