On rush and razors and yeshivas

Applying the theory of economic clubs to fraternities

One of Keynes’s less emphasized ideas was to make economists “humble” and “competent people, on a level with dentists.” In addition to macroeconomic forecasts, they could provide analysis to our day-to-day lives. Keynes’s idea, however, is objectionable on many levels. First, my personal experience with dentists has been one of arrogance and control rather than of deference to the patient. Second, in light of the economic crisis, many people would question if economists are even capable of competence; economists have already led the world into a major recession, imagine the carnage if they took control of our intimate surroundings too.

Despite this, I believe the opportunity for economic analysis of daily events is rife. Considering rush, for instance, James Buchanan long ago, and Eli Berman recently, explored the theory of drew large parallels with fraternities and economic clubs. Both are mutual aid societies in which only members can fully access the benefits. Fraternities offer potential entrants sports, cheaper accommodation, a great house and of course a brotherhood. However, they need to vet freshers to find out who will give to the frat as well as take. This is the first key point of economic clubs: entrants need to signal their commitment.

In Israel ultra-Orthodox Jews signal their commitment by joining Yeshivas for over a decade. In Yeshivas, students sacrifice potentially higher earnings available via academic study to learn to recite the Old Testament by heart. Members of ultra-Orthodox society now know this person is serious about Judaism. At MIT though, it is unusual to find someone willing to give up his or her academic studies. Instead, students show their commitment in two ways. First, hazing illustrates that the student values joining the club more than what they suffer during hazing. If they only cared about cheap booze and women, maybe they would turn around when being forced to…well no one really knows. Second, during rush week students can display commitment by going to bad events. If I turn up to paintballing then the frat only knows I like paintballing. If I go to an intimate and humourless comedy night then they know I’m serious.

The other feature of economic clubs are their ability to limit outside opportunities. The Amish are disconnected from much of the outside world as they are unable to access key technologies and are socially isolated by their puritan dress code. At MIT, many events clash with rush, especially as it is held so early in the year when freshers are just trying to find their feet. Technique, for instance, hold their first event of the year during the Greek griller. By going to rush events you are limiting your outside opportunities in return for the benefits of the frat. As well as showing commitment, this also ensures that when you do join the frat you are more likely to contribute to joint goods inside the frat rather than those outside.

Another key, though less fortunate feature of rush, is its inefficiency. At the beginning of the week, freshers hold the power. 50 percent of accommodations are held off site, which means that there is a large supply of places for a set number of students. Rush events initially try to attract freshers to a given fraternity. As it becomes harder to move between frats the power shifts. The frats, if over subscribed at the beginning of the week, gain monopoly power over those interested in them. Students must pay a greater price, perhaps through cost of living in the future, or through acts of commitment now, to gain a place. This strangely is not so different from the pricing tactics used by Gillette. The cost of a razor is often low, perhaps around $12. Cartridges, however, are expensive, sometimes as much as $24 for four. Like with fraternities I feel locked in, and so fork out the extra money to buy expensive cartridges.

The inefficiency emerges not from the pricing but from the rigidity of the market. Some people may not properly match the frat they are locked into. In other situations a frat may be oversubscribed whereas the one down the road may be desperate for people. At Oxford University, colleges formally ‘pool’ candidates who didn’t quite make the grade, giving them a second chance to find the best matches and ensuring that all the places get filled. This is a trick I believe fraternities miss out on. Where fraternities differ with Oxford, though, they have similarities with Yeshivas, Amish communities and Gillette shavers.

William Damazer is a Cambridge student participating in the Cambridge-MIT Exchange.