Thursday, September 27, 2012

Opportunism and Identity Economics

Opportunism and Identity Economics

Instances of failure to take advantage of opportunities is an ongoing theme in my life. Example are too numerous to settle on just one. For the sake of the assignment I settled on a recent example of a public goods dilemma, that my fiancee experienced. It was called "free laundry day".

For some background info, my partner and I are completely different people when it comes to our judgement and reasoning. As an economist I pride myself on being "mostly rational", given my already bounded rationality. My future wife, on the other hand, favors following her heart/emotions and her particularly keen sense of justice.  As you probably may have guessed, we often disagree on how people should behave in certain situations, which leads us to free laundry day.

Free laundry day is a historic residence hall tradition where even the dirtiest of coeds all bum rush the laundry room for 24 hours to save $2.25 per load of clothes. Also for many it may be the first time  in their lives they have had to wash their own clothes. Throughout this period, from 9am to 9am, emotions run wild, property is damaged, tempers flare, and the laundry room winds up a complete mess. Free laundry day is a great example of a public goods dilemma because the community must share the limited resources of the equipment but no one is particularly responsible for regulating usage or up-keep. As an added bonus, once someone has finished a load their machine unlocks and their clothes are left unprotected.

Back to the story, our disagreement comes from how we each approached the problem with free laundry day. I decided to take a game theory approach centered around efficiency and minimizing my personal stress. I decided to go to the laundry room when I thought the least amount of students would be around, which happens to be close to my normal wake time in the morning around 6:30am. I reasoned that I would also try to wash all of my clothes at the same time to reduce the length of the process, and wasted energy from repeated trips to the laundry room. I got to the laundry room, with one other student (we saluted each others genius with a high-five) used 4 washers and 4 dryers, finished everything and was back in my room and off to class, in a grand total of 2 hours. Absolutely no fuss. My fiancee chose to go after her classes, when she got there all the machines were filled and the room was filled with people. She argued with students about whether it was fair to monopolize a single machine for several hours, and she yelled at people for removing other people's clothes from a machine. After all of that she did not even get to wash her clothes during the first day. She tried again the next morning to mimic me, but when she got there she did not think it was fair to use a lot of machines at once, so she let a friend use a couple of the machines she saved for herself. Suffice it to say, she was not able to take full advantage of free laundry day and ended up paying to dry her last few loads.

She relied on a sense of fairness and her emotional connections with her friend which lead her to give up the machines. Even after all she had been through, when she had the chance she did not take advantage of it. The social-emotional form of thinking may not always seem to follow rational economical thinking but her justification for doing what she did mirrors utility theory in a way. She said "I did the right thing because I put more value into being a good person than I do in getting free laundry". Her statements reminded me of what the famous economist George Akerlof calls "Identity Economics", which is something that we usually do not discuss in a traditional economics course. Her identity along with her motivation to maintain her social connection with her friend combined to make her choose not to take full advantage of her opportunity.

Opportunistic behavior can be considered unethical or irrational but the criteria of which these judgments are based, are highly subjective and are interpreted through the goals, motivations and values of the actor or the viewer. More than just being a good citizen, an individual could have less noble motivations to not be opportunistic. Other times they may have different motivations like implicit contracts or face high social costs/ retribution. It would be very difficult to justify a limited explanation of why people choose not to take advantage of opportunities.

1 comment:

  1. May I suggest that in future posts you try to rein in the economics jargon. It seemed to me here that it got in the way of the analysis. I will show you what I mean by reinterpreting below.

    First, it does not seem to me that Free Laundry Day is an example of the Tragedy of the Commons. Once a washer or dryer are in use, nobody else can use them. That is excludability, which means private good. So to me Free Laundry Day is an example of excess demand of a private good which occurs when a subsidized service is offered freely.

    Next it appears that demand varies with time of day, with it not so high in wee hours and much greater in the afternoon. That's probably true even when money gets put into the machines, so the possibility exists for excess demand at higher prices. This leads to the next point.

    Are there rules to manage the excess demand or not? If there are rules, are they written or unwritten? This seems to me the heart of the matter on whether opportunism is happening. So I wish you had written about that. Did the students who hogged the machines play by the rules or behave opportunistically in so doing?

    Finally, it's unclear from this story whether your girlfriend could have herself hogged a machine. If she couldn't she couldn't, does the post address the prompt?