An economic question

[davv]

And here's an economic question I've been thinking about a bit since I read of the scheme...

Consider a system where everybody is paid the same amount when the economy is at equilibrium. In short-term disequilibrium (i.e. when supply doesn't match demand) some goods may be (relatively speaking) expensive, and others may be cheap. The system attempts to reach equilibrium by scaling up the production of those things that are expensive and scaling down the production of those that are cheap[1].

Now, the question is: does such a system provide sufficient incentive to work? At first it doesn't seem like it - you get paid the same amount wherever you are, as long as you do something. But the people proposed it drew attention to the dynamics. Say that you're in a company producing a certain item. The other people there have been producing that item for quite some time, and probably wouldn't like to have their community broken up by the scaling-down mechanism. Thus they wouldn't want to have someone around who doesn't pull his weight.

Similarly, from the point of view of an individual, he would like to work on that which interests him the most. However, assuming equilibrium, if it's the kind of work many are interested in, then there would be competition for that kind of work[2]. So in order to get work doing the thing he's interested in, it would be something that doesn't interest society all that much, he would have to be very good at his work, or it would be on something where there's an increase in demand (thus opening up positions).

Finally, the community reasoning also applies to an individual who joined. He would, after some time, get to know his coworkers and (if it's a good place) want to stay there instead of having to leave because of the scaling-down mechanism.

So, would the system provide sufficient incentive to, well, work? I can get myself to believe either. What do you think?

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[1] That is, by the system acting like the Walrasian auctioneer.

[2] This is of greater importance in capital-heavy production. That is, if you can set up your own shop, then you don't have to wait to become part of a company. But if the production isn't capital-heavy, then people who are interested in doing the production will probably do so anyway, regardless of the economic mechanism. For instance, open-source developers code for free. Getting paid for it is, of course, a bonus, but not strictly needed.

Comments

[draque.livejournal.com]

This creates a situation in which the easiest jobs are the most desirable. Those with the least responsibility and work. Having the most skilled people flock to them would be very bad for society at large. I would immediately try to find one, as a pay cut that put me on par with an unskilled laborer would mean I was doing difficult travel and hard problem solving when I could save that time and energy for personal projects. I would be incentivized to drop into the lowest viable position.

[davv]

Remember the scaling mechanism. I said that the "scaling mechanism scales up things that are expensive and down things that are cheap". Here, "expensive" means that demand is in excess of supply, so that the short term clearing of prices sets the price per item at above the payment ("wage") for the amount of work needed (on average) to produce that item. Similarly, "cheap" means that people aren't willing to pay as much as the combined wages that go into it.

Say you're considering the job of testing beds by sleeping in them. (This is a stand-in for any sort of pleasant easy job.) Say the system is at equilibrium. So you contact a bed manufacturer. They then say something to the effect of: "Unfortunately, we have enough bed testers already. We don't think you'll increase the demand for our beds enough to pay for your labor. The clearing price will fall below the wage per bed. The system, detecting this, will then give us less resources, and in order to stay in production, we'll have to fire someone. So even if we did hire you, we'd have to fire you soon after. Sorry about that".

In the absence of a constraint, yes, you would want to have the easiest jobs. In the absence of a constraint in the current system, you'd want to have the most profitable job. But usually there are constraints, and it seems there would be constraints here as well.

Now that I think of it, that may give some idea of what unregulated monopolies (so to speak) would be like under both systems. In the current system, companies charge more per unit when they're unregulated monopolies than they do under competition. In this system, it'd seem that an unregulated monopoly would employ fewer people and these would take it easy - instead of employing more people when their goods are in demand (thus producing more stuff), they'd just laze around so that their productivity decreases.

[draque.livejournal.com]

Ahh, I see what you're getting at now. That's a pretty interesting solution... I suppose the only concern I would have at that point would be how gameable the system might be. Gotta think about that a bit.