Daily dose of Akerlof: The rat race

Somehow he succinctly describes the key insight in one page.  Here is the full paper at jstor.  I vainly searched the web for “Akerlof rat race intuition” and of course there was nothing better, because why bother?  The article marked a key turning point in the shifting of thinking of most economists away from a “with free markets and people and firms engaging in voluntary transactions the presumption should be to leave things alone” to a perspective of “with information asymmetries ubiquitous and indeed constantly ‘manufactured’  the presumption should be that we know very little about how economies are really working.”  The issue came up in a student discussion of the 35 hour work week, versus, say, a 40 or 50 hour work week.  How would we research and justify a stance as a citizen one way or the other? (Assuming that the whole point of the work week restriction is that it is fairly binding on what some people and firms would otherwise want to do.)

About mkevane

Economist at Santa Clara University and Director of Friends of African Village Libraries.
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