Responsicle to Robin Hanson’s Overcoming Bias post, “Excess Turbulence”

Responsicle to Robin Hanson’s Overcoming Bias post, “Excess Turbulence”

http://www.overcomingbias.com/2015/08/excess-turbulence.html/trackback

In his post “Excess Turbulence” Robin Hanson discusses the 14th-century French practice of shepherds changing farms every year. Reasons offered for this change included rest times, indulging a preference for variety, and emulating ancestral behaviors of roaming single males.

I’d offer a market structures explanation for why these wholesale changes happened so frequently. To illustrate how these structures play out even in modern times, I’ll use observations of two different ‘markets’ anecdotally observed in New York City.

The structural features I believe are at play are:

  1. High numbers on both sides of the market: e.g. ‘buyers and sellers’ or ‘shepherds and masters’ with low switching costs. This frothiness enables frequent switching.
  2. Low trust
  3. One-way or mutual exploitation

1. High numbers of close (enough) counterparties are needed for frequent switching or else the switching costs become too high, e.g. more than a week’s worth of traveling might cut into a shepherd’s wages. Also, the high numbers create the perception of near-unlimited possibilities. In a bit of mass-coordination, the knowledge that every farm was hiring at the beginning of the season virtually guaranteed employment for a roving shepherd.

2. A low trust environment suggests that each party feels the other cannot be trusted for long, so cooperation is bound to break down at some point. This belief makes partnerships weak, unstable, and short-term. For a fixed-term engagment such as the shepherding season, you’d expect trust to be higher in the beginning than the end.  This might explain the vigor and enthusiasm shepherds display at the start of the season.

3. Given the low trust and the perception of unlimited alternatives, cheating and exploitation becomes rife. Depending on the economic and power dynamics of the market itself (e.g. whether a worker can be blacklisted or imprisoned for misbehavior), the cheating can go both ways and a system of mutual exploitation results. In practice, this looks like masters not paying shepherds’ wages on time or in full, physical or sexual abuse, or withholding food and other necessities. On the other side, shepherd cheating would look like stealing sheep or wool, stealing food, laziness, or animal abuse or negligence. Faced with a declining flock of neglected animals at the end of the year, the master would be highly motivated to replace the entire shepard cohort. Add to it relative anonymity, low communication and the inability of either side to punish bad actors, and you have a system that accomodates mutual exploitation.

These conditions would encourage frequent switching at the minimal viable interval – perhaps a year for sheep or a growing season for crops. As a result, farms switch out shepherds yearly.

These structural dynamics are also at play in two markets in New York City (where I lived for some time):  the entry-level glamor job market and the dating market. Each have similar high-switching behaviors.

Recent college grads who want jobs in the glamor fields of fashion, advertising, and media head to NYC. As the national (and sometimes global) hub for these fields, the industry giants are there and benefit from a large and vulnerable talent pool. Entry-level pay is exceptionally low, sometimes half that of other industries. Young workers often must work long hours under stressful conditions, and compete fiercely for a scarce number of promotions. For their part, workers try to make the most of expense accounts, industry events, parties, and freebies such as gift baskets and sample products. Switching is common, as they improve their resumes by increasing the number of past employers. Once they secure the desired promotions, switching is less frequent.

The heterosexual dating market functions similarly. With a population of c. 10m and high numbers of new people every year, the NYC dating market is exceptionally frothy. Dating culture is often described as being predatory or transactional: men are seen as commitment-phobic and monogamy-averse, whereas women are painted as highly-discriminating and uber-demanding. Romantic relationships form and disintegrate quickly, and layered on top of this is the common practice of dating several people at once. Partner-switching is very common, as was immortalized on the show Seinfeld with Jerry ending relationships for the most laughably trivial reasons.

Both New York markets have the same characteristics outlined above: high numbers of counterparties, low trust, and mutual exploitation. As a result, frequent switching is common and even beneficial, allowing both sides to maximize their benefit under the conditions.

Advertisements

About Kia R. Davis

Strategist. Author. Blogger. Armchair intellectual. Fintech thinker. Backseat economist. Evolutionary psychologist wannabe. Entrepreneur's fairy godmother. Ecosystem developer.
This entry was posted in Uncategorized. Bookmark the permalink.

4 Responses to Responsicle to Robin Hanson’s Overcoming Bias post, “Excess Turbulence”

  1. robinhanson says:

    “For a fixed-term engagment such as the shepherding season, you’d expect trust to be higher in the beginning than the end.” But why, if the engagement could continue on to the next term? Yes if we assume that cooperation starts high then breaks down, that explains switching, but why would it start high and then fall?

    Liked by 1 person

  2. Kia R. Davis says:

    Thanks for the comment! That’s a good point: if the engagement is expected to continue to the next term, you wouldn’t expect a big fall in cooperation (though perhaps a slow erosion over time). But each new shepherd is entering a market whose structure has already been set, so his options are in line with that. Similar to the dynamic you describe in your ‘Life’s Laminar Endgame’ post, cooperation is less important at the end than in the beginning.

    Like

    • robinhanson says:

      At the end of life we can be sure the game will end. But when a job can continue, we need some reason to expect people to quit before we expect a reduction of cooperation near the end of the period.

      Like

      • Kia R. Davis says:

        I think that’s right, that if there’s a reasonable expectation that the job would be indefinite, cooperation would continue to be high. Much like rationale behind the ‘welfare capitalism’ that provided workers with housing, schools, and other amenities in exchange for a lifetime of loyalty. So I suppose the question then becomes what the necessary precursor is for switching: frothiness, low-trust, cheating, or an external constraint. Perhaps the commoditized good being farmed/manufactured makes profit margins thin and lowers wage costs. Or the need for hypertalented ‘stars’ at the upper levels requires a wide funnel of entry-level talent. Or cultural and social power dynamics such as those in feudal Europe made exploitation of the lower classes by the upper a matter of course, removing any incentive for a single actor to behave differently.

        It could start with the ‘ability to cheat’ condition as well. If you assume that people are natural cheaters, then anonymity, low communication, inability to punish transgressions, and low regulation would allow cheating to run unchecked. Add to it low switching costs and a frothy labor market and switching would be beneficial.

        Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s