The economics Nobelist's alarming discovery about human nature.

How the dismal science applies to your life.
Oct. 10 2002 1:17 PM

Phony Generosity

Economics Nobelist Vernon Smith's alarming discovery about human nature.

(Continued from Page 1)

Now I wonder what would happen if the experimenter offered to reverse the flow of funds—inviting you to pass dollars to B (the taxpayer), all of which would be tripled out of the pocket of the hapless subject A, the stranger next door. (Of course, this experiment would be difficult to conduct in practice since A would probably call the police. But let's consider the hypothetical.) Since A and B are interchangeable to you, this seems like exactly as desirable a proposition as the original experiment. Would you spend your life passing money back and forth between strangers, coughing up your own funds at each step along the way?

You might object that subjects are unaware—or at least potentially unaware—that these experiments are funded by tax dollars. Fine, but I don't think that changes anything. Surely the subjects must be aware that these experiments are funded by someone, and that every dollar comes out of someone's pocket. Even if you think the experimenter is determined to keep going till he's spent, say $1,000, it's still true that every dollar you give to A is a dollar that won't be available to some future experimental subject. And why should you care more about A than about his future counterpart?

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There are only three explanations I can see for all this. One is that people just really enjoy moving other people's money around, independent of who those people are. Another is that people simply forget that there are no free lunches, and you can't give something away without making someone pay for it. Yet another is that people somehow care less about anonymous faceless taxpayers than about other anonymous faceless strangers. I'm not sure which of these explanations is right, but none of them does much to improve my faith in democracy.

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