Follow up on today's class and where we are going next

I thought it was a good session today, with a fairly lively discussion. I omitted discussing one obvious thing - in the mode of Econ 102. If the underlying issue with health care cost is that doctors qua entrepreneurs with their own private practice are aggressively ordering procedures to enhance their own revenue, then an increase in the supply of doctors would be the standard intro econ textbook remedy. How would that increase in supply come about? One way would be to encourage foreign doctors to immigrate to the U.S. They might also be the ones who would take the "salary jobs" that would offer an alternative to the doctor as entrepreneur model. (In fact I believe this is already happening, but in what volume I do not know.) Being aggressive about this as a policy matter may have all sorts of politics associated with it that makes the suggestion untenable. But looking at this as a straight economic issue we do teach that expanding supply lowers the market price. So at a minimum we needed to get that idea on the table.

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Next week is our last on Nudge. We will be covering the chapters on Privatizing Marriage and Objections. Both should be lively discussions.

The last week of class I plan to do as follows. On Monday we will read/discuss both Akerlof's Gift Exchange paper and this paper by Ericsson et. al. on Deliberate Practice. I will try to provide a bit of motivation below, then more next week when you are closer to reading those pieces. On Wednesday I want to apply those ideas to our class as we do a debrief. I hope you will blog a bit on both of those. My post next week should give you a sense of where this is heading.

Now for the motivation. In ongoing exchange that happens over time much of that (interior to the firm or organization) happens via a "trust relationship." Gift exchange is, in essence, the economic model of trust relationship. Much of what you get in the relationship should be viewed as a surplus or a rent. Both parties in the relationship understand that. We've seen this notion before, in Akerlof's Nobel lecture talking about efficiency wages, and in Simon's Nobel lecture where he talks about eliciting performance in organizations.

Akerlof in the Gift Exchange paper applies the idea to industrial work. I want to reconsider the idea in the context of knowledge work. With knowledge work, a good part of the motivation of the worker comes from their own learning. In turn, a lot of effective learning comes in the form of "Deliberate Practice." Deliberate Practice means taking effort to learn things just out of reach until that becomes routine and then going a step or two beyond that in an ongoing cycle. Video games where you go from a beginner level to higher levels have a built in deliberate practice aspect to them. It can both be fun - mastering the next step - and challenging - unsure that you can conquer what's ahead when it looks difficult. So I'd like to put that sort of learning into the workplace and talking about the economic incentives that would make it work well. I then want to argue that jobs so structured are the type we'd all like to have. But I also want to suggest that such structuring of the job has challenges to it. Earlier I encouraged people to watch a Daniel Pink video. I think he gets into a bit of a trap with what he presents. So we need to discuss that trap too.