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Saturday, April 19, 2014

Making sure that everyone is rowing and in the right direction

I really enjoy courses I get from the Teaching Company. The two most recent ones I have listened to (and am currently listening to) are the courses on Behavioral economics delivered by Dr. Scott Huettel (Duke) and Why economies rise and fall taught be Peter Rodriguez (Princeton/UVA). These course have given me additional insights into the challenges I face personally and the challenges we face in aggregate in getting people motivated to create a better world for all.

In Dr. Rodriguez's presentations, he reflects upon human history to identify when and why specific peoples have thrived or failed. Improvement of our circumstances over time is completely dependent upon effective human action to increase productivity. It is through human action that we have lifted ourselves from abject poverty and misery. The more people who are working productively, the more wealth comes into existence, and the better off we are in aggregate.

When human operated primarily singly or in small groups, it was likely  not particularly hard to motivate individuals toward productive behavior. Without being individually productive, people went hungry, were exposed to the elements, and likely were miserable. However, as we moved more and more toward labor specialization and working in groups, it became easier for people to not be productive and potentially get away with this. Imagine a giant galley ship with millions of people all rowing. Suppose one stops rowing. Is that a big deal? What about if 1000 stop rowing? What about 100,000? At what point does the ship stop moving? At what point does the behavior of those not rowing entice a critical mass of those still rowing to stop?

Dr. Huettel's presentations in behavioral economics are focused on what motivates people to do things, including being productive and how cooperative behavior came to be and can be effective. Unlike the simple concept of productivity, human motivation and the tools to drive human action are extremely complex since they involve motivating people who are not entirely rational. Remarkably, we will engage in behaviors which will hurt ourselves if we perceive they will hurt potential free-riders even more (Altruistic punishment). Furthermore, this is not a unique human behavior and can be found in animals such as fish.

Understanding human motivation is devilishly complicated and just when you think you know how to manage a situation with a person or persons, everything changes. While human motivations is not just about money, money is a huge human motivator.  It occurred to me that the real function of money is it simply functions as a reasonably good marker of those who engage in productive behavior. Granted it is an imperfect marker but it perhaps is the best marker we have. Is it important for people to be engaged in productive activity? I would suggest it is critical since the aggregate well being of a population is directly related to the ability of those within the population to produce goods and services needed to make the lives of people better. There is a huge moral hazard associated with the widespread ability of people to game a system which allows them access to the products of the labors of others without needing to be productive themselves.

For those who decry those of us within affluent societies that feel driven to work hard and be productive, think of the alternative. We avoid misery and abject poverty because a critical mass of the population feels obligated to some degree to engage in activities which provide value to other people. To undermine the incentives which motivate that segment of the population is to undermine the foundations of the institutions that lift people out of poverty. The default mode in the world is still life on the edge.

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