Alan Krueger, and the economics of small wins (and losses)

by Charles Duhigg in Uncategorized

Obama speaking with Krueger - AP photo

Earlier this week President Obama announced that Alan Krueger will be leading his economics team.  Not much of the coverage has focused on Krueger’s awesome (but not terribly important) work on Rockonomics, the economics of the rock industry.

Coverage has, however, mentioned Krueger’s recent studies of how peoples’ habits change as they spend more and more time unemployed. In a paper published earlier this year, Krueger and a colleague interviewed 6,025 unemployed workers every week over half-a-year. The results are kind of fascinating. For years, economists assumed that the longer people are unemployed – and the smaller their savings become – the harder they look for a job. Desperation, economists assumed, breeds effort.

Kruger found the opposite: “The amount of time devoted to job search declines sharply over the spell of unemployment,” he wrote. The longer someone is out of work, the less and less time they spend each day looking for a job – after 12 weeks, in fact, their efforts have fallen by a third. The unemployed also start sleeping more the longer they’re out of work – particularly in the morning.

Of course, this isn’t surprising to anyone who has ever looked for a job. Unemployment is soul crushing. But there might also be another factor influencing this  malaise: As small losses begin accumulating in someone’s life, their habits start changing. Read More