Notes on Robinson Crusoe, chapters 38 through 42
Microeconomics
isn’t an unrealistic / useless science. It’s true Varian’s Intermediate Microeconomics textbook addresses market failures vaguely,
but I believe we must walk before we can run, and, therefore, it didn’t
bother me to think the economic world surrounded by hypothesis for a while
prior to aiming at the complexity of human being. I’m not saying my gun is
loaded and ready to shoot, but, little by little, as I keep trying to merge
different analytical tools or scientific viewpoints (if you will) and widen the
analytical framework in which I view the world, I dare take a look at the human
being as irreducible.
Anyway, Varian’s
last chapter discusses one sort of market failure: Asymmetric Information. That’s
the only chapter that loosen the Perfect Information hypothesis, for Asymmetric
Information means that buyer and seller aren’t equally informed about the
product in transaction; one would except that seller knows much more
information than buyer about the good’s quality.
Asymmetric
Information leads to Adverse Selection and Moral Hazard, but, as these concepts
aren’t met by Robinson Crusoe through chapters 38 and 42, I shan’t
talk about them.
A different
implication of Asymmetric Information, however, comes into Robinson’s mind this
week: the role of incentives.
“We turn now to
a slightly different topic, the study of incentive systems. As it turns out,
our investigation of this topic will naturally involve asymmetric information (…)
The central question in the design of incentive systems is ‘How can I get
someone to do something for me?’ ” (Varian, 2006, p.641).
That’s exactly
what Robinson was asking himself the day before he met Friday, I.E., Thursday (Friday
was named after the day he was saved by Robinson).
Precisely, after
having a queer dream in which Robinson saved a savage from being eaten and he
became his servant, Robinson started wondering whether that could actually happen.
What
kind of incentive would be necessary so that his servant would put maximum
effort into work, or, in other words, what would cause a servant to by loyal and help him sail back home?
“If I could only
get hold of a savage and teach him to love me, things might turn out just that
way. He must be one of their prisoners and I must save him from being eaten;
for then it will be easy to win his friendship”
One and half
year later Robinson’s dream came true. Everything happened like he dreamt and
Friday became his loyal servant.
The asymmetry of
information regards knowledge about the ocean’s local conditions. Even though Robinson was a good sailor, he didn’t know the tide patterns at that
particular region, actually he didn’t even know where he was. Therefore, Robinson
figured that a savage would be necessary so
he could get back home. However, also did he know, he needed a savage that was
willing to help him, or else the savage could take him back to his tribe. He
needed a servant / friend.
Saving a savage
from death, thought Robinson, was the only incentive that could make a savage
work for him with his maximum effort.
He figured it right, for Friday would do
everything to please Crusoe from that day on…