Earlier this year I read an article titled ‘Australians sending ‘unhelpful’ donations like high heels, handbags, chainsaws to disaster zones‘. The article was written in response to a Red Cross report that found Australia’s efforts to help our Pacific Island neighbours recover from disaster, through donations, may be making things worse.
As stated by the journalist, the main points of the news article were:
- Shipping containers full of donated goods cost millions in storage fees
- Relief workers often have to sort through donations, instead of providing humanitarian help
- Costs of dealing with donations often falls on local governments already dealing with expensive disaster recovery
Below is an economic take on these three dot points.
The first of these dot points represents a stock-flow problem. What that means is although one individual donation is not a problem (might even be good depending on what it is) too many donations can be. While I may think my donation is helping, if we all think and do the same, perversely we are creating a problem as we give more than can be used. This results in a stockpile of donations that needs to be sorted, stored and distributed. (On a side-note climate change is the classic stock-flow problem where what we do individually is harmless but our collective emissions is a worry)
The second of these represents relief workers doing the work of a market. Matching those who want something with those that provide it is what markets do best. Makes you think, could aid agencies set up an online platform that better simulates a market and frees up their relief worker’s time? I have no idea but just imagine an ebay or gumtree style platform where you can post up what you have (rather than send it in) and someone at the Red Cross picks and chooses what they want and when.
The third of these represents what economists would describe as incidence, or in simpler terms how costs are shared. This thinking is typically applied to tax policy and considerations about who is going to be hurt and to what extent. What matters in these debates is elasticity, which roughly translates to desperation or need. Those who cannot find an alternative tend to bear a greater incidence. Getting back to our topic the phrase beggars can’t be choosers seems to apply (to an extent). While as the article suggests they may not want our high heels, chainsaws and handbags to rebuild their community, they can ill afford to turn our help away. And, the reality is, that is why they continue to wade through our gifts.
In closing the article highlights ‘cash is best’. However, what economics has shown is that in lieu of that, a market may help ease what is a giant co-ordination problem made worse by our zeal and their inability to choose.
