Markets: Rich/Nice vs. Poor/Mean
By Bryan Caplan
Consider a model where workers are either rich or poor, and employers are either nice or mean. Rich workers might be more conscientious than poor workers, or simply less tempted to steal from their boss. Nice employers trust their workers to do the right thing, but hire carefully. Mean employers hire anybody, but watch them like hawks. What happens?
In equilibrium, nice employers hire the rich, and mean employers hire the poor. It makes sense: Nice employers need rich workers they can trust, and poor workers misbehave unless there’s a mean employer on their backs. Nevertheless, the firms where mean bosses employ poor workers look very different from the firms where nice bosses employ rich workers. An ethnographer who visited the mean boss/poor worker firms would probably tell a vaguely Marxist story about class conflict. An ethnographer who visited the nice boss/rich worker firms would tell a much more pro-market story about cooperation and meritocracy.
I think this simple model explains a lot about the real world. People who employ, serve, or rent to affluent workers, customers, and tenants can afford to be nice, because they’re trading with people who are conscientious and/or are so comfortable that they aren’t tempted to cheat. People who employ, serve, or rent to impoverished workers, customers, and tenants, in contrast, can’t be Mr. Nice Guy, because the people they’re trading with would take advantage of them. Their workers would show up late, drink on the job, or steal; their customers would shoplift, damage the merchandise, or scare other customers; their tenants would be late with their rent, have loud parties, and damage the property. Obviously there are exceptions; but people in business can’t afford to ignore what’s generally true.
If my story is right, there are two important lessons.
First, many people’s first-hand experience with markets won’t be so pretty. If you’re poor, you’ll frequently encounter abusive bosses, suspicious shopkeepers, and intimidating landlords. This will be especially galling if you’re a poor but conscientious exception to the rule.
Second, these negative first-hand experiences will be deeply misleading. There’s no market failure. Employers, merchants, and landlords who deal with the poor have to be unappealingly tough to stay in business. And without these easily maligned figures to offer work, goods, and dwellings, the poor would be much worse off than they already are. Meanness is the market’s way of coping with a bad situation.
One straightforward implication: Bosses, merchants, and landlords that interact with high-conscientious, low-income clienteles – like grad students or Jehovah’s Witnesses – will be much nicer than those that interact with stereotypical low-income groups. That’s certainly my experience; how about yours?
P.S. I’ve been thinking about this topic for a while, but a recent episode of Breaking Bad brought it back to the surface of my thoughts. (slight spoiler) When they’re slightly above their 200 lb. per week meth quota, bourgeois Walt insists on delivering every last ounce. His lumpenproletarian partner Jesse, in contrast, resents The Man so much that he starts skimming the surplus, risking an extraordinarily lucrative job – and his life. See also Frozen River.