Suppose

Let me put this hypothetical question to you. Suppose you live in Myanmar, which is quite a conjectural statement to start with. On a regular Tuesday morning, your cleaning lady asks you for a small loan, to pay the hospital bills for her child. She offers to repay you in ten instalments, by deducting a third of her wages every week. You readily agree (is there really another option?), fish out the money from your wallet, and leave for work.

The question that keeps you occupied on the way to work is whether to gift the money to your cleaning lady or to accept the instalments. It is an amount you can easily miss, and ideally you would gift her the money as it’s doing so much good to her compared to you spending it on whatever. Yet you are worried about creating the wrong incentives. If the money was gifted, your cleaning lady might ask for more in the future, perhaps without having an urgent cause. She might make up reasons, or invent stories.

The world is incredibly unequal and incredibly unfair. Does it matter that your cleaning lady might make up stories to get money off you when she is so much poorer? In a way it does. By virtue of allowing her into your apartment, and giving her a key, you need to fully trust her. Without that trust, you would have to cancel the contract. Moreover, Myanmar is full of people poorer than your cleaning lady. If you gave her free money, why wouldn’t you hand it out in the street to anyone who might need it?

Still, the world is incredibly unequal and incredibly unfair. This inequality is a by-product of growth in our capitalist system; some sort of an externality of having reached our current level of welfare. People work hard, innovate, and take risks when they know their efforts will pay a reward. Communism failed for a reason. Many people who can afford a cleaning lady are adding more to society than they are receiving from it, thanks to a progressive tax system and the impact they have through their job. Yet, this textbook example doesn’t hold true at all times, partially because of the twin vices of nepotism and corruption that are still all too prevalent. There is only so much you can justify by referring to economic theory.

All reasoning aside, the world is incredibly unequal and incredibly unfair. In this highly hypothetical situation, what would you do? What should you do?