The Economics of Begging

I was approached while eating a meal in McDonalds by a beggar asking for some money to buy a burger. I declined, but it did make me think, what motivates these people?
Some would say it is a sign of these harder times, but I doubt that; beggars have always been around in some shape or form. But, it’s a choice I would never take. As a legal citizen of this country, there is always work available. The people that say there isn’t are talking rubbish, it’s just that they’re too fussy. Decent jobs, yes, are hard to come by, but minimum wage jobs like cleaners are plentiful. This beggar had good English and I would assume he would be legal as well.
Even if you’re not legal there is lots of work, albeit much lower paying, if you know where to look.
Let’s say I lost everything, and I had no family or friends and had little cash, and needed to earn straightaway. What would I do? I would move myself to the cheapest accomodation possible. The likelyhood is, that wouldn’t be in London. There are places up north like Nottingham which are like £30 a week to stay in – that would be good and easy, seeing as I would have no possessions. A minimum wage job like a cleaner would pay maybe £170 a week after tax, giving you over £500 for travel, food, etc. And of course, I would still like to have some business on the side, that part of me would never die. I’m lucky that I have qualifications to fall back on, and that I would be applying for better paid jobs in the meantime. Once I got one of these, I would upgrade my living to somewhere a bit better, and so on. It would be likely that in a few years, I would resembled something reasonable.

So, as you can see, it isn’t really that difficult, although it would be extremely tedious and boring, and probably soul-destroying to start again. But given the choice, I would take this over begging. Man wasn’t designed to sit around all day and beg, to me that is surrendering your dignity.

So why do people do it? I think people want something for nothing; that the potential rewards outweigh the risks. In fact, there are no risks, and the human costs diminish with every approach. I mean, the first time you beg, you would probably feel ashamed, but the 100th time, you would have got accustomed to rejection. It’s a bit like cold-calling really.

Beggars should get some benefits, get some accomodation, and get a job. Begging doesn’t benefit the economy in any way.

Why do we buy shit, anyway?

It occured to me that the toilets in Liverpool Street station, and indeed throughout London, have increased their price to 30p from 20p, after many years. As a seasoned traveller throughout Europe, this price is still behind some others I’ve seen (typically 0.50 Euros) or even 10kr in Stockholm.

But, there is no downturn in demand. Reason being, the utility (benefits) gained from going to the toilet is worth more than the cost. As going to the toilet is a basic, physiological need (everyone needs to do it), it could be reasoned that operators could charge quite a lot more. I suppose it is finding the sweet spot of pricing. Too high, and people will complain, generating negative publicity, or find a place to go for free (such as McDonalds).

This is the case for every business though; they want to make you pay as much as they can make you. And branding and advertising their products is a way of raising the perceived utility. Increased utility means people are willing to pay an increased price.

The point is, when it comes to utility; there are no absolute measures, the key word is ‘perceived’. Most of the stuff we buy, we don’t actually need. So, let’s not feel bad about getting rid of stuff. I have a computer (one of the things to go) – in fact I have several. The utility I get from that computer is minimal. Let’s quantify it a bit – the score is +2 (where 100 is absolute requirement to live). I already have lots of computers. I can sell it to someone who doesn’t own a computer. Their utility score might be something like +10, as they need one.

Everyone wins here. You could argue that I lost 2 points on the utility scale – but I gained cash worth more than the 2 points. Of course, it could be argued that a computer retailer lost out on a sale here, and there can be knock-on effects from that, but inflation busting means you have to take care of yourself. It is pretty much a fact of life that there will be winners and losers.

The cash/utility relationship is everywhere. A simple example is to look at McDonalds. You buy a meal there, which fills you up, but not quite. Let’s say the score is +10. Now, they are offering you ‘make it large’ for just 30p extra. Now, the extra utility you get from a bigger meal (+3) is bigger than the price it costs. So, it seems like a good deal. Of course, there was ‘Super size’ as well, but the utility gains (by the customer) and the revenue gains (by McDonalds) would be negated by the negative publicity (and lost business). So they don’t offer it.

Of course, the utlity score can be negative as well. Let’s say that you’ve eaten a meal, and you’re full. Eating another meal would actually make you feel unwell and uncomfortable. So the utility score would be -5, because there would be no benefits gained. You can see why there are no ‘add an extra Big Mac for half price’ offers, because for most people, the cash cost would be much more than the benefits gained.

From this as well, we have to understand that some goods have no value whatsover and you can’t give it away for free. Which is probably a reason why I have so much stuff.