Friday, March 27, 2009

Parkinson's Law of Triviality

Parkinson's law of triviality is the idea that organisation give disproportionate time to insignificant items. An example often used is the discussion of a multi million pound power plant. No one really understands the implications so it gets waved through the committee with little discussion. However, when it comes to the issue of whether to provide a bike shed for workers, there could be an animated discussion about - whether to build it, how to build, what colour e.t.c. The reason is people can relate to bike sheds - everyone can have an opinion on this issue. The billion dollar issue never gets discussed - instead the $2,000 bike shed can take many hours of discussion.

When reading the media you often the feel this law of triviality is widespread.

A good example is bonuses for failed bankers. In the UK, endless column inches have been spent on former RBS boss Fred Godwin's £650,000 pension. In the US, there is a similar outrage over bonuses for AIG who have required large bailouts from the US taxpayer.

I think in this case the public outrage is justified (see: problem with bank bonuses) It is more than just the money, but, the principle that taxpayers end up paying for failed bankers who seem to gain in the bad times, just as much as the good times.

Nevertheless given the serious economic problems of - record rises in unemployment, the worst decline in output since the Great Depression, and world trade falling for first time since second world war - how much time is justified in ministers dealing with an issue worth 0.000001% of GDP ?

You might say they are powerless to solve real problems - in fact they might make things worse. At least dealing with the likes of Godwin they are not doing any harm. But, as an economist you have to be aware of opportunity cost. Deal with issues which have maximum impact first and deal with inconsequential issues last.

On a personal note, I recently bought a £5,000 Toyota Corrola. What impressed me most was not the engine, airbags or fuel efficiency; but, the fact that there was a device for telling you how much washing fluid for your screen wipers was left and two cup holders which actually work and don't spill your drink! I mean it's got to be worth £5,000 if they can think of devices like that!

This post was inspired by reading - trivial pursuit by Greg Mankiw

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