First, Merry Christmas, Happy Hanukkah, and Happy Holidays to all.

Now to my post.

Robert Murphy recently stated that he carries Clif Bars with him so that when he sees someone begging for money, he has something nourishing to give the person. I stated on Facebook that I have adopted that policy and it works well. I carry a bunch in my car. Every time I’ve asked the person if he/she wants a Clif Bar, the answer has been “Yes.” Moreover, the person has seemed to genuinely appreciate it.

My friend Steve Chapman of the Chicago Tribune, who read about my experience on Facebook, emailed me to ask why I, an economist who understands that from the recipient’s viewpoint, money is always better, give Clif Bars instead of cash.

I have two answers:

1. In my private giving, I am somewhat of a paternalist. I would rather the recipient have healthy food rather than, possibly, spending money on alcohol.

2. Even if I weren’t a paternalist, there’s a strong arbitrage case for my policy. I buy the Clif Bars in a big box from Costco. Although I forgot to save the receipt, I think the per bar price is only about 70 cents. But people who beg for money are typically severely cash-constrained. They don’t normally have enough money to go to Costco (and, remember, that they would have to buy a membership to shop at Costco.) So, if they wanted a Clif Bar, they would likely go to a retail outlet and pay, say, $1.50 each. That means that if they value Clif Bars at below $1.50, they won’t buy them. So all I need for this to an efficient transfer from the viewpoint of the recipient is that he/she value it at above 70 cents. Thus the title of this post. I buy something at 70 cents each and give it to someone who has a substantial probability of valuing it at above 70 cents.