Kuta Beach

Kuta Beach

Saturday, 5 June 2010

Giving Money to Bums

Whenever I walk around in the city I always see bums sitting on the pavement. I feel sorry for many of these people, especially if they are young, female, and shivering--but many colleagues warn me not to give any money to these bums because, apparently, the money is likely to be spent on illicit drugs or alcohol rather than food.

I currently use my credit card to regularly give the humanitarian organization World Vision a regular amount every month. The hope is that a humanitarian organization like World Vision will use the money to provide for the poor useful things like food, water, and shelter rather than alcohol or cocaine. World Vision Australia is audited by PricewaterhouseCoopers (PwC), the same external audit organization that audits Victorian Government entities to make sure they are in compliance with public sector regulatory requirements. World Vision also has an internal compliance team.

I have a lot of faith in large organizations. I have a lot of faith in government and trusted corporations like Google, AAMI, Commonwealth Bank, and so forth. It's not that I am naive. I am sure there are elements of corruption in any large bureaucracy, but I also think that the incentives are there for shareholders, voters, and clients to establish frameworks to hold agents accountable for what they do. In corporations, executives are accountable to the board of directors and to shareholders. In government, the bureaucracy is accountable to the legislature, which is accountable to the voting public. In many prosperous countries there are checks and balances or institutions that put a limit on fraud and ensure things work. Even though I have no idea what is in the food I eat, I trust that government regulations ensure there is nothing harmful or poisoning in my food. Even though there is no guarantee the judiciary will continue to fair and impartial, I trust that contracts will be honored and anyone who breaks the contract will be punished under the law. Even though I know little about climate science, I trust mainstream scientists when they say climate change is a worry.

Back to the topic of giving money to bums--talk about being sidetracked!--I have recently wondered about the merits of handing over cash to bums on the street. As much as I trust World Vision, I do think that charity, like investments, should be diversified, not only to diversify away corruption risk but also to spread the money around in the interest of fairness.

More Jobs, Less Cash Handouts

I am a believer that the best way to help the poor is to give them a job. While the trend nowadays is for people to be cynical and pessimistic in the topic of charity, I am an optimist because I think much progress has been made and the world is getting better and better. I believe that the world is a much better place now mainly because of the rise of India and China, countries with massive labor markets that are liberalising their labor markets to give the poor access to employment. If countries in Africa were to liberalise their labor markets and essential copy China's emphasis on exploiting cheap labor, I think Africans will experience a massive escape from poverty. I think the opportunity is there because wages in China and India are starting to rise and multinationals searching for cheap labor may have to look elsewhere--perhaps Africa--for cheap labor to make shoes, t-shirts, and other essentials we buy. The problem with many African governments lies in the governments there. I am hoping that one day there will be stablility and harmony in Africa so that multinationals will feel comfortable hiring labor.

Worker Benefits Destroys Jobs

In developed countries like Australia, it is surprising to see bums on the streets. Many might wonder why these people don't simply get jobs and start working like normal people do. The answer may be that government regulations give workers benefits like minimum wages and holidays. It is brillant for workers that the government force employers to give holidays (annual leave) and sick leave, maternity leave, superannuation, and so forth, but employers are not happy. These benefits for workers make it less profitable for employers to hire workers, and if workers are costing employers money, they will have to compensate by hiring fewer people. Why would BHP Billiton hire a bum who may only give $10 per day of value when that bum may cost, say, $50 per day in minimum wages, sick leave, superannuation benefits, and so forth? In my opinion, in an ideal world, there should be no minimum wage, no superannuation, no sick leave, no holidays, no maternity leave, and perhaps the government should subsidize companies who hire workers rather than punish them by imposing payroll tax. I am aware these policies will never materialize because of political reality.

Begging as Working

If I hand a bum on the streets some cash, I can help the poor because I am effectively giving this bum a job. Because this is a cash transaction done without government oversight, I effectively pay this bum a low wage for the job of sitting around in the cold. Because there is no government oversight, there is no superannuation I have to pay him, there is no sick leave or holidays.

The Problem of the Rich Bum

There are some objections. One objection to giving money to bums is that the bum may not be poor. The bum you see on the streets may be a bum during the day but when it's night he goes home to his mansion to sleep on a bed only to wake up the next day and start begging again. The risk of giving money to a rich bum is greatest if the payoff from being a bum is high and the costs are low. The cost of being a bum includes being cold and suffering from shame. Some people have no shame so the only creditable pain from being a bum is from the cold. Therefore, it is safer to give money to a bum who is shivering and looks like he is cold. This is because a rich bum would rather stay at home where he has ducted heating rather than shiver in the cold. An authentic bum is so despearate he is willing to work for money, so a way you can filter out rich bums is to subject them to pain. By subjecting themselves to pain, they signal to others that they are authentic bums rather than rich bums. If you see a shivering and cold bum on the streets, he or she is likely to be authentic. If the bum is wearing lots of clothing, it pays to test the bum. For example, talk to the bum and say, "I will give feed you dinner tonight if you take off most of your clothes and walk with me to the restaurant." If the bum is rich, he won't bother taking off his clothes and shivering while he walks to get his next meal. If he is an authentic bum, he will agree to do this.

Rich bums may exist because the payoff from being a bum may be high. If people only give bums $1 a day, you can be fairly certain that only poor people will beg for a living because no rich person in his right mind would work for $1 a day when he could do something else and earn more. However, some bums may be so effective at begging that they may earn, say, $200 per day. This is a major problem. Even if you subject a bum to pain to test the bum (e.g. make the bum walk to the nearest restaurant with little clothing) the pain may be worth it if he is being paid $200 per day for it. One potential solution is to give bums perishable food rather than money. If you see a bum but don't have any food on you, ask the bum to follow you to a cafe where you will buy the bum some cheap and perishable food or beverage. The problem with this is that it can be a lot of effort on behalf of the donor. Not many people have time to walk a bum to a cafe and buy her food.

A quick technique for testing to see if you are giving money to a rich bum from an authentic bum is to offer to buy her clothing off her. Especially on a cold day, clothes are necessary to protect you from the elements. If a bum is willing to give up his clothes for a small amount of money and thereby be subject to pain from coldness, he is likely to be an authentic bum. When you see a bum, you can say, "That jacket you're wearing looks nice. I will buy it from you for one dollar." If you are talking to a rich bum, she won't accept the offer because her comfort is more important than the money. If you are talking to an authentic bum, she will likely accept the offer because she needs that money so badly for food that she is prepared to subject herself to pain from coldness. A bum will always have clothes you can buy. He the bum is naked, he probably deserves your money anyway. You can buy not only the jacket but also shoes, gloves, and socks.

Make Bums Work for Pay

Many people think bums deserve to be bums because they don't want to work. This is unfair because minimum wage 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. Below are some ideas:

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

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

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

Webcam Philanthropy

A great idea for World Vision is to allow members to test the recipients of charity to see whether they are genuinely poor. For example, a World Vision employee can walk around in a poor area with a laptop and a bag of cash. The employee asks for a poor person to come along. This poor person is then recorded with a webcam and someone like me, the donor, looks at this poor person via the webcam. I then type in my computer what tests I want the poor person to do, e.g. 10 pushups, run on the spot, and so forth. Then when I think the poor person has done enough work to deserve cash, I can use Paypal to wire the money to World Vision who then give the same amount in cash to the poor person doing the pushups. I will pay the poor person just enough so that he can live, e.g. assume that you need about $1 a day to buy food to live, then that means you should get about 13 cents per hour assuming a person works for eight hours a day.  Therefore, a person should get about 1 cent per five minutes. I will then subject a poor person to five minutes of pushups and then pay him or her 1 cent for this.

This I think is a corruption-free method of giving to the poor. There is perfect signalling because I am getting the poor person to work for his money, therefore separating poor from rich. There is perfect accountability because I can see with my own eyes the poor person working. When I transfer to the money to World Vision, the charity organization must hand that exact same amount of money to the poor person and I must see it on the webcam.

Obviously World Vision needs to make some money from this to pay for the cost of the laptop, webcam, workers, and so forth, so for every $1 that is transferred to World Vision by members, say, 97 cents will go straight to the poor in cash.

This is a brilliant business idea. Anyone is free to establish this idea. If nobody does, I will try to establish it in the future once I feel secure enough to start a business. This business will not make much money. If you take 3 cents of every dollar that a donor gives, that's not much, and competition may drive this profit down even more to say, 1 cent for every dollar given. But this business idea is not designed for profit (it's designed to help the poor), so if I can get the profits from this business to simply cover bare costs (e.g. the cost of the laptop, etc) and thereby make zero profit, that will be good enough.

Problems with Webcam Philanthropy and Solutions to Those Problems

I've thought about this idea some more and there are some problems with it. One problem with this idea of getting World Vision to cover the costs by taking a percentage of whatever is donated is that a particular donor may ask for a poor person to do a lot of work but not pay anything. To discourage this, it is important for World Vision to charge a time-based fee, say a few cents per minute depending on the cost of the laptop, etc. Furthermore, a recipient of the money can decline if he or she wants to. For example, if a donor offers $1 but in return the recipient must do one million pushups, the recipient may deem that to be unreasonable, decline the offer, and the donor will be randomly allocated to another webcam. The donor cannot waste time by not giving anything because he will be paying a variable fee based on time and this fee is used to pay the cost of doing all this. There needs to be bargaining power on both sides for this market to work.

Another problem is if there is coercion. For example, suppose an abusive husband orders his wife to go to a World Vision webcam and do whatever the donor on the othre side of the webcam wants for money. The wife who is a victim of abuse may go to a World Vision webcam and then do 100 pushups for $1 and then when she gets that money she goes back home and gives $1 to the husband. The way to make sure the wife benefits from this money is to give the donor the option to pay in food and to watch via webcam the recipient eat the food. For example, the donor offers to pay $1 worth of rice to the recipient in return that the recipient does 100 pushups. After doing the 100 pushups the donor transfer $1 over to World Vision who in turn give $1 worth of rice to the woman in real time and then the recipient eats the rice then and there while the donar watches her eat the rice. This is useful if the woman has children. You cannot make children work because of child labor laws, so the mother can instead bring these children along and show them via webcam to the donor and the donor can give the mother rice that she eats then and there and gives to the children. The children eat then and there in front of the webcam and the donor can monitor this.

Another problem is that some poor people may be better than others at doing pushups. For example, a pregnant woman cannot do pushups easily. This can easily be fixed by giving the donor the ability to get the recipient to so other easier things like situps, starjumps, or even getting the recipient to sing. The donor can even type some other novel task if he wants to. This ensures accountability and freedom and makes sure the donor can dictate exactly how his own money should be earned.

Webcam Busking

How can this idea be sold to people? You need to take something that is already familiar to them. Busking is a concept that has been around for a long time. According to Wikipedia, busking is "the practice of performing in public places for tips and gratuities." That is esentially what I am advocating, but I want the idea to be carried out online so that more money can go to the poor.

I have Googled "onling busking" and the idea has already been touted by other people, but what other people are suggesting is not good. Most of what I have read online involves a musician recording his own music and then posting it online and asking for donations. This is not good because a rich person can easily make his own music, record this music, upload it online, claim that he is poor, and then ask for money. He only needs to perform once and then he may make millions. What I advocate is donors giving money to performers in real time so that there is accountability. When I log into World Vision's online busking area, I want to be able to be able to browse through many buskers and then watch a busker of my choice via high-definition webcam. While watching I can give money and when I do, in real time that money must drop near the person and the money must be visible to the donor via the webcam. If I drop, say, a $1 coin then I must see that $1 coin dropping. As I said before, giving food may be a better idea. It may also be a better idea if the donor can see the busker eating the food in real time.

When you are browsing to see which busker to watch, I think it would also be a good idea to allow people to see how much a particular busker is getting paid in terms of hourly rate. This will make the whole thing more equitable so that donars can target those buskers who are not paid livable wages. The currency for this will be in dollars (maybe US dollars or maybe even in gold given how much the US dollar has depreciated lately) or in rice. Donors can see how much each performer is paid in dollars per hour or grams of rice per hour.

It would be best if donors can give money via Paypal. They can initially put busker credits into an account and then this account balance goes down as the donor gives money or rice to a performer in real time. I think to get this idea going there should be no fee paid at all. Instead, ask for donations and say that donations will allow new performing rooms to be created. A performing room is simply a room where the poor person performs. It is just a room with a computer and a webcam. A machine that gives out money or rice would need to be made as well. Probably the most expensive part of this is the real estate. Make it so that anyone who donates money to build a performing room gets to name the room. If it's quite expensive to make a room and multiple people donate money to create a room then maybe make it so that the person who contributes the most money names the room but other donors may write their names or put an advertisement on the wall. This I think should encourage many companies to help out so that they can advertise.

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