The ethics of replacing things

I'm sticking to my decision not to blog the WTC site much any more, because I just find the whole thing far too depressing, and I think the catalogue of incompetence has been pretty clearly laid out at this point for anybody who's interested in what went wrong and when.

But I still read articles on it, including today's NYT story on the Customs Service, and others, moving into the Freedom Tower. Near the end comes this:

There may also be a financial incentive, since about $345 million in insurance proceeds from the destruction of the old Customs building can be used to build its space in the Freedom Tower. State officials said they did not think that the money could be transferred elsewhere.

Which raises an ethical issue which has been niggling me for some time now:

If someone pays you the cost of replacing something they broke or damaged, are you ethically obliged to use that money to replace it?

I'm sure that most of us have found ourselves in this situation at some point. In the normal course of events, one arrives at "I'm so sorry, I'll pay you back". And then you get the money for a new X – but you realise that you don't really need the thing that was broken, and you do have a big credit card bill, and you've been meaning to get a new Y for ages... and so you use the money not for buying a new X, but rather for something else.

Is that OK? One way to arrive at an answer is to see how one would feel were the roles reversed. There are two ways of looking at it from the donor's point of view:

"I gave him $x because I broke his X, and in order to replace his X. I could have given him a new X instead, rather than the money. But instead of using the money to replace his broken X, he went and spent it on something else entirely, and although I like the guy, I'm not the kind of person who'd just give him a brand-new Y. He took my money, which was given with good intentions to make him whole, but his intentions weren't quite so good: it seems he never intended to buy a new X with the money at all! I didn't give him money for a Y, I gave him money for an X, and he should have spent it on an X."
"I broke his X and at that point was morally obliged to replace it. I could have given him a new X, but instead I gave him both a bit more freedom and a bit more work by giving him $x instead. It turns out he was actually much happier with the $x than he would have been with a new X, since he used the $x for something else. This is a win-win situation for both of us: I don't have to go out and buy an X, while he gets to use my money for something he wants even more than an X. I'm out $x anyway, so he should put that money to its best use. That's the whole point of money: it's fungible."

The Customs Service's insurer, it would seem, is taking the first tack. They're obliged to pay the Customs Service the cost of rebuilding their offices at Ground Zero. But if the Customs Service doesn't rebuild its offices at Ground Zero, then there's no obligation.

Personally, I'm much more sympathetic to the second tack If I gave someone money to replace something and they used it for some other purpose instead, I would not feel aggrieved, since they clearly needed the money more for Y than they did for replacing X.

I wonder what neuroeconomics might have to say about this situation? Here's Jonathan Cohen, a neuroeconomist quoted in John Cassidy's New Yorker article:

“The key idea in neuroeconomics is that there are multiple systems within the brain. Most of the time, these systems coöperate in decision-making, but under some circumstances they compete with one another."

It could be that people who take the first tack are reacting on the basis of an emotional, limbic response, while people who take the second tack are being more rational. If that's the case, then one might have to make one's purchasing decision on the basis of whether the person paying you the money is more emotional or rational when it comes to such things. If they're emotional, then use the money to replace the damaged item; if they're rational, then use it for anything you want.

But that, of course, just leaves us with the even bigger problem of second-guessing the limbic state of our donor. Is there a better way, a more hard-and-fast ethical principle, which can be applied here?

Posted by Felix at 9:49 EST

Comments

Whatever the neuroeconomics, it is easy to understand the motivation of the inurance company. What is less clear to me is how after so many years of writing insurance they can still get away with writing a policy that is unclear in this crucial respect.

Posted by: Roger at 18:25 EST, September 17, 2006

Given money is more useful than goods, could you bargain the person down? I've broken your £50 squash racket, so I'll give you a new squash racket, worth £50, or I'll give you £45 in cash. In fact as actually replacing the new thing takes some effort, £50 in cash doesn't quite replace the squash racket (let's assume it was new, otherwise it's complex) unless you assume there's some benefit from it being cash (ie a £50 credit note for a squash racket wouldn't quite cut it).

I think the first reaction is perhaps really a belief that the good wasn't worth the money you had to give to compensate the person. You have no way of knowing what loss you've really caused the person. But if you replace it with something exactly the same you know they've lost/gained nothing. If on the other hand you give them the replacement cost in cash, and they spend it, you feel you might have overpaid.

Saying that if the breakage was your fault, its your fault.

Posted by: Matthew at 15:08 EST, September 19, 2006