Kakonomics, or the strange preference for Low-quality outcomes
The
curious preference for low quality and its norms…
L-doers
segregate themselves in mutual admiration societies…
A
conceptual space similar to “amoral familism”…
…We
investigate a phenomenon which we have experienced as common when dealing with
an of Italian public and private institutions: people promise to exchange high
quality goods and services (H), but then something goes wrong and the quality
delivered is lower than promised (L). While this is perceived as ‘cheating’ by
outsiders, insiders seem not only to adapt but to rely on this outcome. They do
not resent low quality exchanges, in fact they seem to resent high quality
ones, and are inclined to ostracise and avoid dealing with agents who deliver
high quality… They develop a set of oblique social norms to sustain their
preferred equilibrium when threatened by intrusions of high quality. We argue
that cooperation is not always for the better: high quality collective outcomes
are not only endangered by self-interested individual defectors, but by
‘cartels’ of mutually satisfied mediocrities…
We
have spent our academic careers abroad, Gloria in France and Diego in Britain. Over
this long period of time each of us has had over a hundred professional
dealings with our compatriots in Italy – academics, publishers, journals,
newspapers, public and private institutions. It is not an exaggeration to say
that 95% of the times something went wrong. Not catastrophically wrong, but
wrong nonetheless. Sometimes what goes wrong is timing, things do not happen
when they are supposed to happen. Or they happen in a different form from that
which was planned or are simply cancelled. Workshops have twice or half as many
people as one was told to expect, the time allocated to speak is halved or
doubled, proofs are not properly revised or mixed up, people do not show up at
meetings or show up unannounced, messages get lost, reimbursements are delayed,
decreased or forgotten altogether. This experience now extends to internet
dealings: relative to those in other countries, Italians websites are
scruffier, often do not work properly, remain incomplete or are not updated,
messages bounce back, e-mail addresses change with dramatic frequency, and
files are virus-ridden.
…Two
persons agree to trade some units of good x for some units of good y (goods is
to be intended in the most generic sense, and to include intangible resources; x
and y can also be the same ‘good’ as when two people agree to meet, the good
being showing up at a given place at a given time). Assume for simplicity that
goods can be produced at two levels of quality, High (H) and Low (L). H is both
more rewarding to receive and more costly to produce than L; H takes more time,
effort, skills and organisation. This excludes goods that have only one level
of quality – if one pays to have someone murdered, one will regard a non-lethal
wounding as a failure to deliver.
There
might be domains in which H-ness is undefined, such as an intellectual
contribution to a theory which cannot even be proven wrong, or art and fashion
in which the lack of objective criteria of quality make H unfathomable. We will
limit ourselves to consider cases in which the criteria to establish H-ness are
not controversial…
… Problems arise if the two individuals agree on H
but one of them delivers L. This is, of course, a risk of many exchanges:
rational, unprincipled and self-interested agents prefer to dish out L rather
than H, while at the same time, one would think, they also prefer to receive H
rather than L. Dishonest second-hand car dealers prefer to sell a lemon while
charging an H-price. This happens often enough. And it is what happened to us
many time. We delivered H and got L, the sucker’s payoff. One of us has now
become very cautious before dealing professionally with his old compatriots while
the other has started to dish out the occasional L herself…
Our
impression, however, is that when the type of Italians we encounter deal with one
another, there is no great tension over these mishaps: both parties agree on H
and both deliver L. On the face of it, it looks as if they sell each other a
lemon, and yet:
•
Nobody seems to complain.
•
When we got L in return for giving H and complained, the L-party seemed more annoyed
than apologetic. They seem to treat this as excessive fussiness.
•
H-doers do not seem to receive much admiration, quite the contrary, they elicit
suspicion. As an Italian university ‘barone’ once put it, “You don’t understand
Diego, when you are good [at your work] you must apologise”.
•
‘Italians’ end up in LL even if they are playing a repeated game and plan to
trade with each other in the future. In other words, they are not deterred from
dealing with each other again and do not expect the other party to be deterred
by getting L.
•
They do not abandon the H-rhetoric, and, more or less explicitly, keep
promising high standards.
•
A feeling of familiarity develops among L-doers: L-prone people recognise other
L-prone people as familiar, as ‘friends’.
…to
the raw payoffs of free-riding we must prefer to avoid the embarrassment of being
seen as a free-rider or the discomfort of being made to feel of inferior quality
or both – emotions that would be triggered if the other party gave us H while
we saddle them with L. By contrast, when both parties tacitly accept a
“discount” they are not cheating each other. Rather, they are entering a
relation whose advantages for each depend on the reciprocal tolerance of
L-ness. Not only you want pressapochismo for yourself, you also want it in
others.
…we
need to have some prior knowledge, obtained either through direct experience or
vicariously, that “this is how things work”; in other words we need to expect
both that our partners in the exchange are, say, likely not to pay as well or
as promptly as they say they will, and, on the other hand, that they are not
likely to resent it if we fail to deliver a perfect H…
…In
one respect, the type of person who prefers LL to LH is like the types with the
other two preference rankings: they all prefer to put less effort in what they
do and deliver L rather than H. None of them likes to do H for its own sake.
But in another respect the type that prefers LL to LH is different for he is
not the purely self-interested individual, the one who always prefers H for
himself regardless of other people’s feelings and judgments, but, while equally
‘lazy’, our L-doer is a “pro-social” type who, to the advantage of maximizing
purely his interests (LH), prefers a mediocre payoff provided that he does not
suffer embarrassment or discomfort (LL). They dread being the only sinner
around.
One-off
encounters may suffice to set off these emotions and make L-doers happier to
receive an L even from a stranger. Naturally, if the two parties are not interacting
just once and envisage a string of future exchanges, the potential force of these
negative emotions could intensify. If we dislike being made to feel that we are
exploiting a stranger, we would dislike even more to be seen to be exploiting a
familiar person…
… When these conditions obtain, people expect
rather than just accept a certain amount of L-ness. Usually, if one promises to
deliver H and delivers L instead, one would think of this as a breach of trust.
But in our case it looks as if they rely on each other not to be entirely
trustworthy, they trust their untrustworthiness. Not only do they live with each
other’s laxness, but expect it: I trust you not to keep your promises in full
because I want to be free not to keep mine and not to feel bad about it. There
seems to be a double deal: an official pact in which both declare their
intention to exchange H-goods, and a tacit accord whereby discounts are not
only allowed but expected. It becomes a form of tacit mutual connivance on
L-ness…
… It follows that L-doers will try to establish
the – perverse – trustworthiness of others with whom they are considering to
interact. They will look for signs of L-ness and select as partners only those
that emit credible ones. And, for their part, L-doers will endeavour to signal
their L-ness to persuade other L-doers of their trustworthiness. Anyone who
gives an indication of liking H-ness, of not being a committed L-doer, will be
shunned. We can expect that L-doers will try to avoid dealing with H-doers…
…A
major problem of selecting people for their L-trustworthiness is that the most credible
signs of it are emitted by those who not only choose L as a strategy and could under
different conditions revert to H-doing, but by those who can only do L: the
best way to persuade others that one is lax and incompetent, and thus a good
‘friend’, is not by pretending but by truly being lax and incompetent – by
being a genuine L-type. This contributes to the inverse meritocratic selection,
a phenomenon sadly rife in Italy. The custom police secretly recorded the
conversations between Paolo Rizzon, chair of cardiology in Bari, and other
colleagues involved in university appointment committees, among them Mario
Mariani, cardiologist in Pisa. Rizzon can be heard boasting to Mariani: “He was
the best and we screwed him!” He refers to Eugenio Picano, a candidate whose
impact score in terms of citations of scientific articles was nearly six times
greater than the next best candidate who got the job. Inverse selection is
endemic in Italian academia, and much of it occurs because of corruption and nepotism.
But the selection of L-doers rather than H-doers can arguably be sustained by the
desire to keep L-doers strong and unchallenged…
… A key feature of our situation is that the
dominance of LL preferences remains veiled by the H-rhetoric. Both parties
collude by engaging in a sort of “joint mimicry” and pass themselves off as H-doers.
A teacher who pretends to teach, benefits from students who pretend to learn,
and vice versa. By jointly mimicking H, both parties may aim at fooling
outsiders, or simply fool themselves into sustaining a self-image of better
quality.
The
fact that people prefer LL exchanges while paying lip service to H-ness makes
our situation different from the transparent mutually agreed exchange of lower quality
goods that we mentioned at the onset. In the latter case there is no H-façade. There
is also, more importantly, no externality, both parties get what they expect
and no one else suffers from L being exchanged. While in our case, at the very
least, the credibility of H-promises is undermined. If, in addition, our
exchanging characters work for an institution that purports to be delivering an
H-service, the value of the institution’s service will be tacitly eroded by
each LL exchange, as a school in which both teachers and students pretend to be
teaching and learning respectively…
…When
the value of a good depends on its H-image rather than on their actual H-ness,
and the image can partially resist the erosion caused by low quality, then
there is an advantage to keep up the H-façade. There exists a fraudulent
business in Southern Italy of adulterated olive oil made up mixing hazelnut and
sunflower-seed oil, sold under the label “extra-virgin olive oil”. When
Leonardo Marseglia – director of the Casa Olearia company in Apulia – was
charged with contraband and fraud against European Union (and then acquitted)
for having sold bogus oil under the label “extra virgin”, he justified himself
in an interview by arguing that thanks to his adulterated oil many people could
afford to buy oil with the label “extra virgin” at a reasonable price. Some
people, he claimed, are interested in having at least the image of H-ness. “We
pretend to buy good olive oil and you pretend to sell it”. (In zoologists’
jargon this is a case of “cooperative mimicry”, in which those who are
apparently fooled cooperate with the mimic, with a view to fooling someone
else.)…
L-doers
may want to keep up a credible façade with their surrounding Hcommunities because
they gain from this: Marseglia had an interest to pretend to comply with EU
community standards because he was receiving EU oliveoil subsidies. Also,
L-doers manoeuvre to prop up their reputation for H ness with their naïve local
audiences by being seen standing shoulders to shoulders – briefly but as noisily
as possible to be heard far and wide – with H-doers, as in the case of
L-universities liberally dishing out honoris causa degrees. And which
distinguished scholar would want a degree honoris causa from a University that
frankly admitted to having abysmal standards? Finally, the maintenance of an
H-façade may simply satisfy the need to reduce the cognitive dissonance between
what one practices and what one preaches. The gap between the H-standards and
the L-standards creates uneasiness among L-doers. Even if they cultivate
specious legitimising reasons to practice L-ness (as we shall see below), many
still seem aware that there is another set of reasons, which enjoin one to do
H. The dissonance is reduced by interacting always with the same people, whom
one can trust for not challenging one’s standards. L-doers segregate themselves
in mutual admiration societies…
…One
might suspect that L-doers are similar to those who in schools or factories gang
up against those who work better and harder than they do, in general against those
who keep up or raise standards of performance making the rest look like worse performers
or forcing them to increase their own standards. Especially when the rewards
are insensitive to the quality of performance – e.g. the salary at the end of
the month is the same – there is no point producing at H level of quality. There
are certainly elements in common between our case and this case. Agents form a
cartel by agreeing to produce L and punish those who produce H for they break the
agreement. For anti-stakhanovites as well as for our L-doers, doing L amounts
to doing H with respect to their cartel agreement…
…This
L-norm may occupy a conceptual space similar to “amoral familism”, a set of
practices and beliefs that E. C. Banfield (1958) identified in southern Italy
as being the source of lack of economic and cultural development. In his
fieldwork in Montegrano, a fictitious name he coined for a poor southern
Italian village of 3,400 people, Banfield explained the extreme poverty and
backwardness of the village by a lack of cooperation due to the ethos of its
inhabitants of “maximizing the material short-run advantage of the nuclear
family” and discounting any moral consideration for the whole community. In our
case, we have a similar social norm that encourages people to maximize the short
run advantage of a connivance relation that tolerates side-interests and
LL-preferences, while avoiding a form of HH-cooperation, which, while more
individually demanding, would be beneficial for the whole community (having a
high level of teaching at the university, publishing high quality papers, etc.)…
… There might be a sort of disposition to
develop amoral-familistic relationships outside the family, with people who
become “familiar” thanks to a shared proneness towards LL exchanges. In our
case it is the L-disposition that creates the familiarity…
… Our basic point so far can be summed up thus: if
you give me L but in return you tolerate my L we collude on L-ness, we become
friends in L-ness, just like friends we tolerate each other’s weaknesses. But
if you give me H that leaves you free to disclose my L-ness and complain about
it. So you are not my friend, I fear and resent you, and if I cannot punish you
for producing H, at least I avoid dealing with you. While in an ordinary world
it is L-doers who are punished by avoidance and exclusion, in an L dominated world
it is H-doers who are ostracised. Essentially, the L-exchange can be seen as a
cartel of mediocrities who pretend to be H...
…
The payoffs can be tilted in favour of L-ness endogenously, by coalitions of L
doers who join forces to sanction H-doers and to reward each other. In turn,
this is frequency dependent: coalitions of L-doers are more likely to emerge
the higher the number of “naturally born” L doers, of real L-types who are
smart enough to join forces and gain power. When the number of H-doers is low,
H-doers find it harder to meet, interact and reward each other generating
virtuous circles. Part of the explanation for the emergence of LL-dominance is
endogenous.
…We can expect L- cartels to develop where either or both following conditions obtain:
•
Rewards have a weak sensitivity to H-ness, such as when jobs are ultra-safe,
salaries flat, upward mobility has barriers, and friendship-based promotions
dominate over merit based ones. The only H-doers left will be those driven by
principle, by intrinsic motivations – the inveterate perfectionists.
•
Punishments for L-doers are low, or have a low probability of being meted out or
are negotiable; where “forgive” dominates “punish”, where, to jest, catholic
sanctity fattens skulduggery…
…Social norms,
in the dominant interpretation, would exist as an antidote to our natural antisocial
proclivities. The interest of our case is to suggest that this distinction does
not stand up, and that those whom we think of as free-riders too operate within
a normative structure – a special “cement of society” that glues L-doers
together to the detriment of the common good…
Gambetta, D., & Origgi,
G. (2013). The ll game the curious preference for low quality and its norms. Politics,
Philosophy & Economics, 12(1), 3-23.
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