David R. Henderson  

A Counterexample for Scott Alexander

Scott Alexander on Labor Econo... Pseudo-recessions and actual r...

I enjoyed Bryan Caplan's post early this morning. In my view, the best comments so far are by Daniel Fountain and by Thomas B, although Mike Hammock and Hasdrubal make good points also.

I look forward to reading Bryan's responses to Scott Alexander. Meanwhile, I have my own anecdote.

I have an office in downtown Monterey where I hide out to get work done. For some reason, even though I have communicated it to them, some of the small-business people with offices in the same building keep forgetting that, with the particular windows I have, I can hear everything when they talk on the landing outside my office. Even when I try to concentrate on my work, I still hear it clearly.

About a week ago, one of these small business people brought one of his employees out on the landing to ream him. The problem? The employee had refused to work on a joint project with another employee because he didn't like him. The employer handled it beautifully. He explained that the employee he was talking to was a first-rate employee. He explained that he knew the friction between the two and that's why he put them on separate projects. But every once in a while, he explained, he needed them both on one project and this employee he was reaming couldn't, as he had, simply refuse to show up.

Well, he didn't quite handle it beautifully. As I told him later, he shouldn't have handled it with me listening, and as I explained to him, that's why I went out to the landing: to remind him that I was in there and also, by the way, because the young employee was getting so animated that I was afraid he was going to punch the employer. My appearing when I did did seem to break up the tension.

I'm getting sidetracked. Here's what came out of the discussion with his employee. The employer was trying to keep all 5 employees fully employed and, because of a drop in their business and some unanticipated major expenditures on equipment, he had cleared only $7,000 so far this year. Of course, he could have made that up. But when I asked him about it later, he said it was true. I've gotten to know him over a few years and I think he's honest.

When I asked him about the $7,000, and he confirmed it, I asked him something else. I had noticed that in July he had one of his office workers training another young worker on the bookkeeping and appointment-making parts of the business because she, the person doing the training, would be quitting (or going on leave--I'm not sure which) to have a baby. Every day for about 3 weeks in July, I would go by on the way to the men's room and see her training the other young woman.

Then, when I returned from vacation in August, I noticed that the woman who had been trained was not there and there was a third woman, whom I didn't recognize, working there. I asked him what had happened. After all that training, it turned out, she had called in with about one minute's notice before work time and said that she had found another job. All that training--for which he paid the trainer and, I assume, the trainee--was out the window.

He told me that he frantically tried to replace her and had real trouble finding someone. Hopefully, he said, this new one would work out.

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COMMENTS (4 to date)
Peter H writes:

An interesting example. I have a counter-counter example from my own workplace (from the employer side). We have an employee here whom we hired a couple of years ago for some highly specialized work. We have given him substantial training because the work is too specialized for us to hire someone directly with the expertise except at enormous expense. When we hired him, he had relevant experience in the broader field, but not in our narrow niche.

He had been unemployed for a couple of years at the time we hired him, and his finances were such that he declared bankruptcy a few months into having the job. While we have invested quite a bit of money into his salary and training, and it's a big pain in our butt to train someone new, I have no doubt that if we were to lay him off tomorrow, the impact on him would vastly exceed the impact to us.

Jeff writes:


I don't think that's a counter-example to Scott. I think Scott's main point was that employees are generally impacted more from a separation than employers, and this difference increases as the number of employees increase. Your example showed that an employer of 5 cared a lot about losing one employee but it's not clear if the employer or employee would have been impacted more from a separation.

Kenny writes:

I mostly concur with Jeff; your example is a little weak.

But I think something important to keep in mind about Scott's original post/page is that he's bending over backwards to be charitable to the non-libertarian POV. See his post Reactionary Philosophy In An Enormous, Planet-Sized Nutshell for one example. I don't think he would even remotely endorse the passage Bryan quoted as holding in all places and at all times and for all employees.

Also, from the intro to Scott's page:

However, there's a certain more aggressive, very American strain of libertarianism with which I do have a quarrel. This is the strain which, rather than analyzing specific policies and often deciding a more laissez-faire approach is best, starts with the tenet that government can do no right and private industry can do no wrong and uses this faith in place of more careful analysis.
TallDave writes:

Scott -- this has boosted my productivity enormously.


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