The economics of compassion

The survivors of the Asian tsunami can count themselves lucky on one point: It happened over the Christmas-to-New Year’s season, when news is at its scarcest. Probably the scale of the disaster would have guaranteed the same sort of all-consuming media coverage in any event. Still, one wonders whether the world’s response to the Rwandan slaughter might have been different had it been better timed. Of course, all this media attention is not an unalloyed blessing. The tsunami might have provided all the exciting visuals the media could have hoped for, but the idiotic commentary and phoney controversies we provided ourselves, whether on the presumed role of the Almighty in all this, or on the failure of various world leaders to cut short their vacations within the approved number of days, or in our giddiest moments, whether this might mark a “turning point” for humanity, the moment when the world turned away from greed and war and devoted itself to caring for the least fortunate. Gosh, maybe. Or maybe not. What has excited this fit of millenarian optimism is the unprecedented outpouring of public concern across the West over the disaster, and the massive amounts of money that have been raised to provide relief. But that extraordinary surge of public compassion, I’m afraid, is itself very much a media-fuelled phenomenon, or at any rate derives from the same source: spectacular visuals. Absent the same stimulus to the senses, it is unlikely to be replicated. It is not even clear that it should be. Health economists have long noted the same “bias to the visible”: funding for the treatment of horribly disfiguring diseases far outstrips that for unseen internal ailments, which may be far more devastating for the victim. The shock and sympathy that moves us to such disproportionate acts of generosity may be genuine, and praiseworthy, but the resulting allocation of resources may not be the most advantageous, least of all to those in need. Ask the people of Darfur. Moreover, the unity of purpose that arises in the wake of such a catastrophe as an earthquake, where there is a clear objective and a consensus on what is to be done, is one that is rarely in evidence, at least in liberal societies. The closest parallel is wartime. And, as in war, people are inclined to generalize inappropriately from the experience. After the Second World War, many people wondered why society’s resources could be marshalled so effectively to defeat the Nazis, but not to defeat, say, unemployment or poverty. The reason, quite simply, is that an economy is not an army. The economic task is not to accomplish a single end, on which everyone is agreed, but to coordinate millions of competing ends, the everyday wants and needs of individual workers and consumers, whose interests in such matters they and they alone are best placed to judge. So the international response to the tsunami disaster is not likely to provide a template for more complex and enduring issues like economic development, any more than the war on Hitler was a model for the war on poverty. Yet if this is something like a military enterprise, it is surprising that we are not more willing to apply the wartime model in the present example. We do not leave it, after all, to private donations to fund the army. Just as individuals are best placed to judge their own interests in matters of individual wants, as in market-based exchange, so they can have no way of judging more general questions, such as the appropriate level of assistance to provide to the suffering peoples of Asia. They cannot know, as individuals, the total amount that is required, and if they did, they could not possibly assess their own personal share of that total -- leave aside how to ensure each actually fulfilled his allotted obligation. The difficulties governments are experiencing in coordinating their relief efforts, in short, are multiplied a million-fold at the level of the individual citizen. While “free riders” may contribute less than their fair share, there is at least as great a likelihood, in the face of the urgent felt responsibility to “do something” in the face of such a crisis, that others will contribute too much, or in the wrong form (the CBC had a report of a shipload of pepper arriving in Sri Lanka from some undoubtedly well-meaning donor). These are exactly the kinds of collective decisions, moral and practical, that governments were invented to address. Problem: government budgets are already allocated. There is no item marked “tsunami relief,” and many of those clamoring for governments to “do more” would be singing a different tune if it meant “doing less” at home. The same is usually true at the outbreak of war. The appropriate response, then, may be that adopted in wartime: a temporary, dedicated tax, calibrated to meet our share of the international relief effort, and to expire thereafter. If we’re as serious as we claim about doing our part, we’ll pay it. Of course, the income tax was presented as a temporary wartime measure when it was first introduced. That was in 1917.