Hygienic homage to contract theory

Dear Theorist,

Once a week, I’ve hired a domestic cleaner to aid me with the task of cleaning my house while I am at work. Lately, I have felt that the quality of his work has deteriorated. I cannot pinpoint any specific task that goes unattended, yet the general feeling is that the house is less clean. What can be done? How can I rid myself of this annoying feeling without needlessly hurting the cleaner’s livelihood?

Thank you very much,


Dear Troubled Tammy,

As you surely know, household dusk is composed chiefly of skin cells, hair, dust mites, among other nasty ingredients. It often takes 24 to 48 hours to collect. Due to the weekly frequency in which your home is cleaned, there is no way to verify the effort invested short of weighing the amount of accumulated dust. This is a classic instance of the dreaded problem of imperfect monitoring.

A simple solution can be to increase the level of monitoring. One can achieve this by installing a home security system or conducting surprise checkups. This course of action requires much effort from you and may also hinder the working relationship with your cleaner.

Luckily, Theory provides a neater (get it?) alternative route. This problem also called the agency problem, has also troubled many economists, including the 2016 Nobel laureates Holmström and Hart.

Can we make an employee work harder if we only see the end result, which is also affected by factors other than his effort? In short, Holmström and Hart show that we can incentivize our employees to work harder if we increase their rewards for occasions in which the output is ample and decrease the employee’s rewards when the output is meager. In real life, this is called a performance bonus.

In our context of domestic cleaning, my late grandmother achieved this goal by hiding coins and low denomination bills in hard-to-reach corners or below the furniture. Weird enough, she did not receive any academic accolades for her solution.

Perhaps a better approach will be to provide an occasional bonus when you feel more effort was invested. The important part is to link this monetary reward with the cleaning results, say when you notice a cleaner stove or a dust-free bookshelf.

Immaculately yours,

The Practical Theorist