CHAPTER 7 OTHER APPLICATIONS OF DRIVE-EFFORT ANALYSIS The situations discussed in this chapter aim to show how the Drive- Effort analysis helps us understand various kinds of events. The situations discussed in the latter section of Chapter 5, which aim to show how the analysis is well-grounded because it fits the data, should also be considered as among the applications of the analysis. And of course the analysis of monopoly-duopoly in Chapter 6 is a key application, worked out at length for demonstration purposes. The applications fall into two general classes: (l) Applications which relate economic behavior to wealth, where there is reasonable hope of being able to examine the relationship quantitatively. (2) Applications which relate economic behavior to changes in opportunities such as alterations in the tax or social structure, where establishing a quantitative relationship is harder and less likely, and where we therefore probably must be content with qualitative discussion; yet this latter set of applications includes such matters as the rise and fall of nations, which would seem of sufficient import for us to be willing to tolerate discussion that is looser than one would otherwise hope for. _T_h_e_ _R_i_s_e_ _a_n_d_ _F_a_l_l_ _o_f_ _E_m_p_i_r_e_s Explaining the decline of even a single empire--or more precisely for the discussion here, a "dominant nation," which would clearly include the U.S. after World War II, even if the term "empire" seems inappropriate--has been, and continues to be, one of the great intellectual tasks of all time, e.g., Rome for Gibbon. A variety of explanations have been offered for every single case. It would therefore be presumptuous in the extreme for anyone to claim, on the basis of one's own assessment of the historical facts, that a single line of explanation is anywhere near capable of satisfactory explanation of even one case, let alone all the cases of declines of empires. Yet if it is broad enough, a single organizing framework may be uncontroversial and yet useful. From unsystematic reading I extract this broad outline: The fortunes of a given empire seen to be heavily influenced by (a) some joint product of (i) the economic performance and output of the large proportion of its citizens, and (ii) the overall size of the empire in terms of population, and (b) the same sort of joint product of its antagonists. This does not imply unimportance of ideological motivation, but it does suggest that that factor is likely to be more temporary and less continuingly dominant than are relative demography and economics. If this broad framework is not totally unacceptable--and it is sobroad that it seems to encompass the ideas of most writers on thesubject--then it can be agreed that the economic fortunes of thedominant nation matter, both absolutely and also relative to the restof the contending world. With such a more limited perspective, it isinteresting to consult Cipolla's collection of essays on _T_h_e_ _E_c_o_n_o_m_i_c_D_e_c_l_i_n_e_ _o_f_ _E_m_p_i_r_e_s. It would be naive and imprudent to suppose thatthe selection of the essays Cipolla presents might not have been affected by Cipolla's own point of view on the subject, as set forth cogently in his introduction. Yet it would be equally imprudent to assume that those essays, written by a variety of scholars considered well-informed by their peers, cannot be considered as a solid source of information which one can use to try to draw one's own conclusions about the subject. As I read those essays and also other accounts of imperial declines, they suggest that there is evidence for the combination of decreased economic opportunity and increased consumption for the large body of citizens. To exemplify with Rome, following on increases in the standard of living from increased production, (a) transfers grew so much that many citizens did not even need to work in order to consume at a high level (bread and circuses), which implies high effective "wealth" level, while (b) at the same time taxation on output grew so that the opportunities for income and increased wealth were shrinking. (The concentration of land ownership enters here, also.) This combination of increased personal wealth (from transfers) and decreased opportunity (due to taxes) implies less Drive-Effort, according to the framework set forth here. Less Drive- Effort on the part of the average citizen, caused economic decline which, combined with a falling ratio of Roman citizens to the populations of contending nations, led to a shift in relative military as well as economic power. Military power was affected not only by the number of soldiers that could be mustered, but also by a reduction in capacity to pay them. Venice in its heyday suffered problems because its populace was too proposperous to take some dirty jobs. Lane tells us that:1 A galley commander...about 1550 evaluated the kinds of free men available. Although he spoke well of Venetians serving as officers or able-bodied seamen, or even as marines, he considered the oarsmen recruited at Venice the worst. In so prosperous a city, good men found other jobs, only penniless beggars enlisted as oarsmen. Similar observations about the decline of empires have surely been made throughout history. In 170? Mandeville observed about Spain:2 A man would be laughed at by most people who should maintain that too much money could undo a nation, yet this has been the fate of Spain; to this the learned Don Diego Saavedra ascribes the ruin of his country. The fruits of the earth in former ages had made Spain so rich that King Lewis XI of France being come to the court of Toledo was astonished at its Splendour and said that he had never seen anything to be compared to it, either Europe or Asia; he that in his travels to the Holy Land had run through every province of them. In the kingdom of Castile alone (if we may believe some writers), there were for the holy war from all parts of the world got together one hundred thousand foot, ten thousand horse, and sixty thousand carriages for baggage, which Alfonso III maintained at his own charge and paid every day, as well soldiers as officers and princes, every one according to his rank and dignity; nay down to the reign of Ferdinand and Isabella (who equipped Columbus) and some time after, Spain was a fertile country, where trade and manufactures flourished, and had a knowing industrious people to boast of. But as soon as that mighty treasure that was obtained with more hazard and cruelty than the world until then had known and which to come at, by the Spaniards own confession, had cost the lives of twenty million of Indians; as soon, I say, as that ocean of treasure came rolling in upon them, it took away their senses, and their industry forsook them. The farmer left his plough, the mechanic his tools, the merchant his counting-house, and everybody scorning to work, took his pleasure and turned gentleman. They thought they had reason to value themselves above all their neighbours, and now nothing but the conquest of the world would serve them. The consequences of this has been that other nations have supplied what their other sloth and pride denied them; and when everybody saw that notwithstanding all the prohibitions the government could make against the exportation of bullion, the Spaniard would part with his money and bring it [to] you aboard himself at the hazard of his neck, all the world endeavoured to work for Spain. Gold and silver being by this means yearly divided and shared among all the trading countries have made all things dear and most nations of Europe industrious, except their owners, who, ever since their mighty acquisitions, sit with their arms across and wait every year with impatience and anxiety the arrival of their revenues from abroad to pay others for what they have spent already; and thus by too much money, the making of colonies and other mismanagements, of which it was the occasion, Spain is from a fruitful and well-peopled country, with all its mighty titles and possessions, made a barren and empty thoroughfare through which gold and silver pass from America to the rest of the world; and the nation, from a rich, acute, diligent, and laborious, become a slow. idle, proud, and beggardly people. So much for Spain. Increased and oppressive taxation figures prominently in the accounts of various nations' declines collected by Cipolla. As he summarizes:3 One of the remarkably common features of empires at the later stage of their development is the growing amount of wealth pumped by the State from the economy. In the later Roman Empire taxation reached such heights that land was abandoned and many pea- sants, after paying their rents or taxes, had too little food left to nourish their children. And among all economic forces taxation has the unusual characteristic in this context--especially in the Roman case--of having pernicious effects on both elements in the Drive-Effort concept. On the one hand, any taxation of production reduces economic opportunity by reducing the payoff to particular actions, and thereby reduces Drive-Effort. On the other hand, taxation that results in welfare transfers increases wealth and thereby reduces Drive-Effort. So such taxation has a scissorslike depressing effect upon economic activity in farming and elsewhere. (Different sorts of taxes can differ in their effects upon Drive-Effort, of course. This is discussed in the Appendix to this chapter.) Cipolla uses the term "sclerotic" for the condition of the declining empires' economies, and Olson (l982). uses exactly the same term. A hallmark of such sclerosis certainly is insufficient change in ways of doing things. As Cipolla comments:4 At least in the early phase of a decline, however, the problem does not seem to be so much that of in- creasing visible inputs--capital or labour--as that of changing ways of doing things and improving pro- ductivity. The survival of the empire demands such basic change. But it is typical of mature empires to give a negative response to this challenge. The analysis set forth here sees change as requiring effort. And interestingly, Cipolla uses the same term: "Change implies imaginative effort."5 And he goes on in a manner quite like the Veblen quotes cited earlier: "Change hurts vested interests. It is not difficult to explain why change is generally opposed. It would be surprising if it were not. The tendency to resist change is strengthened by existing institutions."6 The economic conditions leading to reduced Drive-Effort thereby lead to reduced change, which again fits the diagnosis of the causes of the decline of empires found in Cipolla's introduction and collected essays. All in all, then, the Drive-Effort analysis seems to provide a useful organizing principle for the understanding of the decline of empires. It probably is not accidental that the two developed countries whose recent economic rise was most rapid--Germany and Japan--are also the two in which recent changes in Drive-Effort seem so marked. While after World War II those countries had to rebuild their physical plants for production and homes, and also establish themselves in foreign markets, their people exerted a great deal of time and effort on the job. With success and affluence has come diminution in willingness to expend as much effort. A quotation on page __ makes the point anecdotally for Japan. And an August, 1984, news report says "Japan Considering Plan to Shorten Workweek...The proposal calls for cutting the workweek to 45 hours over five days from the current 48 hours over six days."7 With respect to Germany, two surveys document a change between generations in the attitudes of Germans toward work. One study, done by Opaschowski and the Ernest Dichter Institut, found as follows:8 "Work? Sure I'll have to work, but work definitely will not be the most important aspect of my life," an l8-year-old carpenter's apprentice here told the interviewer emphatically. "I don't want to be like my father. For him, work always came first and everything else ranged some- where behind. "As far as I am concerned, enjoying life will be the most important thing for me," he added. And a study done by Marplan Institut:9 Work dropped back from the traditional No. l spot to No. 4 on a scale asking the people interviewed to rate their most important desires and endeavors. The cate- gories "family and partnership," "leisure time" and "friends" ranked before "work and career." Of those questioned, 85% put family and partnership in the No. l spot of "most important concerns," 74% rated leisure in second place, friends in third and career in fourth place. In previous generations, Germans admired career- mindedness and applauded success and dedication. Today, a person who knows how to use his leisure time to best advantage is assured admiration and popularity, Prof. Opaschowski says. "The ideal German has changed," he adds. Only 20 years ago, people ranked industriousness and dedi- cation to their job, ambition and achievement as desirable traits and the education of their chil- dren was patterned accordingly. The youngsters were given tasks early and learned that idleness was frowned on, even considered sinful. Today's German parents want their children to have fun, to be cheerful and relaxed rather than concen- trate on achievement. The anecdote which characterized the report was this:10 This study showed that about half the men in West Germany no longer find satisfaction in their jobs. They compensate by turning to leisure activities and elevating them to the central purpose in their life. The Marplan study coined the term which can be translated into "leisure time career." The work week has shortened markedly in Germany in recent years, now being as short or shorter than in other developed countries that did not suffer the sort of war damage that Germany did. The economic histories of England and Germany in the second half ofthe l9th century seem to fit neatly with this hypothesis, too. GreatBritain had built itself a wealth of industrial plants, and thereforewas less disposed to exert itself to build new factories than wasGermany. And it is in the nature of things that later investment tendsto be more efficient. So the result was not merely catch-up by Germany,but a surpassing of the U.K. Economic Development and Effort A country's economic development obviously is deeply influenced by the extent of the effort exerted by its citizens. And those who are interested in its economic development are necessarily concerned with policies that will elicit more rather than less effort from people. If we assume that, given that average wealth (total wealth) is fixed at a given moment and therefore wealth is not a policy variable (which it might be in some schemes of income redistribution which will not be considered here) then one's mind turns to the opportunity aspect of the Drive-Effort formulation. And working in this direction, many writers have asserted, for untold generations, that the best policy is to "privatise" the means of production to "internalize" the returns to effort to the largest possible degree. But this suggestion does not have universal acclaim, and it is worth asking why this is so, within the present conceptual framework. The difference on this matter between the classical school of Mandeville, Hume, and Smith on the one side, and Godwin and Marx and modern socialists on the other hand, hinges on whom the concept of opportunity refers to. Ordinarily there is no confusion about this; we think about the individual who willl do the work and get paid, or perhaps that individual plus her/his family. But Marx et. al., the reference implicitly is to a class or to an entire nation. And implicitly they assume that motivation is not less if the payoff will be distributed among the wider group rather than kept by the worker and his family. Hume and Smith and their colleagues were at bottom interested in human nature, and it was their interest in human nature that led them to the study of economics. They believed that human nature was roughly a constant from time to time and place to place, and they assumed that the motivations that they observed -- personal economic interest among them -- would remain the same except in exceptional conditions. In contrast, Godwin and Marx and their followers have believed that human nature is relatively maleable. In their conception of persons, the maximand may be the welfare of the class or nation, in which case trhe concept of opportunity in the Drive-Effort Measure refers to that group's opportunity rather than the opportunity of the individual. It would seem that by 1985 enough evidence has accumulated to show that Hume and Smith were correct, and that group motivations are ineffective except temporarily during times of national emergency. This may be read in comparative development data of socialist and enterprise economies, and of agricultural production in the two sorts of countries, as well as in accounts of coolective agriculture in China by Butterfield and Mosher and others. The leaders of the People's Republic of China apparently agree, given the recent decisions about that economy. From this follows the inference that the most effective mode of organization for economic development is to make the individual's payoff situation coincide with an individual concept of opportunity, that is, to fix property rights with the individual to the maximum extent possible. This is, of course, exactly the program of writers on development such as Bauer ( ). It needs to be said here, however, that there is reason to believe that private production property seems to be inconsistent in the long run with central planning and with the socialist form of political organization because private property leads to centers of power emerging which challenge the center (and if this is true, the recently announced Chinese reforms will be shortlived). Diff in view of human nature. Nature of self. Indiv. fam, extended fam, larger group...Normal routine. _C_l_i_m_a_t_e_ _a_n_d_ _E_c_o_n_o_m_i_c_ _D_e_v_e_l_o_p_m_e_n_t Why did modern economic development begin and continue primarily in moderate climes rather than in tropic or arctic regions? A common explanation has been that, unlike the tropics, there was enough challenge to survival in the moderate climes, but that unlike arctic regions, the challenge to mere survival was not so great as to make impossible efforts beyond those intended for the simplest survival. This idea (at least the first part of it) was stated nicely by the incomparable Hume:11 What is the reason why no people living between the tropics could ever yet attain to any part of civility or reach even any police in their government and any military discipline, while few nations in the temperate climates have been altogether deprived of these advantages? It is probable that one cause of this phenomenon is the warmth and equality of weather in the torrid zone, which render clothes and houses less requisite for the inhabitants and thereby remove, in part, that necessity which is the great spur to industry and invention. Curis acuens mortalia corda. Not to mention that the fewer goods or possessions of this kind any people enjoy, the fewer quarrels are likely to arise amongst them, and the less necessity will there be for a settled police or regular authority to protect and defend them from foreign enemies or from each other. This general line of thinking can be made more systematic with the Drive-Effort analysis. Before economic development begins, effective wealth is greater in the tropics than in moderate climes, because easy sources of food and of sufficient shelter against the elements constitute a natural endowment of wealth, in the best sense of that term. But there is considerable opportunity to increase "income" and the standard of living in the moderate climes, and not necessarily a great deal less such opportunity than in the tropic climes. Hence the Drive-Effort Measure may be seen as greater in moderate climes than in the tropics. In the arctic, there is little opportunity for primitive people to improve their standard of living significantly, because of the arctic's paucity of natural resources that can be developed without high technology. Though wealth endowment is also low, it may be reasonable to adjudge that there is a smaller gap between opportunity and wealth in the arctic than in moderate climes, and hence more drive for development in the moderate climes. Of course these statements, made without recourse to conceptualmeasurements of opportunity and wealth--let alone actual measurements--can be only impressions, and another observer could argue for oppositeimpressions and conclusions. Yet the Drive-Effort analytic scheme mayat least be of value in focusing this argument on measurements that mayhelp one reach more defensible conclusions. _N_a_t_u_r_a_l_ _R_e_s_o_u_r_c_e_ _E_x_p_l_o_i_t_a_t_i_o_n_ _a_n_d_ _E_c_o_n_o_m_i_c_ _D_e_v_e_l_o_p_m_e_n_t One of the great economic paradoxes is: Humans seem to be using up natural endowments of such resources as copper, coal and oil, which would threaten to choke off further economic advance, yet further economic advance continues, and resources have shown a long secular trend towards more availability rather than less, as measured by the costs and prices of these resources. Part of the explanation lies in the fact that when a resourcebecomes more scarce for a while, as indicated by rising prices, thereoccurs in that industry and in related industries both an increasedopportunity (due to the higher price) and decreased wealth (due to thehigher costs of inputs, and therefore probably a lower profit). Thisincreased Drive- Effort Measure causes greater effort to find substitutesthan existed heretofore, and therefore the increased scarcity usuallyresults in substitutes being found.12 It should be noted, however, that those firms outside the resource industry which have no prospects of profiting by finding a substitute for the material in question suffer both decreased wealth (due to higher input costs of the material in question) and poorer opportunities (because of the overall change to the economy, as in the U.S. after the oil price rise beginning in l973). Hence the aggregate effect of increased scarcity of the natural resource is likely to be economic retrogression in the short run. (As to why the _l_o_n_g_-_r_u_n result of the expected or felt scarcity is that the resource in question--now suitably broadened in definition to include its substitutes, as when coal and then oil substituted for wood, and fuel replaced wood as a concept--eventually comes to be lower in price than before the price run-up, is a story beyond this paper, and a speculative one at that. Key elements are that (a) one scarcity-forced discovery leads to other discoveries which are not forced by scarcity in the same way, and which therefore are a bonus; and (b) raw material substitution is simpler than substitution of one consumer good for another because of the simpler taste-free nature of natural resources.) The absence of natural resources also reduces a group's wealth endowment, which therefore should increase its level of effort. Bishop George Berkeley in 1735 wondered "Whether a discovery of the richest gold mine that ever was, in the heart of the kingdom, would be a real advantage to us?...Whether it would not redner us a lazy, proud, and dastardly people?"13 Perhaps he had in mind the experience of Spain, as discussed by Mandeville a few years earlier (see page 000). Nowadays the Japanese see themselves in this way, with land shortage being the lack of a natural resource that they say has driven them to their economic success. 1And certainly the recent experiences of Hong Kong and Singapore square with this idea. _W_a_r_,_ _N_e_c_e_s_s_i_t_y_ _a_n_d_ _O_p_p_o_r_t_u_n_i_t_y In wartime, civilians tend to exert more effort than in peacetime. This surely is seen in more work hours on the job, and probably it also is seen in a higher level of innovations in order to cope with wartime, job, and personal stresses. One may view the additional work effort as a response to patriotic sentiments and appeals. But the additional time spent in keeping body and soul together, and the coping effort expended in innovation, can also be interpreted as a response to the combination of reduced wealth (in the forms of rations smaller than in peacetime, and of shortages of housing and other goods) and of greater opportunities (grey markets, for example) due to breakdown of the usual organization of society, and the absence of the persons who usually fill various market roles. A greater flow of innovations on the job probably occurs in wartime due to greater receptivity to innovations and greater reward to the innovators (that is, greater opportunities). But the climate for innovations must be more receptive just because a nation's wealth is reduced in wartime, by the very nature of its competition for survival. Nef argues that the overall advance of knowledge is not greater during wartime than in peacetime (l950/l963). But his argument concerns the type of knowledge produced during wartime more than the amount of it, so his argument need not be taken as rebuttal to what is being said here.14 _S_o_c_i_a_l_ _a_n_d_ _E_c_o_n_o_m_i_c_ _S_t_a_b_i_l_i_t_y_-_I_n_s_t_a_b_i_l_i_t_y McNeill (l963), Jones (1981) and others have suggested that over several centuries the relative instability of social and economic life in Europe, compared to China and India, helps account for the emergence of modern growth in the West rather than in the East.15 This idea may be understood in terms of the Drive-Effort hypothesis: Instability implies economic disquilibria, which (as Schultz reminds us, l975) imply exploitable opportunities which then lead to augmented effort. (Such disequilibria also cause the production of new knowledge, if I am correct.) The conclusion of this analysis is nicely consistent with the thrustof Brandel's work, as summarized in a recent review:16 "The important thing," he writes, "was the long period of pressure after the l3th century which raised the level of its material life and transformed its psy- chology." A combination of energy, need and possibil- ity of profit pushed Europe beyond its doors. That is, reduced wealth per family (especially land holdings) because of population growth, together with increased opportunities due to the secular economic boom plus urbanization, increased Drive-Effort. It is frequently said: If more people cause there to be more ideas and knowledge, and hence higher productivity and income, why aren't India and China the richest nations in the world? Let us put aside the matter that size in terms of population within national boundaries was not very meaningful in earlier centuries when national integration was much looser than it is now. There remains the question, however, why so many human beings in those countries produced so little change in the last few hundred years. In earlier writing I suggested that low education of so many people in China and India effectively prevented them from producing knowledge and change, though noting the very large (in absolute terms) scientific establishments in those two countries. But though education may account for much of the present situation, it does not account nearly as much for the differences between the West and the East over the five centuries or so up to, say, l850. The hypothesis that the combination of a person's wealth and opportunities affect the person's exertion of effort may go far in providing an explanation. Ceteris paribus, the less wealth a person has, the greater the person's drive to take advantage of economic opportunities. The village millions in India and China certainly have had plenty of poverty to stimulate them. But they lacked opportunities because of the static and immobile nature of their village life. In contrast, villagers in Western Europe apparently had more mobility, less stability, and more exposure to cross-currents of all kinds. Just why Europe should have been so much more open is a question that historians answer with conjectures about religion, smallness of countries with a consequent competition and instability, and a variety of other special conditions. The key matter for our purposes here, however, is not the causes of the difference in stability, but the fact that the difference existed. If so, it implies relative lack of opportunities in the East, and hence helps explain the relative stagnation there. A corollary, of course, is that once the people in the East lose the shackles of static village life, and get some education, their poverty (absolute and relative) will drive them to an extraordinary explosion of creative effort. The happenings in Taiwan and Korea in recent decades suggest that this is indeed beginning to occur already. This explanation would seem more systematic, and more consistent with the large body of economic thought, than are explanations in terms of Confucianism or particular cultures, just as the Protestant-ethic explanation for the rise of the West (discussion of which goes back at least to Hume) now seems not very appealing in the face of religious counter-examples and shifts in behavior of Protestant nations. _P_o_p_u_l_a_t_i_o_n_ _P_u_s_h_ _a_n_d_ _S_u_b_s_i_s_t_e_n_c_e_ _A_g_r_i_c_u_l_t_u_r_e Boserup (l965) and many anthropologists17 have shown how subsistence agriculturalists shift to more time-consuming production methods when population grows and the old techniques do not produce "enough" food per person due to reduction in land per family.18 This shift in time allocation may be viewed as a response to reduced wealth in land per family, or to a reduction in income stream from the family's land using the old technique. This result with respect to time fits the analysis offered here, but it could also be seen as simply an implication of Becker's analysis. However, the shift in technique also requires an adjustment effort apart from the additional work time involved, and only the analysis offered here implies that that would happen. Therefore, it would seem that the Drive-Effort analysis is a reasonable framework for understanding the shifts in subsistence-agricultural techniques taken as a whole. _E_n_t_r_e_p_r_e_n_e_u_r_s_h_i_p_ _a_n_d_ _E_f_f_o_r_t The Drive-Effort analysis seems to illuminate entrepreneurship well. First let us consider the characteristics of the entrepreneur as described by Schumpeter:19 [T]here is the will to conquer: the impulse to fight, to prove onself superior to others, to succeed for the sake, not of the fruits of success, but of success itself... Finally, there is the joy of creating, of getting things done, or simply of exercising one's energy and ingenuity. And Hagen's review of the various relevant literatures revealed findings "entirely consistent with Schumpeter's characterization of motives."20 Hagen's generalization about the background of these entrepreneurial persons is that they come from groups "who were not fully accepted socially by the leaders of their societies and who had reason to feel unjustly or unreasonably derogated."21 Hagen emphasizes the psychological aspects. I would emphasize, rather, that social status must be closely related to economic security. Those who are derogated and despised are more likely to feel economically insecure than are other persons, fearing arbitary confiscation, discrimination, and so forth than are other persons. This economic view could help account for the parental teachings of outsider children about achievement motivation, e.g., "You've got to be twice as good to get the same job." In brief, classes of persons producing relatively large numbers of entrepreneurs apparently have relatively low wealth as measured by the subjective sense of economic security. By the Drive-Effort hypothesis, this implies additional effort, which is a hallmark of entrepreneurship. _L_a_b_o_r_ _F_o_r_c_e_ _P_a_r_t_i_c_i_p_a_t_i_o_n_ _a_n_d_ _M_a_r_i_t_a_l_ _S_t_a_t_u_s Married men living with a spouse have much higher unadjusted rates of labor-force participation than do never-married, divorced, separated, or widowed men. Bowen and Finegan's more refined analysis (l969) finds that not all the difference in participation, or the parallel difference in hours worked, is explained by being married with a spouse present, but at least _s_o_m_e of the large difference may be so explained. Bowen and Finegan use the concept of family "responsibilities" and a consequent "taste for work" as their theoretical explanation.22 But the concept of greater Drive-Effort, as a result of lower wealth per person in the family, would seem more satisfactory than those concepts. _L_a_b_o_r_ _F_o_r_c_e_ _P_a_r_t_i_c_i_p_a_t_i_o_n_ _o_f_ _V_a_r_i_o_u_s_ _C_l_a_s_s_e_s_ _o_f_ _P_e_r_s_o_n_s The Drive-Effort concept, using as an argument wealth _p_e_r_ _p_e_r_s_o_n in the family, also seems useful for understanding a wide variety of other labor- force participation behavior analyzed by Bowen and Finegan, including lower participation by men whose wives work, higher participation by men with children, higher participation by women with older children than without such children, and so on. For example, (a) labor-force participation of males over 65 fell sharply from 68.3 percent in l900 to a bit over 20 percent in l975.23 The large rise in assets held by older persons-- including Social Security entitlements--provides a straight-forward explanation in terms of the simplest Hicksian time theory as well as the Drive-Effort hypothesis. (b) The higher labor-force participation of non- white females than of white females24 rather clearly is due to lower wealth as measured by expected total future income of the family. (c) Fewer widowed, divorced, and separated women participate in the labor force than do never-married women.25 How much of this is due to greater wealth of the former (from insurance, alimony, etc.), and how much to greater opportunities of the latter due to more education or work experience or other factors, is an interesting question that could be answered empirically; it is an example of many such questions raised by the Drive- Effort analysis that hopefully will stimulate empirical questioning. Who Accepts Dirty, Poor-Paying, Dangerous Jobs? Why are many healthy native persons of working age unemployed at the same time that hundreds of thousands, or millions, of foreigners illegally in the U.S. can find jobs--even though the illegals face greater obstacles in job-seeking--their illegality, and their lack of knowledge of the economy and culture and language--than do natives? The simple answer is that the illegals will accept opportunities that native unemployed persons will not accept. An explanation of why the illegals do so, consistent with the Drive-Effort hypothesis, is that illegals are less wealthy in assets and in entitlements to transfer-payment programs than are natives. There is a similar explanation for why guest workers in Germany, and illegals in the U.S., will do "dirty" jobs, and painful tasks such as stoop labor, that natives will not do at the offered wages. The explanation of why some persons will accept risky jobs may be some cases be that individuals like the excitement of dangers, or perhaps a reputation for courage. But most cases probably are like those described in a newspaper story about a trucker headed "Francisco Rodriguez Earns a Living Driving in Latin War Zones," on the "most dangerous highway" in the world, that between Guatemala City and San Jose, Costa Rica. Mr. Rodriguez explains, "I do it for the money, not for the excitement. And because I have to stay in business" in the face of declining demand due to the dangerous conditions.26 _Y_o_u_t_h_ _a_n_d_ _D_i_s_a_f_f_e_c_t_i_o_n The combination of restricted opportunity and lack of economic "need"-- that is, the presence of a high standard of living--constitutes a recipe for lack of constructive effort. It makes sense that in a time when jobs for school leavers are hard to come by, and while there is support available from the community and from the family, youths show the opposite of constructive effort--rebellion against the system, wanton attacks on persons and property, and self-destructive drug and alcohol abuse. _L_i_f_e_ _E_x_p_e_c_t_a_n_c_y_ _a_n_d_ _E_f_f_o_r_t The effects of changes in a male head-of-household's life expectancy must be complex. Longer expected life for an adult male implies a longer retirement period and hence less wealth per future year, which would imply more time and effort spent working before retirement. Longer expected life, however, also implies less chance of sudden death leaving a family "in need," that is, without wealth. However, the strong ceteris paribus observed relationship across nations between life expectancy and economic growth rates--a relationship which is usually interpreted as due to better health, or to improved general social conditions for which life expectancy is a proxy--leads one to guess that the extension of the retirement period dominates, and hence more Drive and Effort would be expected. Sudden reduction in life expectancy may have a tremendous effect upon Effort, as when a writer in the midst of a book finds out that he/she has a fatal disease. (Of course the effect might be the opposite, too, if the person chooses to use the time as leisure.) _P_o_p_u_l_a_t_i_o_n_ _G_r_o_w_t_h_ _T_h_r_o_u_g_h_ _N_a_t_u_r_a_l_ _I_n_c_r_e_a_s_e In a straightforward arithmetic fashion, additional children in a family reduce assets per person. For example, either there is less housing space per person when the family is larger, or the family must expend wealth to acquire additional housing in order to maintain the pre-existing level. So faster population growth by way of higher fertility ought to increase Drive-Effort by way of the wealth effect. Increased working population (which does not happen for some years after children are born, but inevitably occurs eventually) also increases opportunities for producers in all industries (especially agriculture) due to larger demand and perhaps higher prices. There may be decreased opportunity for children in families that have n+l instead of n children due to reduced nutrition and education, but in economically advanced countries the nutrition effect is not likely to be important, and the extent to which the education effect operates would not be difficult to measure.27 _I_m_m_i_g_r_a_t_i_o_n Immigration has the same positive effects upon the "average" Drive- Effort in a society as does population growth from natural increase. And immigration clearly lacks the alleged but mostly non-existent) negative effect through reduced nutrition and education of additional births, because the immigrants are only present after and not before their nutrition and education might be affected. Furthermore, because the country of immigration usually is richer than the country from which the migrant comes, the migrant's tangible wealth is likely to be less than the average tangible wealth of the natives of the country of immigration, which should increase Drive-Effort of immigrants. The increase in a nations' average "stock" of Drive-Effort by immigration therefore seems clear-cut. And this is evident in the jobs that immigrants do. For example, judging from such cities as Washington, New York, Chicago, Melbourne, and others, immigrants have a very high propensity to be taxi drivers. There would seem to be no other likely explanation than that immigrants are more willing to work hard, and more willing to work for earnings which depend on their output. And while my evidence is not so large, it also seems that immigrants have a tendency to seek out jobs as domestics, which require a certain amount of enterprise. For example, of the first thirteen advertisements my wife called in the Washington area, twelve were placed by immigrants. A vivid case of immigrant effort and its results occurred in the shrimping industry in Texas:28 'The Vietnamese shrimper is one tough competitor. He's rugged. He don't listen to the weatherman or go by any work schedule. He's out there day and night, dragging the bay." 'And the SOB, he can live on practically nothing.' The story of the Vietnamese takeover of shrimping here is in many ways the classic American immigrant saga. They came, the toiled, they sacrificed, they overcame hostility and violence, they prevailed. The large literature on immigrants' earnings over the years in the United States, beginning with Chiswick's work, systematically supports the idea that immigrants work harder than natives, though self-selection may be part of the explanation. (For a review, see Simon, forthcoming, Chapter 6). _P_r_o_f_e_s_s_o_r_i_a_l_ _T_e_n_u_r_e The Drive-Effort hypothesis straightforwardly suggests that the obtaining of tenure should reduce the research work done by professors, because the newly-assured future income is an increase in wealth. Again, curbstone reasoning using common-sense concepts arrives at the same conclusion, but common-sense concepts are usually ad hoc and suggest no measurement of the dollar value of the tenure granting, as the Drive-Effort approach does. And the fact that the same concepts--wealth, opportunity, and Drive-Effort--can be used instead of ad hoc concepts in a wide variety of contexts increases the "scientificness" of the analysis, both because of the greater generality and because the concepts tie in with the rest of the structure of economic science. _F_e_r_t_i_l_i_t_y_ _a_n_d_ _W_e_a_l_t_h The number of children a family brings into the world may be an expression (and indicator) of Drive, ceteris paribus (though admittedly it would be a task of surpassing difficulty to hold the appropriate factors constant in an empirical test of the matter). No one who has ever been a parent will doubt that children require and receive parental effort. And if people with lower wealth are in a generalized state of higher Drive, one would therefore expect them to have more children. One would expect the same conclusion from the child-quality arguments about time and wealth and consumption goods made by Becker and others. Having children is an opportunity available almost equally to couples in various economic circumstances. Therefore, if the expenditure of at least _s_o_m_e effort is a psychological good in itself--which sport par- ticipation demonstrates that it is, and as Leibenstein argues it is in other contexts, too--then there may be additional reason for people to avail themselves of the opportunity to have children if they lack other opportunities. Within subsistence-agricultural societies, the data show that fertility is _p_o_s_i_t_i_v_e_l_y related to wealth,29 which seems to run against this analysis. But this positive relationship does not hold as societies get richer. And average fertility tends to decline as societies become wealthier. In addition to the many other cogent explanations offered (infant mortality, nature of children's and parents' time, and so on), a shift in values of the sort suggested by the Drive-Effort analysis may take place which may contribute to the decline in fertility. _S_a_v_i_n_g As analysed by Modigliani and others, lesser wealth leads in a very straightforward fashion to a larger rate of physical and financial saving, almost exactly paralleling Becker's analysis of the relationship of wealth to work time. Furthermore, making the decision to save rather than to spend usually seems to require some effort, as observed in self-reports and as embodied in such institutions as "Christmas clubs" and the "forced" saving of whole-life insurance policies. (Force and Effort would seem to be closely related concepts.) But the causal relationship between Effort and saving may-- paradoxically--not be the most important relationship in this nexus. Physical saving may not be a key variable in an advanced society (though this is probably going too far). But if the act of saving comes from the same psychological source, with the same causes, as does the exertion of effort, then it may be that a high rate of saving in an advanced country should be thought of as a proxy for a more important economic variable-- Drive-Effort--rather than as a causal variable. This sort of suggestion is in the same spirit as Kuznets's analyses of institutions and cultures in various countries being responsible for two other variables (or sets of variables) which might otherwise be thought primarily to influence each other. The above proposition might be tested by relating rates of savingsby individuals and groups to (other) measures of effort. _T_h_e_ _S_i_z_e_ _o_f_ _F_i_r_ms Earlier it was said that the analysis of firms' behavior may be carried out with only a present-value framework, safely neglecting time and effort. Now that statement needs to be amended. The work-time of a firm as a _c_o_l_l_e_c_t_i_v_i_t_y--that is, its total time expended--need not be included in the analysis. But the work time, and especially the effort expended, by the _i_n_d_i_v_i_d_u_a_l_s working in the firm--decided on by them in light of their individual "utility" frameworks--differs under various conditions, and the size of the firm may be among those conditions. Size affects employees with respect to both wealth and opportunity, and in the same direction. Individuals generally identify, at least to some extent, with organizations to which they belong, including those with which they work. For this reason, the firm's wealth can affect the Drive-Effort of by the employees.30 And the reader is likely to agree that employees of large organizations feel a reflected sense of wealth (and power), perhaps because they assume that gross assets stand for net assets (and certainly there is some positive connection between these magnitudes). Employees feel that the larger firm can afford expenditures on behalf of its employees and otherwise that smaller firms cannot afford, including perquisites such as thick carpets on the floor. Given this sense of wealth, the Drive-Effort hypothesis suggests less effort on the part of employees of large firms than of small ones. Of course the individual's own sense of personal opportunity within the large firm may seem greater than within the small firm, if opportunity is thought of in the fashion described in Chapter 4 on monopoly and competition, which would lead in the opposite direction. Further work-- and probably empirical study--would be necessary to disentangle the two effects. _N_e_c_e_s_s_i_t_y_ _A_s_ _t_h_e_ _M_o_t_h_e_r_ _o_f_ _I_n_v_e_n_t_i_o_n How can one explain the development of technology, only after adversity's onset, which would have been profitable before the onset of adversity's onset, which would have been profitable before the onset of adversity? For example, better scheduling methods for airline flights were developed very soon after the U.S. air controllers struck work in l98l, though the methods could have been discovered and used earlier. It seems straightforward that such adverse conditions may be interpreted as a state of lower wealth in the generalized sense of command of economic goods, which then leads to increased effort in creating and adopting new ideas. Robinson Crusoe is the classic story of how impoverishment leads to a burst of creativity. (Economists commonly use Crusoe to illustrate allocation of resources, but that process really is not at all the central element of the story; rather, invention is at the heart of the Crusoe story.) A typical historical example of the relationship between necessity and discovery is the story of the Marco Polo's father and uncle creating a new trade route for Venice. As Lane tells the story:31 Nicolo and Matteo Polo...were among the Venetians who, after setting up business in Constantinople, extended there commerce across the Black Sea to Soldaia on the southern tip of the Crimea. In 1620 they decided to explore commercial possibilities further inland. Taking jewels and some other wares they rode from Soldaia to Sarai (near modern Saratow) on the Volga River, the capital of the Golden Horde. It proved to be a very good time indeed to be away from Constantinople and out of the Black Sea, since it was precisely in July, 1261, that the Greeks retook Constantinople and encouraged the eager Genoese to seize all the Venetians they could. Some fifty Venetians were captured trying to escape from the Black Sea and treated by the Greek emperor as pirates, being punished by blinding and having their nose cut off. How much of this the Polo brothers heard of this, possibly exaggerated, can only be imagined, but it seems an adequate reason why they should not try to go back by the way they had come, although it is not the reason given by Nicolo's son, Marco Polo, who wrote of their travels. Even Sarai may have seemed unsafe if the Polo brothers were sufficiently informed, for the Greek empire became for a few years the connecting link in an alliance with the Golden Horde on the one side and the Mamluks on the other, an alliance directed partially against the Khanate of Persia and partially against Venice. It is ironic but typical of the commercial conditions of the period that the coup at Constantinople in 1261, a commercial disaster for the Venetians, should have set in motion the finding of a new route and the most celebrated of all Venetian journeys. _M_a_r_k_e_t_ _S_t_r_u_c_t_u_r_e_ _a_n_d_ _I_n_n_o_v_a_t_i_o_n Effects of market structure upon the adoption of innovation illustrate the Drive-Effort hypothesis. This is Leibenstein's X-efficiency concept, whereby lack of competition breeds "slack," which is the opposite of effort. Primeaux's work (l977) on competitive electric monopolies shows that competition-induced effort reduces cost by about l0% of average cost, though adoption of innovations is not separated from other managerial efforts in that analysis. Cases of adoption of innovations that have no cost _e_x_c_e_p_t the effort of making the change (and perhaps a relatively tiny expenditure of time) should be particularly relevant. For example, a historical examination of the adoption of the now-universal "January White Sale" of linens by department stores (Simon and Golembo, l966) showed that stores in small towns were much slower than were stores in big cities to adopt the practice, though there was no installation cost and the practice quickly proved profitable (as shown by continued use by almost all stores after initial use). The only likely explanation is the stronger lash of competition in large cities, which fits with the analysis of monopoly- duopoly in Chapter 6. _T_h_e_ _D_i_v_i_s_i_o_n_ _o_f_ _L_a_b_o_r_ _I_s_ _L_i_m_i_t_e_d_ _b_y_ _T_h_e_ _D_i_v_e_r_s_i_t_y_ _o_f_ _t_h_e_ _M_a_r_k_e_t Adam Smith's proposition about division of labor and the _e_x_t_e_n_t of the market assumed that a bigger market simply implied more of the _s_a_m_e commodity--standardized pins, for example. It is an important shortcoming of Smith's discussion (as Menger pointed out long ago, l87l/l98l), that Smith proposed division of labor as the main force causing economic development, while omitting technical change (and especially endogenous technical change) from the main line of his analysis. In this section, however, I would like to emphasize still another element not found in Smith's analysis: a larger market implies a wider _v_a_r_i_e_t_y of customers to whom one may sell one's goods, with a wider variety of tastes than does a smaller market. This implies that any given owner of unique skills (say playing the balalaika, or organizing the books in a library) has a better chance of finding a customer for that skill, and a better chance of finding a customer who will value that skill highly, in a larger rather than a smaller market. This immediately implies that sellers' incomes will be higher, on average, where there is a larger variety of sellers and buyers due to the increased opportunities. Furthermore, the wider set of opportunities will lead to new skills being developed. To put the matter in different words, the size of the market affects economic development in ways other than greater specialization leading to faster work. There will be more learning-by-doing because more skills are in use, as new skills are grafted onto the old skills, where the market is larger. And new skills will be developed to serve more opportunities. Increase in Drive-Effort due to increased opportunities goes in the same direction. So, assuming that a larger population does not result in lower individual income over the relevant period as it leads to larger total income, larger population size implies faster economic development for the reasons given above, as well as by way of a larger supply of inventive minds and through the productivity-increasing effort of larger volume in various industries (which, of course, is closely related to other factors discussed above). All of this would come clearer with detailed formal analysis. The Drive-Effort hypothesis contains a further implication for the comparison of markets by size which follows from the above considerations. The more attractive set of opportunities offered by the larger market will induce more effort from potentially-productive persons. Economic_Development_and_Availability_of_Goods There is an apparent contradiction in the theory of historical and contemporary economic development which the Drive-Effort analysis clarifies even though it does not immediately predict the outcome of the process. Making goods available for purchase by consumers is commonly thought to stimulate additional effort, to satisfy the desire to purchase these goods; this is often known as the "Sears Roebuck Wishbook effect." But the proposition was clearly stated as far back as Hume, who wrote:32 When a nation abounds in manufactures and mechanic arts, the proprietors of land, as well as the farmers, study agriculture as a science and redouble their industry and attention. The superfluity which arises from their labor is not lost, but is exchanged with manufactures for those commodities which men's luxury now makes them covet. But on the other hand, an lower effective price of consumer goods increases effective wealth, resulting in a tradeoff as discussed on page ____. The process is quite analogous to the tradeoff that may result in a backward- bending labor supply curve: On the one hand, an increased wage increases the value of the opportunity to work a given incremental hour; on the other hand, after a given number of hours the worker is wealthier than with a lower wage, and the tradeoff between the two effects with respect to a particular quantity of work is not determined without additional information. There must, however, be some point at which the supply curve bends backward, because wealth increases whereas opportunity does not with the quantity of hours worked. Backward_Bending_Labor Supply_Curve The underlying idea was stated crystal-clear by Mandeville:33 Everybody knows that there is a vast number of journeymen weavers, tailors, cloth-workers, and twenty other handicrafts, who, if by four days labor in a week they can maintain themselves, will hardly be persuaded to work the fifth; and that there are thousands of laboring men of all sorts, who will, though they can hardly subsist, put themselves to fifty inconveniences, disoblige their masters, pinch their bellies, and run in debt to make holidays. When men show such extraordinary proclivity to idleness and pleasure, what reason have we to think that they would ever work unless they were obliged to it by immediate necessity? When we see an artificer that cannot be drove to his work before Tuesday because Monday morning he has two shillings left of his last week's pay, why should we imagine he would go to it at all if he had fifteen or twenty pounds in his pocket? The Drive-Effort hypothesis, as discussed in the previous section on economic development, would seem to explain this phenomenon more clearly than the conventional explanation.34 _A_ _G_r_a_d_u_a_t_e_d_ _V_i_e_w_ _o_f_ _W_o_r_k_ _T_i_m_e_ _a_n_d_ _L_e_i_s_u_r_e_ _T_i_m_e Becker classes time into two categories--work time, and time spentin consumption. Introduction of the notion of effort permits a moreflexible view, which helps explain additional phenomena. Consider a policeperson offered a second job as a security guard. He/she may turn down the job on the grounds that being on his/her feet an extra four hours is too much. The job-offerer then suggests that the policeperson may sit in an easy chair while on the second job, and thereby rest from the first job. The offer is then accepted. Is the second job work or leisure? Similarly, a physician may regretfully decide not to take a vacation trip to China, but when he/she sees an advertisement by a travel company for a free China trip for a doctor, he/she then decides to go. Is the trip work or leisure? _P_e_r_s_o_n_a_l_ _A_t_t_r_i_b_u_t_e_s The Drive-Effort hypothesis predicts that beautiful girls will exert less effort in school and in response to economic opportunities than will homely girls. Beauty may be thought of as wealth, because it influences the flow of future income from such sources as suitors' gifts and support by rich husbands. Once again, wealth (in the sense of command over goods in the future) seems a more precise concept here than "need," which would likely be the concept invoked in ordinary discussion of such a phenomenon. Mental shortcomings also can lead to productive effort, as Hayek tells us from his own experience:35 Alfred North Whitehead is quoted as saying that `muddleheadedness is a condition precedent to independent thought.' That is certainly my experience. It was because I did not remember the answers that to others may have been obvious that I was often forced to think out a solution to a problem which did not exist for those who had a more orderly mind. That the existence of this sort of knowledge is not wholly unfamiliar is shown by the only half-joking description of an educated person as one who has forgotten a great deal. Such submerged memories may be quite important guides of judgment. I am inclined to call minds of this type the `puzzlers.' But I shall not mind of they are called the muddlers, since they certainly will often give this impression if they talk about a subject before they have painfully worked through with some degree of clarity. Their constant difficulties, which in rare instances may be rewarded by a new insight, are due to the fact that they cannot avail themselves of the established verbal formulae or arguments which lead others smoothly and quickly to the result. But being forced to find their own way of expressing an accepted idea, they sometimes discover that the conventional formula conceals gaps or unjustified tacit presuppositions. They will be forced explicitly to answer questions which had been long effectively evaded by a plausible but ambiguous turn of phrase of an implicit but illegimate assumption. _G_i_v_i_n_g_ _B_l_o_o_d Giving blood is an interesting example because the time required for the activity is almost surely of minor importance compared to the "effort" represented by the discomfort, the potential suffering from hepatitis, and so on. Where the law permits, poor people are more likely to sell their blood than are rich people. Yet the payment is the same amount for all. Only a formulation that makes the increment of income relative to the person's wealth discriminates between the behavior of the poor and the rich in this case. And the Drive-Effort formulation is quite clearly more precise here than is the concept of need. _A_c_t_i_v_i_t_i_e_s_ _U_n_d_e_r_t_a_k_e_n_ _F_o_r_ _O_t_h_e_r_ _T_h_a_n_ _M_a_t_e_r_i_a_l_ _G_a_i_n These chapters were conceived while touring Italy and seeing the legacy of long-ago emperors, holy beggars, martyrs, and other manner of persons not mainly motivated by the accumulation of wealth. Certainly, many (all?) of humankind's most important economic activities are undertaken for reasons other than material gain. Hayek goes so far as to say that all ultimate purposes are non-economic, if memory serves. Therefore, if the Drive-Effort hypothesis can throw light on why individuals and groups perform some of the economic acts that are done for reasons other than personal gain, it would be a feather in the cap of the hypothesis. Earlier, the aim of these chapters was stated as better understanding of _e_c_o_n_o_m_i_c behavior, and the Drive-Effort Measure is defined in such manner as is intended to do so. But if we now wish to consider behavior other than "economic"--that is, behavior that affects other than the economic actor's material well-being--the Drive-Effort Measure must be redefined. It is hoped that a more general formulation of the same general idea will also have some analytic power. Let us replace the term "wealth" with the term "standing"; the term"endowment" would have the correct connotation to economists, but tonon-economists it suggests that the person received an inheritance,whereas "standing" is meant to imply the amount of personal honor, orcommunity reputation, or piety in the eyes of religious community orself, or formal status in a hierarchy, or any other attribute that aperson may value given the time, the place, and the person's own scaleof values. And it is then assumed that Drive-Effort is the same sortof function as set out earlier except that it is now specified as S44n+l55 - S44n55 Drive-Effort Measure = b(55_ _ _ _ _ _ _ _ _ 44) where S = standing. 55S44nLet us now offer some speculations in light of this expanded hypothesis: (a) All else equal, a non-respected person such as an ex- criminalmay, when asked, be more likely than a respected citizen to perform acommunity service, because the former has lower standing (a smaller"wealth") with respect to honor by the community. (b) A person thought of by community and self as a great sinnerwould be more likely to exhibit a dramatic conversion to piety andsalvation than a person previously regarded as among the righteous, ifthe hypothesis is correct. (c) In times when courtly titles were (are?) important, a personwith no title--say a successful merchant--would pay more for a giventitle than would a lower noble with the same economic position, if thishypothesis is correct. (d) The newly-rich--who therefore lack the reputation of being rich-- seem to be more willing to purchase the conspicuous trappings of wealththan are people of "old money." Or so marketers think. Another and entirely different view of effort enters the picture when we consider the situation of the wealthy, however, if we assume that some expenditure of effort and the associated energy is a good in itself. And it seems reasonable, from watching young children at play, or a young puppy frolicking with a ball or chasing its tail, or seeing sailors penned up on a ship at sea endlessly wandering around, or any of us when we cannot as usual be out and doing and instead suffer "cabin fever", that just doing things is often a positive good in itself. If we assume that a certain given amount of activity will be forthcoming, the amount of a person's wealth will influence the choice of activities, and in the direction of producing fewer activities whose payoff is in money and more activities whose payoff is in honor, sex, and other desired aspects of life. It has long been a belief of many that it is a social benefit of wealth that it frees people from working for money so that they might work at other socially-useful activities. Hayek puts this classical theme as follows: "There must be, in other words, a toleracnce for the existence of a group of idle rich -- idle not in the sense that they do nothing useful but in the sense that their aimrs are not entirely governed by considerations of material gain."36 He cites such "gentleman-scholars" of the 19th century as Darwin, Macaulay, Grote, Lubbock, Motley, Hewnrey Adams, Tocqueville, Schlieman. And he thinks it better that private wealth should act at second-hand to make possible such patronized scholars as Karl Marx than that government employment in universities and elsewhere should be the sole means of their support.37 Perhaps so. But one might also speculate that in a rich countries inequalities of income produced by inherited wealth are not necessary to make large amounts of leisure time possible for individuals. A very large proportion of persons in the United States could cut their incomes in half and if by so doing they could reduce their required work time by the same proportion, they would have plenty of leisure necessary to produce the sort of scholarly and scientific work envisioned by Hayek. And being involved int eh world's work on a day-to-day basis probably has the salutary effect of bringing important problems to a person's notice, and the supply of problems must surely be the most important input to a first-class thinker's output. When making an assessment of this matter on balance, one might also keep in mind Bishop Berkeley's questions "Whether every man who had money enought not be a gentleman? And whether a nation of gentlemen would not be a wretched nation?",38 composed mainly of profligates and wastrels rather than of socially productive persons? Appendix _to_Chapter_7 Drive-Effort_and_Varieties_of_Taxes The nature of various modes of taxation must be discussed, becausedifferent sorts of taxes can have different effects within the Drive-Effort framework; some affect wealth, while others affect opportunity,and the effects go in opposite directions, as discussed in the standardliterature on taxation. A property tax such as a hearth tax, found in China and in Englandin earlier years, reduces wealth and therefore increases Drive-Effort;the same is true of a head tax such as was reported to have been usedin Africa by British administrators for this very purpose of getting the"natives" to work harder, rather than for the revenue itself. An income tax, in contrast, has a depressing effect upon Drive-Effort and expended effort and work time, because it reduces the payoff to any particular opportunity. A proportional tax upon a subsistence farmer's agricultural output is very much like an income tax in this respect. Of course a higher income tax also means that less wealth will be accumulated, but in the context of subsistence agriculture in Europe or elsewhere, this effect is not likely to be important, especially because a (the?) major wealth holding is land, and the total amount of land owned does not vary enormously in a short period of time, even though it may change hands. The value of land may be seen as a neat multiple of gross output--about 3.5 to l--as Clark's historical-geographic survey suggests. If this ratio holds for gross output less an output tax, a reduction in such a "residual" due to an increase in taxes would leave the Drive-Effort Measure unchanged, because both numbers in the numerator and the one number in the denominator are changed in the same propor-tion. And if the farmer were to hire labor rather than work the farm with only the family's labor, the value of the land should go down more than proportionately with an output tax, because net profit for the land would go down faster, and would reach zero profits at far less than l00% taxation. This would imply an effort-inducing effect of an output tax on agriculture. But such a hired-inputs situation is not representative of subsistence agriculture. Satisfactory theoretical analysis of the effect of a proportionaloutput tax in subsistence agriculture would be difficult to develop. Itwould have to take into account non-linear (concave-downward) relationships of effort and time to output, the linear tax itself, the size of the farmer's wealth (including human capital) other than land ownership, and the marginal utility of various amounts of food (which is likely to be perceived as some sort of a production target, "enough" to feed the family). Given the difficulty of this theoretical analysis, it behooves us to examine empirical evidence. Judging from reports on Spain in the days of its empire, as well as the Roman Empire, increases in output taxation lead to abandonment of farms and rural depopulation. This suggests that the outcome is less work time and effort in this key sector of the economy than would be exerted otherwise. D/l36A,#5 FOOTNOTES 1Lane, Frederick C., Venice a Maritime Republic (Baltimore: Johns Hopkins, 1973), p. 368 2Eliot, Fable of the Bees, pp. 123-125. 3Cipolla, Carlos, The Economic Decline of Empires (London: Methuen, l970), p. 6. 4i.b.i.d., p. 7. 5i.b.i.d., p. ll. 6i.b.i.d. 7The Wall Street Journal, August 30, 1984, p. 22. 8Simon, E., l982. 9i.b.i.d. 10i.b.i.d. 11Hume, David, Political Essays (New York: Library of Liberal Arts- Bobbs-Merrill Co., 1953), p. 141. 12Letwin (l965) argues persuasively that it is the interrelatednessof a body of concepts that is most important in their having the natureof a science. And he also argues that the novel achievement of AdamSmith was primarily in creating such a structure, rather than in anyspecific insights or analyses. 13The Querist, 1735, quoted by George Stigler and Claire Friedlandin a calendar. 14In my senior year in college in 1953, I argued about this issue in a series of meetings with William Verplanck, my senior thesis advisor, I have become more agnostic in the subject since then (as with many other matters.) 15In a more recent work (l980) McNeill also offers as partial explanations the political fragmentation of Europe with consequent market orientation, and lack of oppressive tax structure. These factors increase economic opportunities. 16Hoelterhoff, Manuela, "Brandel's History: The Way the World Used to Work," Review of F. Brandel, The Structure of Everyday Life, Wall Street Journal, June 15, 1982, p. 24. 17See Summary by Pingali and Binswanger, 1984. 18For a geometric and arithmetic exposition, and an analysis of the conditions under which Boserup's theory does and does not apply, see Simon, l977b. 19Quoted by Hagen, Everett E., The Economics of Development, Rev. Ed. (Homewood: Irwin, 1975), p. 270. 20i.b.i.d. 21i.b.i.d., p. 276. 22Bowen and Finegan, pp. 48-49. 23Bowen and Finegan, p. 56l; Samuelson, Robert J., "Busting the U.S. Budget: The Cost of an Aging American," National Journal, February 18, 1978. 24Bowen and Finegan, p. 546. 25Bowen and Finegan, p. 544. 26The Wall Street Journal, Dec. 16, 1983, p. 1. 27In which connection see Simon and Pilarski, l977. 28The Washington Post, "Vietnamese Shrimpers Alter Texas Gulf Towns," 1984, pp A1, A6. 29For example, see: Stys, W., "The Influence of Economic Conditions on the Fertility of Peasant Women," Population Studies, 1957, 11:136-148; Simon, Julian L., "Interpersonal Comparisons Can Be Made--And Used for Redistribution Decisions," Kyklos, Vol. XXVII, No. 1, 1974, 63-98; Simon, l977, Part II for a review. 30The reader may note that the notion of wealth used here is totalwealth of the collectivity, whereas in another application--family size--wealth per person is the concept used. There need not be any contradic-tion here, since we are dealing with the individual's perceptions. Andsometimes one focuses on the size of an entire entity, and sometimes onthe sizes of its parts. In some cases an individual may focus on both,and there may be opposing effects, in which case the analysis would notbe so simple. But for now we may put aside this matter. 31Lane, Frederick C., Venice: A Maritime Republic (Baltimore: Johns Hopkins, 1973), p. 80. 32Hume, David, Political Essays (New York: Library of Liberal Arts, Bobbs-Merrill Co., 1953), p. 135. 33Mandeville, p. 122. 34See, Hicks, John R., "Annual Survey of Economic Theory: The Theory of Monopoly," Econometrica, III, 1935, pp. 1-20. Reprinted in George F. Stigler and Kenneth Boulding (ed.s), Readings in Price Theory (Homewood: Irwin, 1950). 35Mental, p. 35. 36Hayek, 1960, p. 127. 37i.b.i.d., p. 128. 38Berkeley, The Querist, 1735, quoted by Stigler and Friedland in calendar.