21 May 2010

Whisky and whores*

Sometimes, the stories write themselves:
The [Los Angeles] Department of Water and Power suspended six employees from their normal duties last month... [after a TV station] aired footage which appears to catch the workers buying beer, drinking in a park, drinking while driving and entering a strip club -- all while on the job.
Go read the comments to the article, to get some additional "color" on LADWP employee conduct.

This is an excellent example of how asymmetric information affects principal-agent relations. In non-economic jargon, I am saying that DWP customers (principals) need to trust that DWP workers (their agents) are working to earn their salaries. Since they cannot see everything (asymmetric information), they need to trust the workers to "do the right thing."

Sometimes that trust is misplaced. I predict a few firings and return to business as usual.

Bottom Line: Employees at companies that face competition will get fired if they do not work hard, or lose their jobs if the business fails, so they work harder. LADWP employees don't face such incentives.**

* Not to say that strippers are whores or that those workers were drinking whisky! At least the strippers were being paid to do the work they were SUPPOSED to do :)
** I wonder if Maude Barlow and Food and Water Watch are filing this under "problems with public water suppliers"?