Common Tragedies

Thoughts on Environmental Economics

Self-interest, 1. Society, 0.

Posted by Danny Morris on August 25, 2008

Ahoy everyone,

As this is my first foray into the world of the mighty Common Tragedies blog, I hope not to disappoint. Slate had a pretty interesting article today about pay and performance. A team of economists teamed up with a strawberry farmer in Great Britain to investigate how to maximize productivity of migrant workers. The article explains the experimentation process very well, but essentially, the farmer thought he wasn’t getting as much as he could from his workers and wanted to see how difficult payment schemes could affect his employees’ productivity.

It turns out workers had an incentive to collaborate and work slowly, which would get them more money for doing less work. The economists came in and set up a payment system that took away the ability for workers to cooperate, and productivity increased. In the next experiment, the economists linked managers’ pay to the performance of their underlings, and productivity increased again because managers stopped giving their friends the easiest assignments. In the third experiment, the economists organized workers into teams. While the workers initially grouped with their friends, once the more productive groups were awarded bonuses and prizes, efficient laborers left their friends and joined the more productive teams and once more, productivity climbed. In every experiment, financial benefits beat out the social links that had previously formed in the larger group.

Now, this is only one experiment with a lot of unknowns on our end (i.e. how strong were the social links to begin with, how large were the financial gains, etc), but the findings raise some interesting questions for environmental economics. Mainly, do financial incentives always trump social networks? If so, how large (or small) do the incentives have to be for this to happen? I ask the above questions because they seem pertinent to addressing environmental issues within a social context, which is what many of us are trying to do. If self-benefit always triumphs over social connections, there may not be any value in making any kind of societal-based argument for preserving or restoring the natural environment.

For example, were I an idealistic, slightly naive environmental activist employed by an unnamed advocacy organization, I might try to convince a random passerby that he owes it to his friends and family to reduce his carbon footprint because he (presumably) really care about his friends and family. But, if reducing said passerby’s carbon footprint starts to cost him money, maybe he would not value his personal relationships as much. Maybe none of us would. If your personal emissions portfolio were inversely related to the number of social connections you could maintain (i.e. less emissions means more friends and vice versa)? Would we all be lonely SUV owners or gregarious pedestrians?

Just some (ahem) food for thought…

2 Responses to “Self-interest, 1. Society, 0.”

  1. Evan Herrnstadt said

    Nice post, and thanks for diving into CT.

  2. AD said

    Isn’t this typical of the way economists think though? What you seem to be dismissing here, is that the social connections that keep things “sub-optimal” have value in themselves! They provide meaning to people’s lives, which merely earning and consuming more does not. So does the lower carbon footprint, which almost all scientists agree is for the global good (human survival) as well as ecological well-being.

    If you get into chaos theory, self-interest is merely one of the motivations why complex systems end up developing they do.

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