What Would YOU Do?

What obligation does the man have to report this, or to return the money?

Here's the setup:

A malfunctioning ATM at a bank in Maine has dispensed $37,000 in cash to a man who requested $140. 

South Portland police say they responded to the TD Bank branch Thursday morning after getting a call from a woman who said a man was spending an unusual amount of time at the ATM she was waiting to use. 

Officers found the man stuffing cash into a shopping bag. The money was returned to the bank. Bank officials say they don't want to press charges. But police continue to investigate. The man hasn't been charged. 

A bank official describes the problem as a "code error" and says no customer accounts were affected. 

What would YOU do?  Suppose it was windy, and it was windy because there was a forest fire nearby.  Suppose the money would have burned if he hadn't taken it.  Or blown into the ocean.

I wonder.  I think I would have just returned the money.  But I'm relatively wealthy, and the threat of being charged with a crime is much worse than $37k.  A desperate person might have offered to split it with the woman behind me, so that she won't call the cops.

So, the question, if a rich person can afford to be "moral," but a poor person is coerced by circumstance to be immoral, are we justified in punishing the poor person?  I think the answer is yes, but the fact that I would return the money is not particularly morally praiseworthy.

Final question:  suppose I knew ALMOST for sure I would not be caught.  What amount of cash would it take to induce me to take it, rather than return it?  I think the answer is about $500,000.  So we already know what I am, we are just haggling about the price.

(With a nod to the LMM for the find...)

Auberon's Bond (or, how I Learned to Stop Worrying and Mint Titania's Coin)

Munger shared a bit of correspondence yesterday. As one commenter notes, it's an old class discussion chestnut used to illustrate what happens when credit markets get constipated. Of course, since it is a story, it's quite naturally open to interpretation:

Mike Munger argues that even if there is no multiplier, fiscal stimulus would help to end a balance-sheet recession: http://t.co/RVCCeTagV6
— Noah Smith (@Noahpinion) March 4, 2014

 The net result of the c-note chasing around town is a sense of relief, and calm nerves quite certainly have economic value, even if nothing material is produced. Heck, if you squint right, and assume away moral hazard risks (which becomes pretty heroic once you endogenize the traveler) it almost seems like a free lunch, at least for the inhabitants of the town.

There was something about the story that reminded me of an old issue of Sandman. Collected in the Dream Country trade paperback, A Midsummer Night's Dream tells the tale of how William Shakespeare performed the eponymous play for the actual court of the fey. At one point (during the intermission, I think), one of the actors summons the audacity to present a bill of charge to the king of færies. Auberon stifles his outrage and condescendingly pours out a small fortune in færy "gold" to the hapless human, and then proceeds on his aloof way. Naturally, upon daybreak, the foolish mortal (who, oddly enough knew enough lore to be an itinerant player, but not enough to remember common bedtime stories) finds himself the proud owner of a purse stuffed to the brim with leaves.

He wasn't as wealthy as he thought he was.

Munger's vignette featured a convenient plot device: each of the (eu?)voluntary exchanges made under dubious credit assumptions was already complete. The c-note circulated to clear up some red in the ledgers. The ABC folks would point out that this is an accounting irrelevancy and what matters is the structure (and heterogeneity) of capital, that the fools' gold is a way for the sovereign to lie to the constituent about the true scarcity of credit.

But still, that refractory period enjoyed after the discharge of legitimately incurred debt, the joy felt by the actor after earning a boodle from the Lord of the Fair Folk, are these not valuable public services? If a constituency so wills it, should they not be able to forgive themselves a round of imprudent borrowing? What if they really really mean it that they totally pinky swear that they're off the easy credit spike?

Do we really need a credible threat of ex post regret to discipline private indebtedness? Isn't forgiveness also a virtue? I mean, we have an independent central bank, after all, one totally above the political fray. What's the worst that could happen?

Morality and Social Science: Time, Money, Ethics

Time, Money, and Morality 
Francesca Gino & Cassie Mogilner 
Psychological Science, forthcoming

Abstract: Money, a resource that absorbs much daily attention, seems to be involved in much unethical behavior, which suggests that money itself may corrupt. This research examined a way to offset such potentially deleterious effects - by focusing on time, a resource that tends to receive less attention than money but is equally ubiquitous in daily life. Across four experiments, we examined whether shifting focus onto time can salvage individuals' ethicality. We found that implicitly activating the construct of time, rather than money, leads individuals to behave more ethically by cheating less. We further found that priming time reduces cheating by making people reflect on who they are. Implications for the use of time primes in discouraging dishonesty are discussed.

Money, Moral Transgressions, and Blame 
Wenwen Xie et al. 
Journal of Consumer Psychology, forthcoming

Abstract: Two experiments tested participants' attributions for others' immoral behaviors when conducted for more versus less money. We hypothesized and found that observers would blame wrongdoers more when seeing a transgression enacted for little rather than a lot of money, and that this would be evident in observers' hand-washing behavior. Experiment 1 used a cognitive dissonance paradigm. Participants (N = 160) observed a confederate lie in exchange for either a relatively large or small monetary payment. Participants blamed the liar more in the small (versus large) money condition. Participants (N = 184) in Experiment 2 saw images of someone knocking over another to obtain a small, medium, or large monetary sum. In the small (versus large) money condition, participants blamed the perpetrator (money) more. Hence, participants assigned less blame to moral wrong-doers, if the latter enacted their deed to obtain relatively large sums of money. Small amounts of money accentuate the immorality of others' transgressions.

Remittance Payments and Directional Euvoluntarity: Buttercoin and Brito

Jerry Brito (along with our pal Andrea Castillo) is busy doing the heavy lifting when it comes to the economics (and political economy) of Bitcoin, and since his work already addresses EE points, I have ruled it prudent and polite to keep from sailing upwind of his research. If you'll forgive a note of conceit, I'd like to cross tack just this once.

Buttercoin is a nascent startup aimed at slashing the tendon of Western Union's business model using Bitcoins as the medium of exchange* in lieu of the staple currency: US dollars. Their praedicatum is that the extant firms are circumstantially coercive. Expats have little recourse but to submit to being "gouged" to the tune of 10% per transaction. These guys call shenanigans and say that they can operate for less.

I for one hope they're right. Now, I don't claim to know what the "correct" price is here by any stretch, but I do know the following:
1) Overseas postal workers are far far more likely to steal from parcels and letters than US workers.
2) Setting up an international account with a bank is a hassle the likes of which most Americans have no idea.
3) Even if you do manage to safely and securely get your cash from point A to country B, you're still not out of the woods, since as cash shifts hands, you're not entirely unlikely to end up with a wad of counterfeit Russian bills lining your palms.

Given all that, 10% is often a lot better than the alternatives. Voluntary, as it were, though not euvoluntary. Buttercoin promises to sidestep all that. Bitcoin can't be counterfeited, can't be seized by unscrupulous agents of the state, and can be quickly and painlessly converted into the local currency. If it turns out that the prices charged are thanks chiefly to these technical hurdles, then the Buttercoin folks might well be able to successfully undercut them. If, as I fear might be the case, it's a matter of regime uncertainty (grease the right palms or your business license won't get through), it could well be that the 10% is there as a normal cost of doing business.

Fingers crossed, guys. Godspeed.



*this is sort of an interesting point of semantics here. In this application, is Bitcoin more a medium of exchange or a unit of account? It's a wonky question, and I'm not sure it really matters apart from some technical legal questions across regimes. After all, what really counts as "money" is a matter to be hashed out in arbitration, yes?

Fear and Loathing in the CPI

From  Article I, Section 8 of the US Constitution, aka the Enumerated Powers of Congress:

 The Congress shall have Power To... coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;

A standard weight or measure might be something like a nautical mile or a dram. Even a standard barrel might count*. An ounce is subject to regulation, but a "box" ain't. Curiously, few folks meandering the aisles of your local grocer buy in bulk, so it's almost unheard of to hear "honey, would you pick up 100 grams of toothpaste while you're out?" We buy by the bottle, by the tube, by the loaf, by the case. In other words, we anchor to non-standard units.

And vendors know this. They also understand very well two important vagaries of human nature, both linked to folks' natural tendency to economize on costly information-gathering: it takes quite a shock to jar people from the money illusion and in a cacophony of communication, a lot of relevant information is easy to drown.

This should be intuitively obvious to anyone who's walked into a store. Tell me... do you take the time to do a careful comparative analysis of the nutrition information of each and every food item you purchase, recording panel data along the way and conducting detailed econometric analysis to determine the ideal combination of grocery items? Or are you more like me and you just buy what's on the list, trying 3/4ths-heartedly to avoid buying dairy products that have exceeded the sell-by date? Sure, you know that all those processed foods have filler in them, but did you run a spectrographic analysis to determine what they actually are? Noooooope. Probably nope. Producers know you're a busy person with more important stuff to worry about than whether or not that box of brown sugar is a little bit smaller than the last time you bought it. Or that those fish fingers are a lot more breading and a lot less fish these days. Time is money and every second you spend fretting over the bacon bits is time away from Game of Thrones or whatever it is people are up to these days.

You see, sellers care chiefly about the direct relationship they have with their customers. But there's this little finch sitting on their shoulders. BLS mooks scribble down posted prices and convert that into an index that takes every conscious effort to mimic a typical American consumer. You can read more about the process here. The point is, the BLS folks will treat a bottle of shampoo like a bottle of shampoo, even if it was 24 oz last month and now it's only 22. These figures get drafted into COLA adjustments to transfer payments in a pathetic Ouroboros where the guy trying to get an accurate measure has to stand on the scale to reach the balance beam.

This is all obvious stuff. It's not even the most important critique of the CPI (not by a long shot), but it is the one relevant for euvoluntary exchange. If sellers can "cheat" on the margin by playing fast and loose with package contents and if this jiggering fools both real consumers and the price index, we've got a whole lot of unintentional uncertainty going on. We've got market competition, which tends over time to push prices down, but we've also got a monetary authority who has elected to subscribe to the notion that mild, predictable inflation is good for "the economy" (another metaphor I have a bit of a problem with), and we've got consumers on autopilot who just can't afford the attention needed to stay on top of FOMC operations as needed to isolate relative price changes from inflation. If the alternative is between a state of the world with no elite tinkering of the "price level" (ibid, metaphor) and the status quo, it's not entirely clear to me that there's a slam-dunk case against an unencumbered general equilibrium.

More to the point, the efforts firms waste by fiddling with deceptive packaging thanks to the FRB's policies would probably be better spent improving the actual product. Ditto for the talent employed by the agencies whose job it is to measure the water level of the tub they're standing in.







*The abbreviation for barrel is 'bbl', which comes from Standard Oil. Rockefeller had the same sort of problem I discuss here, except he was the sole buyer. Time was, the derrick workers would snag any old barrel they had lying around and slop the crude right in. Oil contracts were written by the barrel, so it was in ol' JD's interests to standardize the contents thereof. Hence, the "Blue" Barrel (that's the first 'b' in bbl), a uniform 55 gallon blue barrel. Curiously, vertically integrated firms began using the designation, even for non-standard volume barrels like the ones used by distillers and winemakers. Next time you're drinking your oaky chardonnay, try not to think of Daniel Day-Lewis's performance in There Will Be Blood.

Interlude: Change in my Pocket (goin' jing-a-ling-a-ling)

Before I get back to my series on the meta-euvoluntarity of the Constitutional Amendments, I want to devote  a post to something that's been buzzing around the econ and law blogs lately. You might have read about a proposal that runs something like this: the US Treasury, under its authority to utter currency strikes a coin redeemable for $1 Trillion. Tim Geithner at his George Raft-iness saunters over to The Bernank and flips the coin over to him in exchange for a thousand billion dollars' worth of interest-bearing Treasury instruments (though if it's legal tender, there's nothing really stopping them from picking up all the garbage CDOs that ended up on the Fed's balance sheet, but let's not complicate this any more than it already is) You can read two defenses of the proposals here (h/t Tyler Cowen). You can read heaps of scorn elsewhere. (more below the break)

Dirty Money: Morality is Endogenous?

Diverging Effects of Clean Versus Dirty Money on Attitudes, Values, and Interpersonal Behavior

Qing Yang et al.
Journal of Personality and Social Psychology, forthcoming

Abstract:
Does the cue of money lead to selfish, greedy, exploitative behaviors or to fairness, exchange, and reciprocity? We found evidence for both, suggesting that people have both sets of meaningful associations, which can be differentially activated by exposure to clean versus dirty money. In a field experiment at a farmers' market, vendors who handled dirty money subsequently cheated customers, whereas those who handled clean money gave fair value (Experiment 1). In laboratory studies with economic games, participants who had previously handled and counted dirty money tended toward selfish, unfair practices — unlike those who had counted clean money or dirty paper, both of which led to fairness and reciprocity. These patterns were found with the trust game (Experiment 2), the prisoner's dilemma (Experiment 4), the ultimatum game (Experiment 5), and the dictator game (Experiment 6). Cognitive measures indicated that exposure to dirty money lowered moral standards (Experiment 3) and reduced positive attitudes toward fairness and reciprocity (Experiments 6–7), whereas exposure to clean money had the opposite effects. Thus, people apparently have 2 contradictory sets of associations (including behavioral tendencies) to money, which is a complex, powerful, and ubiquitous aspect of human social life and cultural organization.

From Kevin Lewis

Is It Voluntary?

Paul Bou-Habib sends this quote from Hume, one I had never noticed before, from A Treatise of Human Nature, Book III, Part II, Sec. V:

“…A man, dangerously wounded, who promises a competent sum to a surgeon to cure him, wou’d certainly be bound to performance; tho’ the case be not so much different from that of one, who promises a sum to a robber….”

Now, isn't that interesting?  The quote addresses the nature of promises, but implicitly the problem is the nature of promises made under duress.

Is the doctor obliged to perform the surgery if for some reason the man could not pay, and assuming the doctor is not bankrupted himself by performing the surgery?

If you answer yes, why is the wounded man obliged to pay, just because he happens to have money? If the provision of medical care is an obligation imposed on trained medical personnel simply because someone needs the care, why would some people be forced, at gunpoint in effect, when others are not obliged to pay?

Voluntary Coercion: Is It Really Voluntary? Is It Really Coercion?

Have trouble getting up in the morning? Perhaps the negative consequences aren't big enough.

You can make the consequences as big as you want, though, by using this super keen money destroying alarm clock!

Couldn't be simpler. You just have to decide how big a prospective loss will be big enough to motivate you to get out of bed, and then put that amount of cash in the shredder hopper. Then, when the alarm goes off, you have one minute to get up and turn off the money killer. If you don't, it starts LOUDLY shredding your cash.

Since it goes one bill at a time, you might put a $1, a $5, a $10, a $20, a $50, and then some $100s. If it shreds slowly but loudly, say one bill every 30 second, you can "buy" an extra minute of nappy-nap for $6. But then the price goes up rapidly.

Now, I never have trouble getting up, and usually wake before the alarm. So stuff like this makes no sense to me. But it does raise some interesting questions.

1. The remorseless, mechanical money muncher is an effective commitment device. YOU put the money in, and you set the time you want it to start munching. So is it voluntary, or coercive, or both?

2. The advantage of the thing is the knowledge that it cannot be stopped, or argued with, or reasoned with. It will destroy unless you act the way you want to act, at the time you sign the "contract." But you do NOT want to get up, when the alarm actually goes off. (If you are the sort of person who might need this clock, that is.) Isn't this a pretty good description of the state? We agree to be coerced, if we disobey. And the state has no discretion, because it punishes all transgressions equally.

3. Should the thing be legal? After all, destruction of money is a federal crime. Of course, the point of the clock is that you will NOT destroy the money; that's why you put the money in a place where it COULD be destroyed.

UPDATE: Chris Conover comments, on Facebook: It's a great idea that technically, the state deems illegal. That, in a nutshell, describes too much of what the state does these days: prohibiting voluntary (read: mutually beneficial) acts between consenting adults. In this case, if the state were to enforce its ban on destroying currency, it would be prohibiting a consenting act between one's present and future self.