Wednesday, September 21, 2011

Aesop Econ: The Grasshopper and the Ants

Here’s one I remember from childhood:
THE ANTS were spending a fine winter’s day drying grain collected in the summertime. A Grasshopper, perishing with famine, passed by and earnestly begged for a little food. The Ants inquired of him, “Why did you not treasure up food during the summer?” He replied, “I had not leisure enough. I passed the days in singing.” They then said in derision: “If you were foolish enough to sing all the summer, you must dance supperless to bed in the winter.”
Wow. There’s so much econ in this fable it’s hard to know where to start.

Obviously, we’re looking at a problem of intertemporal choice. The insects must decide how much effort to exert during an earlier period (summer) to prepare for a later period (winter). Exerting effort entails a present cost in terms of forgone leisure, but a future benefit in terms of consumption. The optimal choice depends on the magnitude of the subjective costs and benefits, as well as the chooser’s rate of time preference -- that is, how much he values the present relative to the future.

To a behavioral economist, the fable involves myopia or hyperbolic discounting. To simplify greatly, the grasshopper places too much weight on the present simply because it’s the present. If asked during the spring to choose his summer behavior, the grasshopper might plan to work harder. But then the lazy days of summer arrive, and suddenly he decides to kick back. This is known as time inconsistency, and it is often regarded as evidence of cognitive bias or irrationality.

To a neoclassical economist, however, this is clearly a fable about moral hazard -- the tendency to take greater risks when shielded against the consequences. No one knows whether the coming winter will be mild or harsh, and so they must choose between storing up food or taking a gamble. The grasshopper’s failure to work during summer might well be a rational response to the expected assistance of others in the event of a harsh winter.

And this raises the specter of the Samaritan’s Dilemma. People of a kind and decent disposition don’t wish to allow others to suffer, especially if helping them would be a small sacrifice. But providing charity may foment moral hazard, thereby leading to more people needing help.

The Samaritan’s Dilemma featured prominently in the most recent Republican presidential debate, in which Wolf Blitzer posed a tough question to Ron Paul:
A healthy 30-year-old young man has a good job, makes a good living, but decides: “You know what? I’m not going to spend $200 or $300 a month for health insurance because I’m healthy, I don’t need it.” But something terrible happens all of a sudden, he needs it. Who’s going to pay if he goes into a coma, for example? Who pays for that?
This 30-year-old man is the grasshopper, and we are the ants. Aesop’s ants take the position of Ron Paul: “Well, in a society that you [sic] accept welfarism and socialism, he expects the government to take care of him. … But what he should do is whatever he wants to do, and assume responsibility for himself.” I find it interesting that so many people -- who presumably heard this fable in their childhood and thought it wise – found Paul’s answer reprehensible.

Paul also advocated private charity as an alternative to government. Yet private charity, too, creates the potential for free-riding by the irresponsible. So there is a tension in Paul’s position. John Goodman explains how the tension can be resolved:
[P]rivate sector charitable activities are never run like government entitlements. If you are away from home and lose your wallet, the local Salvation Army will give you a meal and a place to sleep and maybe even some cash. But they will not do this day after day, night after night. It’s probably fair to say that all private charities seek to give aid without encouraging dependency.
Aesop’s ants follow a similar policy; they do not refuse the grasshopper aid outright, but instead inquire as to how the grasshopper’s situation arose. Of course, charitable discretion is not a perfect answer. There is always the risk of denying help to the deserving, and also the risk of giving help to the undeserving (what if the grasshopper had lied?). But if you grasp the Samaritan’s Dilemma, you realize there is no perfect answer; that’s why it’s called a dilemma.

11 comments:

Ran said...

> I find it interesting that so many people -- who presumably heard this fable in their childhood and thought it wise – found Paul’s answer reprehensible.

Wait, did you find "The Ant and the Grasshopper" wise when you were young? I always found it heartless, an artifact of a crueler and less enlightened time.

Do I and my liberally bleeding heart therefore get a pass for finding Ron Paul's statement reprehensible?

Ken King said...

Having first been exposed to it via this Disney short during 1st or 2nd grade, I thought the story was a little bit stupid.

That's because the Disney version screws up the moral, and just about gets it backward - the grasshopper gets a minor scolding from the Queen Ant, but essentially gets away with his lack of effort.

If you're not up for watching the whole thing, you can skip directly to the resolution.

Glen Whitman said...

Ken, does that mean that you're sympathetic to the original (non-Disney) version of the fable?

Ran, yes, I give you points for consistency. But I think the wisest position is to realize there really is a dilemma here. To regard Paul's position as self-evidently wrong disregards one prong of the dilemma.

Ran said...

I do see the dilemma, but I have my view nonetheless. (As do "The Ant and the Grasshopper" and Ron Paul.)

Stuhlmann said...

Outside of the tropics, most grasshoppers do not survive long enough during the winter for hunger to be an issue. The cold either kills them outright, or slows them down enough for them to be easy prey. Also the grasshopper's singing in the summer is done to attract mates. Maybe the grasshopper's choices were rational. Longevity doesn't guaranty that you'll pass along your genes.

Philip Whitman said...

You said, "Aesop’s ants follow a similar policy; they do not refuse the grasshopper aid outright, but instead inquire as to how the grasshopper’s situation arose." That statement is not exactly true. Aesop said, "They [the ants] then said [to the grasshopper] in derision: “If you were foolish enough to sing all the summer, you must dance supperless to bed in the winter.” You are right in saying the ants inquire as to how the grasshopper’s situation arose, but you are not right in saying the ants do not refuse the grasshopper aid outright, since, in fact, the ants do refuse the grasshopper aid outright, or at least that’s the way I interpret “you [the grasshopper] must dance supperless to bed in the winter.”

Glen Whitman said...

As I read it, the ants first inquired as to how the grasshopper came to be in this situation, and only then refused him aid. So if the grasshopper had given a different answer, the ants might have helped him.

Ken King said...

Glen Whitman said... Ken, does that mean that you're sympathetic to the original (non-Disney) version of the fable?

In principle, yes, although in practice I'd almost certainly help the grasshopper rather than turn him away - at least the first time.

My childhood reaction was recognizing moral hazard (without knowing that's what it was called) and that it seemed a kind of pointless movie since anyone with half a brain would see past the ostensible point about hard work and realize that the grasshopper wound up sitting pretty, with a token "you were right, I was wrong".

I'm a bit intrigued by the timing of the movie's release (1934) - I don't know enough about Walt Disney's politics at that time, but is there deliberate commentary here on depression-era programs and the New Deal?

Philip Whitman said...

I always thought the grasshopper died because of his laziness.

jimbino said...

I note that the Aesop fable has nothing to do with insurance and everything to do with 401Ks. Most of the world's denizens are, and always have been, mostly uninsured, and most of them would be condemned as idiots if they subscribed to insurance before putting food on the table or getting an education for themselves and their brood.

There are at least two things about insurance that make it a stupid thing to participate in.

The first is that it pays out some 50% of every premium dollar.

The second is that it is racist, sexist, ageist, pro-natalist and pro-marriage. For example, there is no way in hell that a single, childfree, white male in his 20s should ever consider health insurance. There is no way that a Black man would ever participate in Social Security or Medicare if he had a choice, since he is expected to die just a few years after qualifying for benefits. He knows he is lifelong exploited for the sake of Whites, Women, Breeders, the never-having-worked spouses and the Disabled, who all reap huge undeserved benefits from the hobbling of his working life.

Epsilon Given said...

"The second is that it is racist, sexist, ageist, pro-natalist and pro-marriage."

You forgot "pro-employee-of-a-big-company". Insurance is brutal if you're either working for a small company, or if you're trying to strike it out on your own. Ironically, our situation began when the Feds decided to tell people how much they can make; to be more competitive, companies offered health insurance as an extra benefit.

As someone who understands statistics, I appreciate insurance; but as someone who sees the mess caused by government regulation (indeed, regulation after regulation to "fix" the things that regulation broke in the first place!) I just see a big, corrupt mess.