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mXSCNT
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The economic problem of altruism is that some public good or service (such as pollution control) may be valued a small amount by each of a large number of people, with the total utility being high. It's in no individual's best interests to pay for the service themselves, and it's also in no individual's best interests to enter into a collective contract to pay for the service, because if any individual chooses not to enter into the payment contract they would still receive the benefit if the service is provided.
Let's take the question of direct government decision making to provide pollution control off the table for this thread. For this thread, I would like to consider only solutions that are ultimately rooted in each individual making decisions in their own economic best interests. The government may only use policy to "set the stage" for the individual decision-making, not make a direct decision about how much of the service should be provided. Direct government decision making is off topic for this thread.
I made a similar thread earlier but this one is to discuss a new idea.
The new idea is, suppose that there is a loan device wherein an individual may sign over a percentage of their future income to a creditor, in exchange for an immediate lump sum. The creditor is basically investing in the individual's future success.
If enough people in a region take out this type of loan with a single creditor, the creditor now has some (weak) incentive to behave altruistically. If spending $100 for the public good will increase incomes in the region by $20,000 altogether (summing up the income increases from each individual), and the creditor has a 1% share of the total area income, the creditor has an incentive to spend the $100 for the public good, since he expects $200 in return. The creditor's motivation is very weak, however - in this case diluted by 100 fold.
To strengthen the creditor's motivation, the government could supply matching amounts to the creditor, for public works projects that the creditor wants to fund. So if the creditor has a 1% share of the total area income, then for every 1 dollar the creditor would like to use for a public works project, the government would supply 99 dollars towards the same project. Now, if spending $100 dollars for the public good will increase incomes in the region by $105 altogether, it's in the creditor's interest to invest $1 towards the public good, because then the government will match that with $99 and the creditor will receive $1.05 in return, for a 5 cent profit. And the total net income in the region is increased by $5 (including the $1.05).
The source of the government's matching funds would be a tax on those taking this type of loan, in proportion to the percentage of their income they owe the creditor. This tax is no burden, because the total public income is expected to increase by more than the amount of the tax, thanks to the creditor's selfishly altruistic motivation.
Problems with this method:
1. Corrupt creditors - they could be bribed to invest in a "public works" project that really has primary benefit for some private organization, instead of the debtors. Or in fact, the creditors could invest in a "public works" project that actually benefits themselves directly. This could be solved or at least mitigated by requiring this type of creditor (or employees/owners of the creditor) to receive income only from the debtors.
2. The cost-benefit analysis of taking out this type of loan, or offering this type of loan, is unclear, especially compared to other types of loans.
3. It doesn't work for public works projects that improve quality of life but not incomes. Perhaps the government could provide a "quality-of-life income adjustment" that would be added to each individual's income when determining the amount the creditor receives. Or perhaps this is a problem not worth trying to solve.
4. When the percentages owed by the individual to the creditor are different, it is susceptible to a kind of arbitrage, as follows. Suppose that individual A owes the creditor 50% of his income, and individual B owes 0.01% of his income. The creditor could then fund a "public works" project that simply gives money directly to A. The government would match each dollar spent by the creditor with 3 dollars (because the average proportion of income is 25%). Since the tax is proportional to percent owed, A would pay essentially the whole tax. So A loses 3 dollars due to tax, then gains 4 dollars from the "public works" project. Half of that goes back to the creditor, so A has lost a dollar overall and the creditor has gained a dollar. The creditor could basically steal money from A.
To solve the arbitrage issue, the matching amount from the government tax would have to be based on the maximum proportion of income owed by any individual, not the average.
Thoughts?
Let's take the question of direct government decision making to provide pollution control off the table for this thread. For this thread, I would like to consider only solutions that are ultimately rooted in each individual making decisions in their own economic best interests. The government may only use policy to "set the stage" for the individual decision-making, not make a direct decision about how much of the service should be provided. Direct government decision making is off topic for this thread.
I made a similar thread earlier but this one is to discuss a new idea.
The new idea is, suppose that there is a loan device wherein an individual may sign over a percentage of their future income to a creditor, in exchange for an immediate lump sum. The creditor is basically investing in the individual's future success.
If enough people in a region take out this type of loan with a single creditor, the creditor now has some (weak) incentive to behave altruistically. If spending $100 for the public good will increase incomes in the region by $20,000 altogether (summing up the income increases from each individual), and the creditor has a 1% share of the total area income, the creditor has an incentive to spend the $100 for the public good, since he expects $200 in return. The creditor's motivation is very weak, however - in this case diluted by 100 fold.
To strengthen the creditor's motivation, the government could supply matching amounts to the creditor, for public works projects that the creditor wants to fund. So if the creditor has a 1% share of the total area income, then for every 1 dollar the creditor would like to use for a public works project, the government would supply 99 dollars towards the same project. Now, if spending $100 dollars for the public good will increase incomes in the region by $105 altogether, it's in the creditor's interest to invest $1 towards the public good, because then the government will match that with $99 and the creditor will receive $1.05 in return, for a 5 cent profit. And the total net income in the region is increased by $5 (including the $1.05).
The source of the government's matching funds would be a tax on those taking this type of loan, in proportion to the percentage of their income they owe the creditor. This tax is no burden, because the total public income is expected to increase by more than the amount of the tax, thanks to the creditor's selfishly altruistic motivation.
Problems with this method:
1. Corrupt creditors - they could be bribed to invest in a "public works" project that really has primary benefit for some private organization, instead of the debtors. Or in fact, the creditors could invest in a "public works" project that actually benefits themselves directly. This could be solved or at least mitigated by requiring this type of creditor (or employees/owners of the creditor) to receive income only from the debtors.
2. The cost-benefit analysis of taking out this type of loan, or offering this type of loan, is unclear, especially compared to other types of loans.
3. It doesn't work for public works projects that improve quality of life but not incomes. Perhaps the government could provide a "quality-of-life income adjustment" that would be added to each individual's income when determining the amount the creditor receives. Or perhaps this is a problem not worth trying to solve.
4. When the percentages owed by the individual to the creditor are different, it is susceptible to a kind of arbitrage, as follows. Suppose that individual A owes the creditor 50% of his income, and individual B owes 0.01% of his income. The creditor could then fund a "public works" project that simply gives money directly to A. The government would match each dollar spent by the creditor with 3 dollars (because the average proportion of income is 25%). Since the tax is proportional to percent owed, A would pay essentially the whole tax. So A loses 3 dollars due to tax, then gains 4 dollars from the "public works" project. Half of that goes back to the creditor, so A has lost a dollar overall and the creditor has gained a dollar. The creditor could basically steal money from A.
To solve the arbitrage issue, the matching amount from the government tax would have to be based on the maximum proportion of income owed by any individual, not the average.
Thoughts?
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