Working More = Markets Working

Tim Harford writes,

A few years ago, the economists Mark Aguiar and Erik Hurst published a survey of how American work and leisure had evolved between 1965 and 2005. Both men and women had more leisure time — although nothing like as much as Keynes had expected. But some people defied this trend. The best educated and the highest earners, both men and women, had less free time than ever. Starting in the mid 1980s, this elite began to drop everything and work ­furiously.

Pointer from Mark Thoma.

What Harford does not mention is what I think is the most important trend, which is the drop in “home production.” We are making much better use of our non-work time, because we enjoy genuine leisure rather than doing unpaid tasks that we do not like.

Several decades ago, when an economist colleague bragged about building a deck on his house, I pronounced the aphorism “Do-it-yourself is a market failure.” He should have been able to earn more income by working more hours as an economist, and then pay someone else to build the deck. But he worked in a fixed-salary position for an employer that did not allow outside consulting.

The main trend is that people are doing less unpleasant work. As Harford notes, some people now enjoy their jobs. People are doing less unpaid housework (as I write this, a paid worker is mowing my lawn). Many people whose unpleasant jobs have been “lost” are now out of the labor force.

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16 Responses to Working More = Markets Working

  1. Slocum says:

    I pronounced the aphorism “Do-it-yourself is a market failure.”

    I see the point but have reservations. First, of course, home production has big tax advantages. With a marginal tax rate of ~35% with federal and state income taxes, I can hire myself at a substantial discount relative to an outside contractor. This is arguably inefficient, but we’re talking about deadweight loss rather than market failure.

    Next, the principal-agent problem vanishes with do-it-yourself, since I’m both principal and agent. And it’s not just principals and agents having different interests but also different standards–how good is ‘good enough’? Contractors and home-owners may disagree on an acceptable level of perfection, and this seems to lead to predictable conflicts. The principal-agent problem also shows up in scheduling. A contractor wants to interleave multiple jobs so that he has consistent work for his crew. A homeowner wants work to be started and done to completion as quickly as possible to minimize the period of disruption. Delays and no-shows by contractors seem to be a nearly universal source of tension.

    But lastly and most significantly, I’d prefer to design and build a deck rather than spend even more hours in my desk chair. Which doesn’t mean I’d like to design and build decks for a living (any more than I want a job as a sous chef because I enjoy cooking or a wedding photographer because I like cameras). So I’d counter the “do-it-yourself is a market failure” aphorism with “variety is the cure for drudgery”.

    • Slocum says:

      Oh, and BTW, there’s a strong connection between this post and the previous one — the net and youtube, in particular, has been an enormous boon for learn-it-yourself/do-it-yourself folks (a youtube search for ‘build a deck’ returns many thousands of hits).

      And learn-it-yourself is arguably more valuable for home production than it is professionally because there are no barriers to hiring yourself for any job you can manage whereas to do the same professionally you’ll likely need a degree, certifications, and maybe a license (along with a track record, contacts in the field, marketing, etc).

    • sam says:

      +1 on this. Marginal tax rates plus variety mean I would prefer to spend an hour working on my house over an hour at my job, and the financial difference is minimal.

      Plus there’s the case of location:

      If I was to go to work and pick up an extra shift, I’d have to drive to work, burn gas, all uncompensated. If I fix a leaky pipe at home, I need to do none of that.

      If I were to hire a plumber, I have to compensate the plumber not only for his plumbing skills, but for driving to my house.

      Due to these costs, even as a lousy handyman / mechanic working slowly while watching youtube. I usually come out well ahead of taking my car in to the shop or hiring a professional for small jobs.

      Emphasis here is of course on small jobs. Your savings changing your own oil, brake pads, and filters is great. Your savings changing motor mounts may not be.

      • MG says:

        +1 on the inefficiencies of earning income. You could also include inefficiency of selecting and waiting for contractors…

      • Daublin says:

        All true, but note that many people overcome the travel costs by having a handyman do a dozen things on a single visit. They’ll wait until they have at least a couple of hours’ worth of work to do, and then have their handyman do all of it while they are there.

        It doesn’t cure all the inefficiencies, but it helps. You still have to formulate what you want in a way they can actually do it. You still have to deal with acquiring parts, which has principal-agent problems. And if it’s a Saturday you have to change out of your pajamas to great them (to put it euphimistically).

  2. ColoComment says:

    Some people equate do-it-yourself home work WITH leisure. They enjoy working with their hands and the pride of looking at a successfully completed home project.
    My daughter watched a few YouTube videos and then successfully replaced her nonworking kitchen sink garbage disposal. The personal pride she felt in that activity was tremendously satisfying for her.
    When I call a handyman to do a home repair/improvement for me, I have to take time FROM work to wait for him, greet him, explain the job, wait until he’s done, and see him out the door. It may be “market success” for him, but it’s nonproductive time for me.
    Frankly, if I were as handy and self-driven as my daughter, I’d prefer to spend a few hours over a couple of weekends, doing the home work myself!

    • James Hanley says:

      I very much agree with this, particularly the issue of pride. I cannot buy the satisfaction of knowing I can do these things for myself. That doesn’t mean I don’t ever hire a professional–sometimes the time involved, the steepness of the learning curve, the unpleasantness of the task, more remunerative opportunities, etc. etc., make it worthwhile hiring a professional. And I have no criticism of those for whom hiring a professional is always the better choice. But I know I can build a deck or a shed, or rewire my house, and that satisfaction is more than worth the price to me, just as a good move, a baseball game, or a fine meal is worth the price.

  3. Various says:

    Don’t forget the change in marginal tax rates, which I think was a biggie. I believe that pre 1980s, the highest marginal federal rates were something like 70%. I’m a good example of the incentive effects of marginal rates. When I matriculated from MBA school in the 1990s, I went into investment banking because, among other things, it paid very well. It also involved frequent 80 hours work weeks and “all nighters.” (As an aside, prior to entering this industry, I thought that “all nighters” was a myth. I can attest that it is definitely not a myth). Anyway, the pay was great, but I hated the lifestyle. The point being that I would never, ever have subjected myself to the crummy investment banking lifestyle if I had been paying 70% if Fed taxes and another +/- 10% in state taxes.

    • Ron says:

      If 80 hour work weeks and all-nighters is one of the major blessing of lower taxes, I think I’d rather pay the taxes.

  4. Andrew' says:

    My dad is the commenters while I am Arnold, if I may say so. Through honest to god maintenance, my dad kept our first VCR running for almost 30 years, after most people had stopped using their last VCR. I on the other hand am willing to overpay for anything that can be paid for.

    • Slocum says:

      “I on the other hand am willing to overpay for anything that can be paid for.”

      I know someone who told a friend of his that he’d signed up for a special shopping service — $500 a year and you get the best deal on everything without ever having to shop around. The friend excitedly asked where to sign up…and was told it was actually a virtual service — need to sign up, you automatically enroll and get all the benefits just by being lazy.

  5. Buzzcut says:

    Forget plumbing, or deck building. What about lawn mowing?

    It does seem like contractors have a much higher lawn mowing productivity than my two boys do…

  6. Michael Moran says:

    Reminds me of a study comparing US and Europe which found Germans work as much as Americans, but they do more “home” or “DIY” labor. The theory was the high taxes in Germany, both income and VAT, made DIY more economically rewarding for the individual even though much less economically efficient for society.

    Pretty sure study was done by Timbro.

  7. Paul Ralley says:

    As important is the increase in the proportion of our lives spent outside the workforce. Nearly 50% of young people now go to university (in the ’30s 90% left school at 15), and life expectancy has increased c. 20 years since Keynes wrote – so on average c. 23 years of additional leisure.

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