Bryan Caplan  

Markets: Rich/Nice vs. Poor/Mean

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If Capitalists Ran the Schools... Social Security and Kids...
Consider a model where workers are either rich or poor, and employers are either nice or mean.  Rich workers might be more conscientious than poor workers, or simply less tempted to steal from their boss.  Nice employers trust their workers to do the right thing, but hire carefully.  Mean employers hire anybody, but watch them like hawks.  What happens?

In equilibrium, nice employers hire the rich, and mean employers hire the poor.  It makes sense: Nice employers need rich workers they can trust, and poor workers misbehave unless there's a mean employer on their backs.  Nevertheless, the firms where mean bosses employ poor workers look very different from the firms where nice bosses employ rich workers.  An ethnographer who visited the mean boss/poor worker firms would probably tell a vaguely Marxist story about class conflict.  An ethnographer who visited the nice boss/rich worker firms would tell a much more pro-market story about cooperation and meritocracy.

I think this simple model explains a lot about the real world.  People who employ, serve, or rent to affluent workers, customers, and tenants can afford to be nice, because they're trading with people who are conscientious and/or are so comfortable that they aren't tempted to cheat.  People who employ, serve, or rent to impoverished workers, customers, and tenants, in contrast, can't be Mr. Nice Guy, because the people they're trading with would take advantage of them.  Their workers would show up late, drink on the job, or steal; their customers would shoplift, damage the merchandise, or scare other customers; their tenants would be late with their rent, have loud parties, and damage the property.  Obviously there are exceptions; but people in business can't afford to ignore what's generally true.

If my story is right, there are two important lessons.

First, many people's first-hand experience with markets won't be so pretty.  If you're poor, you'll frequently encounter abusive bosses, suspicious shopkeepers, and intimidating landlords.  This will be especially galling if you're a poor but conscientious exception to the rule.

Second, these negative first-hand experiences will be deeply misleading.  There's no market failure.  Employers, merchants, and landlords who deal with the poor have to be unappealingly tough to stay in business.  And without these easily maligned figures to offer work, goods, and dwellings, the poor would be much worse off than they already are.  Meanness is the market's way of coping with a bad situation.

One straightforward implication: Bosses, merchants, and landlords that interact with high-conscientious, low-income clienteles - like grad students or Jehovah's Witnesses - will be much nicer than those that interact with stereotypical low-income groups.   That's certainly my experience; how about yours?

P.S. I've been thinking about this topic for a while, but a recent episode of Breaking Bad brought it back to the surface of my thoughts. (slight spoiler)  When they're slightly above their 200 lb. per week meth quota, bourgeois Walt insists on delivering every last ounce.  His lumpenproletarian partner Jesse, in contrast, resents The Man so much that he starts skimming the surplus, risking an extraordinarily lucrative job - and his life.  See also Frozen River.


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COMMENTS (26 to date)
Steve Sailer writes:

Right.

In "Lucky Jim," Kingsley Amis says, "There was no end to the ways in which nice things are nicer than nasty ones."

Sociologically, we see positive correlations between most positive things: income, IQ, trust, cooperation, law-abidingness, kindness, future time orientation, health, beauty, and so forth and so on. There is no end to the ways in which, say, La Canada is nicer than Compton.

Thus, Moynihan's Law of Proximity to the Canadian Border: on just about any socially positive measure, there is a positive correlation between a state's ranking and it's distance from the Canadian border: e.g., Minnesota is usually in the top ten states on anything.

Someday, this knowledge might even induce Bryan to have doubts about his desire to remake America into Alto Mexico.


Matt writes:

I've worked in an office setting and I've worked in a warehouse setting. In the warehouse setting bosses were very careful to monitor employee behavior (I got yelled at for being 1 minute late!). Employee training had a section on what to do if you are drunk in the morning or on drugs before you go to work. The office setting was much more relaxed. The boss trusted employees to work at their own pace to accomplish work by deadlines. It generally was not expected that employees would come to work intoxicated and no one really talked about it.

Mr Econotarian writes:

You may be correct - this could imply a "socialism trap" of a poor country with mean employers, the employees vote for more socialism, then get poorer, etc.

How did the US escape this? Certainly there was lots of class struggle in the decades around 1900, but perhaps enough workers were in agricultural settings rather than manufacturing ones and organization of labor was this tougher.

Your idea shows another benefit to economic freedom that brigs wealh. Not only can you own a car to drive away from the hurricane, your boss will give you the day off as well.

david writes:

A Marxist would point out that your model starts by characterizing the poor as people who "misbehave unless there's a mean employer on their backs", which is a large assumption to make. "They're poor because they deserve it", etc.

You could clean this up by making employers risk averse + giving the poor a higher variance in behavior, or something. But that would entail market failure.

Jaap writes:

Apparently Greece did not escape this trap yet.
(http://www.nytimes.com/2010/05/06/world/europe/06greece.html?scp=1&sq=greece%20riot%20deaths%20bank&st=cse) Allegedly (from left-wing sources) these employees were forced by their boss to remain at work despite warnings from the protestors to stay home.

Thus, Moynihan's Law of Proximity to the Canadian Border: on just about any socially positive measure, there is a positive correlation between a state's ranking and it's distance from the Canadian border: e.g., Minnesota is usually in the top ten states on anything.

So, Steve, should I move to Detroit? Being actually north of the Canadian border, it must be heaven on earth! And I understand property prices are ever so much more reasonable than in Fairfax County, Virginia (a/k/a "Southern Hellhole").

More seriously, there does seem to be a general tendency of Equatorial Misery and Polar Happiness. With rare exceptions, pretty much wherever you start on the equator, as you head towards a pole, the places tend to become better governed, peaceful, and rich (at least until the point where it gets so cold that it becomes difficult to inhabit for humans).

Surprisingly this holds as much in the Southern hemisphere as in the Northern. Hence, Chile, Australia, and South Africa (yes, even them) tend to be the nicest places in the region and what they all have in common is that their inhabitants couldn't move closer to Antarctica without developing skill at water breathing.

(And, of course, there are exceptions to this tendency--rather than law--too. Singapore sits pretty much on the equator and by some measures is one of the best governed places on earth. And Hong Kong is not much further and probably even better. But then tiny city-states often are able to develop positive distinctions from their region.)

Æternitatis writes:
Apparently Greece did not escape this trap yet. (http://www.nytimes.com/2010/05/06/world/europe/06greece.html?scp=1&sq=greece%20riot%20deaths%20bank&st=cse) Allegedly (from left-wing sources) these employees were forced by their boss to remain at work despite warnings from the protestors to stay home.
This is rich. Leftists tries to intimidate businesses into shutting down. Business refuses. Leftist mob murders business's employees. Leftists explain: Clearly business is at fault! By not caving they *forced* us to murder these employees.
Hume writes:

Not sure how many of the "rich" have "nice" bosses. My experience in the corporate world says otherwise. Perhaps there is a difference in trust, but I think that "trust" is only one input in what makes one "nice." Of course, everyone will say "you are getting paid so-and-so, shut up and deal with it." Fair enough, but this is simply changing the subject from "the rich have nice bosses" to "the rich should deal with it."

Tracy W writes:

David - I think you're missing the point of the model. What we see, to some extent, is nicer working environments at higher-paid jobs than at lower-paid ones. What we don't see is what causes this. The Marxist story assumes that the employees are similar to start with, and thus the difference is about class. Bryan Caplan is suggesting an alternative explanation, with a different assumption.

This is a relatively uncommon way of critical thinking, that of generating drastically different alternative models of the world and seeing if that could also explain what we see, as a way of checking if our deductions are necessarily right.

Kurbla writes:

(i) Majority of the socialists, especially Marxists, would agree that relation between capitalist and worker is not personal, and that capitalists do what they have to extract profit, and that little of their behaviour reflects their personal morality. So, you wouldn't be challenged at all at this point.

(ii) The notions of "mean" and "nice" are somehow vague and not in the centre of the class conflict. The socialists complain on capitalists, exploitation, profit. And it is pretty much the same for "nice" and "mean" capitalists.

(iii) It is true that if workers are not, well, conscious - and that is matter of culture, and individual character - that there will be more tensions, and market will perform worse; and then these same workers will blame the market and bosses and capitalists for what they're guilty but also, for what they're not. But those same people would blame planned economy on the same way. It is our general human "quality" - to accuse other people for our own shortcomings.

Michael Bishop writes:

Complementary/Alternative explanation:

Some employers like to be mean. The highly-skilled (rich) can pay (through lower wages) to avoid dealing with such people, the poor can't.

Æternitatis writes:

@Michael Bishop

That is an interesting idea, but does it explain the data (assumed to be that the rich have nicer bosses/landlords/etc. than the poor)?

Just because the rich can afford this comfort, they would not necessarily want to pay the price. Perhaps they'd rather earn even higher wages with a nasty boss? And perhaps some of the poor would rather give up some of their meager earnings to have a nice boss?

If the premium nasty bosses have to pay is related to the base pay (rather than being some fixed sum), it is not clear to me that we necessarily would end up with rich workers having nicer bosses than poor workers under your model/explanation.

Also it fails to explain why some bosses (landlords etc.) are nice and some are not. If nasty bosses have to pay higher wages, is that just them indulging in their tastes? Maybe, but that explanation is rightly regarded as the economist's last refuge to "explain" otherwise puzzling behavior. Prof. Caplan's explanation, in contrast, offers a reason why some bosses would be nasty.

m.edwards writes:
"Obviously there are exceptions; but people in business can't afford to ignore what's generally true."
I don't think this is generally true, just true often enough to color perceptions and build a stereotype.
Zac Gochenour writes:

My experience essentially agrees with Bryan's story. But I am high-conscientiousness and so are most of the people I know.

Food for thought: another implication is that bosses, merchants, and landlords that deal with high-income, low-conscientiousness clienteles will be meaner. What are some of these groups? Trust funders maybe?

If this is not the case, then essentially the story is: employers, landlords, etc treat rich people nice and poor people mean, unless the poor people can effectively signal their high conscientiousness, such as by being a grad student or Jehovah's witness.

Æternitatis writes:

It is not just conscientiousness--the mere fact that a person is rich ensures that they are (1) able to pay for violating their commitments and (2) can be made to do so by the law. The poor, by contrast, are judgment proof and hence above the law with respect to any conduct less than criminal.

Dealing with people who can act with impunity induces suspiciousness and monitoring. Dealing with people who are either going to abide by their commitments or be forced to pay induces (and justifies) trust.

Doug writes:

I'm going to make a prediction: someone in the leftist blogosphere (I'm looking at you DeLong), will take this post and make the logical fallacy of assuming that since you said that there was correlation that 100% of the variation in employer quality is based on rich/poor.

They then will take the most horrific workplace mishap, like say the Triangle Shirtwaist Fire, and imply that you think they got what they deserved.

Andy writes:

Why do you assume that employee behavior is the cause and not employer behavior? I think you may have it backwards: Employers are more trusting to richer employees because they have to be, not because they want to be. Rich employees are more costly to replace and they are likely working in fields where their skills are in high demand (otherwise, they couldn't command the kind of salaries to make them rich). In essence, employers have to compete over rich employees who aren't going to put up with as much BS. By contrast, the poor are more likely to be employed in unskilled or semi-skilled labor and are more easily replaced. Employers have less incentive to treat them well because if they quit - so what? They can quickly and cheaply be replaced.

Doug writes:

Andy,

Even if that's the case if I'm a low-wage employer why wouldn't I just be nicer to my employees and pay a lower wage. Certainly even lower wage employers have some marginal preference for higher niceness.

In order to explain the discrepancy it has to be shown that the wage premium for niceness is less than the cost of niceness. All your model shows is that the wage premium is smaller for cheaper workers than rich workers, it doesn't say anything about the cost.

Andy writes:

Doug,

I'm skeptical there's anything here to begin with, namely the premise that the rich are "nicer" than the poor in a working environment or even in general. I think it's more likely that an individual's "niceness" is due to other factors. Also, I think the rich are more likely to have a better working environment and greater job satisfaction.

ajb writes:

Actually it's worse than that. Various regulations that limit testing and firing and even statistical discrimination make it more likely that nice employers won't hire high risk workers. This is like the minimum wage and the threat of anti-discrimination suits. If I am a nice boss but I have the right to lowball the pay of a former felon with no education I might take a chance on him if I can give him tests and if I know that I can fire him at will later. If there is a ban on testing and a high minimum wage and a high legal hurdle on what is acceptable discrimination then I'm more likely to just pay the price for the stereotypical good kid with a normal degree from a standard background. The guy who hires the felon and pays a "standard" wage will be the one who's really mean or who has non-legal means of punishing those who shirk.

Steve Sailer writes:

Right.

A friend of mine who owns a small business says, "If I can't fire him, I can't hire him."

pandaemoni writes:

Where do you people work? Working with and among the wealthy is hardly a good predictor of the "niceness" of bosses.

I am definitely in the rich and conscioentious camp, yet I have had bosses unconcerned about committing assault (in my personal case having a lucite block thrown at my head, but I wouldn't even count the number of sexual assaults I've witnessed or heard about over the years). Verbal abuse, of course, flows even more freely. A distinct lack of regard for an employee's personal and family commitments is so common, it would be faster for me to list the bosses that *are* considerate of them.

I've seen bosses break the spirits of those around them to the point of people leaving the company in order to avoid having a nervous breakdown. I have also seem employees duck into conference rooms and closets to avoid bosses, and sometimes just to cry. (In my experience, it has only been certain female co-workers have actually cried, but there were multiple women who've done it.)

One thing in support of the model is that boss behavior scales. A given boss will often give secretaries, mailroom guys, janitors, etc., less respect than higher-paid employees, and abuse them more readily. The could be because they are considered less "trustworthy" and in need of more supervision. It could also be because they are seen as "less important" though, so that the boss feels they are not worthy of the heightened respect. I sense that both are true to varying degrees.

I also see (and myself employ) an opposite strategy: always be nice to the secretaries and mail room people, because they can screw up your work in a heartbeat, and in a way that you might not catch. Professionals handle criticism (legitimate and otherwise) better, in my experience, than non-professionals. I, personally, try to be considerate to everyone, but I don't dance around my honest criticisms as much with professionals.

MernaMoose writes:

Andy,

I think you may have it backwards: Employers are more trusting to richer employees because they have to be, not because they want to be.

I'd say there's a big element of truth to this. Though I have also seen professional employees (myself included) be willing to tolerate more abusive environments if the pay was higher. But the minute it isn't paying more, the good people start vanishing with great speed.


OTOH, I also have to agree with pandaemoni.

Where do you people work? Working with and among the wealthy is hardly a good predictor of the "niceness" of bosses.

I started life out working at the unskilled end of the spectrum, then became a semi-skilled technician, then went to college (later age than traditional) got a PhD and now work in R&D. I've seen the gamit.

In the white collar universe, your bosses are likely to be less strict with you (for example about being a few minutes late in the morning). And in the professional job ranks I'd say it's more likely that you'll get a nicer boss, on averge. They'll give you more consideration and room to flex/adjust your schedule for family issues, etc, compared to unskilled and hourly jobs.

However, I've had my share of mean bosses even in R&D. And when you get a mean one in the white collar world, I think, they can actually cause you a lot more personal grief. Boss quality is still hit and miss even if you're in the "rich" ranks.


In the past, white collar professionals haven't been monitored to nearly the same degree that hourly people have, for the simple reason that it just wasn't practical to do so. But these days, as easy as it's become to monitor professionals through their computer activities, I think even the "rich" are now being monitored to roughly the same degree as hourly people always have been.


Still, white collar professionals do get more flex in performing their jobs than hourly do on average, which in all practical terms means "nicer boss".

Though I wonder, how much of it is because -- given the nature of the work that we do in the "rich" ranks, there has to be more employer-employee trust, if productivity is to be high? Not sure I can explain all of why but I feel that's a true statement.


In any case, an interesting little exercise here, that allows us to reconsider some of our deepest held assumptions about how the world works.

The Unbeliever writes:

"Food for thought: another implication is that bosses, merchants, and landlords that deal with high-income, low-conscientiousness clienteles will be meaner. What are some of these groups? Trust funders maybe?"

I think that is an almost perfect definition of professional criminals, which (conveniently) would fit the model. Think drug traffickers, Mafia, credit card scam rings, etc.

endorendil writes:

It's a cute tale, but without anything to back it up, it's no more than a tale.

In my view, rich workers cheat much more than poor workers. Just look at all the fraud perpetrated by CEO's, hedge fund managers and other assorted millionaires. It takes a lot for disappearing jars of mayonnaise to come close to what a white collar employee "steals" by taking extra toilet breaks, having pointless watercooler chats and playing Farmville on company time each day. And then we're not even talking about the grand frauds and corporate scams that we've seen over the last decade. When millionaires cheat to the tune of billions, we can safely put aside the idea that wealth makes people act better.

Joe writes:

Consider a world where academics either have to test their assertions or they don't. Physicists and chemists can be proven wrong so they publish rigorously documented finding to back up their assertions. Economists only publish work pertaining to persons with perfect rationality, perfect self-interest, and perfect information living in a mechanical world, so they can publish all kinds of wild conjecture and no one cares.

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