You’re the Boss?

October 26, 2011
Posted by Jay Livingston

Why do people work?  More specifically, why do some people work more and others less?

N. Gregory Mankiw has an idea, which he shared with us in Sunday’s New York Times.

Here are two facts about the French economy. First, gross domestic product per capita in France is 29 percent less than it is in the United States, in large part because the French work many fewer hours over their lifetimes than Americans do. Second, the French are taxed more than Americans. In 2009, taxes were 24 percent of G.D.P. in the United States but 42 percent in France.

Economists debate whether higher taxation in France and other European nations is the cause of the reduced work effort and incomes there. Perhaps it is something else entirely — a certain joie de vivre that escapes the nose-to-the-grindstone American culture.

The French spend about 15% less time, on average, in paid work each day (251 minutes to our 289).  (OECD summary and spreadsheet here).  Over a lifetime, as Mankiw says, those 38 minutes a day add up to many fewer hours over the course of a lifetime. (I’m not sure why lifetime hours is the appropriate measure when GDP is computed as an annual figure.  Whatever.)

Mankiw is an economist, a very successful economist – best-selling textbook, head of Bush II’s Council of Economic Advisers, currently Mitt Romney’s chief economic adviser.  So he takes the economist’s view of motivation: how much people work depends on how much money they can make.  (Mankiw throws in that bit about culture, but I doubt he puts much stock in it and that what he thinks work is really all about is making money and keeping it, i.e., income and taxes.) 

Mankiw seems to assume that the decision of how much to work rests entirely with the worker.  That’s certainly true for Mankiw himself (see my earlier post on Mankiw’s work decisions here ).  But many of us workers don’t have that kind of autonomy.  So to get another view of sources of input into this decision of how much to work, I turned to the economic observations of Eddie Cochran:

Every time I call my baby, and try to get a date
My boss says, “No dice son, you gotta work late.”

Yes Gregory, there are bosses.  Even in our American “nose-to-the-grindstone” culture, people say, “I have to work late tonight.”  Have you ever heard anyone say, “I’m going to work late tonight because I want to make more money – especially now that my income tax has been reduced by two percentage points”?  No doubt, there are people like that.  But most of the hours in the French and US data are accounted for by people whose hours are determined by external forces.* 

That French employee doesn’t just decide all by himself, “I think I’ll spend an extra hour at lunch today and give up an hour’s wage.”  How much we work is economic and maybe a little cultural.  It’s also a matter of politics.  There are contracts and laws that are the outcome of organized efforts – by unions and political parties – to limit how much employers can demand of employees.   Those laws that affect how much people work may be shaped by culture – shared ideas about work and life.  It’s less clear that they are shaped by taxes.

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* In the last two years, many people in the US are working shorter hours than they were before 2008.  Some have reduced their work hours to zero.  I doubt that this reduction  reflects an increased joie de vivre.

It seems incredible to me that a guy as smart as Mankiw can ignore those external constraints on people, assuming instead that workers make these decisions as free and independent individuals, unfettered by institutions, calculating their individual benefits and costs.  But now I’m reminded of Fabio Rojas’s post of nearly five years ago, “What Economists Should Learn From Sociology.”  Number two on Fabio’s list was “Social networks/social structure matters. Simple idea but few economists sit around and model the effects of social structure.”

The Big Shill

October 25, 2011

Posted by Jay Livingston

Jay Smooth, posted a rap (here) with an outstanding analogy.  The media, he says, in its reaction to Occupy Wall Street, is like the shill in the three-card monte game. (Mr. Smooth did not name names, but you get the sense he watches a lot of Fox.)

The ringer’s* job is to pretend they’re an objective outside observer commenting on the game when they’re actually part of the hustle who’s there to help bamboozle the public into thinking this game is legitimate.

Like this other Jay, I too used to watch the 3-card-monte teams in Times Square back in the 80s. 
I liked listening to the dealers’ rhythmic, rhyming rap, and I admired the sleight-of-hand. (The basic move is very simple, but sometimes you’d see a truly skillful dealer who could work the bent-corner variation.) 

Mostly, I took a Goffman-esque delight in watching the game, seeing how each person played his role, creating the illusion that the game was honest and winnable, trying to manipulate potential marks using no weapon except self-presentation. Even when a knowing mark did pick the right card, the team had a ruse to avoid the loss while still keeping the appearance of an honest game. The shill would jump in with a $40 bet on a different card, and the dealer would turn that card up, collect the shill’s money and push the mark’s $20 back. “Sorry, only one bet per shuffle.”

It always seemed obvious to me who the shills were. They looked like the dealer (both were usually black in the sea of mostly white tourists) and dressed like the dealer, and they seemed utterly unfazed when they lost a twenty or two on what to the onlookers was obviously the wrong card. Even the occasional white shill (a “salt and pepper” team), with scruffy appearance and clothing, looked less like the passers-by and more like the dealer.

One afternoon as I was walking in Times Square, I saw a young man standing at a 3-card-monte table.** He looked like a preppy college kid from central casting – blonde hair, white polo shirt, green cotton cable-knit sweater knotted loosely over his shoulders. He had reached in his pocket and was fingering a $20, about to make a bet. I don’t know why I suddenly felt protective – maybe I didn’t want our tourists to dislike the city – but I moved up just behind him and said quietly, “If it was as easy as it looks, do you think he’d be here?”

The kid said nothing. He watched as the dealer tossed the cards (“the red, you’re ahead, the black’ll set you back”) and when the dealer stopped (“who saw it – just like that”), the kid put his $20 down. Hadn’t he heard me?

The dealer turned over the queen of hearts and put his $20 on top of it. (“I don’t get mad when I lose, I just grin when I win”), and the kid stayed to play again. And again.

Now that, I thought, is a shill.

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* Jay Smooth calls this role the “ringer.” I was brought up to call it the shill. Academic journal write-ups of psych experiments back in the day, the pre-IRB day, referred to them as “confederates of the experimenter.” Makes it sound more legitimate, don’t you think? But the deceptions of those psych profs would have left the 3-card monte guys drooling with envy and eager to learn.

** The “table” was a flattened cardboard box resting on another cardboard box – easily kicked down and left behind if the cops came by.

(The photo is borrowed from Ephemeral New York)

Dictatorships Are People, My Friend*

October 23, 2011
Posted by Jay Livingston

We usually think of a dictatorship as a ship run by dictator – a strongman, a tyrant who has absolute power and can do anything he likes to anyone he doesn’t like.  True, but it’s important to remember that dictatorship is not just a matter of personality.  It is also a structure.  Even a Saddam or a Khaddafi doesn’t do it all by himself.  To carry out his directives, he needs other people in other organizations – a coalition of the willing.  These usually include the military, but there may also be economic organizations, bureaucracies, and other groups whose strength the “strong man” needs.  He has to make sure that they remain willing.

Any dictator worth his salt tries to minimize the power of these groups and to arrogate as much power as he can to himself and his family. Often, that is not possible, and the dictator must allow these others wealth and power in return for their loyalty. But even when it’s all in the family, he has to keep the family happy.  Unhappy families are all alike – they can dissolve into conflict and even treachery. 

This is one of the messages of The Dictator’s Handbook  by Bruce Bueno de Mesquita and Alastair Smith.

Now, for those who are preoccupied with Wall Street, with its huge salaries and bonuses despite financial failure, Joshua Tucker at The Monkey Cage , extracts the money quote from The Handbook. 

In terms of the political organization of businesses, large publically [sic] traded companies most closely resemble rigged election autocracies. There are typically millions of people – shareholders – with a nominal say in the choice of chief executive. But in reality the decision to retain a leader comes down to the choices of senior executives, board members and possibly a few large institutional investors.  No executive lasts long if he does not keep this small group happy, which is why such insiders receive large bonuses and rewards even as the organization fails.

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* Most readers will recognize the allusion in the title of this post.  For those who don’t follow the GOP all that closely, the reference is here.

Lessons in Journalism

October 21, 2011
Posted by Jay Livingston

Ah, the New York Post.  Some years ago, I said here that regardless of the actual content of the front page headline, the subtext is almost always the same.

This morning, the Post was playing off the old journalistic cliche: Go for the local angle.  While stuffy papers like the Times and the Wall Street Journal reported the death of Khadafy as an international story, the Post nailed the real import of the event for us New Yorkers.