Lazy Economics

In the whole field of Economic theory, not many concepts have been studied for a longer time than the general idea of labor productivity. As a fundamental part of growth theory since the Solow-Swan model from the 1950’s, labor productivity generally describes the impact of one additional unit of labor on the achieved output of a venture. In the classical model, labor productivity was understood to be augmented by technology, making the laborer more productive. While the state of the art understanding of labor productivity changed, most mentionable through the efforts of Paul Romer and Robert Lucas in the 1980’s by making technological advancements endogenous to their model and adding the concept of human capital, not a whole lot has changed in the common economic understanding of what makes people perform the way they do.
Unfortunately, it turns out that the average human is more than just an initial endowment of human capital with labor augmenting technology attached to it. We are emotional, easily distracted and mostly very, very lazy creatures and just don’t play nicely with the ideals behind the homo oeconomicus.

With that said, I am going to present a recent publication of the World Bank Group on the topic of productivity. Published in its World Development Report of 2015 with the title “Mind, Society and Behavior”, the chapter makes some interesting claims for additional factors that might influence how productive individuals really are.
The main claim the article makes is that besides the labor augmenting effect of technology and the quality of human capital, psychology plays a huge role in how well those initial endowments can be used in performing tasks in a daily working environment. 
The authors give examples on how a set of cognitive, psychological and social barriers can affect productivity especially in a lower income setting. While differing in their symptoms, the underlying effects described are actually observable in a wide range of scenarios:
In employment, procrastination seems to be an important cause for productivity losses. Studies (and this authors personal experience) suggest that employees are more productive close to deadlines but become less productive with less pressure to perform. Other mentioned hindrances include a missing perception of the importance of one’s occupation, the perception of unfair treatment by one’s employer as well as social effects among coworkers. The authors suggest that actually a lot of those barriers in employment could be overcome by contractual design, e.g commitment enforcing contracts that could lower the negative effects of procrastination.
Even more interesting are the implications of those hurdles in the context of self employed work in small businesses or agriculture. Here, those effects might be even worse due to a lack of external enforcement which leads to a severe difficulty to “translate intention into action”. This thesis finds supporting evidence in an experiment done in Ghana: In the set up, some small business owners got aid in the form of financial support, while others got a comparable worth in equipment useful for their respective businesses. While the productivity of those latter businesses rose sharply, the businesses that got money did not experience any growth. Instead, the money was in most cases used for individual spending or family demands. Other studies suggest similar effects, one found that generally, if business environments become more favorable, small business owners tend to not earn more money but simply work less.
While the effects mentioned so far mostly revolve around the efficient use of human capital, another focus was the use of labor augmenting technology. In the field of agriculture, the article questions why farmers in very poor regions fail to even adopt simple technology in their workflow. As in the case of employees, the authors identify procrastination as one factor that hinders productivity. This effect seems to be especially important in agriculture where timing plays an important role in the usage of fertilizers etc. to have the maximal impact on the harvest. Like in the small business case, the article also finds mismanagement of funds to be a concern. With long delays between sowing and harvest, along comes a delay between effort and reward as well as a delay between the availability of funds after the harvest and an investment opportunity by buying fertilizer or other labor enhancing technology.

All in all, The World Bank article suggests some very interesting aspects of the human nature that might actually hinder productivity. However, especially for the field of development economics this might not be as exciting as it sounds. The article focuses entirely on developing nations when it comes to establishing its barriers for productivity and emphasizes that understanding this effect is crucial especially for development economics. This is only understandable considering the context of the publication, but it begs the question on how those negative influences compare across nations. I can not imagine that effects like procrastination, individual mismanagement or plain and simple laziness are not equally observable in developed countries. While not making the effect irrelevant in this, but rather making it important in a global context and an important addition to general economic growth research, the question arises how relevant those effects are in achieving change in developing nations. In the case that those effects are indeed stronger in developing countries and not just an overall characteristic of mankind, the question of causality arises. Are those new effects really a cause for underdevelopment or much rather new symptoms of old causes like corruption, insufficient education or inequality? Sure, targeting those negative influences by adapting policy might create growth; however, it might not be all that useful for reducing poverty in the long run.

TLDR
Have we been doing it all wrong so far? Probably not. Would behavioral influences make a neat addition to the standard model? Most definitely. Is it especially important for development economics? Depends.

This Article is based on the chapter “Productivity” from:
World Bank. 2015. World Development Report 2015: Mind, Society, and Behavior. Washington, DC: World Bank. doi: 10.1596/978-1-4648-0342-0. License: Creative Commons Attribution CC BY 3.0 IGO pp.128-140

 

 

3 thoughts on “Lazy Economics

  1. I actually agree with the argument concerning that the reasons for low productivity not only can be observed in developing countries, but also in some developed countries in some sectors. That’ why your article has raised another question in my mind, why workers tend to be more productive in the private sector than in the public sector?
    I think the right distinction would be between the incentives exist in the private sector and the public sector, which may explain to us reasons for differences in productivity not among only among countries but in general. I think in the private sector generally workers tend to feel not secure as there is a higher possibility of leaving the job in case of laziness or low productivity or even losses in the company’s profits and also most importantly tend to be more competition among workers who seek to work harder to prove higher productivity than others and so higher rewards.
    On the other hand, in the public sector, we find civil servants feel more secure and no fear from leaving the job, as either they work harder or not, they get the same salary compared to others and so there is no competition in the public sector could be one reason. Another reason could be the low salaries in the public sector where people tend to provide a level of productivity that fit exactly the salary they get and so in case of low salary, people tend to provide low productivity. And so I think by following the principle of economics “people respond to incentives”, by establishing the right incentives as we see in the private sector, we would expect people to provide higher productivity.

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  2. Interesting article. I think laziness, like procrastination, is a fundamental trait in humans. I do agree with Florian that these are traits that can be identified in both developing and developed nations. I once read an article about an employee in the US who outsourced his entire job to a third party in China and spent his days, at the office on the internet, watching cat videos. Interesting way to spend one’s time. Story here> http://goo.gl/HDyimE . You don’t have to search for too long to find the sheer vast amount of therapies, motivational and religious literature that target this aspect of human nature. Productivity and hard-work are brandished as a trait of the Alpha Human working hard to provide for his/her family. In low income economies especially in some African countries, women are sternly warned about not falling for the charms of a lazy man! I do believe that at a cultural level, laziness is unacceptable within communities worldwide to begin with. I also think a proper standard should be set for what can be universally considered as laziness (Is this even possible?) What could be considered laziness in one country could be understood, instead, as fundamentals for improved quality of life in another. I also think ‘outsourcing’ (a fancy word for laziness in certain entrepreneurial and business contexts) has been something that humans have been doing throughout recorded history. Why should you bother getting any work done when someone else can do it for a fee? At the macro level, I do agree with Omar that incentives matter and that it is important to differentiate between the types of incentives employed in both the private and public sectors. I can imagine that more reward oriented incentives can be employed in the private sector as opposed to a ‘sanctions’ type incentive used in the public sector to deter laziness and encourage a full individual contribution to the welfare of society.

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    1. A very interesting addition to the discussion with which I wholeheartedly agree. I am also really intrigued by your Idea that lazyness might be viewed as some sort of improved quality of life. This might be especially interesting if we think about modern technologies. As someone who is basically always on the lookout for ways to automate my workflow in order to have more time for cat videos, I think its just a matter of time since this might become a concern.

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