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Saturday, February 20, 2010

Guard labor and open source

According to this paper by Samuel Bowles and Arjun Jayadev, an astonishing 26% of the US workforce in 2002 was engaged in non-productive "guard labor", meaning their work was not directed towards producing goods or services but was instead aimed at making sure that the wrong people did not help themselves to slices of economic pie that they were not supposed to have.

Compare this to 11% in contemporaneous Sweden, or 7% in the US in 1929.

I'd argue with some of the definitions and methodology in the paper, in both directions. For instance, supervisors are the largest category of guard labor, but it's hard to say that all of management is non-productive -- they aren't all PHBs, many make creating contributions other than merely riding herd on their employees (ie, they are thinking of someone like a low-level manager in a call center whose only job is to make sure employees don't stay too long on their bathroom breaks -- but there is also, say, Steve Jobs). On the other hand, there are entire industries that are effectively engaged in guard labor that are not counted in Bowles and Jayadev's measure, such as health insurance. And the finance industry is neither productive nor guard labor (I wonder what percentage of the economy is skimmers and con artists?).

Prisoners and the unemployed are also counted in the numbers for guard labor, because the concept depends on the idea of power and sanction, and prisoners and the unemployed are considered "necessary concomitants of the public and private sanctioning systems, respectively". This struck me as odd, but makes some sense when taking a macroeconomic point of view -- both the guards and the prisoners are people who are not doing actual economically productive work -- their labor is wasted as a direct result of the fact that the social system of power and property needs to be upheld.
Ideally we would also include those producing guns for private use, locks, security systems and the like, but we are not able to do so because of the lack of data.
The need for guard labor is related to the broader goal of understanding the role of institutions in the role of managing and reproducing the economic activity of society:
The insight we wish to develop is that securing conformity to institutions can be quite costly, and the cost differs among institutions and across time and space. Conformity achieved through the coordination of expectations or the internalization of norms, for example, may not be very costly, as in the case of driving on one side of the road or the other, or the voluntary compliance with tax laws in some countries. However, where conformity to a society'™s institutions is secured primarily through governmental coercion or privately deployed sanctions,the resource costs may be substantial. Examples include some authoritarian political systems, colonial regimes, and as we will see, highly unequal capitalist economies.
Intuitively, the more inequality in a society, the more guard labor it requires. There's a convincing scatterplot of GINI vs. guard labor fraction by US state included in this quite good profile of Bowles in a Santa Fe paper.

Prior to about 20 years ago, most economists thought that inequality just greased the wheels of progress. Overwhelmingly now, people who study it empirically think that it's sand in the wheels.
Here's the last paragraph of the paper:
Fourth, illegitimate inequalities are costly to sustain. While cultures often justify vast differences in power and access to valued resources, the mind is not a blank slate on which such ideas as the divine right of kings or the superiority of the "˜white race" can be etched at will. Two decades of behavioral experiments have provided convincing evidence that humans in dozens of cultures are inequality averse, and that violations of norms or reciprocity often lead to costly confl‚icts.
Of course the counterargument to the view that guard labor is mere friction is pretty easy to make -- that all this guarding is actually necessary to make producers productive, via incentives and structuring. The ticket-taker at the movie theater produces nothing, but without the efforts of him and others, the actual movie-makers could not get paid and could not raise capital to produce anything. It might be more efficient to have a different scheme, for instance having entrance to the movies be free and producers supported by the government via taxation. That may sound absurd or totalitarian but just such a change is happening in academic publishing via the Open Access movement and free-access journals like PLoS. Institutions that did nothing but provide proprietary guards over content (like my former employer Elsevier) are on their way out.

In fact, the whole free/open source movement in software and elsewhere may be seen as a response to the unpleasantness of guard labor. Proprietary software requires licensing schemes (ticket-takers) that cause new bugs, interfere with legitimate uses, and more generally cause friction. More broadly, locking software behind a pay wall reduces the amount of sharing and requires frequent reinvention of the wheel. It's inefficient, and this drives engineers crazy. Most of the time they don't get to vote, but the FOSS movement arose as a direct response to some of the unpleasantness surrounding proprietary software and has in its way been amazingly successful.

Guard labor is in its most purest and most apparently wasteful form when it is guarding digital content. The question is why then, if our economy is more involved in producing content than ever before, is the fraction of guard labor so high? I suppose it is also true that guarding digital content takes more effort than guarding physical objects -- how much of the fraction is RIAA lawyers, or the army of private detectives employed by Monsanto to sue small farmers who allegedly use their genetically modified seed without paying (genes are basically digital content -- and I just watched Food, Inc. which goes into this story). Monsanto, like DRM, is friction, but capitalists would argue that it such friction is necessary to spur production. But there can't be all that many people employed doing this kind of work.

I was around for the birth of the open source movement and efficiency really had nothing to do with it -- it was a moral struggle, based on the anguish of the excluded when a once open resource suddenly being subject to enclosure and guarding. But its ongoing success happened because of efficiency and the self-interest of software producers and companies. It is interesting to hear arguments for more general economic equality and openness, usually derived from a moral or emotional basis, being made on the basis of macro-scale efficiency.

[[edit: I was constructivly flaming Bowles' frequent collaborator Herbert Gintis on open-source here]]


Anonymous said...

That non-productive "guard labor" has increased has a simple explanation. Government employment has increased while private sector employment has fallen. Yes, there are some government jobs - e.g., letter carriers, public schoolteachers - that aren't guard labor. However, policing is guard labor par excellence - so is regulatory activity. How many "alphabet agencies" fit this description? IRS, FTC, SEC, FDIC, NLRB, CFTC, etc.? Aren't all their activities "aimed at making sure that the wrong people did not help themselves to slices of the economic pie that they were not supposed to have"?

Washington, D.C. has seen job growth - the vast majority of it non-productive - even as the rest of the country has suffered massive unemployment. If you want to cut guard labor, shrink government.

mtraven said...

I don't think that most regulators fit into the authors category of guard labor, which is involved with constraining individuals, not corporations. I also don't think the number of people employed in regulatory activity has risen all that much (and its certainly fallen in some categories, thanks to the e coli conservatives).

Here's their definition of the categories of guard labor (from a later paper, but the methodology seems to be the same). Note that the largest portion of federal spending is on military activities, which does fit into their category as guard labor, but I'm guessing that's not what you are talking about.

Supervision: Either (Definition 1) Non-Production and Supervisory Employees in Private Non Agricultural Industries, or (Definition 2) Employees in occupations coded in the Dictionary of Occupational Titles as having supervisory or related relations to people.

Protective Guard Labor: Police Employees at all levels of Government and Judicial and Corrections Employees at all Levels of Government and Private Guards

Defense Related Employment: Active Duty Military Personnel and Civilian Employees of the Department of Defense and Indirect Employment from Defense Related Expenditure

Unemployment: Unemployed Individuals and Discouraged Laborers

Prisoners: Prisoners in Federal Correctional Institutions and Prisoners in State Correctional Institutions

This is economics from a radical left perspective; trying to turn it on its head to make yet another argument for libertarianism is a misreading (and boring). A libertarian society (like you seem to favor) would lead to massive increases in inequity and thus (according to the authors) require more guard labor, not less. A society with government taxation and redistribution with the goal of reducing inequity would require less.

jlredford said...

re: inequality - see also the new work "The Spirit Level" (Globe review here), which claims that the best correlation to social ills (crime, drug use, teenage pregnancy etc) is the level of income inequality. It correlates better than the size of the countries, the racial mix, or the proportion of poor people.

My own view is that rich people make poor use of their wealth in economic terms - they either sit on it or spend it on vices like yachts or crank pet projects like Ivy League endowments. Spread that money around and it'll get spent on everyone's well-being.

Anonymous said...

The IRS is not involved with constraining individuals? Individuals aren't prosecuted by the SEC for insider trading? Come on! These are in every sense of the term police agencies.

It would be interesting to see some historical comparisons. If the authors contend that guard labor is higher in societies where inequality is higher, how would (say) Regency England compare with England today? England was a far more unequal society 200 years ago than it is now, yet I suspect the percentage of the work force employed in guard labor was much lower then than it is now. There was not even a uniformed regular police force in Britain until the mid nineteenth century when it was introduced by Sir Robert Peel (hence "bobbies").

mtraven said...

The paper has many historical and cross-country comparisons. If you don't like their definition of guard labor, feel free to write your own.

TGGP said...

Arnold Kling discussed this Bowles paper here.

Robin Hanson discusses the variance in management quality here. I discussed another management paper from (I believe) the same bunch a while back. In my limited experience, managers don't engage in much monitoring.

Although the health insurance industry may manage large amounts of money, I don't think they take up that much of the workforce (much like the IRS). And not all their personnel is devoted to verifying claims, a lot I would guess is devoted to managing their investments (though you don't consider that to be productive or guard labor).

Marx famously referred to the "reserve army of the unemployed", but it's still hard to view that as "labor". Prisoners don't even fit that category because their removal from the labor market prevents them from performing the same Marxian function. Better to just call them unproductive. As long as we're being radical, I would consider children to be analogous to prisoners. Many proponents of mandatory education explicitly cited their removal from the labor market as beneficial to the remaining adult workers.

I don't think the authors actually know much about gun culture. Most gun-owners never have to use their guns in anger. I just enjoy shooting them, as do a great many other people. Similarly, one might assume that motorcycles are for getting from here to there, but that's not really why people buy them.

Colonial regimes actually didn't require that much personnel. I just read William Easterly's "The White Man's Burden" (I blogged about it here) where he indicts the old colonies for having such an infinitesimal ratio of personnel to population, which is the exact same evidence Mencius Moldbug uses to acclaim their efficiency! Similarly, in the bad old days before democracy & the welfare state there was often no professional police or standing army.

Divine right of kings and white superiority actually seem to have been accepted principles for a long time that did not require great resources to enforce. That wasn't constant, but I don't think those were particularly difficult and hence illustrative of their principle regarding legitimacy. Or in a non-normative sense we could say that those principles were "legitimate" in the past, just as an anarchist might still define the state as the entity having a monopoly of the legitimate use of coercion.

Carrying over physics terminology to different domains is tricky, but I do find it interesting that friction both decreases velocity and makes acceleration possible in the first place. I remember in physics class discussing how a glass-tire on glass-road setup would be a theoretical next-best after rubber on asphalt due to the high friction values.

TGGP said...

Anonymous, I would say your examples of governments workers are not the exceptions. There are a hell of a lot more teachers than regulators (though as I mention above we could analogize them to corrections officers). Regulators have a large impact but low personnel. And yes, that personnel increased greatly under George W Bush, but it was still a tiny fraction of the government (or total) workforce.

mtraven, your individuals/corporations distinctions makes no sense. Of course digital content restrictions apply to corporations, and federal regulations apply to individuals (try setting up a small business and outcompeting corporations by flouting laws they have to obey). Restrictions applying to corporations would seem to fit fine under Bowles' theory.

Kevin Carson, Charles Johnson and others argue that a libertarian society would actually result in less inequality. The U.S of the 1920s would be considered more libertarian than now, and you have just pointed out it had much less guard labor.

jlredford: I believe the rich tend to invest (not the same as "sit on") their money while the poor are more likely to spend it on consumption. Yachts just don't absorb that much of their wealth (and "yacht-taxes" fail to bring much revenue, in contrast to "sin taxes"). I've actually heard that as a (tongue-in-cheek) argument for redistribution from the poor to the rich! "The Spirit Level" is heavily criticized by Tino Sanandaji at Super-Economy.

Anonymous said...

Even under the authors' definition of guard labor it is hard to believe a larger percentage of the American population was so employed in 1910 than there is in 2010. There was certainly greater inequality in this country's population in 1910 than there is today. The standing army was very small and so were police forces.

My midwestern county's historic courthouse, built in the 1860s, still stands. It has a tiny jail attached, which was adequate for the county's needs for more than 100 years. The sheriff's wife was still responsible for preparing the jailbirds' meals as recently as the late 1960s.

The county's population has just about doubled in the past 50 years, but the number of county employees has grown twenty-fold - ten times faster than the population. Most of these people fall into the category of police, judicial, and correctional employees at all levels. The new courthouse - or "government center" - is vast, and additions are constantly being built.

I do not believe increasing socioeconomic inequality is the reason for this vast growth of government; certainly our old courthouse and the relatively small number of law-enforcement and judicial employees it housed served quite well in the period when we had no income or estate taxes and entrepreneurs were piling up huge fortunes here in lumbering, milling, railroads, etc., untrammelled by any government nosey-parkers.

As for rich people "sitting" on their money, as TGGP pointed out, this is quite the opposite of the truth. In fact, a rich investor's assets are most likely deployed in the ownership of businesses, where they produce income or growth for their owner. The average middle class family has its the principal portion of its net worth invested in about as unproductive an asset as it is possible to conceive - its house. True, this provides them with a place to live, but it is also a source of continuing costs.

There are profound tax incentives for this malinvestment, e.g., the deductibility of mortgage interest from taxable income, and the exemption from taxation of substantially all capital gains on the sale of a principal residence. No other leveraged investment enjoys the tax preferences of residential real estate, and these have certainly been factors of some importance in the development of the real estate "bubble" that burst and brought about the current recession.