The very human act of hustling

Two things happened this week. The first is that I got hustled by a man on the street. The second is that I finished reading “Misbehaving“, Richard Thaler’s new book on the history of behavioral economics. Bear with me. There’s a connection.

Let’s start with the man, call him David. I’d never seen him in our neighborhood before. He was in a wheelchair. Slightly hunched over. As I passed, he whispered to me to come over. His hearing aid battery had run out. He needed money for a new one. I couldn’t quite understand why he wasn’t able to get it fixed on Medicaid but I agreed to give him a dollar, I just needed to get some change first. So I went into the dry cleaners, who told me, firmly but politely, that the man had been hustling people in the neighborhood for days. There was nothing wrong with his hearing aid. I left the store and looked around. David was now across the street, head down, concentrating on something. As I got closer, I could see what was occupying his attention. A large bunch of notes. Big ones. I’d been hustled.

This threw me. Why would somebody choose to lead their life like this? Step forward Richard Thaler. His book has three insights about human behavior which might just help explain my confusion.

The first is inertia. Take savings. We all know we should probably be saving more and we plan to take action. Only we plan to take it “soon”, some time in the future. And then we procrastinate. Find something else to do. Never quite get around to increasing our savings. We get stuck. And so it might be with David. He probably knows he should be doing more to get his life on track — working, investing in himself. And he promises himself he will do it. He’s just going to see if he can make a quick buck on the street first. To counter the problem of low savings, employers offering workplace pensions began automatically enrolling their staff in pension systems with a designated savings rate. Very few employees opted out (that’s inertia at work again). Savings rates went up. So maybe automatic systems aren’t functioning well for those on low incomes.

The second is loss aversion. We hate losing money twice as much as we like gaining money. In coin toss experiments run with college students, where they were told they would lose $10 if the coin landed on tails, they asked for at least $20 if they won on heads. In experiments run with executives, where they lost $100,000 on tails, they asked for $200,000 on heads. So let’s say David was making around $100 a day from the streets. To stop him hustling (and losing $100), you would have to offer him at least $200 in a paid job. Notwithstanding his disability, David would need to receive pretty generous tax credits to top him up if he worked an 8-hour day minimum wage job.

The third is present bias. We see ourselves having more self-control in the future than we have today. Tomorrow I’ll exercise, start my diet, save for a rainy day, do my tax return. But when tomorrow comes, we have the same conversation with ourselves. It’s our very own, very personal Groundhog Day. And so it might be with David. Tomorrow, he’ll go down to the job center, the disability office, the housing association. My local gym has just started offering a fee reduction which is based on how many classes I attend in the forthcoming month. A clever way to force self-control because I have to go tomorrow if I want to save money.

The next day I saw David again outside our building. His tomorrow hadn’t come.

Originally published at on July 8, 2015.