Emily Oster

2 min Read Emily Oster

Emily Oster

An Economist’s Guide to the Unfortunate Logic of Tipping

From Quartz: Ask Emily: An economist's guide to the unfortunate logic of tipping

Emily Oster

2 min Read

As an economics major, I don’t believe in tipping. (It’s discriminatory! It doesn’t actually incentivize good service!) I don’t want to support a system I don’t believe in, so when I go out to eat, I would prefer not to tip at all. But my girlfriend says that by going out to eat at a restaurant, I’m essentially agreeing to their terms–which means forking over cash. Am I justified in refusing to tip on ethical grounds?

A lot of people say economists are jerks. Broadly, I disagree with this, but I have to say that I do not think you are helping the cause. I agree with your girlfriend you should tip, although not quite for the same reason.

First, a primer on the origins of tipping. Historians believe practice began in Tudor England. Sometimes it served as a token of appreciation (say, as a small gift for servants after a stay at a friend’s country house). It could also be an incentive for better service in taverns. In either case, you can think of tipping as a way of saying “thank you” for good service. This leads to the obvious question: What’s the economic point of saying thank you?

The best economic case for tipping is based on the idea of repeated interactions. Tipping may not lead to good service on your first visit at a new restaurant, but I can pretty much guarantee that not tipping will result in bad service on your second and all further visits. In a “repeated game” like this, it makes sense to cooperate with the social norm and tip, in return for having the waiter cooperate with the social norm of not spitting in your food.

From a purely self-interested perspective, you could argue that this logic doesn’t always hold. Let’s say you go to a restaurant in a distant city. You’ve never eaten there before, and it’s highly unlikely you’ll ever go there (or see your server) again. Why should you give your waiter more money than you have to?

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It has been a busy summer for the team at ParentData. I’d love to take a moment here to celebrate the 400k milestone. As I’ve said before, it’s more important than ever to put good data in the hands of parents.

Share this post with a friend who could use a little more data, and a little less parenting overwhelm.

📷 Me and my oldest, collaborating on “Expecting Better”
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Head to the newsletter for more and stay tuned for part two next week on naps! 🌙

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