Arnold Kling  

Idle Chatter from Ed Leamer

Why is there Free Parking?... Extraterritoriality...

Continuing my relatively unplanned commentary on Macroeconomic Patterns and Stories, chapters 7 and 10 are on idleness. One can think of a recession as resources being idle, and then we wonder why they are idle when they could be productive. Some quotes:

The greatest amount of idleness of assets is due to scheduling problems. Your bed is used only when you sleep and your TV is used only when you are awake.

...Indeed the primary function of the division of labor is to minimize idleness. If you do the hammering while I do the sawing, we can keep the hammer and the saw operating at the same time.

Lots to chew on there. For example, it occurs to me that one advantage of large factories may be to reduce idleness. The more work being done at one time at one place, the less you have to worry about small variations in productivity at different points in the production process. If there is only one person applying finish in a small shop, then that person could get either way ahead or way behind. If there are lots of people applying finish in a giant factory, then the law of large numbers implies that the average amount by which the finishing process gets way ahead or falls behind other processes can be held down.

Another issue concerns the disposition of idle assets by a firm. If your capital is not being used, why not sell or rent it? If Hertz has excess cars, why not lend them to Avis?

Hiring and firing workers is an asset disposition issue. If your firm has excess workers, then at the margin the workers are idle whether you keep them or not. If you keep them, you pay for them while they are idle. If you let them go, then they deal with their own idleness. When you scan the horizon and see opportunities, you acquire assets (workers). When you scan the horizon and see threats, you dispose of assets (workers). You rarely make these decisions based on short-term calculations of real wage rates and marginal products. Much of the cost of a worker is overhead, particularly with things like health insurance and training costs to consider. Much of the benefit of a worker is uncertain and lumpy, because we are in a Garett Jones economy. Or, as I put it elsewhere, Labor is Capital.

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COMMENTS (1 to date)
Jaap writes:

I've actually seen this in Chinese massage parlors in Amsterdam. there are one or two people present at any time, but usually demand for massages comes erratically. once more people come in than can be handled at any time, a call goes out to other parlors to see if they've got idle people around. subsequently, they come over to massage 'excess demand'.
I'm not sure how they are connected in the long run (maybe they don't just operate in one group, but ARE one group) and how compensation in doled out. I imagine the shopowner gets at least part of the revenue 'external' masseuses generate. I don't understand Mandarin/Cantonese.

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