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We return at last to our discussion of the Land/Labor/Capital triad of the factors of production (plus entrepreneurship, which is nowadays considered its own factor). We’ll start with a broad overview of Labor as a factor of production, and then zoom into the role of motivation on labor productivity.
Labor is unlike other factors of production like raw materials, for two main reasons:
- If you don’t use an iron bar today, you can use it tomorrow; but if you don’t work today, that work potential is gone forever. You can work tomorrow, but you could have worked tomorrow even if you also worked today. That is, labor is a perishable resource. (It’s also a flow, not a stock; you have a maximum intensity of work that you can do at a given time, and you can’t “store extra work” for later.)
- Unlike resources like wheat, or gold, or cars, which are largely interchangeable with other units of the same resource, one person’s labor is not the same as another person’s labor. Our labor is affected by individual skill, training, motivation, and differing opportunities to apply that labor to useful work. Labor is thus heterogeneous. (Indeed, one of the trickiest problems with labor is the difficulty in measuring labor outputs, and in assigning people to where they can do the most good—a great source of frustration when you’re out of a job!)
As we are trying to build a simple but powerful model of a fictional economy for worldbuilding purposes, rather than trying to exactly describe the real world in all its messy glory, we’re going to identify three major factors that influence the labor productivity of a society:
- Human capital,
- Physical strength and health, and
- Culture.
The rest of this post will discuss the impact of culture on labor productivity—and particularly, cultural influences on our motivations for working.
Culture has many effects on labor productivity—for example, whether individual initiative is rewarded or punished, whether people are used to teamwork and obedience or if they resist authority, whether people are diligent and careful in their work or take a slapdash attitude towards maintenance. (The eminent economist Thomas Sowell noted that in the early United States, a Scots-Irish Southern “cracker” would walk around or through a creek running through his property for years on end, without any thought of improving the situation; whereas a Puritan-descended Northerner would almost immediately build a footbridge. This is but one example of the larger pattern identified by Max Weber in his Protestant Ethic and the Spirit of Capitalism.)
All of that is important, but for now we will focus specifically on motivation. Different people are motivated by money differently, as John Médaille discusses. Médaille, in Towards a Truly Free Market (a fascinating argument for the Catholic-infused economic doctrine of Distributism), points out that employment is unlike most commodities in that “[l]owering wages does not [automatically] increase employment; only the prospect of selling more goods induces employers to take on more hands.” On the flip side, wages cannot rise arbitrarily high; at a certain point, either profit rates will go to zero (causing capital to withdraw from that industry in search of better returns elsewhere), or wages will rise above the capital substitution rate, i.e. the point where it makes more sense to spend money on infrastructure and robots than on people.
Moreover, unlike other commodities where rising prices stimulates more supply, higher wages will not automatically elicit more effort from people. In some cases, it actually reduces effort. Médaille presents three stylized models for worker motivation:
The surfer works only as much as needed. Once he earns enough money to feed himself and see to his other necessities in a minimal way, he stops working and goes surfing for the rest of the week. If you want to elicit more work from a surfer, you would actually need to pay him less. (This tendency occurs in many peasant societies. In 19th-century Germany, the ruling-class Jünkers found that they could increase agricultural yields by suppressing peasant incomes to a level of utter misery, forcing them to work more in order to survive; if they paid the peasants more, on the other hand, yields dropped as the peasants simply drank away the surplus.)
The homebuyer has goals: he wants to achieve a certain level of material comfort (such as buying a home), to take care of the family and achieve some level of social status. Increasing pay will elicit more work from the homebuyer as these goals become achievable—but only to a point. Once pay is high enough and the goals are achieved, the homebuyer will not continue to increase work output and may even start to reduce output at the high end, as other things (leisure time, time with family, social involvement, etc.) become relatively more important than another few thousand dollars in the bank.
The oil rigger, on the other hand, is highly motivated by money and will work more if he gets more of it. At a time in his life where he has few other commitments, the oil rigger is willing to work incredibly hard in exchange for incredible pay, with the plan of benefiting from the accumulated money later in life. The more you pay the oil rigger, the harder he will work, until the point of sheer exhaustion. Cut the oil rigger’s pay, on the other hand, and he will leave in disgust to find better opportunities elsewhere. (See also investment banking, many commission-based jobs, and so on.)
As a result, the productivity of a given society’s workers will be influenced by the relative proportions of Surfers, Homebuyers, and Oil Riggers among its workers. So what determines that proportion?
Ronald Inglehart’s 1997 book Modernization and Postmodernization argued that societies exhibit coherent patterns of cultural development that are partly predictable, based on economic conditions that allow for and stimulate cultural change. This change generally happens across generations; people’s values are usually set by their experiences in childhood and early adolescence, and do not change much as they get older. But in times of rapid economic change, the values of the next generation can differ significantly from those of their parents. Moreover, even though economic conditions make cultural change possible, the resulting cultures also have an independent influence over later economic performance.
A key argument is the scarcity hypothesis: people tend to most value things that are in the shortest supply. In a time of social disorder, people will value authority and tradition; in a time of poverty and starvation, people will value material things. In a time of material abundance but soul-crushing conformity, people will value self-expression and autonomy. And these values persist once they are stamped into a person during adolescence and early adulthood, even as external conditions change.
In this book and in later research, Inglehart argues for two discrete axes of broad cultural variation between societies (and to a much weaker extent, between individuals): traditional versus secular-rational values, and survival versus self-expression values. (He initially thought that these axes were independent of each other, but later research suggested that they correlate strongly.) A society with “traditional/survival” values is a Traditional society, marked by deference to tradition, low economic growth and consequently significant poverty and insecurity, and little importance placed on political rights or personal fulfillment.
In a society with growing wealth, increasing state capacity, and bureaucratic organization, this cultural pattern gives way to the “secular-rational/survival” configuration, which Inglehart calls Materialism. In short, the spread of rational methods and organization is thought to bring true prosperity into reach—all we must do is work hard to achieve it. As a result, traditional authority is displaced by Science, Industry, and the State, and people develop strong work ethics beyond what are typically found in traditional societies. Work brings reward, and so the more you work, the better you are rewarded.
As wealth grows even more, societies reach a point where increasingly hard work no longer yields as much marginal benefit. Material safety is now taken as a given by those who grew up with it; this new generation shifts from a survival mindset to a self-expression mindset, which Inglehart calls Postmaterialism. This generation lacks the focus on material reward that marked their parents’ work ethic; they work in order to express their values, not merely to feed themselves, and are not as willing in the aggregate to spend nights and weekends in the office for the sake of higher pay.
(Obviously, Postmaterialism depends on the material prosperity that enables it. If material conditions suddenly regress, a cohort with Postmaterialist values will struggle to adjust, and the social consequences of this struggle may be dire.)
So as worldbuilders, we can think about the cultural attitudes at play in our invented societies, and how they will influence labor productivity and the economic development of the societies. There are some fun stories that can be told on these themes; can you think of any?
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(This post is part of Politics for Worldbuilders, an occasional series. Many of the previous posts in this series eventually became grist for my handbook for authors and game designers, Beyond Kings and Princesses: Governments for Worldbuilders. The topic of this post belongs in the planned second book in this series, working title Wealth [Commerce?] for Worldbuilders. No idea when it will be finished, but it should be fun!)