Marriage and convenience
The Undercover Economist – FT Magazine
I am back from a brief holiday, and that always brings fresh perspectives. I am noticing new things about life in the office and life at home. In both cases there are the petty annoyances. At the office, I find myself increasingly irritated by the loudspeaker that bellows a pre-recorded and irrelevant security announcement whenever I lock my bicycle to the bike racks. At home, I have to put up with my wife’s predilection for unreasonably healthy eating.
Of course, in both cases there is give and take. In exchange for putting up with the electronic honking of the security system and for the turnip soup, I am allowed to take my own little liberties. My salary is not docked if I turn up to work late after a trip to the dentist, but I wouldn’t want to try the trick if I was billing by the hour.
As at work, so in love. When I was dating I’d work out, brush my teeth after every meal, and always wear clean underwear. Now I’m married I do those things too, of course. Mostly. But I suspect that occasional lapses would, within reason, go unpunished.
What the marriage and the job contract with the Financial Times have in common is that they are long-term arrangements where, in principle, a series of short-term arrangements might do. I have in the past written for the newspaper as a freelancer. Nobody shouted at me for parking my bike, but nobody paid me for going to the dentist either.
There are also many short-term alternatives to “till death do us part”. Some cultures even offer temporary marriages: pagans sometimes marry for a year and a day, renewable by mutual consent, while Shia Muslims can arrange fixed-term marriages. Of course, most people who rent motel rooms for a fixed time don’t bother with the concept of marriage at all.
So why are some partnerships brief and some permanent? Consider – as economist Paul Joskow of the Massachusetts Institute of Technology did in the 1980s – US coal mining and the coal-burning power industry. On the west coast, coal mines and coal-fired power stations married each other, either by merging or by signing 30-year contracts with great detail about how disputes were to be dealt with.
On the east coast, free love prevailed: power stations did not necessarily locate near the mine head and they often bought coal on the spot market or through relatively short-run contracts.
Professor Joskow was in no doubt as to the reason for the difference. All east-coast mines produced very similar coal, were able to operate profitably at a small scale and were linked by a rich web of transport connections. A power station could pick and choose from month to month which mine would supply it.
On the west coast, the mines were much bigger and each one was unique. Power stations had to tune themselves to deal with a specific mine’s output, and would generally be located near the mine head. In such a situation, it would be easy for the mine to exploit the power station by suddenly jacking up the price of coal. The best thing, then, was a merger of interests so that both were on the same team…