Garett Jones  

Will The End of Sleep Reduce Wages?

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Jon M at Sociological Speculation reports

...new drugs such as Modafinil appear to vastly reduce the need for sleep without significant side effects (at least so far). Based on reports from users, it seems that people could realistically cut their sleep requirements to as few as 2.5 hours a night without a decrease in mental acuity. 

He notes that people would probably work more, and wonders whether...

...these pills would amount to an increase in the labour supply and cause a fall in hourly wages or unemployment.

Normal microeconomics makes the right answer obvious: A rise in supply pushes down the price of work, so wages will fall.  But normal microeconomics only takes you so far: to get at dynamics and interdependence you need some kind of macroeconomics, a tool for seeing the big picture. 

So here's what probably happens when drugs make it easier to work more hours: All those extra work hours make capital more valuable, since your assembly line, your delivery truck, your call center can now all produce more output per machine.  

What happens when something gets more valuable?  People try to accumulate more of it.  And what happens when the economy accumulates more capital?  All those extra machines probably make workers more productive, boosting labor demand and therefore raising wages.

So sleep reduction drugs like Modafinil push down wages in the short run, but that increases the demand for capital which pushes wages back up in long run.  If the economy is straighforwardly scalable--if doubling the machines and work hours exactly doubles output--then the sleep reduction drug will have exactly zero effect on long run hourly wages.  

And you don't even need incentives, optimization, choice, all of that to get this clean result: The original Solow Growth model showed that even if people just consume a fixed fraction of their wages, and don't raise their savings rate at all when the productivity of capital rises, you'll still get the clean result that extra work hours have zero effect on long run hourly wages.

The end of sleep is unlikely to push down wages. 

Coda: You'll notice that a big rise in work hours caused by Modafinil is economically just the same as a big rise in immigrants.  Immigrants put in the work hours that push down wages that build the capital that raises wages.  

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COMMENTS (22 to date)
leogex writes:

Why assume that people wouldn't enjoy the increased hours for leisure activities or learning other skills?

Ron Ronson writes:

"What happens when something gets more valuable? People try to accumulate more of it"

Unless its a Verblen good is that true ? Surely lower wages would cause goods to be produced by relatively more labor and relatively less capital. While overall demand for capital could increase (as more capital is needed by the expanded workforce) overall the ratio of capital to labor would decrease not increase with the opposite effect to what you cite.


One can also imagine that demand would increase as people consume more in their additional waking hours. This could affect some industries (computer games , TV ?) more than other leading to an increased demand for people with those skills and rising wages in at least some industries.

drobviousso writes:

If I'm only sleeping for 2.5 hours a day, I'm probably going to work and produce more, but I'm going to want to consume more too.

It is like a nega-drobviousso immigrates from the sleep dimension. More production, and more consumption.

ThomasL writes:

I propose calling it "Manhole 69".

Alex Godofsky writes:
You'll notice that a big rise in work hours caused by Modafinil is economically just the same as a big rise in immigrants. Immigrants put in the work hours that push down wages that build the capital that raises wages.

I would go further, and say that you can (in the long run) look at Modafinil as just speeding time up, so that ~1.3 human years happens during every solar year.

basketball1082 writes:

Sounds like it will be awful for workers in the developed world. Developed world workers are already undergoing significant trends that suppress wages in the short run (globalization, technology changes) and that only will benefit future workers. Instead of slightly declining wages like the last 11 years we would have a dramatic decline in wages that will last my entire working life.

I'll pass.

Zac Gochenour writes:

I agree with your answer - it would be very similar to having more kids or more immigrants. More man hours for work and more man hours for consumption.

Just want to add a sobering thought: I'm pretty confident the decline is going to come from widespread Modafinil use. This drug has been available for many years now; the effects are nowhere near as dramatic as claimed. There's certainly a loss of mental acuity, and to keep it up for more than a few days makes you feel like you're coming down with the flu. Great in a pinch, but won't usher in the brave new world of 2.5 hour nights.

Methinks writes:

Oh GOD, I need this drug!!!

Methinks writes:

Great in a pinch, but won't usher in the brave new world of 2.5 hour nights.

Didn't see that before posting my comment. DARN! As a chronic insomniac, I was kinda hoping for a pill that rendered the sleep I'm already not getting unnecessary. Too bad.

Fralupo writes:

So what happens if you can't take the drug? Are you going to unemployable?

I don't think I'd sign up to live 30-40 years of my life taking a drug so I can make a living. You can count me out of the increased labor supply.

Mike Rulle writes:

You are kidding, right? Even if such a drug existed, which it most certainly does not, what is your point? That each person would now become 1.3 people for production and consumption? Why are you writing this stuff? Humor I hope!!!

Those who oppose immigration will not be persuaded by this Huxleyian type tale.

Neal W. writes:

The idea sounds dystopian to me.

Most people don't enjoy their jobs, and most people incorrectly believe more consumption of material goods will increase their happiness. Which means the extra hours will be used to work more.

If the extra hours were spent more on visiting friends, family, or whatever things we find enjoyable, then it would be great.

Richard writes:

The point is an interesting one, but the premise is ridiculous. I am a modafanil (Provigil) enthusiast and have read a lot of the literature. Modafinil can maintain alertness in people deprived of sleep for one night or a few days; however, I suspect that very few people could chronically get by on 2.5 hours for very long - or would want to! People develop tolerance to it over time and it can stop working. In some individuals, it does little or no good. Many people have side effects - jitteriness, anxiety, heart palpitations, tense muscles, headaches, clenched jaws, and in some people it can cause a dangerous rash syndrome.
Plus it's expensive. It's cool to discuss this hypothetical effect on the global economy, but this is not a drug that large populations of workers or going to want to take - or should.

Granite26 writes:

Even assuming that most people are not required to work extra hours to remain competitive, there's a drastic (class?) difference between the quality of leisure time.

If person/class A spends an extra 2-3 hours a day on self improvement (exercise, reading, studying) while person/class B spends the extra time watching TV, how is that going to exacerbate existing inequality measures?

Steve Sailer writes:

Sleepless workers, immigration, why don't we just cut to the chase and re-institute slavery so capital owners can own everything?

If there truly are no side effects AND people decide they want to take the drug AND the price of the drug is negligible, then wouldn't the macroeconomic effects be equivalent to a rise in population? Think of a Solow model with a one-time jump in the population growth rate, with all variables normalized by capita*waking hours instead of the usual normalization by capita.

I think the price of the drug would get high enough that we would need to factor it into the analysis, though. If the drug company is profit-maximizing and consumers' demand comes from marginal analysis, then each dose of the drug will cost nearly as much as the additional wages the person can earn or utility of leisure they can get from the extra waking hours. If consumers are equal shareholders in the drug company, then the analysis should still work as before, otherwise it gets trickier.

Abelard Lindsey writes:

Modafinil may work over the short or even medium term. However, I am skeptical of it working long-term. I think most people lack an understanding of just how fundamental of process sleep is.

Sleeping is a process common to all vertebrates. This fact, along with the fact that sleep can be considered a serious evolutionary downside (it makes you vulnerable to prey because you are not awake) suggests that sleep is of such a fundamental importance.

It is known that long-term potentiation (one of the processes of memory and learning) occurs during sleep, particular during REM (this is when you dream). This is the process by which neurons delete old, seldom used dendritic connections and grow new ones. This is a fundamental process of neuro-biology. What is less known, but will be understood in the near future, is that actual neuro-genesis (replacement of defective neurons through apitosis and regeneration of new neurons) also occurs during sleep.

Sleep is essential to both of these processes.

I seriously doubt that Modafinil can compress these processes into a 2-3 hour period.

MingoV writes:

Modafinil is a dangerous drug. Its primary use is keeping a person alert after a bout of insomnia. It was not designed to keep people functional after deliberate repeated truncations of sleep. Most people need three bouts of REM sleep each night. That requires a minimum of five hours sleep. Going without that much sleep for more than a few days results in serious problems with concentration, memory, judgment, and behavior.

Doug writes:

I think this is how a Nightmare on Elm street started.

gwern writes:

> Modafinil is a dangerous drug.

Not really. The side-effect profile is pretty darn minimal.

> Its primary use is keeping a person alert after a bout of insomnia. It was not designed to keep people functional after deliberate repeated truncations of sleep.

Drugs can't really be 'designed', especially not drugs affecting the central nervous system. The question is not whether it was designed to do anything in particular, the question is whether it works.

> Most people need three bouts of REM sleep each night. That requires a minimum of five hours sleep. Going without that much sleep for more than a few days results in serious problems with concentration, memory, judgment, and behavior.

Yes, probably. But very few people perform at full capacity on 5 hours sleep, and the conclusions sound like they'd still hold if it were 8->5 hours rather than 8->2.5 hours.

http://www.gwern.net/Modafinil

Dave Tufte writes:

This is pretty standard growth vs. level effects stuff from the Solow growth model.

What the drug would do would be to increase the amount of effective labor without increasing the number of people. In short, it's a technological improvement.

Those improvements have negatives because that growth has to be "fed" with additional capital. This makes us feel bad because we'd really rather consumer that investment.

But, the improvement is a positive for the level of income (and well-being that is highly correlated with it).

People who complain out those outcomes are closet Luddites. This really isn't any different than the benefit to society from having children with lower mortality. It's a good thing, even it it comes with some hassles.

IronmanAndrew writes:

I work at DMESupplyGroup and we have kind of a work culture that is centered around health, exercise, etc. One of our goals in reaching a healthy state is ensuring we get 7 hours of sleep a night or more. It is a commitment, and it has made all the difference in the world.

http://www.dmesupplygroup.com/

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