Exchange Economies

(Photo: otzberg)

A friend of ours had her purse, containing her driver’s license and passport, stolen in a German train station. She reported it to the local police, who told her that she may well get the purse back — minus any cash. Homeless people in the stations troll the trash bins for food and other goodies. When they find purses, wallets, etc., they turn them over to station police. In exchange the police do not roust them out of the stations, which they use for shelter and warmth. In fact, the police were right — the friend did eventually get some of the lost items back.


I went to a large state school where off-campus residents often threw large house parties. At the parties, students would throw empty beer cans out in the yard. Partially for fun, and partially because it's a lot easier to throw it in the yard than fight through a crowd to find a trash can. On Saturday and Sunday mornings, homeless people would come by with shopping carts and collect all the cans for recycling money.


Can this be considered Pareto efficient? Both the bums and the woman come out ahead. Even the police have less work kicking people out into the cold.

Do we need to consider externalities such as other users of the station having to deal with a smelly bum?


The woman does not really come ahead, does she ? She is still a few bills short.


The lost cash is a sunk cost here, she's not getting that back either way.


Well, it depends who's doing the stealing. If the homeless are the ones doing the stealing, it's a poor exchange.

Derek Halpern

The question is who takes the money? We're quick to assume the homeless people take the money, but is that true?

There's loads of research behind why honest people steal. One piece that I like is "Why Honest People Steal" by Virgil Peterson.


It is not at all the homeless people you see in the streets that rob purses. In Europe robbers are usually foreigners*, some on legal status (east Europeans) and some illegal (varies) and usually organized in mafias. Touristic places here are overwhelm by them. If I look just a bit, I witness 2-3 robbery examples any giving day in Barcelona!

The woman will probably have lost some 50-200€ however nothing beats loosing all your documents, the opportunity cost of going agency to agency replacing them is horrendous!! Trust me, she gained 3/4 of her lost happiness with her purse return!
On the other hand, I doubt that the police let homeless stay in the station because of their good deed, though it may help their cause. The decision rest on mayors. In Germany they usually are permissive, and in France the opposite is true.

* The power of immigration however vastly overweights all these externalities though!



"In Europe robbers are usually foreigners*, some on legal status (east Europeans) and some illegal (varies) " Yeah thats not even kind of true. Belgium, the nation with the most non-europeans in europe has one of the lowest crime rates, and UK, with a nearly 85% white population has the highest.


In Berlin, I've found that the homeless people in train stations are mainly looking for glass and plastic bottles and cans to return for the deposit (usually 8 cents per glass bottle, 15 or 25 cents for plastic bottles, and 25 cents for aluminum cans). Although this doesn't seem like a lot of money, I recently waited in line at a convenience store behind a man who was returning a large quantity of bottles and cans. Unlike grocery stores, which have machines for depositing the returnable containers in and calculating what you get back, the man behind the counter was tallying everything up. The total? Over 50 euros. Assuming that this was the man's earnings for the day of searching for bottles (this was at 5-6pm, so a reasonable assumption), that's pretty good, especially in a city with 13% unemployment and a country with no minimum wage.