Food Stamps and Fungibility

A week or so ago, a Facebook friend of mine posted about his experience meeting someone outside of a Chicago grocery. The person he met tried to sell him food stamps, offering $100 in purchases on her EBT card for $80 in cash. My friend thought this was funny, because this person was doing what he thought was a terrible job of negotiating. And, of course, the comments on his post were predictable: this person doesn’t have a job, this is taxpayer money, and so on.

But here’s the thing: that person trying to sell access to her EBT card at a discount makes sense. It’s a sensible thing to do.

And here’s why.

First, food stamps (or, more accurately, SNAP benefits, usually stored on an EBT card) are non-fungible. People can only spend those dollars on things that the state has decided that she can spend them on: bread, cereal, fruit, meat, dairy products and so on. People cannot spend those benefits on alcohol, pet food, hot food, or anything that would be eaten in the store.

And that’s all fine and good. But it also means that people can’t spend them on household supplies that you might find in the store, like paper towels, toilet paper, soap, or feminine hygiene products. And, of course, it also means that people can’t spend them on other necessary things like medicine, doctor visits, rent, utilities, or clothing.

Food stamps are for food only. And as long as the person needs food, that works fine.

Second, poverty involves a lot of trade-off thinking. People who don’t live in poverty often think of prices in terms of money. For example, since I had to buy a new dress shirt recently, I know that dress shirts at a certain store cost about $89 plus tax. But we can also think of prices in terms of goods. I could think of that shirt as two dinners out or a month’s internet bill. People living in poverty often think in terms of trade-offs: every purchase made means being unable to make a different purchase later.

And people living in poverty think that way because they have to. When someone doesn’t have enough money to make it through a month, she has to decide what necessities she will buy and which ones she’ll try to forego. This person who my friend met may have had a car repair, a rent payment, or medication that she needed to pay for. And she may have been willing to give up a certain number of meals for that.

Food stamps are for food only. When the person needs something else, that doesn’t work at all.

What this person was willing to do was commit benefit fraud (an extremely rare occurrence) to purchase fungibility. And she was willing to pay a premium for it.

And, if what she needed was money for rent, transportation, or heat, that is entirely reasonable.