Quiet Quitting

"Big successful businesses are not built by men like you--9 to 5 and then home to the family. You live on them, but you never build one. Big successful businesses are built by men like me. They give everything they've got to it. Live it body and soul. Lift it up regardless of anybody or anything else. Without men like me there wouldn't be big successful businesses. My mistake was in being one of those men."
--Ralph Hopkins (The Man in the Gray Flannel Suit)

Lower productivity may be driven in part by trends toward 'quiet quitting.' Quiet quitting is doing the bare minimum at work. Put in your time and go home.

While there has always been a fraction of quiet quitters in the workplace (sometimes called 'slackers' in the past), perhaps that fraction is growing.

Of course, this could just be another fleeting meme on the net.

Remote Work and Lower Productivity

I was standing
You were there
Two worlds collided
And they could never tear us apart
--INXS

For more than a year, I've been wondering when the negative productivity effects of remote workplaces encouraged by pandemic regulations would show up. Coase's seminal work told us that organizations exist to reduce the transaction costs inherent to individual contractors trading on the market. 

Stated differently, productivity tends to increase when people work together.

CV19 pulled workers apart. Consequently, transaction costs should go up and productivity should go down.

It appears that the data are finally starting to reflect this reality. For Q1 and Q2 of 2022, non-farm business labor productivity has printed in negative territory (FRED graph here). Parenthetically, the FRED graph seems to paint a more positive picture than the actual BLS data series, which currently indicates 4 negative prints in the last 8 quarters, including huge -7.4 and -4.6% YOY declines thus far this year. Not sure why the difference.

Some commentators are attributing lower productivity to increased 'sloth' associated with employees being able to get away with goofing off when working remotely. There is certainly some truth to this, as one way to cope with agency problems is increased monitoring. Monitoring is a type of transaction cost, one that certainly increases when distance between employee and supervisor increases.

But the larger point is that costs of trade among workers endeavoring toward the same end go up when they are not working in close proximity.

We're witnessing a large-scale example of this currently.

Ceiling Prices

We run though the day
And stare at the night
Is your head full of noises?
For me, well, it's just like
The Fourth of July
--Roger Daltrey

Among the dumbest of economic policies pursued by politicians is the price ceiling. The thinking is typical authoritarian. Think prices are too high? Then simply declare them lower. Set a maximum price for transactions on the market. Punish those who engage in transactions at a higher-than-mandated price.

What happens when producers are forcibly restrained from selling output at higher prices? Supply leaves the market. Shortages develop. 

Not only does present supply leave the market, but future sources do as well. Entrepreneurs are less motivated to develop marginal or substitute sources of supply when the profit signal of higher prices is suppressed.

Over time, prices are likely to be much higher--particularly if it takes a long time to replace capacity once it is taken off the market by the caps.

Cogitate on that as G-7 bureaucrats mull price caps on Russian oil.

That Ain't Workin'

We got to install microwave ovens
Custom kitchen deliveries
We got to move these refrigerators
We got to move these color TVs
--Dire Straits

One factor that influences price pressures is the number of people in the workforce. Less workers mean less supply. Less supply at constant demand means higher prices.

The labor force participation rate has been in secular decline. The 'Great Resignation' resulting from CV19 policies added fuel to the fire as able-bodied people hit the silk.

How are markets likely to compensate for the labor shortfall? Offer higher wage rates--which also, by itself, is inflationary.

As one policy distortion begets others...

Public Health Philosophy

Sometimes you're better off dead
There's a gun in your hand 
And it's pointed at your head
--Pet Shop Boys

Robert Malone proposes that public health policy is built on two philosophies: utilitarianism and Malthusianism.

Utilitarianism posits that the morally right action is the action that does the most good. It is a form of consequentialism--the correct action is assessed solely in terms of results produced. 

Utilitarianism fosters what these pages have deemed 'greater good accounting.' If a program is deemed to help more people than it hurts, then it is deemed a winner.

Malthusianism springs from the writings of political economist Thomas Malthus, who believed that population growth would outstrip food supply and other scarce resources, consequently triggering global poverty and death. 

The central implication of Malthusianism is population control. Limit the number of births so that future standard of living won't be compromised by too many people walking the planet.

Two hundred plus years, and billions of people, later and the world has yet to hit Malthus' dreaded upper bound of population. Why? More people produce more, which alleviates the scarcity that worried Malthus. Moreover, those people innovate, applying capital in manners that improve productivity even more.

Meanwhile, countries that have seen birth rates decline significantly, such as Japan, face major demographic headwinds likely to restrain standard of living in the years ahead.

None of that matters to public health officials, or climate alarmists, or socialists in general. The ingenuity that flows from liberty must be restricted in favor of utilitarian and Malthusian central planning. 

Never mind the misery and chaos that such planning creates... 

Return or You're Fired

Come on and let me know
Should I cool it or should I blow?
--The Clash

Unlike many CEOs who have been pussyfooting around the issue, Tesla (TSLA) CEO Elon Musk has made it clear. Come back to the office in person or seek employment elsewhere.

Musk seems to understand the productivity decline likely from remote work.

btw, lower productivity exacerbates inflation...

War Fatigue

Armchair warriors often fail
And we've been poisoned by these fairy tales
--Don Henley

Governments wanting to engage in war with foreign entities must win consent of the citizenry to do so. If they view the war as illegitimate, the people have capacity to shut the war down via several avenues, including voting officials out of office, withholding funds for military resources, or even overthrowing the regime prosecuting illegitimate war.

Consequently, governments must convince people that their war is just. They must do so at the outset of the conflict, and then continue to do so. Because war requires ongoing sacrifice in order to fund the war effort, it is possible that enthusiasm for war will wane as people increasingly regret what they must forfeit as conflict drags on.

It appears that support for US involvement in the Ukraine conflict is already waning. Surveys suggest that the American public is increasingly wary of US efforts to harm Russia in manners that hurt the domestic economy.

That, of course, is precisely what sanctions do. Any effort to restrict production and trade with entities abroad damages standard of living at home.

As more Americans realize that sanctions are not unilateral, this administration loses its public grant of legitimacy for engaging the country in war.

Administrative Overhead

Brantley Foster: What's this department? What do they do here?
Fred Melrose: Who knows? This place is a zoo. Nobody knows what anybody else is doing.
--The Secret of My Success

Administrative staffing (a.k.a. 'overhead') generally increases with organizational size. Small organizations are characterized by decision-makers who wear 'many hats.' A manager might make a production decision one minute, then an HR or accounting decision in the next.

As organizations grow, it usually makes sense to divide up decisions among specialists. Specialists focus on a narrow functional domain, such as R&D or marketing, which increases their decision-making productivity as they benefit from learning effects and lower switching costs. 

Moreover, sheer size and complexity makes large organizations difficult for any one person to understand. The number of decisions that must be made on a daily basis could number in the tens of thousands and easily exceed any single decision maker's capacity for rendering them. 

There are technical reasons, then, why we should expect more staff and administrative overhead as organizations get larger. More staff can improve productivity.

However, staff could also grow for social reasons. Because they seek to maintain or improve legitimacy in their institutional environments, organizations seek to score points with external social entities. Stated differently, organizations might add staff to 'look good' rather than to 'do better.' 

Coercive social pressures might drive organizations to hire regulatory or compliance personnel. Think environmental, safety, and legal departments. 

Social pressures might also be normative in nature, motivating organizations to staff in manners that signal awareness and caring about particular social issues and causes. For instance, many organizations have recently staffed departments of diversity and sustainability in response to those popular movements.

Meyer and Rowan (1977) seminally observed that administrative additions of this type may not be accretive to the organization's technical core at all. Adoption of staff for legitimacy reasons is instead largely ceremonial in nature. It is meant to satisfy the social needs of outsiders rather than the economic needs of buyers.

This is the price to be paid for increased social standing. More resources that could be invested toward productive ends, such as process and product development, are allocated bureaucratically for the sake of appearance. 

Some have argued that organizations must strengthen their legitimacy in the eyes of others in order to acquire the resources necessary to achieve greater economic performance. However, it is straightforward to theorize that excessive attention paid to looking good robs resources from the technical core, thus decreasing the likelihood that socially conscious organizations will do better and survive over time.

Perhaps this pathology increases with the strength of the institutional environment.

Reference

Meyer, J.W. & Roward, B. (1977). Institutional organizations: Formal structure as myth and ceremony. American Journal of Sociology, 83: 340-363.

Saving Rain

Here comes the rain again
Raining on my head like a tragedy
Tearing me apart like a new emotion
--Eurythmics

Nice graphic that shows that not only do Americans have no net savings, but that savings is negative after inflation.

As the Fed has suppressed interest rates over the past 30-40 yrs, people have had less incentive to save. Why put money into a savings account when there is little or no compensation to do so?

Now add inflation. As prices go higher, why put money away today when those dollars are expected to be worth less tomorrow?

Remember the saying 'Save it for a rainy day'?

No savings means no buffer against uncertainty (i.e., you'll get rained on). And, perhaps more importantly, no capital to fund productivity improvement.

Defending Shortages

Arthur Castus: What is his punishment for? Answer me!
Ganis: He defied our master, Marius. Most of the food we grow is sent out by sea to be sold. He asked that we keep a little more for ourselves, that's all. My ass has been snappin' at the grass, I'm so hungry!
--King Arthur

Transportation secretary defends widespread shortages, claiming that they are a product of a strong economy. Textbook central planner rationalization. 

The truth is that prolonged shortages occur only when markets are not permitted to freely function. In unhampered markets, increased demand motivates producers to increase prices. Higher prices signal opportunity to producers, who subsequently increase production rates and, in some cases, add capacity so that higher demand is met with more supply. 

Shortages persist if this process is impaired. If prices are not permitted to rise, or if producers are restrained from increasing supply (through, for example, regulations that slow supply chain activities), then demand continues to outstrip supply and shelves go bare. 

Those who defend shortages are typically the people who create them.

Specialization and Adaptive Strategies

If I go there will be trouble
If I stay it will be double
--The Clash

Last time we discussed the relationship between specialization and the external environment. Essentially, the higher the degree of uncertainty in the external environment, the lower the appropriate level of specialization. 

How can producers manage the tradeoff between productivity and adaptability inherent in specialized work? Two strategies seem plausible--both involving reduced degrees of specialization (or higher degrees of diversification) as uncertainty increases. 

The first strategy we'll call static diversification. The concept parallels portfolio theory in finance, except that instead of a portfolio of securities, producers deal with a 'task portfolio.' The narrower the task portfolio, the fewer the skills and the more specialized the portfolio.

In certain environments, task portfolios should be very narrow so that producers can reap the productivity benefits of specialization without concern for having to alter the portfolio to cope with environmental change. 

However, in uncertain settings, producers must spread it around, investing in various skills to hedge risk that some skills will be obsoleted by disruptive change. By embracing the adage of not putting all eggs in one basket, producers operate in various lines of work and perhaps in various markets so that they are not dependent on one specific skill set. This variety improves adaptive capacity.

How much static diversification is necessary? Returning to our core proposition that degree of specialization is inversely proportional to level of environmental uncertainty, the more turbulent and uncertain external contexts are, then the more diversified the task portfolio should be.

The second strategy is dynamic diversification. Using this strategy, producers broaden their task portfolios with learning skills that allow them to quickly adapt to changing environments. Ability to sense change, skill in new product and process development, and prowess in organizational change management all constitute 'dynamic capabilities' (Teece et al., 1997) that can be developed or acquired to improve adaptive capacity.

Such dynamic skills may not be directly useful in the production of output for today's market. Instead, they constitute resources that enable timely reconfiguration of production for tomorrow's markets. 

Because payoff associated with dynamic diversification is often delayed--perhaps for extended periods of time, managers may be reluctant to invest in it, preferring instead the immediate and visible fruits of static diversification. On the other hand, due to its potential for quickly shaping new, relevant skills when environments change, dynamic diversification may tie up smaller fractions of an overall task portfolio in diversification--allowing producers to specialize more in the here and now--and reap the associated productivity benefits.

So, if both static and dynamic diversification strategies are both viable approaches for dealing with the productivity/adaptability tradeoffs of specialization in uncertain settings, then which one is more preferable? Perhaps the better way to ask the question is this: Under what situations are static or dynamic diversification preferable?

That, my friends, constitutes an interesting research question--one that scholarship will hopefully help us answer at some point in the future.

Reference

Teece, D.J., Pisano, G., & Shuen, A. (1997). Dynamic capabilities and strategic management. Strategic Management Journal, 18(7): 509-533.

Specialization and Uncertainty

Do you remember
When you got your lucky break?
You're looking back now
And it seems like a mistake
--John Waite

In previous missives we discussed the benefits and risks associated with specialized work. Specialization promotes higher productivity through learning by doing and lower switching costs. Fully realizing these benefits requires free trade with other specialists in order to satisfy each producer's spectrum of needs. If trade is restricted, then some needs will go unmet--unless producers diversify into multiple lines of work, thereby reversing in full circle fashion the productivity gains from specialization.

Specialized producers also face elevated risk of obsolescence compared to more diversified producers. Due to technological change, competition, or evolving consumer tastes, particular lines of work may, at some point in time, no longer be necessary. Because specialized work typically requires commitments such as expensive schooling, investment in expensive narrow purpose equipment, and engrained work routines, adapting to changing environments can be difficult.

How can producers manage the risks associated with specialization? 

First, let's note the crucial role that the environment--particularly environmental uncertainty--plays in answering this question. While many conceptualizations of environmental uncertainty have been developed, an important one in our context involves what is called state uncertainty. Specifically, environmental uncertainty can be seen as the extent to which current or future states of the world can be understood or predicted. When events are understood or foreseen with less clarity, then environments are said to be more uncertain.

The central proposition for our purposes can be stated as follows:

Proposition: The higher the level of environmental uncertainty, the lower the appropriate level of specialized work.

If environments are completely certain and predictable, then high levels of specialization are appropriate. There is little risk of change, or at least surprise change, that could not be anticipated in ways that would place specialized producers in vulnerable positions.

As uncertainty increases, however, so does vulnerability. Due to the irreversibility of their production commitments, specialized producers may be incapable of responding to unforeseen events or conditions in a timely manner, thereby threatening their adaptability to changing conditions.

Consequently, degree of specialization should go down as level of environmental uncertainty goes up.

But what implications does the relationship between specialization and uncertainty have on production planning and work design? What strategies are available to producers that allow them to be as productive as possible--while maintaining adaptive capacity essential for coping with uncertainty?

We'll discuss next time.

Walking Away

Here comes Johnny and he'll tell you a story
Hand me down my walkin' shoes
Here comes Johnny with the power and the glory
Backbeat the talkin' blues
--Dire Straits

In Ayn Rand's classic Atlas Shrugged, protagonist John Galt and producers like him decide to leave the system rather than continuing to operate in oppressive authoritarian environments full of regulations and other restrictions.

As authoritarianism continues to escalate under current political regimes, workers in many industries (e.g., here, here, here) are emulating Galt. They are walking away from workplaces governed by rules, mandates, and ultimatums that they find distasteful.

What happens to an economy if enough workers hit the Galtean silk? Rand crafts a fictional scenario. 

Bluff in a game of chicken? Temporary or permanent? We may soon find out, as a real life, large scale version of the Galtean walk is playing out before our very eyes.

Sick Out Shutdowns

All my bags are packed
It's time to go
I'm standing here
Outside your door
--John Denver

Reports growing of 'sick outs' in protest of vaccine mandates. Hospitals, education, transportation companies.

This matters most in organizations that provide services. In contrast to the manufacture of tangible goods where production is commonly paced by machinery, the primary factor of production in service operations is generally people. Generally, the more workers in a service operation, the greater the amount of output that can be produced.

We noted this more than a month ago when hospital workers began hitting the silk. Less people mean lower capacity. Lower capacity means less output.

Less output means disruptions and shortages.

Lower Hospital Capacity

It's been such a long time
I think I should be going
And time doesn't wait for me
It keeps on rolling
--Boston

One difference between manufacturing and service operations involves their composition of productive resources. In manufacturing processes, equipment serves as the primary factor of production. Equipment leverages the amount of output that workers can produce. Capacity, defined as the maximum amount of output possible from a production process, is generally determined by how much equipment has been installed to support labor.

In service-based operations, people are usually the primary factor of production. Although facilitating equipment may be employed, people generally control the pace and composition of output in service operations. Obtaining more output in service sector settings commonly requires hiring more workers.

With vaccine mandates now being imposed in many organizations, workers are being fired for non-compliance or leaving in advance of compliance deadlines. Several recent headlines have highlighted the situation in hospitals, where large groups of nurses and other workers are resigning or or threatening to resign in defiance of vaccine directives in their organizations.

Hospitals are prime examples of service sector operations that depend on people to produce output. The fewer doctors, nurses, and other staff personnel, the smaller the number of patients that hospitals can treat. By imposing vaccine mandates that cause workers to hit the silk, hospitals are essentially reducing their productive capacity.

When you hear that hospitals are being 'overrun' with patients, recognize that this may be due to self-imposed capacity limitations. Vaccine mandates may lead to fewer workers. Fewer workers mean fewer patients can be treated. Therefore, hospitals may reach capacity limitations when far fewer patients seek treatment than in the past. 

Afghan Unwind

There's a room where the light won't find you
Holding hands while the wall come tumbling down
When they do, I'll be right behind you
--Tears for Fears

The chaos that has erupted in Afghanistan following the abrupt removal of remaining American forces by Joe Biden has fostered no shortage of finger pointing. Republicans, especially, smell political blood in the water. Their howls range from "America has been completely embarrassed" to "Biden should resign."

These rants may be justified on some levels, particularly in light of what has transpired over the past year and a half. But, as Ron Paul notes in a more or less "I told you so" rant of his own, many of these same politicians created the Afghan mess to start with.

Meanwhile, most Democrats are predictably circling the wagons around Biden. He did the right thing, Dems claim, by taking us out of an unpopular war. And, indeed, prior to the chaos polls had suggested that nearly 70% of American opposed US presence in Afghanistan and wanted us out. 

As a matter of fact, I was one of them.

At the end of the day, I suspect the problem that most Americans, and perhaps many across the globe, have with what is going on is not the intent but the execution. As Ron Paul observes, the 20 year campaign of terrorist fighting and nation-building in Afghanistan had been counterproductive for years. Most people saw the writing on the wall.

The Trump administration seemed to understand this. Trump had begun the process of unwinding in-country military commitments but stopped short of complete withdrawal based on advice that it wasn't quite time to do so yet. 

Reports are circulating that the Biden Administration ignored similar advice. Rather than continuing a measured withdrawal, Biden decided to pull out cold turkey. Unfortunately, the political vacuum created by his hasty action has cost many lives, with more surely to come. It has also cost Biden a pile of political capital.

Which brings me to my main point. There was a time where I might have done things like Biden did here. I used to think that if I were in charge, then I would end every government-sponsored program--immediately. 

But now I know better.

When government intervenes anywhere--overseas in military ops such as Afghanistan, or in domestic affairs such as welfare and healthcare redistribution, it distorts human behavior and interaction. These distortions create dependencies and other commitments that cannot quickly be reversed should those interventionary policies no longer garner political support.

As Biden's actions have demonstrated, trying to reverse these dependencies quickly is likely to create considerable pain. Retrospectively, a more measured phase out may have been more sensible--and more humane. 

Biden might have told his administration, the media, and people in the US and Afghanistan, that the US would be out of Afghanistan in, say, two years. He could have demanded phased withdrawal plans from the military and other advisors in the early days of his administration, and then shared the plans with all stakeholders. Those plans could have included key dates, goals, measures of progress along the way.

And to be fair, Trump could have done the same thing.

Similar measured exits could be designed for every bloated government-sponsored program on the books. Social Security, Medicare, welfare, etc. For example, Social Security payments might be phased out over the course of four, eight, or ten years.

Do measured withdrawals from government programs cost more? Perhaps, but perhaps not given the potential cost associated with chaotic withdrawal. Is it possible that a measured withdrawal never happens--given the proclivity of institutionalized bureaucracies to stifle change? For sure. Will they be politically unpopular with large voting blocs that benefit from the largesse? Without question.

However, I can't help but think that the transparency of a well communicated gradual exit strategy executed by determined leadership would be an effective, and fair, way to back out of trillion$ in government largesse.

Let's also note this. If we don't proactively back out of commitments, particularly those with massively upside down economics, then market forces will do it for us at some point. And when they act, market forces are likely to do so quickly. 

Biden's handling of the Afghan situation therefore serves as a harbinger of the chaos likely to ensue in other domains if we do not learn from mistakes made here and initiate programs of measured reversal.

Risks of Specialization

Max Kellerman: You and me, Tito. We've seen it all, eh? Bubba and Zedda serving the first pasteurized milk to the borders. Through the war years, when we didn't have any meat. Through the Depression, when we didn't have anything.
Tito Suarez: Lots of changes though, Max. Lots of changes.
Max Kellerman: It's not the changes so much this time. It's that it all seems to be ending. You think kids want to come with their parents and take fox trot lessons? Trips to Europe, that's what the kids want. Twenty two countries in three days. It feels like its all...slipping away.
--Dirty Dancing

Previously we discussed the benefits associated with specialized work. What about potential downsides? One risk is restriction of trade. In order to realize gains from specialization, specialized producers must be able to trade with each other. By engaging in trade, specialists can satisfy needs that they are unable to fulfill themselves. They also benefit from the increased productivity of other specialists. Prices should be lower and quality should be higher when specialists trade.

When trade is restricted (e.g., tariffs), then specialists must either forego some needs or diversify. Either way, standard of living is likely to decline. 

Another risk is obsolescence of one's specialty. Due to competition, technological change, or evolving buyer preferences, certain lines of work may longer be valuable on the market. To adapt to such disruptive change, specialists must learn new skills.

While the 'switching costs' associated with changing jobs may be relatively low for some specialists, they may be extremely high for others. Much retraining may be required. If large commitments were made to build previous now-obsolete skill sets (expensive schooling, investment in expensive narrow-purpose tools, etc) then those specialists may have difficulty justifying a career change due to high sunk costs. Moreover, the repetition associated with specialized tasks can be habit forming...and old habits sometimes die hard.

How can workers cope with the risk:reward trade-off associated with specialization? We'll discuss in a future post.

Imitation Gone Awry

"Hey, check out the Dukes over there. They must know something. Let's get in on it."
--Floor trader (Trading Places)

Although institutions are commonly viewed as people (the president of the United States), places ('institutes of higher learning'), and even dates (holidays), institutions are better seen as laws, customs, and other norms produced, practiced, or symbolized by those 'things.' A primary, but certainly not singular, purpose of institutions is to provide a stable social backdrop for human interaction.

Institutions operate by exerting 'isomorphic' pressure for sameness in behavior. Per their seminal work, DiMaggio and Powell (1983) elaborated three types of isomorphic pressure: coercive ("Do this or go to jail"), normative ("This is how we do things around here"), and mimetic ("Follow the leader"). Although these categories are often useful for analytical purposes, they are often blended in practice.

A common hypothesis in institutional theory is that, when uncertainty rises in the environment, mimetic pressure often dominates the landscape. Simply stated, when people don't know what to do, they copy the behavior of others who they think might 'know' something.

There is certainly some validity to this premise. It is hard to dismiss that much of the behavior during the CV19 pandemic seems to be driven by mimetic isomorphic pressure. For example, once an influential organization decides to mandate vaccines, other organizations quickly do the same. People see others wearing masks, so they put masks on too.

Mimetic isomorphism can lead to obvious dysfunctionalities. Imitating others is the basis for herd behavior. The 'blind may be leading the blind'...perhaps over the cliff.

It seems plausible that mimetic isomorphism can only 'work' for so long. If copying the behavior of others doesn't produce positive results within a reasonable amount of time, then people will being to discard this strategy in favor of something else. Probably not all at once, but gradually as people slowly conclude that their imitation strategies are not producing desired results. 

People more prone to think for themselves are likely to be early dissenters and strike out in search of alternatives. Those alternatives may take the form of non-isomorphic behavior entirely. Entrepreneurship, innovation, et al. This is sometimes called 'active agency'--i.e., pursuing interests that do not align with prevailing institutions (Oliver, 1991).

Perhaps much of the pushback to the new round of CV19 mandates that we're currently witnessing results from active agency driven by imitation gone awry.

Reference

DiMaggio, P.S. & Powell, W.W. (1983). The iron cage revisited: Institutional isomorphism and collective rationality in organizational fields. American Sociological Review, 48: 147-160.

Oliver, C. (1991). Strategic responses to institutional processes. Academy of Management Review, 16: 145-179.

Benefits of Specialization

Treating today as though
It was the last, the final show
Get to sixty and feel no regret
It may take a little time
A lonely path, an uphill climb
Success or failure will not alter it
--Howard Jones

Specialization is the extent to which individuals or organizations perform narrow groups of tasks, with commensurate limitations in variety of output produced. Specialization generally leads to higher productivity (i.e., output/labor hr) because of learning effects, lower switching costs, and other economies. The benefits of specialization explain why dividing tasks among workers (i.e., division of labor) is among the most intuitive of economic acts.

In order to realize those productivity gains, however, trade must flow freely. Because they produce limited variety, specialists are unable to produce the broad array of goods that they need to advance their standard of living. Those goods must be acquired from other producers--most likely from other specialists. 

When specialists can trade freely, then the economies of specialization are collectively realized. Prosperity improves for all.

The prospective reward associated with specialization is therefore high. But we also know that there is a positive relationship between reward and risk. Generally, endeavors that offer the prospect of higher reward carry more risk as well.

We'll consider the risks of specialization in an upcoming post.

Paid Leisure

All I wanna do is have some fun
I got a feeling I'm not the only one
--Sheryl Crow

Several surveys suggest 1-2 million people are abstaining from work because they have been getting the extended and expanded CV19 unemployment checks.

Why should this be surprising?

People generally prefer leisure to work. If government is willing to pay people not to work, and compensation offers a subsistence deemed acceptable, then expect long lines at the unemployment benefits window--particularly for low-skilled workers.

When unproductive behavior is subsidized, you'll get more of it.