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Economic Theory Not As Expected.....

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How Uber Drivers Decide How Long to Work By NOAM SCHEIBER

New drivers quit early on days when their hourly wage is high but work longer when it is low, the opposite of what economic rationality would seem to dictate.

That's because most people aren't economic experts......

Satisficing rather than maximizing.

I suspect it is the hunter gatherer brain in action. No point getting more food as it will rot, so a good day allows us to go home early and avoid te risk of being eaten by a lion.

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Satisficing rather than maximizing.

I suspect it is the hunter gatherer brain in action. No point getting more food as it will rot, so a good day allows us to go home early and avoid te risk of being eaten by a lion.

Interesting link thanks, I didn't know what this was called.

I think loss aversion and the relative psychological impact of wins and losses is probably part of it too. If your expected earnings are £X for a day and you're sitting at <£X, it feels like a loss and ridding yourself of that emotion is a strong driver to carry on working. A similar thing happens in poker, even amongst world class players, there's a strong temptation to stay in a game where your edge is nil (or worse) but your results mediocre even if it's a terrible strategy for maximising long term expectation.

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This phenomenon is well known , Studies of NY taxi drivers have shown they work to earn a target then go home thereby working less time when busy and longer when quiet.

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Satisficing rather than maximizing.

I suspect it is the hunter gatherer brain in action. No point getting more food as it will rot, so a good day allows us to go home early and avoid te risk of being eaten by a lion.

If what they earnt was perishable food, you'd be correct.

But one of the drivers behind the creation of money was the need for acquiring goods without being at the distinct disadvantage of having a perishable bargaining chip I.e. food that would rot

Edited by knock out johnny

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Didn't the last crash show that when economic theory/mathematical models meet human nature (greed/stupidity) without taking human nature into account models will fail and it all goes to sh1t

Edited by knock out johnny

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I expect it's because people's bills are pretty fixed and they work until they have enough to pay them. Then, if possible, a bit extra for some fun money.

I wonder if they did the study in hong kong where taxi drivers pay roughly zero income tax whether they would see a different result....i suspect they would

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I wonder if they did the study in hong kong where taxi drivers pay roughly zero income tax whether they would see a different result....i suspect they would

Since when has income tax been calculated on daily earnings?

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Since when has income tax been calculated on daily earnings?

My point is that if you are being taxed 30/40/50%, where is the incentive to do more than the minimum to survive? I have spoken to taxi drivers in NY and they have mentioned how the government - via income tax and car tax etc etc - makes their life hand to mouth.

I have spoken to drivers in HK and then work every hour for their families wealth pot, cos they keep it all.

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In one camp is a group of so-called behavioral economists who have found evidence that many taxi drivers work longer hours on days when business is slow and shorter hours when business is brisk

It's more difficult, more stressful, more wear and tear on one, on one's health and one's vehicle etc and there's more traffic/traffic jams/awful congestion/more risk of breakdowns, accidents and injuries/more hurry hurry risk of CCTV and radar infringements and traffic offences/more joe public to deal with when business is "brisk"? - there's more to life than money? Behavioral economists might not recognise that - being economists.

Edited by billybong

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I guess they claim WTCs ?, if your earning less your effective marginal tax rate on earning over the hourly thresholds is higher.

My favourite phrase.

I worked mine out as 65%, a big disincentive to work.

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My point is that if you are being taxed 30/40/50%, where is the incentive to do more than the minimum to survive? I have spoken to taxi drivers in NY and they have mentioned how the government - via income tax and car tax etc etc - makes their life hand to mouth.

I have spoken to drivers in HK and then work every hour for their families wealth pot, cos they keep it all.

Because working a bit harder, even at a relatively high marginal tax rate can make a big difference to discretionary disposable income.

If you only choose to earn enough to put a roof over your head and food on the table, life might be rather dull. A few more hours of labour can make a massive increase to your discretionary expenditure.

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Quite.

Indeed it is the approach of a lot of day traders. Once they hit the day's target, they stop.

Isn't this simply the difference between doing something you love/passion (or with a phenomenal longer term pay-off) or doing something for money?

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Taxi driving can be a pretty decent job - but I wouldn't want to do it in a big City.

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If what they earnt was perishable food, you'd be correct.

But one of the drivers behind the creation of money was the need for acquiring goods without being at the distinct disadvantage of having a perishable bargaining chip I.e. food that would rot

Money is a relatively modern concept whilst the other mechanisms have hundreds of millions of years of natural selection behind them. I doubt evolution has quite fine tuned our reactions to money just yet - it is somehow unnatural. My point was, as hotairmail suggested, that the illogical behaviour is due to a long evolutionary history of dealing with resources that have almost zero marginal utility beyond a certain point because of perishability or other factors causing large discounting per unit time. Most resources in nature do not depreciate at the snail like pace of 2% a year.

Edited by Tiger Woods?

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Because working a bit harder, even at a relatively high marginal tax rate can make a big difference to discretionary disposable income.

If you only choose to earn enough to put a roof over your head and food on the table, life might be rather dull. A few more hours of labour can make a massive increase to your discretionary expenditure.

Totally true and many off threads discuss early retirement on that basis. Earn whilst you can and relax in your late 40's. (If you are paid enough in your 30's of course).

I absolutely can relate to the taxi driver leaving early after £150 earned on a good morning - but hanging on during a bad day. Illogical but I understand it and something I had never reflected on. Nice thread.

Edited by Phil321

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How Uber Drivers Decide How Long to Work By NOAM SCHEIBER

New drivers quit early on days when their hourly wage is high but work longer when it is low, the opposite of what economic rationality would seem to dictate.

That's because most people aren't economic experts......

True that most people aren't economic experts but what's not really the point. There's more to life than maximising economic gains (plus the instinctive evolved behaviour already mentioned). If offered the choice between a pay rise and a time off rise I'd take the latter. With a more typical for me less generous view of people there's the constant conflict between greed and laziness (although both of those behaviours have evolved for good reasons).

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What was that joke about a guy who tells a bum sitting on a beach how much better his life would be if he worked really hard, and earned enough money to eventually retire so that he could one day.... sit on a beach? :lol:

It still bugs me that our huter gatherer ancestors apparently only needed to work about two days a week and all owned their own homes- where did it all go wrong?

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What was that joke about a guy who tells a bum sitting on a beach how much better his life would be if he worked really hard, and earned enough money to eventually retire so that he could one day.... sit on a beach? :lol:

It still bugs me that our huter gatherer ancestors apparently only needed to work about two days a week and all owned their own homes- where did it all go wrong?

I am not sure that world ever existed, even 150 years ago the average lifespan was 33 and most of the world lived in abject poverty.

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