BY: SYON BHANOT (SWARTHMORE COLLEGE) & JACKY YE (SWARTHMORE COLLEGE, CLASS OF 2019)
Imagine you have an office job in New York City. You’ve been working at this firm for five years and know how the office works. The cubicle to your right is occupied by Joshua. Joshua’s been around a while, but you don’t understand how he still has a job. The guy’s a total slacker. Meanwhile, the cubicle to your left has been vacant for a while -- that is until Ellen, fresh out of business school and eager to prove herself, shows up. She’s a star -- she gets more done in a day than you do in two. Your boss comes in and assigns you to work on two different projects, one with Ellen and the other with Joshua. You notice that when you work with Ellen, you feel more productive than when you work with Joshua. Actually, working with Joshua starts to really frustrate you, and you think about reporting him to your boss.
We all have worked with our fair share of Ellens and Joshuas over the years. What’s interesting is that we generally get motivated to work harder by the Ellens, while the Joshuas tend to make us lazier… and angrier. So why do we behave differently when we’re exposed to different peers?
Economists John Horton and Richard Zeckhauser explore this question in their current NBER working paper, “The Causes of Peer Effects in Production: Evidence from a Series of Field Experiments.” Specifically, Horton and Zeckhauser look at how workers in an online labor market behave differently when working with high-output peers and low-output peers -- Ellens and Joshuas. They find that when workers are exposed to high-output peers, they are more productive, and when they’re exposed to low-output peers, they are less productive. That’s perhaps not all that surprising. What is surprising, though, is that workers who were exposed to low-output peers were more likely to punish their low-output peers, even when their peers’ outcomes didn’t influence their own.
To illustrate the significance of this point, let’s go back to our example. You and Joshua are working on a project together and you don’t like it. Joshua isn’t doing his part. In this case, if Joshua slacks off, you will have to work more. Worse, because it’s a group project, you worry that Joshua will end up taking credit for your hard work -- what economists call “free-riding.” This bugs you. You’d probably consider talking to your boss about this. But would you feel the same way if you knew that both of you would be evaluated separately? Your intuition might be that you wouldn’t be as eager to complain to your boss, but Horton and Zeckhauser suggest otherwise.
Why? According to Horton and Zeckhauser, your reaction is about equity. In this case, equity can be thought of as how much one values fairness. In some way, it seems “unfair” if you’re working and someone else is slacking off. This perceived unfairness drives you to want to punish the slacker. On the flip side, it might seem “unfair” if you’re slacking off while someone else works hard. In both cases, your fairness barometer pushes you to resolve unfairness by either getting someone else to work harder (via punishment) or working harder yourself.
The idea that our peers influence us is hardly new or surprising -- behavioral economists have been studying the causes and consequences of peer effects for years. But it’s not just the experts who should take note of peer effects. Indeed, they influence all of us, whether we like it or not -- the Ellens and the Joshuas of the world aren’t going away anytime soon. But at least the next time a Joshua annoys you by not pulling his weight, you’ll know why. And maybe you’ll see the virtue in taking a seat next to Ellen, too.