New "super drugs" like Modafinil let people reduce the amount of time they sleep, to potentially as little as two-and-a-half hours a night, without any apparent negative side effects. Most normal people would look at those extra five or six hours a night and imagine all the fun things they could finally do — watch all the Best Picture Oscar nominees, read some of the books piled on their shelves, take up basket-weaving or the violin. But economists aren't normal people — there's a reason economics is called the "dismal science"— and when they see a world full of 18 hour wakefulness, they ask: How will that affect the bottom line, both of companies and workers?Well, "workers would probably prefer to allocate the bulk of that extra time to leisure but I doubt employers will let that happen," says Oxford doctoral student Jon M. at Sociological Speculation. In a "generous breakdown," the company gets three of the extra five hours previously lost to sleep while the worker gets two. Everybody wins: Workers get more pay and employers get more work from the same number of employees. "Overall the transition to a sleepless world seems beneficial to humanity."
Or not, says Garett Jones at the Library of Economics and Liberty. "Normal microeconomics" suggests that "a rise in supply pushes down the price of work, so wages will fall"— or you'll lose your job. But it's probably not that simple: My guess is that "sleep reduction drugs like Modafinil push down wages in the short run, but that increases the demand for capital which pushes wages back up in long run." In other words, they'll have "exactly zero effect on long run hourly wages"— but you'll work more.
That's broadly interesting, but let's look at a "sleepless economy" by winners and losers, says Megan McArdle at The Daily Beast. "The mattress industry is presumably devastated," since people won't drop big bucks for a bed they'll barely use, but if you work in the food-service or entertainment industry, demand for your leisure services will shoot up. "Overall, I expect that most non-elite workers will resist the pressure to work longer hours, at least initially." But once they face the need to finance their extra hours of fun — and the reality of spending five more hours a day with their spouse and children — "they will probably up their hours at least somewhat," and that will transform the child-care industry.
"The main thing that needs to be emphasized is simply that it's very hard to say what the real implications are" of an economy where people don't sleep, says Matthew Yglesias at Slate. "The world is a great big place full of enormous diversity," and you'll probably be expected to put in a solid 18 hours a day if you work in "certain kinds of high-status professions — CEOs and Ezra Klein and such"— or as "migrant factory workers in China (or whatever the new China is in terms of sweatshop work)." But in general, the effects are anyone's guess.
A larger labor supply could push down wages reversing the historic trend toward shorter working hours in developed countries. But that's a bit simplistic. Wages aren't lower in Boston than in Bangor because of the larger labor supply. Maybe less sleep-deprived workers would be more productive and wages would go up. Maybe consumption of local services would skyrocket (more nights out on the town) and demand for labor would rise. Maybe all those doped-up CEOs working 18 hour days would start spectacularly mismanaging their companies, yet nobody would be willing or able to admit that it would make more sense to put in fewer hours. [Slate]