That hard-headed economist I mentioned earlier would at this stage spring to their feet. Brandishing revealed preference theory, they would say this is obvious – that it is these very benefits that explain why the volunteer army exists in the first place. And, once again, they would largely be wrong. For research has shown that people tend systematically to under-estimate the positive effect for them of giving to others. In a nice experiment, people were randomly assigned $ to spend, either on themselves or others. Those who were told to spend it on others subsequently reported significantly higher subjective well-being ex-post, contrary to their expectations ex-ante. 23 This means that volunteer army would possibly be larger still if individuals had greater selfawareness of the private benefits of volunteering. When it comes to volunteering, preferences may be as much concealed as revealed. 24 Social value of volunteering Finally, let’s consider the social welfare benefits of volunteering. Why might these differ from the economic and private benefits? And by how much? Let’s take a simple example. Consider a volunteer who helps out a charity providing support services for the homeless. Is the value of this activity captured by the hours spent volunteering? By the amount it would have cost to hire that person to provide that help? By the amount that person themselves benefit from volunteering? Well, all of the above are important and large, as I have shown. But they would still potentially significantly under-estimate the value society should place on this activity.
The collapse of the stock market would have enabled them to reap a handsome profit from the futures contracts they had taken out. A few figures will help give some idea of the scale of this attack and the vulnerability of Hong Kong’s markets at the time. We estimate that the hedge funds involved had amassed in excess of $ billion in currency borrowings, at an interest cost of around $ million a day. They also held an estimated 80,000 short contracts, which translated into the following calculation: for every fall of 1,000 points in the Hang Seng index they stood to make a profit of $ billion. If they could have engineered that fall within 1,000 days they would have broken even. If they could have achieved it within 100 days they would have netted $ billion. All they had to do was to wait for the best moment to dump their Hong Kong dollars, to drive up interest rates and send a shock wave through the stock market. August was an opportune time: turnover in the stock market had shrunk to about a third of its normal level; there was bad news as the government announced that first-quarter GDP growth had been negative; and rumours were flying around predicting the devaluation of the Renminbi and the severing of the link between the Hong Kong dollar and the US dollar.