Every day, on my way to work, I pass at least 3 homeless people.  They stand on street corners holding signs that say things like “Homeless – Anything Helps – God Bless.”  It’s actually quite heart breaking…at first.  If you live in a city, you become kind of numb to it after awhile.  A philosophical question arises as to the issue of whether to give them money.  A friend and I debated this question to exhaustion about five years ago – without reaching a conclusion.  Here are some of the basic considerations of that argument.

Don’t give them money

Ralph Waldo Emerson once said, in his essay, Self-Reliance, that he never gives homeless people money.  He goes on to say that this is because if you give people a hand up, they’ll never pull themselves up, and thus never develop the skills required to be self-reliant.  You are, in essence, making them weaker by giving them money.  I’ve heard the theory extended to other forms of oppression.  People have to overcome the oppression themselves or be doomed to be oppressed by another oppressor in the future.  You can’t free a people, they have to free themselves through revolution.  Niccolo Machiavelli would say that anytime you help someone else, you’re hurting yourself.  He saw life as a zero sum game.  I think I would personally give a little more weight to Emerson than Machiavelli. 

Of course, I don’t think people are homeless because they aren’t trying hard enough.  I don’t think that’s it at all.  People tend to be homeless (long term homeless, at least) in two basic circumstances, (1) severe substance abuse or (2) mental illness.  Those things have to be coupled with the lack of a support system or a rejection of their support system.  Most of the people I know won’t become homeless because they know someone who would take them in.  They have a network of people that would help them out if things got bad enough.  I don’t know how Emerson would have responded to this.  Maybe he would have suggested that no one take them in.  Perhaps he would have advocated tough love.  Of course, taking them in might make them self sufficient sooner.  Having a place to stay, to wash up, and access to nice, clean clothes could only help you land a job – and a ticket out of your dire situation.  This brings us to the other side of the argument.

Give them money

On some level, people have a responsibility to help one another.  If you see someone fall, the proper thing to do is go and help them up.  If you see a blind person, you should offer them your arm.  If you see a fist fight, you should break it up.  If an elderly person gets on the train, you offer them your seat.  Money really isn’t much different.  Charity is a positive thing.  People take pride in charitable giving.  Being able to help people makes us feel good.  I heard Tracy Chapman, the singer and class warrior, once make the point that some people are just one handout away from being able to make an honest living (think this guy).  I like this point, too.  It makes sense.  I wouldn’t be what I am without the help I’ve received in life from my family and friends.  Some of the successful people you know might refer to themselves as self-made, but if they thought about it much at all they could probably point out lots of people that helped them, by influence if nothing else. 

My take

I haven’t given money to a homeless person in a long time.  I put my head down and keep walking almost every time.  Maybe Emerson’s argument has something to do with this.  Maybe it’s my belief in the free market.  More than anything, I think it’s economics.  I don’t think it’s the most efficient way to use the money.  If you’re going to give money to the homeless, an economist would say it’s smarter to save all those one dollar bills and donate them to a homeless shelter, or soup kitchen, or free medical clinic (my wife’s preference), or to a program that helps get homeless people off of the streets.  This way you have a little better idea about where the dollars are going, and you can potentially help more people.  For whatever reason, people are more likely to help an individual case than a broad cause.  There’s a bias toward helping an individual.  I think it has something to do with actually seeing the person with your own eyes, living, in front of you.  You want to be able to help this person, that you can see and hear, have a meal today.  You want to make an immediate impact.  It’s probably why they advertise for you to adopt a specific child in Africa rather than just asking you to donate to help lots of children in Africa.  If they can connect your heart to an individual, you’ll be invested in helping.  Just a thought.  Anyway, this was on my mind today and I thought I would do a post on it.  Let me know what you think by email or in the comments – do you give money to homeless people?  Why or why not?  Thanks for reading.

This is part 5 of my review of New Ideas from Dead Economists by Todd Buchholz.  Here are parts 1, 2, 3, and 4 if you’d like to look back.  Any of the entries can stand alone, of course.

I had a college professor in undergrad that taught a class on Southern American literature.  Very smart guy.  Ivy league graduate school and all that.  He was a Faulkner scholar.  He had a tremendous amount of knowledge about literature.  He cared a lot about people.  Injustice really bothered him.  Overall, I’d say he was a cool guy.  One day in class he started telling us about how Coca Cola was exploiting Indonesian (I think it was Indonesian) workers for pennies an hour (this made him furious).  He finally went so far as to say that Coca Cola was an evil company and that Coca Cola should give the Indonesian workers the factory.  I was puzzled, so I raised my hand and asked whether it was the wages that he found to be unfair.  Wages were part of the problem.  I stated that if the Indonesian workers could make more money elsewhere, they would, and that the Coca Cola job was actually helping them, their families and their economy.  He disagreed for a number of reasons, and proceeded to assault my logic on moral grounds.  I concluded that he didn’t know much about economics.  In any case, he didn’t subscribe to the same brand of economic theory that I did.  It’s possible that he had, at some point, studied our next economist, Karl Marx. 

Buchholz spends a pretty decent amount of time talking about Marx’s life.  It’s obvious why he did, too.  Marx is fascinating.  The amount of money he spent (he was not a frugal person), the life he led, the things he did.  He was an academic above all things.  He poured through money and raged against the burgeoise.  He wrote books while living in vast poverty.  He was rarely able to hold any job for much time at all.  Both he and his wife were from wealthy families – and they lived off help most of the time.  He spent his time writing and studying.  He was a man of ideas and ideals.  Some of his best known works include Contribution to the Critique of Political Economy, The Communist Manifesto, and, of course, Capital.

Like all the economists we’ve examined, Marx had so many ideas that it’s hard to give you even a brief overview of his major ones.  I’m going to take a shot at it anyway.  Many people think of Marx as an enemy of capitalism.  This may be true to an extent.  I think he did view capitalism as possessing sort of an evil quality.  That being said, he actually believed that capitalism was a necessary precondition to socialism.  He believed that the extra production capitalism produced would help lead to socialism, and that socialism was inevitable, but I’m getting ahead of myself here.

Marx’s basic theory was that capitalism requires the exploitation of the worker.  He believed that the value of a product is determined by the amount of labor used to produce it.  Machines are just labor stored up in metallic form.  An item that takes 10 hours of labor to produce is twice as valuable as one that takes 5.  Assuming this is true, no profits can be made unless labor is exploited.  Instead of paying the workers for the exact amount of value they add to the process, the business owner only pays them a small amount and takes the surplus value for himself.  The worker, according to Marx, is unable to demand the full value he/she is owed because the business owners own the means of production (materials, place to work, etc.) and because the worker is easily replaceable by someone in the unemployment pool that capitalism inevitably creates.  Marx explains why this exploitation can’t go on, citing the inability to exploit machines, increasing economic power of a few, depressions, and possible revolution of the poor. 

Obviously, Marx has been widely criticized, though his ideas still command a cult following.  Any modern thinker can see problems with his labor theory of value.  For one, it ignores incentives for innovation and entrepreneurship and the value they can add.  They ignore the value of human capital in running a business – knowledge and management skill in running a business.  Buchholz uses the example of the man who invented Velcro after getting several burrs caught on a wool sock.  Surely he added value above the amount of labor used to create the Velcro, didn’t he?  Capitalism also keeps prices low for consumers and demands quality.  Alfred Marshall, who we’ll look at next time, also points out that Marx focuses solely on the supply of goods.  Marshall points out that value comes from demand, and sometimes risks must be taken to unlock that demand.  Such risks have value as well.

I do agree with some of Marx’s ideas.  Without some form of social welfare, I do think the poor would eventually revolt.  People will go to great extremes to survive.  That I truly believe.  I also believe that Marx’s writings have some value.  I don’t believe he represents the utopia that he’s commonly associated with, because I just don’t believe that his writings reflect that that’s what he felt Marxism would lead to.  As economist Frank Hahn once said,

“Most Marxists have never even read Marx.  Of course, you really can’t blame them.”

What I do believe has value, is that Marx represents the other side of the coin.  His reasoning flies in the face of current economic theory.  He looked at the world and had an idea of how it could be different.  Of course, I don’t think any attempts at realizing Marx’s ideal have been very successful.  His ideas are still challenging.  They still make you think.  I don’t agree with most of them, but some of his ideas actually make a lot of sense, if you read them for what they are.  I am a hearty advocate of the free market on this site and in my personal life, but I still recognize that there are other view points out there.  He had a sense of humor, too – Marx once famously declared that he was no longer a Marxist.  I hope, wherever he is, that my Southern American literature professor isn’t either.  Thanks for reading.