Archive for February, 2009
The Gig Economy
| Peter Klein |
Tina Brown heralds the rise of the “Gig economy”:
No one I know has a job anymore. They’ve got Gigs.
Gigs: a bunch of free-floating projects, consultancies, and part-time bits and pieces they try and stitch together to make what they refer to wryly as “the Nut” — the sum that allows them to hang on to the apartment, the health-care policy, the baby sitter, and the school fees.
Love the term. She cites poll results on the number of young, educated, skilled workers who bounce from job to job but — as usual with these kinds of breathy pronouncements — doesn’t offer any time-series data. Reliable evidence on “nonstandard labor” (self-employment, part-time work, independent contracting, and the like) is hard to come by, and we don’t really know how much of the Gig economy (like the “new economy”) is actually new. Self-employment rates have generally risen in OECD countries during the 2000s, but I’m not sure about the other data series. Can anyone suggest recent academic studies?
Yet More “Shameful” Interventionist Rhetoric
| Mike Sykuta |
It’s obviously not enough for regulators from the Obama administration to march down Wall Street and mandate changes in the incentive systems of rank-and-file workers or even mandating that these “bonus” payments be rescinded (see here and here). Now banks that received bailout money are being chastised and brow-beaten from the bully pulpit of the White House for honoring long-term contracts signed years before the current “crisis.”
Today’s Wall Street Journal reports Citigroup is considering reneging on its 20-year stadium naming rights deal with the New York Mets to appease the White House and the populist press. Citi has already caved on its commitment to purchase a new corporate jet to replace two aging planes (a move that would likely have enhanced both fuel and environmental efficiency, ironically enough). Although Citi and the Mets claim the deal is still on, the attitude from Washington is remarkable in its complete disregard for the complexity of business deals, if not for the very essence of the institutional structures that support exchange (and contracting).
First, despite all the clamoring about Citi spending $400 million on naming rights while receiving $350 million in TARP funds, the reality is Citi is obligated to pay $20 million a year for 20 years. So while taxpayers are being told they are paying to name the new Mets stadium Citi Field, only a relatively small amount — certainly by bailout standards — is being spent this year. If the purpose of the bailout is to get firms through these troubled times and into a more stable future, we’re not talking about taxpayers taking on a 20-year commitment. (more…)
Andrew Gelman on Significance Testing
| Peter Klein |
A very insightful post on the McCloskey-Ziliak / Hoover-Siegler controversy, paradigmatic examples of signficance testing in economics, rational addiction, and other econometrics-related issues. An excellent discussion starter for a graduate course in research methods. Or your next dinner party.
Personal trivia: I’ve interviewed both Steve Ziliak and Mark Siegler for academic jobs. Both were deemed too smart to be a good fit.
Raising Rivals’ Costs
| Peter Klein |
Last spring, Microsoft supported bills in the New York and Connecticut legislatures to impose strict regulations on businesses that gather personal information online for marketing purposes. The bills would hurt Microsoft, too, given that it also wants to sell advertisements based on customer behavior. But the self-inflicted wound may be worth it for the damage it causes Google.
Thanks to Jesse Walker for finding the passage in Wired’s very interesting story on the political economy of digital competition, which is just as nasty as in “old economy” industries. And don’t even get me started on Apple’s threat to go nuclear on Palm.
Hayek on the Austrians
| Peter Klein |
Those of you longing for a copy of my favorite volume in Hayek’s Collected Works, but unwilling to pay the hefty University of Chicago Press or Routledge price, can now get a handsome paperback edition for only $12, thanks to Liberty Press. The brilliant introduction and copious editor’s footnotes alone are worth the price!
Attacking Incentive Pay is the “Height of Irresponsibility”
| Peter Klein |
Imagine you’re a salesperson at a company. In order to create an incentive for you to bust your tail, the company negotiates with you a leveraged compensation plan under which you receive a relatively small base salary plus fairly generous commissions on the sales you close. Suppose you do a bang up job one year, but the company as a whole suffers a loss because of some poor decisions beyond your control (or because of developments in the macroeconomy, such as the bursting of an asset bubble facilitated by government-sponsored entities). Now imagine that the government perceives your company to be strategically important and therefore decides to subsidize it by, say, buying its preferred stock or extending it a loan. Would it be “the height of irresponsibility” for your employer to honor your legitimate compensation expectations and pay you the wages that you effectively earned under your implicit deal with the firm? And what would happen if your employer didn’t pay you what you legitimately expected? Wouldn’t you and the other successful salespeople at your company immediately bolt, leaving the company with a much less effective sales force?
I have little to add to Thom’s excellent post on Obama’s populist attack on bonuses except to note that the compensation system is just one element of a firm’s organizational architecture (along with the allocation of decision rights, systems of performance evaluation, and so on). The firm, as Holmström and Milgrom put it, is an incentive system, and the elements of this system interact in complex and nuanced ways. The idea that regulators can simply march in and dictate changes to one element or another, based on popular prejudice, without affecting the performance of the system, is typical of the hubris of the intellectual.
Facebook in the Classroom
| Peter Klein |
According a new survey, 76 percent of undergraduates here at the University of Missouri are on Facebook at least once a day, and they are more likely to get school-related information from Facebook than from email.
I’ve never used Facebook as an academic resource. If you have, could you share something about your experiences? For example, I could create Facebook Group pages for my courses and use them for announcements, discussion, chat, hosting course materials, etc. Facebook isn’t a substitute for Blackboard, or one of the other specialized teaching platforms, however; it lacks testing and grading features, doesn’t automatically import membership lists from enrollment data, isn’t supported by university IT people, etc. How can Facebook and Blackboard be used effectively as complements?
Organizations and Markets 
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