Give them away.

At times like this, whenever there is a natural disaster; be it flood, earthquake or tsunami, when the televisions and newspapers show graphic pictures of destruction, poverty, death and hunger, we readily gives money away to charities, whatever extra and small changes that we have. Some of us even look into our wardrobe and start picking whatever piece of clothing that we don’t need; last year’s baju raya, those pants that’s too loose (lost weight in the past month) and kids clothing that doesn’t fit anymore and start thinking “I could give those away.”

In the economics viewpoint, these act of charity of giving away money and material goods distribute goods and services within a society, resources are distributed to those who need and increase society’s utility value. It also reduces deadweight loss; that loose pants (or is it tight?) in your wardrobe wouldn’t be of any use to you. Someone else might value your old pant more than you do.

If citizens of a country like Malaysia who is largely unaffected by the disaster collectively donate excess and old stock of goods, clothing, drugs, medical equipments and building materials to disaster zones, it would be good for world community and for Malaysia’s economy. Why? You might ask. By donating excess inventories (or in our case, excess clothing in the wardrobe) we are reducing stock of goods in the economy. Firms on realising that inventories are low, will work to maximum capacity to meet demand to replenish stock (or in our case, we have an excuse to buy that Dockers pants that cost a day’s wages, and work overtime to make up for it). Prices in the economy will remain high, (there won’t be “end of season sale” or “old model discount”) and the economy would keep humming at above expectation growth rate. Everybody would be happy.
Would somebody donate their van for use as ambulance in Acheh? Just kidding.