Wolfers finishing the 2008 Stockholm MarathonMarketplace, the economics program on American Public Media, is running a fun series this week — asking economists to reflect on how thinking like an economist can shape your personal decisions. While the pieces are pretty light, it’s also a neat opportunity to teach some simple economics. Yesterday, it was my turn, and so I focused my economic lens on my marathon training. And thinking like an economist means thinking in terms of opportunity cost.
When I analyze the opportunity cost of running, it turns out to be surprisingly expensive:
As I spend my hours slugging out the miles, I’m forced to confront my choices. Instead of sweating it out on the trails, I could take on extra teaching and earn a few extra bucks. And so going running costs me good money. By my calculations, my 16-week training program comes at an opportunity cost of several thousand dollars. A quicker runner would have a smaller opportunity cost. It’s only because I’m both slow and an economist that I fret that the world’s cheapest sport is actually incredibly expensive.
But despite this cost, running is still worth it. Why? There are many other choices that non-economists make that come with an even worse cost-benefit ratio. The true advantage of thinking like an economist is that it can help you make better decisions:
To an economist, the choice is still a no-brainer. We think you should only do what you love, and pay for it by doing what you are good at.
By sticking to economics, I make time for running. Rather than spend hundreds of dollars worth of time cleaning my house each Sunday, I hire a cleaner who does a better job at a better price. When a friend asks me to help them move, I write them a check to pay professional movers instead. It’s just more efficient. And while it can be hard to forgo extra income for a long run, it is even harder to justify wasting that time on Facebook. And with the time that saves, I’m pulling on my shoes to head out for another run.
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The mathematics of opportunity cost/benefit associated with running are so fraught with black swans that it is foolish to attempt to apply gaussian mathematics here. To mention a couple of the black swans, consider cost of getting hit by a car, being struck by lightning, meeting one’s “lifemate”, or other highly unlikely events that completely change the system being evaluated.
This reinforces my belief that having money makes you happy because it can buy you time to do things that entertain you. Many people would hire movers, if they could afford it.
Mythological persistence once again invades economics. This time its that “running may prolong life”. Even non-runners believe this. When Jim Fixx died at age 52, the runners all locked their arms and ran roughshod over the facts, loudly proclaiming that Fixx was an aberration. But of course, he was actually typical of his kind of extreme running.
To those concerned about the increased medical costs to society of these extreme runners, “Take heart”. Their drastically shorter average lifespan should more than offset the extra medical costs while they are still alive.
What leads to happiness? Opportunity costs lie in many more dimensions than that of money alone. #10 above reduces happiness to entertainment, #1 includes shared experience as a major factor. Either may be correct for their own lives, which further supports the Author’s perspective on why running is a valuable choice for himself. The result of this, however, is that it illustrates the uniqueness and individuality of everyone’s personal composition of behavioral economics, and the difficulty in attempting to generalize economic principles across a population with any degree of accuracy.
Oscar Wilde is said to have observed that “[t]he cynic knows the price of everything and the value of nothing.”
In offering a friend cash to hire professional movers, you have mistaken your labor under the circumstances for a commodity. You have failed to perceive that, to the unique market that is your friend, your integrated set of services as companion, co-laborer and non-cash provider are a scarce resource quite likely worth more than the movers’ services or cash you offered.
When it comes to loving one’s friends, the fungible is rarely an adequate proxy for the particular, and attempting arbitrage between the two is rarely feasible or advisable.
I’m no economist but the best decision I ever made was to reduce my work hours. This was at a very stressful time in my professional life that would probably have led me to quit my, well paid, job otherwise.
So I now use my off time for classes at a local community college, mostly in music and theater but I also know a little about welding and blacksmithing now.
I do occasionally wish I had my “lost” pay back but my life is not poorer for the loss.
As a long distance runner training for a marathon, and a junior economist (BA with thoughts of an MS or PhD), I understand the value of giving up something to get the miles in. In my case, it’s not money, but rather sleep. Summer in Texas (Dallas) get’s really hot and humid very early in the morning so we meet at 5am three days per week. What I get in return I find difficult to equate to dollars. My training group (upwards of 200 people divided into different pace groups) provides camaraderie, motivation, and some laughs. We’re all experiencing similar high’s and low’s with regard to being tired and sore. I don’t have to get up at 4am to begin stretching, but it’s a choice I make, and without regret.
I approach these life-maintenance tasks a little differently.
The things I enjoy I don’t factor an implicit wage rate.
The things I’d rather not do I factor my normal hourly (day-job) wage rate.
The things I hate doing, I factor a time and a half rate.
If that implicit rate, along with my estimate of my time involvement exceeds the cost of hiring out, I hire out.
I also hired a friend to help work on my house and insisted on paying him, telling him upfront, I wouldn’t be willing to help him as quid pro quo in the future.