## Monday, July 4, 2022

### Compensating Wage Differentials according to Dilbert

Anonymous said...

I enjoy Dilbert but Scott Adams is Trumpian.

kevin quinn said...

This reminds me of Robert Frank's CHOOSING THE RIGHT POND, which I always used to assign in Principles classes. He has a discussion of alienation and imagines a "free market economist" who claims that providing unalienating work is inefficient since if the benefits to workers exceeded the costs in lower productivity to an employer, employers who provided unalienating work at lower wages would thrive. He says that this argument assumes that workers don't care about relative income, counter-factually, as he thinks.

Here is how I illustrated this point with my students:

Suppose that workers now make 30,000/year doing alienating work (un-alienation index of 1. Providing less alienating work--with an un-alienation index of 2--would reduce productivity by 10000/year. Workers' utility is:
wage(in thousands) * index of unalienation * relative income

Clearly they would be better off, and employers no worse off, if they all had less alienating jobs at wages of 20000/year, since then utility would be 20*2*1 instead of 30*1*1. Will the market provide less alienating work? No.

Consider just two workers. If both take less alienating jobs each gets utility of 40. If both take alienating jobs, each gets utility of 30.

But if one takes the alienating job, while the other takes the less alienating job, the former gets utility of 30*1*(30/20)=45. The latter gets utility of 20*2*(20/30)= 26.67.

This makes taking the alienating job a dominant strategy: If you take the unalienating job, I want to take the alienating job, since 45 > 40. If you take the alienating job, I want to do so as well, since 30 > 26.67

So we both take the alienating jobs; employers offering non-alienating jobs at 20000 find no takers.

The market fails.

Peter Dorman said...

Yes, relative income is one way to upend the CWD argument. Another is that meaning or disalienation at work is usually related to the extent of self-determination on the job, while employers value discretionary control almost existentially. (It is not valued only for its immediate productivity effects, which may well be increasing in the *loss* of control, but for its broader effect on the ability of employers to formulate, enforce and revise plans.)

A different approach, which I developed in an article ages ago, is that alienating work alters the preferences of workers, reducing their demand for disalienation. I was responding to the argument by Nozick in Anarchy, State and Utopia.

kevin quinn said...

Peter: I like the second, adaptive preferences, approach. The first, aimed at libertarians, would I am sure be countered by the claim that benefits are benefits, so
the employer's incalculable benefit from totalitarianism in the workplace just goes into the hopper, easily offsetting the "costs" to the workers!

kevin quinn said...

Probably the best approach here is to leave utilitarianism behind and ground the good ness of a democratic workplace in a deontic ethic--treating others never as means only, e.g. Elizabeth Anderson's book on workplace democracy comes to mind --title escapes me.
On the consequences of adaptive preferences, see Sen's Ethics and Economics and Jon Elster on "sour grapes."

kevin quinn said...

Elizabeth Anderson:

https://press.princeton.edu/books/hardcover/9780691176512/private-government

Private Government: How Employers Rule Our Lives (and why we don't talk about it)

Peter Dorman said...

One can unpack the deontic approach a bit by considering the effects that alienation and authoritarianism in the workplace are likely to have on democratic and participatory processes in other contexts. This, I think, was Dewey's approach: we learn through our experiences how to be democratic.