Panhandling behavioral patterns consistent with rational profit-maximization

Beggars can be choosers—and they appear to be rational ones.

Panhandlers are commonly considered “mentally ill” or degenerate substance abusers, and perhaps many are. Even so, this does not seem to prevent them from panhandling optimally. We find that panhandlers behave as homo economicus would behave if homo economicus were a street person who solicited donations from passersby in public spaces.

Here is the appropriately named paper

Hobo Economicus

Abstract

We collect data on hundreds of panhandlers and the passersby they encounter at Metrorail stations in Washington, DC. Panhandlers solicit more actively when they have more human capital, when passersby are more responsive to solicitation, and when passersby are more numerous. Panhandlers solicit less actively when they compete. Panhandlers are attracted to Metrorail stations where passersby are more responsive to solicitation and to stations where passersby are more numerous. Across stations, potential-profit per panhandler is nearly equal. Most panhandlers use pay-what-you-want pricing. These behaviors are consistent with a simple model of rational, profit-maximizing panhandling.

How do they go about?

Some panhandlers beckon you with cardboard signs. Others beseech you with impassioned vocal pleas or by noisily shaking a cup. Some panhandlers stand passively, like urban wishing wells, waiting to receive your change. Others perform music or give away newspapers, and still others lie on the ground practically asleep. Panhandlers may solicit fixed sums from passersby, or they may invite you to pay what you want. And while panhandlers solicit in many public spaces, their locational distribution varies widely. Do panhandling behaviors display patterns? If so, what do they look like, and what explains them?

What they all have in common is their social engagement with passersby because that is their human capital.

We ground our model of panhandling in a few observations. First, panhandlers “support themselves by...engaging the consciences of passersby” through solicitation. Second, panhandler solicitation is generally regarded as a nuisance; it threatens to create “psychological discomfort...in pedestrians,” such as guilt, awkwardness, shame, even fear. Third, pedestrians are willing to pay a modest price to avoid this discomfort. For example, people seek ordinances that restrict or prohibit panhandling. And if they can do so easily, pedestrians divert their paths to circumvent panhandlers.

Panhandlers engage in profit maximization by observing spatial equilibrium.

The space where, ceteris paribus, passersby are more responsive to solicitation and, ceteris paribus, passersby are more numerous therefore tends to attract more panhandlers. An arbitrarily large number of panhandlers who choose sequentially among spaces at which to solicit will locate such that the potential profit available to a panhandler at each space is equal—panhandling spatial equilibrium.

The results reveal panhandling behavioral patterns consistent with rational profit-maximization. Panhandlers solicit more actively when they have more human capital, when passersby are more responsive to solicitation, and when passersby are more numerous. Panhandlers solicit less actively when they encounter more panhandling competition. Female panhandlers also solicit less actively.

Conclusion

Economists have shown that a variety of unorthodox behaviors seemingly unamenable to orthodox economics—from the behavior of pirates and prisoners to that of clerics, cults, duelers, diviners, even human sacrificers—belie rational maximization. Our study finds that the behavior of panhandlers, who are commonly seen as “mentally ill” or degenerate substance abusers, does too. This finding is consistent with T.W. Schultz’s (1980: 649) supposition that “poor people are no less...competent in obtaining the maximum benefit from their limited resources” than “those of us who have comparably greater advantages.” Beggars, it turns out, can be choosers—and they appear to be rational ones.

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