Competition and the Market Economy

If you have ever wondered about the legitimacy of the capitalist claim that market competition provides better services at better prices, then I have a suggestion for you. If you’d like to test this premise, take a trip to the left coast, the Bay Area, the home of The Haight, one of the few places in America where it is not only okay to be a way-leftie, but it is cool and puts you in the center of the Bay Area’s political mainstream. I suggest that you spend time at Fisherman’s Warf and U Cal-Berkley. Last year I was able to spend consecutive days in each of these areas. Here is what I found: Fisherman’s Warf was teaming with tourists. It is filled with places to get great seafood, bars with good bands, shopping (everything has its darker side), and tourist attractions like Alcatraz and the famous sea lions. Seven days a week Fisherman’s Warf is brimming with tourists. Those realists among you have probably already filled out the mental image of Fisherman’s Warf as also packed with something else. Something most localities that rely on tourists absolutely hate – panhandlers. My completely subjective conclusion is that Fisherman’s Warf has more panhandlers per block than any other tourist location in the country. Those of you who are both realists and economists are now also probably concluding that with all these targets (oops I mean tourists) and all these panhandlers, that these panhandlers must be pretty good. What? Good panhandlers? Please move to the head of the class. The panhandlers at Fisherman’s Warf were, without question, the best panhandlers I have ever seen. In general they were polite, often entertaining, and almost always helpful. There were the “silver” guys who put on rudimentary street shows, there was the “bushman” who would scare the pants off your pal by hiding by a trash can, camo’ed from sight until the last minute when your victim passed by. The Bushman rustled his camo at just the right moment, getting a fabulously amusing “start” from your intended target. (I admit the bushman nailed me but good – it was the best dollar my friends spent on the Warf). There were also clever signs asking for help and offers to help tourists find elusive tickets for a bay cruise or Alcatraz tour. These panhandlers were the crème de la crème of their trade. Why? Because there were so darned many of them that if they weren’t pleasant, polite, entertaining, or helpful they had no chance to get any of the thousands of tourist dollars walking around in tourist pockets. I saw a couple of less than pleasant panhandlers on the Warf (undoubtedly rookies) making no headway with anyone at all. These must have been transplanted panhandlers from Berkley.

Prior to spending a couple of days on the Warf, we thought we would tour Berkley. See the campus of Cal-Berkley, hit a few of the bars that were probably a lot more fun back in the 60’s, and generally try to absorb some of the 60’s culture that dissipated into the atmosphere decades ago. There were still some living relics from the 60’s playing their guitars on the street for pocket change and there were some 60’s wannabe generation X’ers who appeared lost trying to be a new millennium hippie. As you might expect in any metropolitan area, there were panhandlers. I noticed while I was there that the Berkley panhandlers were an unusually snarlly lot. They asked for a hand out as though they expected it, as though my money was really their money that mysteriously found its way into my pocket. One particularly unpleasant panhandler berated us multiple times as we spent time strolling the streets of Berkley. His demeanor deteriorated each time we refused his demands for money to the point where we were flogged with obscenities the final time we tried to dart past him. As we were just getting out of earshot of this particularly unpleasant panhandler (I think the term bum probably applies to him, but I am trying to be sensitive here) I heard what I am sure was a well intentioned lady approach the snarly panhandler and ask “would you be offended if I offered you a few dollars?” Offended?!? Why would he be offended? Had she just heard what he had called us? This is not someone who offends easily, but there she was, not only asking if she could give the most snarly of panhandlers money, but making sure that it was done in a appropriate way, not in any way offensive. Heck, I wouldn’t have been offended if she’s offered me a few bucks too, but that didn’t happen. This, however, is the problem with the Berkley panhandlers and why they will never be up to the “standards” set by the panhandlers of Fisherman’s Warf – they don’t have to be good. There is no incentive for them to be the best panhandler they can be. There is less competition for tourist dollars in Berkley, there are fewer panhandlers, and there are people willing to fork over their cash to these less than pleasant panhandlers without provocation and do so in an inoffensive way. I find that highly offensive. Why should these panhandlers be offered “a few” inoffensive dollars while my pal the bushman is over on the Warf scaring the shorts off my friends 12 hours a day? My suspicion is that the bushman makes in an hour what these Berkley low-lifes make in a week…and you know what, the bushman earns what he gets. Like anything in a free market economy, there is equilibrium. Products find their demand or they go away, skills migrate where they can be rewarded, and competition brings out the best in everyone, even in panhandlers. The bushman is additive to the experience of the Warf, not because he wanted to be, but because he had to be. The competition is pretty stiff on the Warf, if you are a panhandler, you’d better be the best or you’ll soon find yourself panhandling in Berkley.