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Commerce · III.11 · MMXXVI · daylight

La Bourse  /  Volume III  /  Nº III.11  /  Workbook — the student

WORKBOOK — THE STUDENT

Chapter III.11 · What Money Cannot Do

For the person studying this alone, or in a seminar, with no budget to allocate and no tariff to set. The instruments in this chapter are large. The habit underneath them is small, portable, and yours today.

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WHY THIS WORKBOOK IS DIFFERENT

The chapter is written for someone who can change a tariff. You probably cannot. What you can do — and what almost nobody does, at any level of seniority — is compute the incidence of a refusal.

That is the transferable skill and it is the whole workbook. Somebody declines to charge for something on generous grounds. You ask who receives the benefit of that generosity and who pays the implicit charge, and then you do the arithmetic rather than arguing about the motive. It works on a university's library policy, a housing cooperative's waiting list, a family's unpaid care, a shared flat's kitchen, and a national water utility. The utility is only the case study most textbooks reach for.

A second skill sits beside it: the convergence test. Two methods, one ratio, and a decision about whether a price exists at all. Twenty minutes, and it ends a category of argument you will otherwise have for the rest of your life.

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PART ONE — DISCOVERY

Days 1–30: find what is already working without a price

Exercise 1.1 — The unpriced inventory (90 minutes)

List ten things that reliably happen around you with no payment attached. Be concrete and be small: someone refills the kettle; a seminar group shares notes; a neighbour takes in parcels; a forum answers questions from strangers.

For each, write one sentence answering: what is holding this up, if it is not money? Reciprocity. Reputation. Pleasure in the doing. Membership. Habit. Duty to a specific person.

Then mark the three you believe would survive the introduction of a payment, and the three you believe would not. You are building the intuition that Brief 1 makes rigorous.

Exercise 1.2 — The Swedish replication, on paper (60 minutes)

Take the numbers directly. Women donating with no payment: 52.0 percent. With SEK 50 offered: 30.0 percent. Compute the fall in percentage points, the relative fall, and the supply multiplier, and check them against 22.0 percentage points, 42.3 percent and 0.577.

Now the part that matters. The effect disappeared when the payment could be assigned to charity, and there was no significant effect among men. Write two hundred words on what those two facts jointly rule out. If you conclude "money reduces altruism", go back — that hypothesis does not survive the charity arm.

Exercise 1.3 — The appreciative interview (45 minutes, with another person)

Find someone who does something valuable unpaid — a volunteer, a moderator, a carer, a union rep — and ask exactly this, without variation:

"Tell me about a time this went unusually well. What made it possible? And is there anything somebody could have offered you that would have made you less willing to do it?"

Then stay quiet. The second question is the one nobody asks, and the answers are the reason this chapter exists.

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PART TWO — THE ARITHMETIC

Days 31–50: compute before you take a position

Exercise 2.1 — Reproduce the chapter's figures (2 hours)

Do not take them on trust. Open lib/verify/III_11.py, read it, and then compute these independently — by hand, in a spreadsheet, in whatever language you use.

1. The scope elasticity of the birds study: $80.00, $78.00 and $88.00 for 2,000, 20,000 and 200,000 birds. Confirm 0.0207.
2. The protest-zero decomposition: 780 positive answers at $39.74 over 1,000 and over 900. Confirm $31.00, $34.44, 11.1 percent, and an aggregate difference of $311,083,011 at 90,322,581 households.
3. The value of a statistical life deflated: $7,400,000 × 313.7 ÷ 201.6. Confirm $11,514,782 and, at an annuity factor of 23.115, $498,157 per life-year.
4. The whole water table. This one is the term's real work.

Then do the thing that matters most: find one published figure in this chapter and check it against the original paper. Not the computation — the input. Every input in the module is marked PUBLISHED or MODELLED for exactly this purpose. If you find a discrepancy, write it down and bring it to your seminar. This edition wants to be checked.

Exercise 2.2 — Your own convergence test (60 minutes)

Choose something you have said cannot be priced. Now price it twice, by two methods that share no assumptions — a replacement cost, a foregone earnings figure, a stated willingness to pay, an insurance premium, a market comparable.

Write the ratio between your two answers.

• Ratio under about 3: a difficult price. Argue about the number.
• Ratio in the hundreds: an absent price — the chapter's language example came out at 903.2 times, against a value of a statistical life where two independent routes land within a deflator of 1.556.

Whatever you find, you have converted a stance into a measurement. That is the exercise.

Exercise 2.3 — The honest negative, found (45 minutes)

The chapter's honest negative inverts: the protective move is often the regressive one. Find a case in your own institution. A free service whose capacity is rationed by queue, by proximity, by knowing whom to ask. Then compute, even roughly:

• Who uses it, and how does that break down against income, year group, distance, or first-generation status?
• What does someone excluded pay instead — in money, in hours, in a worse substitute?

Write the two-column table. A rough incidence table beats a precise opinion.

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PART THREE — DREAM AND DESIGN

Days 51–75: build the apparatus

Exercise 3.1 — The present-tense description (60 minutes)

Describe, in the present tense and in four hundred words, an institution you belong to as it would be if every decision not to charge came with an incidence table. Not "it would be fairer." What is on the agenda, who writes the table, what does the table look like, what happened the first month it existed.

A dream stated in the future tense is a wish. A dream stated in the present tense is a specification.

Exercise 3.2 — The instrument catalogue, on one page (90 minutes)

Build your own version of the chapter's five, and hold yourself to a case and a cost for each.

Fill the "use it when" column yourself. That column is the whole point and it is the one no textbook will give you.

Exercise 3.3 — The one-page case (45 minutes)

Take the incidence table from Exercise 2.3 and write one page: what is currently free, who receives the benefit, who pays the implicit charge, what instrument you would use instead, and the one number that decides it. Give it to exactly one person who could act on it.

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PART FOUR — DESTINY AND DELIGHT

Days 76–90: make the habit hold

Exercise 4.1 — The three conditions (30 minutes)

The chapter names three things that make the discipline persist: the convergence test written down and applied by someone who is not arguing; an incidence table attached to every refusal; and a catalogue that turns "we will not price it" into a choice rather than a silence. Write, for one institution you belong to, what each of the three would look like concretely — the document, the meeting, the person.

Exercise 4.2 — The irreversible commitment (this week)

One thing you cannot quietly take back. Publish the incidence table. Put the scope elasticity in the seminar paper. Ask the question out loud in the meeting where the free service is discussed. Small and irreversible beats large and deniable.

Exercise 4.3 — Delight, on purpose (ongoing)

Notice the moment in Exercise 2.2 when the ratio came back and the argument stopped. That feeling — a test settling a question without anybody having to have been wrong about their values — is the pleasure this chapter is offering, and it is available to you repeatedly and cheaply. Keep a note of each time it happens. By the end of a year you will have a list, and the list is a practice.

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THE TERM PROJECT

One allocation, carried the whole way

Choose one good, in one institution, that is allocated without a price. A library's study rooms. A clinic's appointments. A city's allotments. A department's funding for conference travel. A housing cooperative's list.

Then, across the term:

Weeks 1–3 — Describe the rule. Not the stated rule; the operating one. Who actually gets it, by what route, and what does a successful applicant know that an unsuccessful one does not?

Weeks 4–7 — Build the incidence table. By whatever dimension you can actually measure. Where you cannot measure, write unknown, not flat. A missing answer and a zero are not the same fact, and the whole method dies at the moment you confuse them.

Weeks 8–10 — Price the refusal. What does an excluded person pay instead? The chapter's city gives you the template: $1.458 per cubic metre against $0.371, 3.93 times as much, for 4.00 times less water at the same monthly outlay of about $8.38 against $8.54.

Weeks 11–13 — Propose an instrument, with its cost. From your catalogue. Name the cost honestly — Cape Town's R1,700,000,000 midpoint shortfall, Oregon's rewrite. A proposal that names no cost will be believed by nobody and should be.

The deliverable: eight pages. A rule, a table, an implicit price, an instrument, a cost. Give it to somebody who can act.

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SELF-ASSESSMENT

Mark yourself honestly against each. Four is where the chapter is finished in you, not where you are finished with it.

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CARRYING IT FORWARD

Three things to keep past the term.

The question. Who receives the benefit of this not being charged for? It takes four seconds and it is the most useful sentence in this volume.

The test. Two methods, one ratio. Under three, argue about the number. In the hundreds, reach for an instrument.

The refusal to round. Every input in the module for this chapter is marked PUBLISHED or MODELLED. Do that in your own work from now on. The habit costs one column and it is the difference between a figure a reader can check and a figure a reader must trust.

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A SEMINAR EXERCISE WORTH RUNNING TWICE

The room that prices, and the room that refuses

Split the seminar. Give both halves the same case — a city clinic that has always been free, now facing a waiting list of eleven weeks.

Room A may only use prices. A fee, a subsidy, a voucher, a sliding scale. Room B may not use a price at all. A cap, a standard, a right with a queue rule, a ration, a panel.

Give each room forty minutes and require the same three outputs: the rule, an incidence table with an unknown written wherever they cannot measure, and one named cost. Then bring them together and do the only thing that matters — put the two incidence tables side by side.

What happens, reliably, is that Room B discovers it has built a price after all. Its queue charges in hours, its eligibility rule charges in paperwork, and its panel charges in whoever is articulate enough to appear before it. That is the chapter's central finding arriving in the room rather than off a page, and a student who has watched it happen does not forget it.

Run the same exercise again in week ten with the roles swapped. The second run is where the learning lands, because the people who argued hardest for a price now have to compute who their price excluded, and the people who refused one have to name what their refusal cost.

The written deliverable: two pages, both tables, and one paragraph on which room produced the more honest document. Not the better outcome — the more honest document. Those are different questions and telling them apart is the skill.

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THREE THINGS TO READ NEXT

For the crowding-out evidence. Read Mellström and Johannesson (2008) first and Lacetera, Macis and Slonim (2012) immediately after, in that order and in one sitting. Reading either alone produces a confident and wrong practitioner.

For the valuation argument. The 2012 exchange in the Journal of Economic Perspectives between Carson and Hausman is the whole debate in two papers by people who understand each other perfectly. Read both; the disagreement is real and neither is being careless.

For the philosophy. Anderson's Value in Ethics and Economics is the serious version of the claim that some goods are not commensurable. Read it holding the convergence test in your other hand, and decide for yourself whether the test does justice to what she is arguing or quietly assumes it away. That question is the best essay in this chapter's set and it has no settled answer.

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APPRECIATIVE QUESTIONS FOR YOUR SEMINAR

1. Where in this university does something valuable happen reliably with no payment attached, and what is actually holding it up?
2. When has a decision not to charge for something here clearly been the right call — and who benefited that nobody predicted?
3. If every free service published who used it, what would we learn about ourselves in the first month?
4. What would it take for no shadow price exists here to be heard as a finding rather than as a refusal to do the work?
5. Which argument in this department would the convergence test settle in twenty minutes?
6. What is the smallest incidence table any of us could build before next week, and who would want to read it?