Using the best possible numbers for earning-to-give, imagine that an additional direct work person was like the AMF staff and generated $2.5M in donation opportunity. Now imagine I took the low value of earning-to-give, $9.5K/âyear. Using these two numbers, it would take 263 people earning to give to match one person doing direct work, suggesting that 99.6% of people should earn-to-give.
I noticed that Iâm confused about this argument because it implies that the worse earning to give is, the more people should do it.
Could you explain more why these are the correct things to compare? I get and agree with your second comparison where you compare salaries.
âI noticed that Iâm confused about this argument because it implies that the worse earning to give is, the more people should do it.â
**
Some hopefully more intuitive analogies:
When automation dramatically ups the productivity of a single worker in a job, a common result is that fewer people are needed to do the job (people get laid off, sometimes they strike, etc.)
The huge increase in productivity of farmers means that whereas at one point probably 80%+ of the working population was needed in agriculture to produce enough food, now itâs <10%.
If Iâm earning barely enough to live on and then living costs outpace wage rises (i.e. my real wage falls), I will probably work more hours.
If Iâm cooking, I will likely add much less of an ingredient with a very strong flavour than one with a relatively weak flavour.
**
Peter is looking at a deliberately simplified analysis where all people are either money-producers or money-consumers. If there are too many producers or consumers, the marginal producer/âconsumer isnât actually increasing the amount of money that gets moved (we are either opportunity-constrained or funding-constrained). We want a rough balance, and so the worse the producers are at producing, the more of them we need, and vice-versa.
Thanks, I agree that this is helpful and explains his 2nd example where he is comparing the salary of an AMF person to what an E2G person donates, but I still donât understand the example I quoted where he is comparing the âdonation opportunityâ from AMF staff versus E2G.
(To use the terms of your last paragraph, it doesnât seem like this is comparing producers and consumers but rather 2 different types of producers.)
I agree itâs not intuitive when you put it that way, but I think it makes sense:
Imagine a strange world where the highest impact thing to do is to turn this magical crank. Also forget about meta opportunitiesâthere are only two possible roles: turning the crank yourself (direct work) or funding the salaries of people who turn the crank (earning to give).
Forgetting a moment about psychological constraints and thinking only about pure impact, you ought to turn the crank yourself, because the more people turning the crank the more impact there is, and earning money itself doesnât turn any cranks.
However, the people turning the crank need to not starve to death, and theyâre requesting a frugal $25K/âyear to fund their lifestyles.
Currently thereâs $0 in this crank movement (two different puns intended), so we need an ETG person to fund some salaries.
Now imagine that the highest salary you can get is $50K/âyrâyou take $25K/âyear for yourself and can fund one person full-time turning the crank. So for every one person turning the crank, you need one person ETG, or else nothing would happen. The next person to join the crank movement will do ETG, the person after that to join will turn the crank directly, and so on.
Now imagine that someone gets a superjob and can earn $50M/âyrâthey also take $25K/âyear for themselves, but they have $49,975,000 left over for donations; enough to fund 1999 people to turn the crank. Now the next 1999 people to join should turn the crank directly, because we donât need any more money. None of the next 1999 people should earn to give.
When earning to give was worse, we needed more people doing it. When it got better, we needed much less people doing it. Thus, the better earning to give is, the less you should do it, generally speaking.
Thanks Peter, I agree that your insight about âwhen itâs worse more people should do itâ is correct and your analogy is helpful.
But what really confuses me is the specific example I quoted where you are looking at what an AMF staff person does versus what an E2G person does. It seems like in both cases you are comparing âdonation opportunityâ, yet you are choosing the one which is worse.
An AMF staff person is like a crank turner in my exampleâit doesnât matter how much donation opportunity you create if thereâs no one there to fulfill it.
I think you are agreeing with me? We shouldnât be comparing the output of the âcrankâ, but instead be looking at what it takes to turn the crank. Therefore we shouldnât compare 2.5 M to 9.5 K, instead we should compare the salary of someone at AMF to 9.5 K.
I noticed that Iâm confused about this argument because it implies that the worse earning to give is, the more people should do it.
Could you explain more why these are the correct things to compare? I get and agree with your second comparison where you compare salaries.
âI noticed that Iâm confused about this argument because it implies that the worse earning to give is, the more people should do it.â
**
Some hopefully more intuitive analogies:
When automation dramatically ups the productivity of a single worker in a job, a common result is that fewer people are needed to do the job (people get laid off, sometimes they strike, etc.)
The huge increase in productivity of farmers means that whereas at one point probably 80%+ of the working population was needed in agriculture to produce enough food, now itâs <10%.
If Iâm earning barely enough to live on and then living costs outpace wage rises (i.e. my real wage falls), I will probably work more hours.
If Iâm cooking, I will likely add much less of an ingredient with a very strong flavour than one with a relatively weak flavour.
**
Peter is looking at a deliberately simplified analysis where all people are either money-producers or money-consumers. If there are too many producers or consumers, the marginal producer/âconsumer isnât actually increasing the amount of money that gets moved (we are either opportunity-constrained or funding-constrained). We want a rough balance, and so the worse the producers are at producing, the more of them we need, and vice-versa.
Thanks, I agree that this is helpful and explains his 2nd example where he is comparing the salary of an AMF person to what an E2G person donates, but I still donât understand the example I quoted where he is comparing the âdonation opportunityâ from AMF staff versus E2G.
(To use the terms of your last paragraph, it doesnât seem like this is comparing producers and consumers but rather 2 different types of producers.)
I agree itâs not intuitive when you put it that way, but I think it makes sense:
Imagine a strange world where the highest impact thing to do is to turn this magical crank. Also forget about meta opportunitiesâthere are only two possible roles: turning the crank yourself (direct work) or funding the salaries of people who turn the crank (earning to give).
Forgetting a moment about psychological constraints and thinking only about pure impact, you ought to turn the crank yourself, because the more people turning the crank the more impact there is, and earning money itself doesnât turn any cranks.
However, the people turning the crank need to not starve to death, and theyâre requesting a frugal $25K/âyear to fund their lifestyles.
Currently thereâs $0 in this crank movement (two different puns intended), so we need an ETG person to fund some salaries.
Now imagine that the highest salary you can get is $50K/âyrâyou take $25K/âyear for yourself and can fund one person full-time turning the crank. So for every one person turning the crank, you need one person ETG, or else nothing would happen. The next person to join the crank movement will do ETG, the person after that to join will turn the crank directly, and so on.
Now imagine that someone gets a superjob and can earn $50M/âyrâthey also take $25K/âyear for themselves, but they have $49,975,000 left over for donations; enough to fund 1999 people to turn the crank. Now the next 1999 people to join should turn the crank directly, because we donât need any more money. None of the next 1999 people should earn to give.
When earning to give was worse, we needed more people doing it. When it got better, we needed much less people doing it. Thus, the better earning to give is, the less you should do it, generally speaking.
Does that make sense?
Thanks Peter, I agree that your insight about âwhen itâs worse more people should do itâ is correct and your analogy is helpful.
But what really confuses me is the specific example I quoted where you are looking at what an AMF staff person does versus what an E2G person does. It seems like in both cases you are comparing âdonation opportunityâ, yet you are choosing the one which is worse.
An AMF staff person is like a crank turner in my exampleâit doesnât matter how much donation opportunity you create if thereâs no one there to fulfill it.
I think you are agreeing with me? We shouldnât be comparing the output of the âcrankâ, but instead be looking at what it takes to turn the crank. Therefore we shouldnât compare 2.5 M to 9.5 K, instead we should compare the salary of someone at AMF to 9.5 K.
Some things are like this, though it is uncommon. https://ââen.wikipedia.org/ââwiki/ââGiffen_good