Intro. [Recording date: February 1, 2018.]
Russ Roberts: Before introducing today's guest, I want to share with you the results of the survey of your favorite episodes of 2017. I want to thank everybody who responded. A little over 2400 people filled out the survey. You come from all over the world. You live in 68 different countries, which is an EconTalk survey record. And I also want to tell you how much I enjoyed your feedback and comments, that were at the end of the survey. They inspire me; they make me want to make EconTalk better; and they touch me. So, I just truly thank you for taking the time to put your thoughts into words there. And, if I have a chance I'll respond in some place to some of the particular comments. Here are your favorite episodes from 2017, in reverse order. These are the episodes that were mentioned in people's top 5 most frequently.Don Boudreaux, Michael Munger, and Russ Roberts on Emergent Order
Tim Harford on 50 Inventions that Shaped the Modern Economy
Gary Taubes on the Case Against Sugar
Megan McArdle on Internet Shaming and Online Mobs
Michael Munger on the Basic Income Guarantee
And here are the top 5, now:John McWhorter on the Evolution of Language and Words on the Move
Benedict Evans on the Future of Cars
Nassim Nicholas Taleb on Work, Slavery, the Minority Rule and Skin in the Game
Michael Munger on Permissionless Innovation
and the Number 1 episode listed by 22% of you as a top 5 episode:Sam Quinones on Heroin, the Opioid Epidemic, and Dreamland
And the last thing I want to say about the survey of today is that a number of people complain or observe--some people get angry about this--that when I list the episodes on the poll on the survey about this, they are in chronological order. I think that's helpful to help people think about when they occurred and what they thought about them. But it's a little bit unfair to the ones that fall earlier in the year. I will point out that the Sam Quinones episode, which was Number 1, did fall early in 2017. But of course that proves nothing. There still could be a bias. But I also want to point out there's biases against the episodes that are later in the year. They don't get as many listeners. Some people don't get around to them as much in time for the survey. So, it's not science, folks. It's not supposed to be. It's just a survey. But it's okay. It's just a way to give you a chance to tell me which episodes you liked and didn't care for so much. Again, I appreciate it; but I do want to respond to that somewhat-common complaint.
Russ Roberts: And now for today's guest. My guest today is philosopher and author Elizabeth Anderson.... Her latest book, Private Government, is the subject of today's episode....
Russ Roberts: Your book--and it's quite short; you might even call it a monograph, though it includes some responses from a diverse group of people in different disciplines, and then your response in turn--your book makes a seemingly crazy--it's a pretty outrageous claim when I first heard about it. But I actually found it quite provocative. And I encourage listeners who might think, 'Whaat?' to actually open your mind and consider the possibility that Elizabeth's onto something here. And, what you write about is the freedom available to modern workers in private corporations, private workplaces. And I want to start with a quote:
American public discourse is also mostly silent about the regulations employers impose on their workers. We have the language of fairness and distributive justice to talk about low wages and inadequate benefits. We know how to talk about the Fight for $15, whatever side of this issue we are on. But we don't have good ways to talk about the way bosses rule workers' lives.
Now, that's a very strong claim about--not that we don't have the language, but that bosses rule workers' lives. And later on you talk about the boss as a dictator. In fact, you call the boss in a modern workplace a communist dictator. So, I want you to start by trying to flesh out that descriptive claim.
Elizabeth Anderson: Right. So, first of all, let's just observe that any complex organization in order to fulfill its objectives needs some kind of internal governance structure. And, once we scale up, that inevitably involves a hierarchy of offices. So, we're going to have an internal governance structure. It's a little government. And then the question we can ask is: What is the constitution of that government? And the default constitution of the American workplace is a dictatorship. It's top down. The Chief Executive Officer, the Managers--they are not elected by the people who are governed within that organization. The people who are governed are the workers. They are the ones who have to take orders from their bosses. So, we have a dictatorship. And then the question is why do I call it a "communist dictatorship?" You are absolutely right--I'm being deliberately provocative here. It's because if you have a system of government in which the government owns the means of production, that's Communism. Heh, heh, heh. So, right? The corporation that owns the means of production, it's an internal government unto itself, with the form of a dictatorship. So that's why I'm calling bosses communistic dictators. Small-c communists. Not that they're members of the Communist Party. That would be big-C Communists.
Russ Roberts: And it's an accurate description in a certain dimension. I'm going to challenge some parts of it. But I think it's important to make the observation, which we've made many times on the program before, and I think some people on the libertarian side of things struggle to accept this: But, a corporation, a company, any time of workplace with multiple employees, is--it's a command-and-control environment. It's top down, as you say. This observation is made often by Coase in his classic work on "The Nature of the Firm," going back to 1938. It's essentially embedded in Hayek's work, because Hayek will say, people will say complaining to Hayek, 'Well, you're against planning.' And he says, 'No, I'm not against planning.' It's a question, as John Papola and I talked about in our rap videos: Who plans for whom? Who does the planning? And then, in a true Communist or Socialist state, the planning, the top-down planning, comes from a centralized set of government officials. But in a corporation or a company, it comes from the bosses--the CEO (Chief Executive Officer) or then others within that hierarchy--who boss people around--and this is the key point, or one of the key points--they boss them around without prices. It's not a market inside a firm. So, there's planning inside--there's islands of planning; and you and I plan all the time, for our lives. So, emergent order, which is a favorite topic here, it's not that, 'Oh, we just leave things alone; everything turns out great.' That's never been the claim. The claim is you leave things alone from a certain level of top down--that is, from the government--and you let these private enterprises plan accordingly to figure out what's best for each individual and for each organization; and the competition among them is what leads to outcomes that we who are in favor of free markets find attractive. So, what's wrong with that? So, I accept your nomenclature: it's a bit provocative but I think it's accurate, more or less. 'Dictatorship' is a bit strong; we'll talk about that. But what's wrong with this? So, there's top down, within certain parts of the economy.
Elizabeth Anderson: Right. And so, I want to stress that my objection is not the fact that the internal government of the workplace involves some hierarchical structure. I think once you scale up, there's no other way to enable a large organization to coordinate. So, there are going to have to be authority relations within the firm. What I object to is what I call private government, and by private I don't mean it's part of the private sector. What I mean is the bosses exercise nearly unaccountable power over those they govern. And my objection is basically that it leaves workers vulnerable to all kinds of abuse. So, one of the examples that I cite, although it's far from the only one, is the fact that workers in the poultry industry aren't even allowed to have bathroom breaks. They are told they've got to show up wearing diapers. They are mocked; if they don't have diapers they are urinating on themselves. It is just an appalling humiliation and abuse. Workers should at least be entitled to go to the bathroom. But we have many other cases. Ninety percent of restaurant workers suffer sexual harassment. Just, mountains of abuse. And the abuse exists because bosses have unaccountable power, and that's what I call private government.
Russ Roberts: Well, that 90% seems a little high to me, but you could argue it doesn't matter: if it's 10%, or 20%, or 30% it's still horrible. And of course we have laws against certain types of abuse by bosses. Obviously a boss who strikes a worker can go to jail for assault or other things. What I found most interesting, though, is the range of stuff that bosses can dictate to workers that are totally legal.
Elizabeth Anderson: Quite right. Yeah.
Russ Roberts: one example being lack of bathroom breaks. Again, I don't know how common that is, but even if it's just once, it's still pretty appalling. What else have you got for me?
Elizabeth Anderson: Well, we could take a look at white collar workers who are quite commonly pressured by their bosses to contribute money to favored political campaigns or political action committees. My own husband, who works actually at a non-profit health care organization has been pressured to contribute to their political action committee. And it's one of those things where--he resents that; he doesn't particularly care to advocate for what his employer's political causes are, especially since most health care organizations' primary interest is raking in more money and hiking prices; and he doesn't actually believe in that. But, you know, his donations are monitored by his boss. And he's resisted that. But a lot of workers may well think twice about whether they're really free to do that, especially if questions of promotion up the hierarchy of the firm are on the line.
Russ Roberts: You also point out the employer often has the ability to dictate what you do when you are not at work.
Elizabeth Anderson: Quite right. And this, I think, is even more objectionable. Normally we think that once you are off duty, you should be free from any kind of control or regulation by your boss. But, in the United States the default rule of employment is employment at will. And that entails that your boss can fire you for any or no reason at all, including things that the boss finds out about your off-duty activity. For instance, if one has a gay partner, in many states one isn't protected against discrimination on account of sexual orientation. Stuff that you might post on Facebook expressing perhaps controversial opinions can get one fired even if the Facebook posting isn't addressed to fellow workers or harassing them in any way, but just expressing an opinion that the boss disagrees with. Recreational use of drugs and alcohol over the weekend--seems to me none of the boss's business, what you are doing. Of course, you can be reasonably expected to show up sober on Monday. But, you know, recreational activities over the weekend, I don't think should be subject to the boss's control. But, in reality, people are fired for what they do over the weekend, and in their leisure time.
Russ Roberts: And what's the--I can do it, but I'd like to hear you try and do it--what would be the standard libertarian response to these kind of concerns? Why do people like me tend not to worry about this until we read your book?
Elizabeth Anderson: Because there's always the exit option.
Russ Roberts: Correct.
Elizabeth Anderson: There's a formal symmetry between the right of the boss to fire you for any or no reason and the right of the worker to quit for any or no reason.
Russ Roberts: One of the things I liked about your book, Elizabeth, is that you did a very fair job talking about the people who don't agree with you, which is rare. Which I appreciate. You didn't straw man or take cheap shots or [?] at the arguments of, say, Adam Smith that we're going to get to in a minute. I thought you did a very nice job. But that would have been my response if somebody had mentioned this stuff, and I'd say, 'This is silly. You can always quit and go work somewhere else.' So what's wrong with that argument?
Elizabeth Anderson: Well, one of the difficulties is that for the vast majority of workers, their only other options are to get employment with another dictator. So, I point out that libertarians wouldn't be so happy if workers and citizens behind the Iron Curtain could have freely migrated to any other Communist country. That's not a really great set of options, and I don't think it would have made them free just if they could have moved from Hungary to Czechoslovakia before the fall of the Eastern Bloc. And I don't think we should be happy with the set of options that workers face today in the United States.
Russ Roberts: Of course, one different option instead of working for another dictator is working for yourself. And there's a lot of good humor on the web making fun of the fact that you replace a monstrous boss when you work for an employer and then you become self-employed and you work for a different monstrous boss--who pushes you, drives you, makes you work 20 hours a day: it's yourself. And being self-employed is not a bed of roses, either. So, but what do you think of that option, though--self-employment?
Elizabeth Anderson: Well, I think for some people it is really great. And indeed, what I argue in my book is that historically, that was the libertarian dream: everybody be their own boss and then it's up to them how hard they are going to work. They reap all the fruits of their labor. They are totally free from other people's authority. That was the original libertarian dream. It is true that some self-employed people tend to be very hard, self-driving people. But I think there's a lot to be said for autonomy.
Russ Roberts: I agree.
Elizabeth Anderson: I, myself, tend toward the workaholic. I'm very highly motivated by work, and so I drive myself pretty high. And, in a way, as a tenured professor, it's pretty much up to me how hard I work.
Russ Roberts: Shhhh. Don't tell anybody. We recently had Bryan Caplan on; he's already pulled the curtain back. So, all our listeners know about this. Go ahead.
Elizabeth Anderson: Yeah. I mean, in reality, one of the things that tenure is selecting for is very hard, self-driving people. But, I feel a lot better that I'm choosing this for myself than if somebody was dictating to me that I had to work this hard.
Russ Roberts: I think it's more--when you think about my argument on these issues or the way I would generally frame it, it's not so much that you have the choices to work for a different dictator. It's that the fact that there are different choices usually mitigates the level at which a dictator will take advantage of the power they have available to them, because they don't have a monopoly. If you go to Silicon Valley and you spend any time at all at, say, Facebook or Google, as I have, wandering around meeting folks now and then, it looks more like a summer camp than it does a Communist dictatorship. It's a very pleasant place to work, more or less. There are unpleasant things; we've talked about some of the challenges that maybe Google has with political diversity or ideological diversity, and there's a little bit of groupthink. And other things going on there. But, on many, many dimensions, it's an enormous improvement. Now, not every company in America looks like that. Not every worker is able to find a job at such a place where there's all the free food and other delights--ping pong tables, the huge things that matter in America that are scattered around those kind of places. But, the argument would be that yes, the boss has that potential; but the boss pays a price. And, a firm that abuses its workers is going to struggle to attract workers. Now, I always found that to be a pretty compelling argument, or at least empirical argument. What your book forces me to do is consider the possibility that the fact that it's maybe rare is not sufficient to reject your argument of abuse. The fact that these abuses do take place does raise a flag for me that even though competition may reduce them, it's still an issue to take seriously. But, how do you feel about that--just on the empirical side and the relative costs and benefits? Do you think competition is sometimes at least an effective protector of the worker?
Elizabeth Anderson: I think competition is helpful for highly skilled workers in whom the corporation ends up having to invest a lot to get the most out of them. Then it's a big cost for them if a worker quits in disgust about the climate in which they have to work. For lots of other workers, especially low paid, unskilled workers, it's not at all clear that the exit option puts sufficient pressure on employers to make conditions decent. So we do observe quite a lot of employers who tolerate extraordinarily high turnover rates, because if they're unskilled, it's not that costly just to hire new people. For instance, Amazon warehouse workers, there's enormous churn probably because the job has high accident rates and it's totally exhausting. Few people can actually bear up under the physical stresses for all that long. And, Amazon seems to be really content to tolerate extraordinarily high turnover rates without improving the conditions at work. I would also point out that competition depends a lot both on where we are in the business cycle--so, now we're in a favorable condition with very low unemployment. But, we've had--the last two recessions, we've had extraordinarily protracted periods of high unemployment. And there, the exit option isn't really much of a threat to employers, and it's really difficult for workers to quit in a high unemployment environment. And finally, we should also pay attention to the fact that the extent of competition for workers is geographically extremely uneven. So, recent research has found that especially in rural areas and small towns as well, the number of employers who are competing for people in a particular occupation might only be one or two or three; and under those cases, it's very easy--you have essentially monopsony conditions arising. And that may be a cause of why even in an economic boom that's lasted for many quarters, wages haven't increased and conditions of work would naturally also not improve under monopsony.
Russ Roberts: I don't know how common that is. I'm a little bit skeptical about that. And I think it's a little more complicated in general. I often think about my cleaning crew--I have people who come to clean my house once a week. I'm fortunate enough to be able to afford a cleaning crew. We pay them $100, roughly $100 for the hour or so that they're here. It's usually three or four people, so they make roughly $25 an hour at a job that is somewhat unpleasant. But they have very little education; they don't speak English particularly well, some hardly at all. The head of the crew--now, I'm not sure what she pays them, so I'm not sure it's split evenly; I'm sure she takes a little bit more; it's her car that drives them around, and I suspect she provides the vacuum cleaner and other tools that they use. But that's kind of a shocking thing, that they make $25 an hour, on average at least--which is 2 and a half times or so--I don't know what the exact Maryland minimum wage is, but it's well above it; it's certainly well above the Federal minimum wage. And the answer--the question is why do I do that? Why do I pay them so much money? And the answer of course is, if I don't, they won't come. They'll go to somebody else's house. Now, there's a lot of competition, in that sense, that there's a lot of houses that want to be cleaned in my neighborhood, where people are busy and would rather pay for cleaning than do it themselves. But it's kind of striking to me that, at least in that case, competition does protect at least on the monetary dimension. There are also--of course, they are not my employees. They are self-employed. So, maybe that makes a difference, too.
Elizabeth Anderson: Sometimes self-employment helps. I think--I would be very skeptical if the workers under the supervisor are making anything close to $25 an hour. Of course, it might depend on where you live, too. In urban areas workers' wages tend to be higher.
Russ Roberts: Yes, they do.
Elizabeth Anderson: But I'd also like to point out that there's been an increase in various kinds of precarious employment, temporary employment; and so, in many cases, there might only be one temp agency, and with a scarcity of full-time or permanent employment. So, I should note, for instance, that in the recovery from the recent recession, most of the jobs that have been created have been temporary. So, people are hired out by a temp agency. And those workers, a huge chunk of their wages are taken by the temp agency, and they're living under very precarious conditions and it severely weakens any kind of bargaining power they have--power to resist whatever abuses they face when they are appointed to work for a particular firm.
Russ Roberts: Yeah, the temp agency thing is extremely interesting to me. I know it's not well understood by most economists; certainly not well understood by me. And I've looked at it a little bit. I know--and those out there who are listening who are econ grad students, I encourage you to think about this as a dissertation topic. It's true what you said--those agencies take a large chunk of the worker's salary. They also charge an enormous amount. And it raises the puzzle as to why employers are willing to pay such a premium to hire workers through that agency. And it has, I think, to do with the regulatory environment, the legal environment. But I don't think--I haven't seen anybody look at it very carefully. And it's also--calling them temp agencies--in some settings, I'm sure that's accurate, but in many other settings--I know people who run factories who deal with this--they're not really temporary. They just work through the agency. They actually work for years and years in this strange relationship where the employment is paying a premium over and above what they would pay if they hired them directly. And, unfortunately, tragically, I think it's an issue of insulating the employer from legal issues related to--illegal immigration, sometimes. Could be to threats of lawsuits of other kinds. So, companies are paying an enormous premium right now. And that does hurt workers, but it's not as--it's a little bit misleading to say that they take a large share. It's true that they take a large share; but it's a large share of a very large number; and what the worker is left with is still enough to get them to be willing to work there. The puzzle is why workers don't contract themselves out more directly at times, and why employers don't. Why this middleman of the agency is an economically viable institution in today's world is a very interesting question, and I'd like to see--maybe somebody's worked on it that I don't know about. So, if anybody out there knows, I'd really like to see it. But when you say there's only one or two agencies--so, start one. You are suggesting there's a profit opportunity. Why wouldn't you expect someone to come along and do a better job?
Elizabeth Anderson: Well, the workers themselves [?] don't have either the management skills or the credit to borrow money to start their own. And the people who do are mainly interested in taking the biggest cut they can from the workers they employ. So, I don't think you can count on competition here really helping the workers very much.
Russ Roberts: You are suggesting that you could make--you, not a worker starting their own firm--you, Elizabeth Anderson starting your own firm. You could make a lot of money. You could start a firm that pays the workers 20% more maybe, 10% more, a decent amount more; and you'd get a bunch of them, and you'd still be able to make a lot of money if you could sell those workers' time to employers.
Elizabeth Anderson: Right. And so, the question is whether there's that much room--what is the advantage to the new temp agency in offering higher wages. It's not clear to me what the advantage is to them.
Russ Roberts: You'd make money. That would be the claim.
Elizabeth Anderson: But you'd make less money.
Russ Roberts: Well, you'd make less money than the existing firms, but you are claiming the existing firms are exploiting the current workers. So, there'd still be, in theory room for a new agency or a new employer to come along--it's always the issue here in these kind of competitive situations, right? If Amazon treats its workers badly, people with low skills in theory should be able to find a workplace where they are not abused. What you are suggesting is that they are all being abused. Or that it's frequent. Or that it's common, because of the lack of skills that these workers have and the market power that these employers have over them. And, I disagree with you about the frequency of it; but I don't disagree about the existence of it. And I want to come back to the point I made earlier, which is: You could argue that the existence alone is sufficient. And let me make the argument against me as strongly as I can. If someone says to me, 'We need to require seatbelts because seatbelts save lives,' I always say, 'Yeah, but it treats people like children.' And I don't do any kind of cost-benefit analysis when I think about liberty. I'm a classical liberal or a libertarian and I think people should be responsible for their own lives. Yes, there's an issue about externalities and being able to control the car if you're not wearing a seatbelt and hurting someone else. Put that to the side. Just this issue of--just take the nanny state claim. I don't like the nanny state, and the fact that the nanny state might save lives by banning trans fats, and taking into account that trans fats might be good for you, even. I have no idea. But the fact that the nanny state makes mistakes--even if it didn't make mistakes, it would bother me, because I don't like the idea of being infantilized by the power of the government. And the point you are making which I think is very powerful is that: If I accept that point in the case of public government--what we would call, normally, public government, why do I accept it in the case of private government? Why do we do a cost benefit analysis there, when it comes down to freedom? And I think that's a very compelling point.
Elizabeth Anderson: Yes. Exactly. But I also want to make the additional point that the constitution of workplace government is itself a creature of state regulation. It's the state that creates the infrastructure of employment law. And it's already handed all the authority cards over to management. And so, in that context, management doesn't really have any incentive, or rarely has an incentive to deal any of those authority cards back to workers. And that's one of the reasons why workers have so little liberty, on the job and even in many cases off the job.
Russ Roberts: I don't know. One of the challenges of your worldview, at least some pieces of it, is it seems hard for it to explain the enormous transformation of the workplace over the last hundred years. I would argue it has very little to do with government regulation. It has to do with market forces that have raised the standard of living, raised wages, reduced the work week, gotten rid of many of the abuses. I mean, the fact that so many people, more than ever today, can take, effectively, leisure on the job if they want--it's true that in some cases they can't, but in so many more they can--suggests that the overall situation is not as bleak as your argument.
Elizabeth Anderson: Well, in some respects it is the case that conditions of work are a lot better than they were even 50 years ago. I would credit automation for a lot of that, especially, you know, in manufacturing jobs. It's a lot less injury-producing--
Russ Roberts: safer--
Elizabeth Anderson: It's a lot less polluting. It's way safer. And, you can go right outside of Detroit to the River Rouge automotive assembly plant. They have tours. It's amazing how much better working conditions are for workers assembling these trucks than they were back, you know, during the era of mass industrial employment. So, I agree with you that there have been some genuine gains. But there have also been some degrees of deterioration because of the decline of permanent, full-time employment. There's an increasing percentage of workers who are part of the Precariate, who really are not sure what they are going to be doing--some on tents[?]. It's a lot less stable, especially for younger workers, who are now, you know, jumping from one job to the next because nothing really lasts or builds into a career. And those people are especially vulnerable.
Russ Roberts: Do you want to say something about the gig economy? And Uber, Lyft, etc., where on the surface at least--and I feel this way; I suspect you don't--but it seems to me that that allows a lot more autonomy for people. And they really appreciate it.
Elizabeth Anderson: Well, it is true that Uber drivers have a great advantage in that they can set their own hours. And that does enable a lot of autonomy. The downside is that a lot of these workers don't have secure enough employment to plan ahead, do long-term projects like buying a house. There's a lot more insecurity. And, of course, if you actually take a look at the business plans of Uber and Lyft, they've been losing money like crazy. It's not clear that they have a real idea about how to turn a profit.
Russ Roberts: Yeah, it's not clear it's viable. I agree.
Russ Roberts: Let's step back for a minute. I really enjoyed the first part of the book where you talked about the Levellers and the egalitarian strain in 17th century thinking, which I knew nothing about. So, talk about who the Levellers were. And, we'll come back full circle, we'll get to modern times. But the sort of vision that people had about personal liberation flourishing and autonomy. You tell that story very well. So, give us that background.
Elizabeth Anderson: Yes. So, the Levellers were a bunch of revolutionaries in 17th century England, during the English Civil War. And they were pretty much--we would call it today the Left side of the spectrum, although of course the Left-to-Right spectrum wasn't really invented until the French Revolution about a century later. The Levellers, what I find interesting about them, was that they were, as the name implies, very strong egalitarians. And they were also very strong advocates of free markets. And that's what really struck me. Because today we're used to thinking that egalitarians are against the market. But, in fact, through the entire 17th and 18th century, and in the United States deep into the 19th century, egalitarianism and free market thinking went entirely hand in hand. So, the Levellers really kicked it off. Many of the Levellers were small craftsmen. And they were opposed to subjection to the monopoly guilds. They wanted to run their shops as they saw fit, and be able to trade freely without the regulation of the monopoly guilds. And so, they made constant petitions to Parliament to abolish monopoly. Because monopolies were of course a state creation. A state would hand over a monopoly to a guild, and the guild--all the shots were called by the large craftsmen, and they regulated what the small craftsmen were able to do: the days of trading, the kinds of goods they would put on the market, where they were allowed to trade. Very powerful arguments were made by the Levellers that this repression of free trade was created stagnant--it stagnated the economy; you'd have much greater economic growth if you just allowed free competition to arise. And they also argued, quite plausibly for their day, that the rise of open and free competition would multiply opportunities for ordinary workers to become self-employed, and get out from underneath an oppressive boss, and enable them to set up shops for themselves. I think it was a very compelling argument in its time, and highly persuasive.
Russ Roberts: And then, how does that--how did Adam Smith's vision fit in with that? About a century later?
Elizabeth Anderson: Yes. About a century later, Smith is advancing that argument I think with very powerful reasoning for its day. Smith also argued that free markets would liberate workers. But, you really had to be serious about freedom across the board. So, that required abolition of monopolies of all sorts. He was especially concerned about the monopoly in land, in England. Only a couple hundred families owned virtually all the land in England. It was locked up in these dynasties and the laws of inheritance for bad: the great estates were being broken off and sold off in pieces. So, yeoman farmers were pretty much shut out of the market in land. Smith argued that the great, aristocratic landlords were very inefficient at farming. The most efficient worker would be the one who is self-employed. The yeoman farmer. He had the greatest interest in proving productivity because he got to keep 100% of the fruits of his labor. A tenant farmer didn't have nearly that incentive to improve productive techniques, because he would only get to keep part of the portion of his labor, of the value that he adds. And so, Smith argued that the most efficient system, the most productive system, would be one in which the estates could be freely sold off, in bits, to yeomen farmers. And then you would have a boom in agricultural productivity. But even more important from Smith's point of view, you would have a boom in self-employment. And that would dramatically improve the freedom of workers. Smith thought the same about abolishing the monopoly guilds, abolishing apprenticeship and other forms of involuntary labor. This is all Smith's free market vision, was overwhelmingly designed to support the freedom and advancement, material advancement, of ordinary workers. So, we should be really be reading Smith as a friend to the ordinary worker. And arguing that freedom and equality as ideals are compatible, in a free market system.
Russ Roberts: And as you point out--I thought this was a great observation--Adam Smith's pin factory isn't really much about factory. It's really an artisanal pin, to some extent. It's a group of skilled people working together, but without the kind of capital and infrastructure that describes a modern industrial manufacturing plant. And, as you point out--and I'll let you continue your story--the Industrial Revolution comes along, which changes the size, the efficient and effective size, of firms. And that changes everything, in your vision.
Elizabeth Anderson: Yes. Exactly. So, if you read Smith carefully, what you find is the crux of his argument is that incentive effects swamp economies of scale. He basically thought economies of scale were negligible, except for a very few types of enterprise--canals, for instance, are really large. They take huge infusions of capital. But there weren't many things like that, he thought. So, what's important to keep in mind is that even though historians conventionally date the beginning of the Industrial Revolution a little bit before Smith wrote the Wealth of Nations in 1776, in reality, nothing like the 19th century factory system was predictable in 1776. The shops, the manufacturing enterprises, were very small. And if you have, like, Smith's pin factory, only 10 people working at it, you could easily see that in such a small enterprise there could be a lot of camaraderie between the owner of the shop and the employees, each of whom had a reasonable expectation that with further experience they might be able to set up an enterprise of their own. One of the key pieces of evidence that I think is quite telling for this era, which was equally true of the United States, was how common drinking was. Between bosses and workers. It showed that they were having fun together. They were much more on an equal plane than what happened with the rise of the factory system. So, what happened with the Industrial Revolution is, a set of technologies was invented that massively increased economies of scale, to a degree that was completely incomprehensible in the late 18th century. And, once you have, once you scale up the size of the enterprise--again, I think it's just fundamental scale and hierarchy pretty much go hand in hand. It's almost impossible to manage a large-scale enterprise without a hierarchy of offices. And it's that distance between managers and workers through layers of the hierarchy that opens them up to greater forms of abuse than when their boss worked under identical conditions to they themselves as in the traditional artisanal mode, when, you know, a master craftsman did exactly the same kind of labor as his journeyman.
Russ Roberts: It's extremely interesting. I think about my father's father, my grandfather, who was a peddler, and who I would say temperamentally not very well suited for employment and working for somebody else. And as a result, had a pretty hard life, financial. Did okay. You know. But a lot of ups and downs; and some very tough times. And never any particularly great times for his financial wellbeing. And, so, I don't want to romanticize self-employment. And I don't want to understate the hardships of a Manchester, England factory worker in 1850, because I don't think they were very pleasant. Of course, nothing was very pleasant back then. Or, a few people had pleasant lives, but not so many. And, when I step back and put your history in perspective, I'm struck by the fact that that all changed mostly through forces not related to people like you and me--philosophers and policy analysts--but more just through the natural forces of competition and human innovation. And so those technologies that made the firms bigger, that allowed a lot of workers to be treated in a somewhat brutish way by authoritarian bosses and hierarchies, that's what gave us the wealth that lets us have, so many people have today. Not everybody, but so many. And so, I'd ask you as a philosopher, as an ethicist: Was that a good deal? Should we not encourage that over the generations? Or should we pay a price, and intervene in that system in ways that would slow it down but would lead perhaps to more dignity in the short run?
Elizabeth Anderson: So, I think if we look at the history of the Industrial Revolution, it is true that the great benefit it brought was spectacularly increased productivity. Just immense. Mind-blowing, compared to previous centuries. But I wouldn't credit technological improvement alone for the improvement in ordinary workers' lives. I would argue that the rise of the Labor Movement and the democratization of the advanced countries, the economically advanced countries, were also critical factors in making sure that the fruits of that higher productivity were widely distributed to the workers. So, that was, I think, an essential part of the story of the second half of the 19th century. And all the way through the post-War era. The strength of the Labor Movement was very, very important in ensuring both the dignity of workers within the firm and their access to the fruits of this enormous technological improvement. And what we see is, you know, in just the broad history of capitalism, is there's an inflection point in the mid-1970s. And, what you see around that time is worker productivity, labor productivity continues to increase, but workers are no longer seeing advances in their wages that track rises in productivity. Whereas, for the post-War era right around to the mid-1970s, workers' wages were increasing pretty much exactly in line with increases in productivity. Workers really haven't done well in the past few decades, notwithstanding spectacular technological advances, because most of the economic growth has been absorbed, maybe, by the top 10%.
Russ Roberts: Yeah. I just think that's just totally wrong. But it's what they believed, and we're not going to debate it here other than to point out that we don't measure productivity particularly well in the era of computers. We don't measure prices very accurately when there's enormous, rapid quality improvement. So I would argue that our measures of the standard of living are grossly inaccurate; and to just make a crude argument, since we're not going to get into the weeds here: I don't think the average American would want to live in 1970. Or 1973, which is sort of that inflection point. So, I think that's a bit of a--that's a long, 'nother story. Interested listeners, all my listeners know, this is one of my favorite issues; and I'm creating a series online called "The Numbers Game." You can go to policyed.org and look at the first two videos produced that start to look at these issues in more depth. So, I encourage people to do that. But, I do think there are people being left behind these days. And I just don't think it's the bottom 90%. I think it's the people with the least skills who are least able to be part of the modern economy. And I think they do have a very hard time. I think they have a tough time in the workplace. I think the places that are, the options that are available to them are much bleaker than they used to be. And certainly bleaker than what you and I are able to enjoy. We're working; and I don't--that part I don't deny.
Russ Roberts: Talk a little bit about--and you can react to that, if you want.
Elizabeth Anderson: So, it just seems to me that the income data show that the vast majority of increases in income have been reaped by pretty small slice at the top. So, yeah, you could argue that maybe objective standards of living have improved because now everybody's got cell phones and so forth. I worry more about the difficulties that workers have in, say, getting access to health care. To a certain degree health care reform has helped them. But, a lot of those workers are actually priced out of the market even today, because we don't have Universal Health Care. It's education, access to higher education is increasing in cost. There are some real basic things here where I think people are having a harder time getting access to. Not to mention housing prices in the areas of major job growth. And, here's a point at which you and I would probably agree. I think that intensity of zoning regulations that forbid free development of cheaper housing for ordinary people is a major cause of outrageously inflated housing costs in the major metropolitan areas where we are seeing the largest growth in really good jobs. And that is severely constraining opportunities for ordinary workers.
Russ Roberts: Yeah, we do agree on that. I would just make the point on the areas of housing, health, and education, that most of the problems with affordability come from government subsidizing access to the system. So, it's a little bit like the Yogi Berra line: It's so expensive, 'It's so crowded nobody goes there any more.' It's true that the prices have been driven up, but that's often because more and more people have access to it. Now, in the case of education it's often through subsidized loans, which is a really messed up way to do it, I think, unfortunately: If you don't finish college, in particular, it's a brutal system.
Elizabeth Anderson: Oh, I agree. It's awful. Yeah.
Russ Roberts: We probably agree on some of that, too.
Russ Roberts: Before we close, I'm going to ask you for some suggestions. But, I do want to mention that Nassim Taleb in a recent episode--I think it was last summer--did talk about how employees are more like slaves than, say, contracted workers. So, for listeners who are struggling to opening their mind to Elizabeth's arguments, he does make the point that, to keep your job is really a thing that workers long for. And they will do some things that are not so pleasant. They will give up that weekend to work overtime because the boss wants them to, and so on. So, even for white collar workers, there is a level of slavery there. And the question is: One way to think about it is, 'Is it worth it?' And, I think a lot of workers would say it is. But I like your point, which is, 'But that's just not necessarily the right criterion for deciding whether some of these practices should be legal or become conventional.' So, let's turn to things you'd like to see done to make the world a better place in this dimension.
Elizabeth Anderson: Yeah. So, I think it would be worth Americans to look overseas to the German model. Germany has incredibly high productivity, very flourishing manufacturing sector. And they also have a system of governance known as co-determination in which workers elect representatives to management. And that gives them a voice in how their workdays are regulated on the shop floor; it gives them a measure of dignity as well as a pathway into being able to exercise the skills of management. I don't think anybody looking over at the condition of the ordinary German worker would think that they are losing out very much in standard of living. They have a really great life. And that suggests to me that we don't have to sacrifice technological improvement and productivity gains if we give a voice to workers in the workplace. I think we can have our cake and eat it, too.
Russ Roberts: So, why don't we see more--if that's true, why don't we see more worker cooperatives here in the United States? Why wouldn't, again, a firm that wants to attract good workers create that type of relationship with their workers?
Elizabeth Anderson: Well, as it happens, Germany-style co-determination is actually against the law. And the reason for this is that technically speaking, under American labor law co-determination is considered the same as a company union, where the boss effectively regulates the union. And those things are illegal. I think we should modify labor law to permit such arrangements--not company unions, but co-determination on the German model.
Russ Roberts: What else would you like to see?
Elizabeth Anderson: I would like to see changes in labor union law, as well. I think it's important for workers to have access to modes of organization that aren't necessarily sited in an individual shop floor. In the days of mass employment, mass manufacturing employment, it was easy to organize workers on a very large scale. But, those kinds of systems of employment have really declined lately. And that's made organization much more difficult. So, I would like to see, for instance, access to unionization on the part of temp workers. I'm not sure exactly how that would work. But I do think it's time to rethink the classic union model as it's developed in the United States.
Russ Roberts: Do you think we should change the ability of employers to fire at will?
Elizabeth Anderson: I think some constraints on the ability to fire at will would be merited. One way to deal with that is if you did have worker voices within the firm, they could still handle this internally without the need for litigation. Of course, litigation expenses if you actually take it to a court are very, very expensive. But there are other ways to modify the internal governance of the firm so they can handle this internally, which is usually cheaper than going to the courts. I'd rather see something like that--more autonomy for workers in the internal governance of the firm than handing everything over to a complex system of state regulation that would be enforced either by a government agency or by the courts.
Russ Roberts: So, one of the--let's close with a bit of a conundrum, which is that as sympathetic as I am to many of your arguments about freedom, the economist in me tends to look at the incentive effects and the costs and whether that's going to ultimately make most people better off. I'm not a utilitarian, though. So, it's an interesting challenge for me. But I'm thinking about the following. So, let's say we changed the ability of firms to fire at will on the basis of, say, drug use, on the basis of political expression. Maybe on the basis of suspicion of sexual harassment. Incredible things have happened in the last 6 months when stories came out, not proven in court but accepted as probable or believable or almost certainly true, and people were summarily fired from all kinds of for-profit, non-profit enterprises. People's roles taken out of movies they'd already performed and were filmed in. It's really an extraordinary time. And most of us think, 'Gee, that seems great. That's how the market responds to these kind of things. In many ways, it's responded better than the way the political market responded to accusations against various politicians.' And yet, once we put those issues as rights, put those opportunities as rights--the ability not to be fired for those behaviors or not to be dictated--it would make it a lot more expensive for people to be hired. And my worry is if we move to what you would call maybe a freer system, it could be a world where workers have a hard time getting access to it, because, now that these things are going to be so clear-cut and objective, there's inevitable subjectivity and legal nuance. And is it really going to make people better off? I don't know. What are your thoughts on that?
Elizabeth Anderson: I do agree that that might be a concern. And, we really would have to look empirically, see how it plays out. And then go back to the drawing board and rejigger the way the internal governance of the firm works. Because, the other side of the coin, of course, is that a lot of people are unjustly fired, for reasons that, you know--
Russ Roberts: Sure.
Elizabeth Anderson: Yeah. So, there are tradeoffs here. And we just have to look empirically and see if we can design institutions that give us the best tradeoffs.
Russ Roberts: Is that the way you'd think about it, though? Would you look at it in a utilitarian way as costs versus benefits? Or would you put some freedoms as sacrosanct that you would not allow a private firm to impinge on, infringe on?
Elizabeth Anderson: Yeah. So, I do think that there is a role for some baseline liberties that the employer cannot infringe upon. And that would include things like freedom with respect to sexual orientation. And basic anti-discrimination law. Certain levels of fundamental dignity, like the right to go to the bathroom. There are a number of things like that which I think aren't going to detract in any significant way from productivity, just basic in a way, a set of constitutional rights for the worker to certain kinds of liberties that the employer can't infringe. So, I think there's a baseline level that could be set as part of the constitution of the firm. But, firms and working conditions and so forth vary so much, I don't think a lot can be done at that level. You want the internal governance of the firm to be responsive to some of the more fine-grained concerns that arise due to very different manners, modes of production. And that, I think you get that information by enabling workers to have a voice in how they are governed.
Russ Roberts: Why don't you close by talking about autonomy generally, and human dignity. In a certain sense, your workplace is a third of your life, roughly--more or less, in today's world where we usually get the weekends off. And yet, it plays an outsized role, I think, in our self-respect and in our sense of identity. Maybe that's a bad thing. But I think it's a real thing. What are your thoughts on that?
Elizabeth Anderson: Yeah. I agree. I think it plays a spectacularly large role, in the sense of dignity and worth that workers have, especially in countries that inherited the Protestant work ethic. I think this is a very deep cultural thing, and it's no longer attached to any particular religious idea. So, here I am an atheist, but, boy, do I--I am very strongly driven by the Protestant work ethic. No getting around it. It's just--I feel it in a very deep-rooted sense. And I think many people do. That's a sense of where they get their dignity. I think it's a very, very powerful strain in American culture in particular, even in contrast with the rich countries of Europe. And, I think there are costs to it. Absolutely. One of the things I worry about is that the impending automation of millions of jobs may well lead to a situation in which tens of millions of people maybe don't have many prospects of stable work at all. And I think we really have to worry about where are they going to find, not just the needs of subsistence--even libertarians are thinking about having some kind of basic income scheme to cover them--but it's a question of how are they going to fill their hours with meaningful activity in which they can take pride. I think the problem hits men harder than women. Women are used to thinking, 'Okay, if I can't get a job, I can raise my kids; and that's super-meaningful activity.' And men, maybe will come around to that view, but I think it's harder given the way dependent care is gendered in American society. Men feel a little uncomfortable in those roles. And then, you know, suppose we get the Google Truck, and millions of truck drivers are unemployed. What are they going to be doing? What's going to be their source of pride and dignity in a sense that they're contributing to society? I think it's a real open question, how we're going to handle that.