Known Unknowns

Is work overrated?


Welcome to Known Unknowns, a newsletter that asks whether we need a job to feel human.

Do we really need to work?

I’ve never bought into the whole “bullshit jobs” hypothesis. Maybe it’s the economist in me, but if someone pays you to do something, then it must be valuable to someone and therefore to society as a whole. I may not understand every job, like why we need so many diversity consultants—do they increase productivity, or reduce it? But from another perspective, jobs like that provide tremendous value, and if done well can ensure a fair and equitable workplace (whatever that means). And that sounds good—maybe that means more productivity in the long run.

And even if I don’t get it, I’d bet that even a mediocre diversity consultant believes that their job is important, and that they feel good about it. After all, work is important—it provides purpose and dignity, and of course, if you’re paid for it, there’s obvious economic value too.

The past 18 months have led us to rethink many aspects of our working lives. I wrote about a friend of mine who is thinking of quitting his job. It was never going anywhere, even though it paid pretty well (though less than the market rate), but the glamour of travel and just a general sense of complacency had kept him in the job for more than a decade. But then a year at home forced him to face what was wrong with the job, and he’s not alone in that. People are quitting their jobs at record numbers, and companies up and down the skill spectrum are now offering bonuses to keep people from doing so.

Quitting has been trending down for decades, but it’s actually an important part of a dynamic economy. Perhaps my friend has forgone years of being more productive and pursuing further advancement. But I’m still pessimistic about the possibility that all of the quitting will last. We’ve become accustomed to a state of languishing, and going back to our old routines may feel good, at least at first. And I suspect the bonuses that aim to get us back in the office are counting on that. Never underestimate the power of passivity.

The good thing about working from home is that it forces you to assess your own productivity as well. You waste a lot of time chatting with people in the office and whatnot, so no wonder everyone is excited about a new study with Icelandic civil servants working a 4-day week and being more productive and happier because of it. But don’t we already have a better experiment in the form of France with its 35-hour work week? It didn’t go so well in the private sector if you actually care about income growth. Besides, I’m also starting to think that there are positive externalities to wasting time at the office.

My enthusiasm for jobs—all jobs—may be why I’ve always been a UBI skeptic. And I’ve always thought that all of those “studies” where people find their productive true selves are flawed. If you only offer UBI for a year or two, it’s not actually UBI. And if the payments are variable, then that’s also not UBI. UBI means essentially giving everyone a fixed rate consol bond, which is different from a 2-year bond or a dividend paying stock—very different, in fact, in terms of value, wealth, and risk-taking effects. So, kind of UBI is not actually UBI.

A new study looks at lottery winners, which seems to be a better experiment, since the winnings are enough to approximate the lifetime fixed annuity that UBI pays. And guess what? People earn less, take less demanding jobs, and if they start a new business, it’s likely not going to be a good one. And that can mean that young people forego important career-building years in terms of raises (even lower paid people get most of their raises in their 20s and 30s) and skill-building opportunities.

This just shows how “trying UBI” and then taking it away can incur big costs. If people think that something is going to last forever, and then it suddenly doesn’t, it can leave people in a lurch—or bankrupt and depressed, like many lottery winners. Always take the annuity.

Does economics need more humanity?

However, maybe I don’t fully appreciate how complex people are, and that work isn’t everything. I’m an economist, after all, and economic historian Deirdre McCloskey’s new book argues that that means I inherently discount the human element.

Now, I’ve been an economist for more than 20 years, and that means 20 years of hearing, pretty much every day, that people are more complicated (dare I say irrational) than economists realize. The world has no shortage of armchair econo-critics.

And yet I kind of loved this book, which totally berated me, the reader, for not having read all of the great texts of humanity. And that’s something that I feel sort of guilty about, so I maybe I enjoyed feeling inadequate. But McCloskey also makes some great points, like that maybe Britain industrialized first because it treated its people with respect and offered them greater opportunities. Those opportunities weren’t just economic—there was also the rhetoric that elevated the masses to go forth and create.

It may not be so simple, but I do worry about the not-at-all thinly veiled hostility that elites have toward their fellow citizens these days. It’s divisive and discounts their humanity. And if you accept McCloskey’s argument, this may be holding back growth (maybe even more than economic inequality). And I reckon that that’s something we should be worrying about.

Digital currencies

There are some things in life that I won’t understand no matter how many people try to explain them to me—to name just a few, I’d list particle physics, how my TV works, Bitcoin, and the point of digital currencies. Most financial transactions are already digital, so why do we need a new special, digital currency?

I suppose the point is really a move toward narrow banking, which may have some benefits that I don’t fully understand. One might be that if you keep an account at a central bank, they can pay negative interest rates, which will be a new policy tool with which to boost consumption. But as a consumer, that doesn’t sound so great to me. Also, it does kind of change the way that our whole financial system works, and how private banks create capital. Maybe it will be better, but right now it seems high-risk to me.

Anyhow, someone who understands all of this better than I, Markus Brunnermeier, has some questions that should be answered before we upend the entire financial system for benefits that have yet to be well-articulated. Not that it’s stopped us before, however.

In other news

I’m moderating a panel on inflation tomorrow with Mervyn King, Joseph Gagnon, and Mickey Levy. Hope you can join!

Until next time, Pension Geeks!