06/24/2013 12:27 pm ET Updated Aug 24, 2013

A Hairy Proposal

There is a barber in Seville who shaves every man in Seville who does not shave himself. But this begs the question: who shaves the Barber of Seville? If the barber shaves himself, then he must not shave himself. If the barber does not shave himself, then he must shave himself. Thus, the barber is in a perpetual state of flux between shaven and unshaven.

This Catch 22 style paradox is not unlike the paradox which social planners grapple with every day. Many of the nation's urban poor are in trapped in a malignant cycle of temporary employment because they simply don't have the education or experience to improve their station. However, their joblessness ensures that they don't have the capital to obtain that education or continue searching for employment.

For aesthetic appeal, consider the case of the Barber of Detroit. The Barber of Detroit shaves any man who can pay for it. However, there are many homeless in Detroit who cannot. So these vagrants remain decrepit in appearance and fatal candidates for jobs, as well as sully the image of the city. Clearly there are social ramifications for the barber's decision to not offer his services ubiquitously, but he is a profit seeker. How do we reconcile these seemingly disparate incentives?

According to the cooperative model of the firm, users of the service provided seek to contribute to its production directly rather than exchange it for currency. Suppose the barber offered all of its customers the option to either pay for a shave and a haircut or work off its cost (say, two hours at minimum wage).

Clearly the latter option would not be desirable to someone earning a decent wage with a consequently a high cost of time. However, the homeless would gladly be persuaded of this offer. Moreover, even if they did it only for beautification purposes (in the worst case scenario) and had no intention of seeking a job afterward, they wouldn't look so characteristically homeless. Perhaps the barber needs to be persuaded to allow unkempt bearded men to work at his shop, though, lest they frighten the other patrons away.

The homeless would impose negative spillover costs on the barbershop that economists like to call "externalities." However, if as I've proposed, the social outcome that results when the barber incurs these externalities is preferable, then the government can transfer some of its unemployment relief dollars to compensate the barber for his losses and ensure that he continues providing both options. But why would this be preferable to simply offering the homeless more unemployment aid? Remember that Detroit gets very cold in the winter, and the homeless will likely spend the aid money on liquor to keep warm.

Of course, this poverty co-op schema is not only applicable to barber services, but to all kinds of services that the poor demand but cannot obtain. From a restaurant meal to a new shirt, the list of possibilities is truly expansive. And while these Co-Ops would only offer the poor ultra-temporary jobs, they would give them the tools they need to function as productive members of society. Tools that will buy them, and society, a lot more than money can.

I therefore exhort urban and social planners to begin these programs as experimental initiatives. I'm looking for feedback, so please let me know how this could be improved.