November 24
Done
He Knows if You’ve Been Bad or Good

He Knows if You’ve Been Bad or Good

December 22, 2023
 
Growing up, my friend’s dad (let’s call him “Jim”—not his real name) supported Christian mission work in Kenya.
Jim had an acquaintance (or a friend? or a friend of a friend?—my memory is fuzzy) who worked as both a missionary and a construction foreman. Let’s call him “George” (not his real name).
The story goes like this.
When George leaves a construction site to inspect other properties, he gets the distinct sense that his men start shirking. To verify his hunch, George recruits a trusted member of the crew to report on the teams’ productivity. Sure enough, the informant confirms, George’s absence generates a team-wide siesta.
Clearly, George faces a property rights problem.
So-called “time theft” causes a wealth transfer from owner to employees when it’s not anticipated. When owners do foresee it, they can compensate by offering lower wages, but relative to the case where shirking is policed, production with rampant time theft generates less wealth. Society is poorer.
What George needs is “governance,” which I’ll define as “rules that facilitate cooperation.”
The problem is that “governance” isn’t sold in a tidy package at your local Walmart, least of all in Sub-Saharan Africa.
Making the trusted employee a manager to police shirking might or might not work. Quis custodiet ipsos custodes? He may be trusted today, but start shirking tomorrow.
Installing cameras is costly. I’m not certain when to date this story, but I think it is at least as old as the 1980’s, which makes reliance on digital technology more costly than if this tale was from (say) 2023.
What would you do?
George leaned on superstition to plug his governance gap.
It turns out that George had a glass eye. Lacking scientific knowledge of the glass eye or of “real” eyes, George’s employees believed he could see the glass eye to see, regardless of whether it was attached to his skull! (Of course, a glass eye doesn’t allow one to see even when it is attached to one’s skull). One day, George plucked his glass eye out—much to the astonishment of his men—and then announced he’d be leaving it behind to, well, keep an eye on them.
As before, George requested the assistance of his trusted employee to observe the results in his absence. Under the watchful glass eye—voila!—the men worked just as hard as when George was physically present. Superstition was the least costly means of providing governance in a context where other means of doing so were relatively expensive.
It's hard for me to believe that George didn’t compromise his Christian witness by way of his little stunt (and Jim agrees with me), but it’s easy for me to believe that output rose.
All this brings me to Santa Claus.
notion image
At Christmas time, many economists focus on the economics of gift-giving, but here I want to examine something else. Is it possible to explain the persistence of the Santa myth?
Sure, Santa is lots of fun for families. But maybe Santa’s also more than that. I must credit my former student, Alex Kidd, for first suggesting to me that the Santa myth offers a low-cost means of inter-familial governance. Since then, I remembered that the great Peter Leeson also includes a short discourse on Santa in this book.
Parents want kids to broadly “behave.” Parents want kids to clean their rooms, do their homework, interact peaceably with their siblings, respect visitors to the home, come when they’re called, and so on.
And parents rely on various forms of governance to achieve these outcomes. Yet, as in Africa (or anywhere…), governance in families isn’t always easy to come by. Consider that traditional means of discipline are often distasteful for parents to administer and thus can be costly to use. Most parents (rightly) don’t enjoy disciplining their children.
What about relying on conscience? Parents laugh. Adam Smith’simpartial spectator” is no panacea “east of Eden.”
Furthermore, states clearly don’t provide many rules for how children must interact with their parents. In fact, this vacuum of rules is reminiscent of Oliver Williamson’s point that courts tend to defer to firms’ own internal means of resolving disputes (what Williamson called “forbearance”). Like firm, like family. When was the last time a mom sued her son for failure to clean his room? Families are like pirate ships insofar as both must look somewhere other than the state to supply internal governance.
Rather than augmenting governance in families, if anything, states often reduce the efficacy of options on the inter-familial governance menu. For instance, my former professor and now-colleague, Jeff Herbener, suggested to me that American social security contributed to the erosion of intergenerational bonds. In the absence of social security, parents depend more on children. To secure the favor of their children, they transfer more wealth to children by way of bequests or by paying for big-ticket items like education, ceteris paribus. But, of course, parents can turn off that spigot for a rogue child, thus exercising some control over the behavior of their offspring. Social security reduces parental reliance on children, thus reducing parental wealth transfers, thus reducing inter-familial governance.
All this to say that Santa, like the missionary’s glass eye, may plug a governance gap.
After all, a central component of the myth is that Santa keeps a list of who’s “naughty and nice,” an element of the story that parents may conveniently dangle in front of their children 365 days a year. Santa’s surveillance capabilities would make Big Brother Grinch-green with envy. When children believe in the Santa myth, their behavior changes accordingly and predictably.
While this story may be plausible, none of this proves that the Santa myth persists due to its governance-supplying powers. Maybe the Santa myth is purely a way for families to have some fun. But if Santa provides governance too, certain patterns should arise which would lend weight to the Santa-governance perspective.
For instance, economists have suggested that an “only child” may be more demanding of his parents because he is a “monopolist” of his parents’ affection. (Others have recoiled in horror at this suggestion because they deem it grotesque “economism,” but to my thinking, it’s hard to see how this isn’t simply a straightforward application of incentives). If children without siblings tend to “push the envelope” further than their sibling-constrained counterparts, we might expect parents of only children to invest more in the Santa story than do parents with multiple children. Kids with siblings have built-in competition to keep them in line. Parents of only children need Santa.
What else should we expect if Santa supplies governance? Well, when other means of supplying inter-familial governance get cheaper, parents will substitute away from the Santa myth and into these other means instead. We might expect parents with a lot of disposable income to rely less on Santa than those that don’t. Those with disposable income can say “no more [insert-kid’s-favorite-extracurricular-here] if you [insert-parent’s-least-favorite-behavior-here].” Since poorer families have fewer “extracurriculars” to yank, relying on Santa-governance may be a cheaper option.
Here’s another pattern prediction: The less religious and the irreligious are expected to lean more heavily on Santa-governance than the religious. For the religious, God is already watching all, including children, and may mete out chastisements for bad behavior. The additional benefit of maintaining the Santa myth is a lie. (I count myself in this category, so am not metaphysically equating belief in God and Santa).
Doubtless there are many other pattern predictions that could shed light on the validity of the Santa-governance hypothesis. I haven’t thought of them yet.
Admittedly, the Santa-governance story seems less well-equipped to explain the Tooth Fairy or the Easter Bunny, but Santa-governance need not be a universal theory of every childhood myth. Maybe the Tooth Fairy and the Easter Bunny are just for fun.
One other thing. For the Santa-governance story to be true, parents obviously need not be able to consciously articulate it. They only need to receive a flow of benefits from Santa-governance that makes investing in Santa myth proliferation worth it.
The last thing economists need is to be accused of Scroogeism, Grinchism, or draining life (or Christmas!) of joy. We’ve been hearing these accusations for as long as Santa has been bringing gifts. Yet, I don’t think anyone must choose between wonder, joy, and mystery, on the one hand, and hard-nosed thinking in terms of costs, benefits, and persistence, on the other. No one ought to wonder less at the moon for grasping the physical principles which enable its orbit. For once, there’s no tradeoff. By rendering our social life intelligible, we make it more wondrous, not less.