On the Theory of the Firm and the Economics of Bullshit Jobs

Brent Barron

If you’re reading this, there’s a decent chance you have a bullshit job. Bullshit jobs–as defined by a recent article in Strike! Magazine–are jobs that seem an awful lot like they might have been created just to keep people busy now that we’ve automated the ability to actually make things:

“We have seen the ballooning not even so much of the “service” sector as of the administrative sector, up to and including the creation of whole new industries like financial services or telemarketing, or the unprecedented expansion of sectors like corporate law, academic and health administration, human resources, and public relations. And these numbers do not even reflect on all those people whose job is to provide administrative, technical, or security support for these industries, or for that matter the whole host of ancillary industries (dog-washers, all-night pizza deliverymen) that only exist because everyone else is spending so much of their time working in all the other ones.”

If you work in government, you probably have a bullshit job, but not for the reasons that you (or the punditry) think. It’s not because incentives are wrong in government, or that government attracts the lazy, it’s because almost everyone probably has a bullshit job. Do you work at a job where no one would really care if your entire industry disappeared? Then you have a bullshit job. Do you work in finance? Bullshit job. Marketing? Bullshit job. Real estate? Industrial relations? You get the idea.

The Strike! article doesn’t give much attention to the causes of bullshit jobs, other than a brief attribution to the ruling class fear of a happy and productive population with time on their hands. I take a different view: I don’t think that bullshit jobs are the result of the dark cabal running the world needing to keep us busy. I think there’s a perfectly viable economic explanation for bullshit jobs.

One of the late Ronald Coase’s important contributions to the field of economics was the use of transaction costs to explain why firms exist. The act of buying and selling goods and services has costs associated with it: it takes time and resources to find and negotiate with someone. Firms exist because they eliminate these transaction costs, since people are just employed by the firm. Generally, economic theory assumes that firms realize economies of scale, that is, the cost of making a widget goes down as the firm gets bigger and makes more widgets, partially because they can continue to avoid transaction costs.

Economics usually assumes that this keeps happening: firms get bigger and economies of scale continue to be realized. But this ignores some fundamental limitations of the human brain, and these limitations are what create bullshit jobs. Dunbar’s Number suggests that there is a limit to the number of social relationships we can maintain, estimated at about 150. With this in mind, it’s easy to imagine that the size and complexity of modern bureaucracies, both in the public and private sector, impose diseconomies of scale. Big organizations get less efficient because we’re incapable of managing that many personal relationships.

Bullshit jobs–now such a big sector of the economy–are a result of the size of organizations we now work for. There’s no better illustrative bullshit job than the “knowledge management professional.” I have friends who are “knowledge management professionals” and the sole function of their job is to create systems that allow people to find out information from other people. They don’t make anything, they don’t deliver services that customers want, and they don’t help the greater good of society, but they’re absolutely necessary because so much of our economy is composed of organizations that the human brain can’t really handle.

It’s possible that some trend will reverse this. Maybe digital prototyping and 3D printing will lead to a drastically increased number of start-ups and small businesses. Maybe it happens because crowdsourced funding allows small, focused production with a built-in market. Maybe something else we haven’t seen yet will reduce the number of bullshit jobs, but until that happens, most of us–in the public or private sector–will keep devoting most of our waking hours to jobs that don’t actually do anything.

Brent Barron is a graduate of the School of Public Policy (Class of 2011) and former Co-Editor of the Public Policy and Governance Review. Brent currently works for the Ministry of Research and Innovation and enjoys technology policy, behavioral economics, and competitive ax throwing.


3 Comments Add yours

  1. dancarins says:

    Isn’t a case that there are simply too many people for the amount of resources to be equally distributed, meaning that unsustainable lifestyles have to be subsidised by extracting resources from other (“developing world”) places at less than fair price (slave labour, awful working conditions, pollution), other generations (i.e. transferring environmental degradation on our children through climate change) and debt, inflation, currency devaluation or quantitative easing?

    Steadily our standard of living erodes as a result of the latter. Perhaps the pay-off is that BS jobs are at least jobs in the sense that 100% employment in the Soviety Union was also based on BS jobs – if the world was the see trully equitable spread of wealth tomorrow, then all hell would break lose.

    Maybe we should be a bit more honest that capitalism is no better than Soviet-style socialism.

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