Will the Cashless Revolution Wipe Out Panhandling?

A reader named John Neumann writes:

Guys, I had a thought today as I was walking to work in the sweltering D.C. morning heat: As the U.S. has increasingly become a cashless society with the rise of debit- and credit-card use, has there been a decrease in panhandling, busking, and homelessness? Obviously, fewer people carrying cash or change means panhandlers, buskers, and the homeless will have fewer and fewer people giving them money on the street. Would busking and panhandling become extinct if we do eventually become a completely cashless society? Is that already happening?

Great questions, John!

Photo: FaceMePLS

I don’t know the answers, but I might now seek them out. If we do ever get truly cashless, presumably you could transfer money from your digital wallet to a panhandler’s digital wallet. Might it be hard for a panhandler in possession of a digital wallet to appear needy? Probably not: if they are ubiquitous, the cost of a digital wallet itself would likely be near (or even below?) zero.

John’s questions raise two other thoughts:

+ I wonder if the appeal of going cashless might wane in light of so much high-profile financial hacking going on.

+ If/as we do get more cashless, what are the other unseen ramifications? Personally, I’d be happy to do away with the stuff. It’s dirty, inefficient, and produces a lot of troublesome by-products.


Joshua

As long as there is prostitution, graft, and black/grey market trade (from pirated DVDs to drugs), panhandlers need not fear a world without cash.

AaronS

In the case of drug addicts who use cash to obtain drugs, the first thought is that a cashless society would do great damage to the drug business. Digital records of all transactions would make it very difficult for addicts or dealers to do business.

From this, I think (at least) two things would arise. First, upping the ante, someone would come out with some app that would "hide" or "erase" your transactions. Just as there are apps today to erase your questionable internet surfing habits. So technology would try to end-run the game.

But for most addicts, I imagine that that sort of complexity is beyond reach. So how do they obtain drugs? Clearly, some new sort of "currency" would have to arise. It might be some sort of barter system. It might be some underground currency. It might be gold. It might be a more complex market for stolen goods. But to cop a phrase from Jurassic Park: "Addiction will always find a way."

I imagine the same goes for the homeless. Most of the people aren't homeless because they don't want to work, etc. They are homeless because they have such mental issues, addiction issues, alcohol issues, literacy issues, and the such, that they CANNOT work. They, too, will find a way. It may be that they have to form "unions," pooling their money to buy the appropriate technology, then tracking how much each person has "in the bank."

Every advance has the law of unintended consequences. For every child we save from malaria, that's another person that needs the earth's dwindling resources. For every new oil find, we feel a lessened need for alternative energy. Yes, we should save the child even if it means we all must do with less, but let's not make the mistake of thinking that there is not a price to pay. A cashless society will solve a lot of problems...and create many new ones, I"m sure.

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caleb b

Aaron, I think you have made some great points. Addicts can be very clever and quite industrious.

The only point I question is "Most of the people aren’t homeless because they don’t want to work." Well....we really don't know that. Partly because the only method we really use to study the causes of being homeless are surveys. The surveys list several options as to why someone is homeless including substance abuse, mental illness, housing affordability, etc.

My point is that there isn’t an option for “I’m just lazy and I don’t want to work.”
Full Disclosure: I was homeless from age 12 to 14.

Please, don’t get me wrong....addiction and mental illness are the primary causes, but being lazy isn't really a reason someone is going to own up to.

Here is a study on homeless causes by The US Conference of Mayors. http://usmayors.org/pressreleases/documents/hungerhomelessnessreport_121208.pdf

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Joshua Northey

Well I could see it diminishing the number of panhandlers/buskers, not sure it would effect the homeless much (might drive some panhandlers/buskers into homelessness).

I don't think the "high profile hacking" will have any effect on the employment of a electronic economy. It will mostly have to do with old people dying. When people born in say the 1980s are getting to be senior citizens then we may be able to finally stop using cash.

Cashless would probably makes the Police and IRS's job easier which is a good thing.

This will drive the anti-government whackos crazy, but I would honestly think the best system would be a federally administered one where everyone's money was held by a government agency which administered the readers/e-wallets.

Would eliminate all kinds of crime. Would eliminate tax evasion. Could cut out non-productive sectors of the economy (parts of the financial industry).

Of course moving to such a system will be as traumatic as the money to paper money, so it will take time.

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paul haine

In the future, panhandlers will probably just request that you 'Like them on Facebook'

Mango Punch

As long as there is demand for black markets there'll be resistance to going cashless... Also Steve, given interchange fees it's not unambiguous that non cash transfers are more efficient than cash.

Enter your name

Especially for small transactions. I once had to put a single photocopy on a business credit card. I suspect that Kinko's lost money on that seven- or eight-cent sale.

I do find that the cashless society is a theme in my replies to beggars: I usually reply "Not today" or "Sorry", but if I'm not actually sure what's in my wallet, then I may reply "Sorry, I don't really carry cash any more" or "Everything's on plastic these days". It may or may not be true on any given day, since I do occasionally have some cash in my wallet, but if I don't know, it gives me an "excuse" rather than a bald rejection.

Donnie

I view this as one of the big positives of going cashless: an easy way to reduce the amount of time spent being hassled by panhandlers. Also, reduction in size of the wallet required to hold my items.

Paul

Perhaps currency might start toward science fiction. Compare prepaid cards to say a credit chip out of star wars, different chips are loaded with different amounts. You replace paper with a piece of plastic (or some other exotic science fiction material) You wouldn't necessarily need a digital wallet.

I would also be happy to see paper and coin currency go away. I'm sure it would whip out current panhandling as we know but it would be replaced by something else.

pawnman

In the anime Cowboy Bebop, everyone had what was essentially a small credit-card reader. If you wanted to give someone money, you put your card on one side, their card on the other, and transferred the agreed-upon amount. Seems like a logical way to go to me.

Joshua

Square.

jjdaddyo

In a similar vein, I've often thought that going cashless would hamper the drug trade pretty significantly, although I am sure ways would be found to get around it.
How about flipping it on its head? How would the drug trade operate if the largest denomination of US currency was the $5 bill?

EricS

I have three things to say on this issue.

First of all, this is a great and playful question. It's very idea though begs, in my mind a larger one: Do monetary societies breed homelessness? And also, how are we defining homeless? If we are talking about the 'crazy' drug addicts and people who are mentally challenged that is one thing. But if we are talking about the people who are either out of work or incapable of finding work we might mean something very different. There is also a third type of homeless, those who choose to be. I think beggar culture is a myriad of peoples coming together in specific ways that perhaps most of don't see.

So my answer is yes and no. I think the addicts/insane would probably still live on the streets no matter what. However, they would probably have significantly less access to drugs and would probably obtain drugs through barter rather then monetary means. I think the out-of-work types who live in their cars would probably be less inclined to do so. Since any time spent homeless would now be trackable. Although, the possibilities of tracking depends on what type of fiatless system we have. For instance if we have the kind mentioned in this:

http://www.economist.com/blogs/babbage/2011/06/virtual-currency

Then they would probably be more inclined to spend time living in their cars as apposed to a cashless society with only credit cards and the like.

The third type of people, those that choose to be homeless are the most likely to be in the no category. Since people of this type are likely apposed to systems, especially technological systems and things like that, I think they would not beg. At least not for money. They may try and barter and we might see a rise in barter economies because of this polarization, but they will definitely exist less in densely populated areas if this is the case. I think they are more likely to move places where beggar culture is seen as a positive and where barter is openly accepted. However, that may be in modern day society. With the change over to paperless money, people could choose to start valuing services outside of monetary systems, based on the grey/blackness of the transaction in place.

Secondly, depending on the nature of the monetary system in place, hacking may not occur. (See the article I posted from the economist). If monetary systems move toward a paperless one it could greater certainty in monetary systems, independent of government involvement. Which would be crazy. We would more or less be returning to the brentton-woods system, so to speak where everything is tied to the gold standard. Of course, this seemed to fail, so perhaps non-governmental control monetary systems are a bad thing. I am curious if anyone wants to debate this point.

Finally, I think given the above analysis a simple point can be made. A paperless system will create real change. Perhaps if monetary systems can become completely costless or relatively cheap, it will mean economic prosperity, of course if the unintended consequences can be mitigated and done so well. Of course, this presupposes some form of regulation. I believe such an outcome is efficient and more likely to occur under a colaborative, self regulated system. That is what the world is trending towards anyway, if you believe Don Tapscott, that is. Which I do and it is evident.

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Tim Dellinger

One for the prediction markets: when will the first cashless restaurant open? the first cashless brick-and-mortar retail store? E-commerce is by definition cashless, and my guess is that an e-commerce site will open a brick-and-mortar store and decide not to accept cash. It would certainly save them lots of hassle!

I personally care, but most people don't: cash = privacy. No one knows that it was me who bought that Justin Bieber CD. Or that I even buy CDs. Or what wage I pay my babysitter.

Joseph

Have anyone heard about BitCoin? It's a sort of digital money that cannot be traced. And yes, people are already buying illegal drugs with it but also making digital donations and paying for services online. You can exchange dollars for bitcoins and vice-versa.

BitCoins works like P2P filesharing, you pass your bitcoins to the other part without any one in the middle. And yes, it's weird, hard to understand and may create a bubble on the long run --- but people are using it anyway.

Jebuswankel

I can just imagine the cardboard signs with QR codes linking to said bitcoin accounts.

Jay Cadmus

I had the same thought about a different form of panhandling -- the tip jar on the counter at Starbucks, Dunkin Donuts, anywhere providing counter service.

With people using credit, debit and gift cards for their purchases at these establishments, will the tip jar become extinct?

Jen

I recall reading an article recently about how people are more likely to be dishonest and cheat during a study where they are dealing in hypothetical stock shares rather than hypothetical money as part of the game. Wish I could find the link now... If I remember it correctly, they in essence found as big CEO's compensation / reward schemes are further removed from being based on actual money, the easier it is for them to think they're not doing some unethical by manipulating stock prices etc.

Marcus Kalka

Even if people used more modernized, digital currencies and panhandlers no longer asked for cash, then the panhandlers could always beg for good, old-fashioned things like...oh, I dunno...food, water, or cigarettes.

Matthew

@Aaron: There is no way to "hide" a transaction processed by a financial institution (FI). While you can possible hide the destination for the funds under another name; e.g. a strip club in Anchorage, AK goes by "The Great Alaskan Bush Company", once that transaction shows up in the FI's records only that institution can change it. There is no going back and cleaning up your tracks and any FI found doing that would probably be shut down the next day. This would run afoul of so many record keeping and money laundering laws it would be suicide for the FI to allow this.

You have to remember that any transaction, whether information or money has two sides. Even those programs that clean up browsing history cannot delete it from the webserver's log files on the other end.

It is true that "addiction will find a way" but that doesn't mean it is going to become very, very difficult to get a fix as cash becomes less prevalent.

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James

Why assume that the economy will ever go totally cashless? (Voluntarily, that is, rather than having it imposed by a repressive government.) European bank cards have had a cashless facility for a decade or more: they can be loaded with electronic "cash" that can be used for purchases, yet AFAIK there are still plenty of Euro/CHF bills and coins in circulation, and many cash transactions being made.

Mike

San Francisco, where I live, which also has a very conspicuous panhandling population, has enough density so that some of the busier neighborhoods sport cash-only or cash-preferring venues (generally these places tend to be new, and try to keep prices down in an otherwise expensive area by trying to avoid using - or even having - credit card readers).

So, in one place where pan-handlers abound, credit card use is discouraged as well.

Ben Marvin

I see an awesome PR opportunity for Square to hand out free credit card readers to homeless people. Then the excuse of "sorry, I got no cash" would no longer work.

alex

I was just gonna say, as long as there's prostitution, a black market in drugs, stuff like child porn and slavery, snuff films, gun-running, etc there will be a cash economy. And those things are not going away, since study after study have shown that instead of being strictly the purview of shady high school dropouts, the money from these things always traces back to the large corporations like G.E., ATT, etc you name it.

Child porn. AT&T.

Snuff Films, G.E.

Heroin-addicted slaves washing dishes at your local restaurant. TimeWarnerAOL.

Wrap your mind around it.

So *everyone* has to use cash so this stuff can be kept mostly out of sight. You don't think the top %% with the money in the US are doing so well because of the above-ground economy do you?