Wednesday, January 12, 2011

Drift Taxing

Worthwhile Canadian Initiative makes an insightful connection between overfishing and charitable donations. It's a stretch, but it works. He uses the results of a recent economic experiment to show that beyond a certain point people's generosity - like fish stocks - is rapidly depleted to the point where more effort (fishing/collecting) produces less output:
In the real world, however, multiple fundraisers chase the same donors. Each request for money, taken in isolation, is perfectly reasonable. In aggregate, however, the total amount requested by fundraisers could easily be more than donors consider to be fair.

Faced with a barrage of requests, a donor's generosity collapses. People begin screening their calls, throwing requests for funds straight into the recycling bin, or putting the phone down with a single word: "sorry."

With altruism, as with fish, overexploitation is partly attributable to technological change: lower telecommunication costs and new forms of communication reduce the cost of requesting funds. Data mining is the sonar of the charitable world, allowing potential donors to be located precisely.

It doesn't just stop with fishing and charities of course. Take taxation for example. The government will become increasingly desperate to meet the agreed IMF/ECB budgetary criteria in the coming years (it won't be much easier for the next government either). So expect to see more 'drift taxing' in future budgets (plastic bag taxes and the like): and more efforts by the 'fish' swim into the deeper, blacker parts of the economy to avoid extinction.

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