The economics lessons from the sexual harassment scandals

The great number of sexual harassment cases in the past few weeks have provided us numerous lessons, and I believe one of them is that it demonstrates the value of the (micro)economic way of thinking. Here are a few ways how.

Incentives matter

As economists like to say, people respond to incentives, be they rewards or punishments. What strikes me the most about the current revelations is how cheap it must have been to harass in so many contexts and for so many people. Many of the individuals who are now admitting to harassment could have thought they would never be caught. The reasons may be numerous, including societal norms being stacked against victims coming forward, or the fact that it is extremely hard to prove sexual misconduct, but one thing seems clear: many who have done harm this way have done so quite simply because they could get away with it: it came at a low cost. Now suddenly, the costs are rising, for future as well as for past misbehaviour. With the incentives changing, expect behaviour to change as well. A corollary of all this is that most people are neither angels, nor demons. As Gary Becker’s model of criminal behaviour tells us, most people could very well be criminals if their incentives were directed that way. Very often we have incentives such as the criminal law and social norms to thank for our good behaviour. Yes, there are genuinely „bad apples”, but bad incentives are more likely to have played the key role.

Unintended consequences

Incentives sometimes work is surprising, unintended ways. Some commentators complain that the developments following the harassment revelations will make workplaces too „sterile”, stifling flirts and all kinds of romantic advances. Setting aside the question of whether ridding the workplace of such things is a good or a bad, the critics could in fact have a point. If our definition of harassment is too uncertain or slippery, even relatively harmless behaviour could be expected to be punished sometimes, making any risky behaviour, good or bad, less frequent. It is important therefore that society have standards regarding harassment that are clear enough so that the line between overly pushy advances and harassment would not become too blurred.

The power of common knowledge

„Coming forward” is difficult for those suffering from abuse and harassment partly due to the fear of being „a lone accuser”. Being the one who comes forward first is costly while offering uncertain benefits. Coming forward is therefore a game of coordination. If no one else comes forward it is often does not worth the costs to do so, while if others come forward as well, the cost of doing so is much lower. Coming to the light have what economists call a social multiplier. All this could be seen very clearly in the aftermath of the Harvey Weinstein case. As time went on (and goes on), more and more accusations have been made, against more and more people: celebrities, artists, and finally, political figures. More and more victims coming forward also forms what we call common knowledge: victims know they are not alone, they know that they all know that they are not alone, and so on ad infinitum. This makes the social multiplier effect even stronger.

The use (and misuse?) of social punishment

Several people have described the flood of harassment accusations as a „witch hunt” or a „lynch mob”. While such worries and their tone are over the top and in most cases simply wrong, and while social punishments (most of all: shaming) can play a crucial role in setting the incentives right, we should not underrate the downside of online social punishment. The problem with shaming through social media is that it is virtually costless to participate in it, while at the same time it offers private benefits to those doing the shaming: shaming the right kind of persons can demonstrate our loyalty to our respective ideological tribe. Because of that we should worry that such forms of social punishment will go too far: if people pay a near-zero cost for something, they tend to overindulge in it. It is important to keep that in mind throughout the necessary phase of reevaluating people, their careers and whole societal norms.

More generally, as I have tried to illustrate, keeping in mind the crucial lessons of incentives and tradeoffs can help us see how we got there and also how we should move forward.