Preferences for avoiding death

30/04/2013 § 7 Comments

Slate blogger Matthew Yglesias has been getting flak for his post that appeared quickly after news of the factory collapse in Bangladesh. In it, he explained that economics was all about diff’rent strokes for diff’rent folks:

Bangladesh may or may not need tougher workplace safety rules, but it’s entirely appropriate for Bangladesh to have different—and, indeed, lower—workplace safety standards than the United States.

Reactions in Western corners of the internet have been fierce and occasionally funny:

Corey Robinson questions whether Yglesias is right about the collective preferences of Bangladeshis:

‘Hundreds of thousands of garment workers walked out of their factories in Bangladesh Thursday, police said, to protest the deaths of 200 people in a building collapse, in the latest tragedy to hit the sector.’

Would it not be easier for Matt Yglesias to dissolve the Bangladeshi people and elect another?

Justin Zachary at Daily Kos points out that the factory was in fact in violation of local safety laws:
What happened in Bangladesh was the result of the safety standards that are currently in place not being enforced. As Kalpona Akter, executive director of the Bangladesh Center for Worker Solidarity, told Democracy Now!, Bangladesh “already has some rules and regulations for safety,” with which some politically powerful owners are not complying.
Maha Rafi Atal at the (UK) Guardian tries to walk a middle ground of increased safety but continued employment for Bangladeshi workers:

that should be about making a distinction between wages, which do not have to be the same everywhere, and workers’ rights, which should.

It may look on the surface like Yglesias is being all ‘realist’ and ‘sensible’, but in fact he gets the economics wrong. He forgets three things:
  • preferences are only half the story. The other half is the choice space in which preference can be expressed. It is the combination of preferences and available options that lead to the choices made. Ascribing the choices to preferences alone gets the theory wrong; one can just as legitimately point to the limited options
  • the market theory that Yglesias uses to underpin his ideas — that there are market transactions deciding the prices of garments and safety — assumes freely available and perfect information. A large economic literature then explores the impact of relaxing that assumption. But that’s the post-grad course, and Yglesias is stuck in 101. Here’s the thing: we could make it perfectly obvious to Western consumers how their garments were made, what the working conditions were. Then we could talk about a market solution. Let me put it another way: is Burger King going to launch a horse-burger because people were buying them before they found out what was in them?
  • supply and demand do not exist outside the institutions that help shape the economy. An analysis that doesn’t account for politicians who can override police edicts and flout safety regulations is incomplete. We should recognise that, for example, agreements and regulations help set the conditions in which the market is operating. So, there are trade agreements around clothing that promote its production in poor countries, but much less international recognition of professional qualifications for doctors, lawyers, accountants, etc. (On that front, economics is like the Wild West — anyone can hang out a shingle.) It is at best disingenuous to throw your hands up and say

in a free society it’s good that different people are able to make different choices on the risk–reward spectrum.

In a free society, it’s also good that people can express different opinions. Even when they haven’t got a clue what they’re talking about.

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§ 7 Responses to Preferences for avoiding death

  • Hmm. I’m mostly with Yglesias on this one: choice spaces are endogenous to effective preferences. Were there greater effective worker demand for a compensation bundle with more safety and less salary, more firms would provide that bundle. But I will put reasonable weight on that the firm’s apparent ignoring of the safety regs could have had real negative effects where the workers thought that the regs were a binding floor: they then would have been taking unknown and uncompensated risks.

    Now you’re offered two options.

    A. Western retailers inspect plants and provide workers with accurate information about actual risks at the firm, so that workers can negotiate the appropriate total compensation bundle and sort to the firm providing the most-preferred bundle;

    B. Western retailers enforce binding safety floors.

    ‘A’ causes problems where workers can’t be made to understand the real risks; ‘B’ causes problems where workers put more value on income than on risk reduction.

    I suppose that the choice between A and B depends on whether you think the floor in B is set to match the likely preferences of workers, or whether it’s set by American lobbyists to price out the competition. I tend to prefer A.

    • Bill says:

      Sure, I understand this thinking — and thanks for the lucid explanation. Effective demand for a bundle of compensation plus safety should create its own supply, if the bundle is feasible. Well-meaning regulations could have the perverse impacts of specifying an unfeasible bundle.

      But I think that once you add in information asymmetry (companies not being clear about how their products are made — and even lying about it in some cases), protectionist international rules about who can work where at which occupation, and criminal behaviour, the explanation for the factory collapse isn’t a simple as ‘poor people die at work — get over it’.

      • Posted now. I think that the information asymmetry among western consumers roughly offsets that western consumers are prone to doing really stupid things that they think are helpful. The criminal behaviour – that’s something different.

  • […] compensation bundles with higher monetary income and fewer on-the-job amenities like safety. Bill Kaye-Blake takes issue with Yglesias's analysis. He writes: It may look on the surface like Yglesias is being all ‘realist’ and […]

  • Jim Rose says:

    the value of a safety is different in developing countries: no one wears a seat belt; blind corners are the places most favoured to overtake trucks.

    I do not look out of the car whne travelling in the philippines.

    It takes a long time for migrants from developing countries even to believe that tap water is safe to drink.

  • […] total compensation bundles with higher monetary income and fewer on-the-job amenities like safety. Bill Kaye-Blake takes issue with Yglesias’s analysis. He writes: It may look on the surface like Yglesias is being all ‘realist’ and […]

  • […] total compensation bundles with higher monetary income and fewer on-the-job amenities like safety. Bill Kaye-Blake takes issue with Yglesias’s analysis. He writes: It may look on the surface like Yglesias is being all ‘realist’ and […]

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