Glamor Economics

Chapter 142

Chapter 18, Section 4 Let people who pretend to be fake have nowhere to hide——Efficiency

Human beings are rational, that is, they pursue the maximization of benefits when the labor is given, or they hope to minimize the labor when the benefits are given.This kind of self-interest is understandable. People always make good use of the conditions they depend on in various environments to maximize their own interests. "Han Feizi" records the story of Mr. Nan Guo's "filling up the numbers".

King Xuan of Qi loved music and liked to listen to people playing the Yu. Every time he heard a musician playing the Yu, he would choose 300 musicians to play together for him.Mr. Nan Guo heard that King Xuan of Qi liked to listen to ensembles, so he went to King Xuan of Qi to recommend himself.King Xuan of Qi was very happy and kept him with generous treatment.In fact, Mr. Nan Guo doesn't know how to play the Yu at all, and every time he plays in an ensemble, he puts on airs.Later, King Qi Xuan died, and his son King Qi Min succeeded to the throne, but King Qi Min liked to listen to musicians solo.When Mr. Nan Guo heard the news, he ran away quickly.

For thousands of years, people have always regarded Mr. Nan Guo as a typical example of shoddy as an expert and a layman as an expert. In fact, we have to say that in the "ensemble" environment, Mr. Nan Guo's performance is undoubtedly a rational person: he gets something for nothing.King Xuan of Qi practiced an egalitarian big-pot rice system. No matter how well the Yu blows and how much labor he puts in, he will get the same share of food. Of course, the Yu blower should put in as little effort as possible—pretending to be blowing Instead of blowing hard.Of course, Mr. Nan Guo is a rational person, and other Yumen are also rational people and will follow suit.The fact that Mr. Nan Guo can get the same food without playing the Yu will become an example, and more people will follow suit. In the long run, the Yu sound of the orchestra will only become smaller and smaller.This is the collective inefficiency caused by egalitarianism.As economists often say, bad institutions make good people do bad things.

To make a lazy person like Mr. Nan Guo hardworking does not depend on moral preaching, but on changing the big pot rice system.When King Min of Qi changed the ensemble system and required each player to play Yu individually, Mr. Nan Guo had only two choices, either to learn how to play Yu hard, or to be eliminated.Mr. Nan Guo finally chose to run away.Eliminating people like Mr. Nan Guo will inspire others, and the efficiency will definitely increase.

Mr. Nan Guo's behavior was born under King Qi Xuan's egalitarian big-pot rice system; what made Mr. Nan Guo escape was not his conscience, but King Qi Min's change of the system.Breaking the big pot rice system, although it broke the "job bowl" of Mr. Nan Guo and his ilk, it provided fairness for more people.

People's laziness or diligence is not born, it is largely acquired.The egalitarian big pot system can turn hardworking people into lazy people, and an efficient incentive system can also turn lazy people into hardworking people.This is another saying that economists often say, a good system makes bad people do good things.

To make lazy people hardworking, the specific method should be as follows:
One of the methods is to implement efficiency wages. The term "efficiency wages" originally comes from development economics.Development economists have found that higher wages increase labor productivity in developing countries.They believe that since people in developing countries are generally malnourished, higher wages can improve workers' nutrition and physical fitness, which also greatly improves labor efficiency.

But soon economists found that the phenomenon of efficiency wages also existed in developed countries, so the original explanation was obviously unreasonable.In the end, economists unanimously explained that higher wages are incentives adopted by enterprises to prevent workers from being lazy.Here, wages constitute the opportunity cost of being caught and fired: the higher the wage, the higher the opportunity cost of firing.To avoid exorbitant opportunity costs, you must work hard to avoid getting fired for being lazy.Therefore, higher wages are conducive to reducing the opportunistic tendency of workers to be lazy.

The second method is to implement group incentives or punishment.In the process of group cooperation, it is not easy to measure or monitor the performance of each member, so the monitoring cost will become high.The alternative is to evaluate the final performance of the entire group, awarding a group bonus when a given goal is reached, and a group penalty if it is not reached.Because everyone is eager to get a bonus and no one wants to be punished, everyone will work hard.Of course, it is difficult to avoid laziness in group activities. If the bonus is high enough and the fine is high enough, everyone will reduce this tendency to be lazy after weighing the pros and cons.

[links to related words]

Efficiency wages refer to such an incentive and compensation system that enterprises pay employees much higher wages than the market average to encourage employees to work hard, that is, enterprises pay employees wages that are higher than the market average. It can effectively motivate professionals and improve productivity and business performance. Therefore, such a high wage is an efficiency wage, that is, at this wage level, the relative benefit of labor costs is the highest.

(End of this chapter)